TURKMENISTAN GOVERNMENT ADOPTS ITS 2010 BUDGET

UNCLAS ASHGABAT 001507 SENSITIVE SIPDIS STATE FOR SCA/CEN; EEB ENERGY FOR EKIMOFF/BURPOE/COHEN COMMERCE FOR EHOUSE E.O. 12958: N/A TAGS: ECON EFIN EPET PGOV TX SUBJECT: TURKMENISTAN GOVERNMENT ADOPTS ITS 2010 BUDGET ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) On November 21, President Berdimuhamedov signed the law on the state budget of Turkmenistan for 2010. According to the law, budget revenues are set as 48.28 billion manats (USD 16.94 billion) and budget expenditures are set as 49.78 billion manats (USD 17.47 billion). The government is going to cover the 1.5 billion manat (USD 0.52 billion) shortfall by tapping into funds accumulated in the country's stabilization fund in 2009, which was a budget surplus year for Turkmenistan. The projected budget deficit will be the first in over a decade. ¶3. (SBU) Local newspapers published lengthy articles praising the state budget, but providing very little detailed information about the budget expenditures. The press reports specified that the government will spend 74.1% of budget funds to finance social development projects and praised the Government's decision to increase spending on healthcare by 11.7%, education by 10.5%, culture by 36.5%, and construction by 54.6% compared to the 2009 spending. (Note: Given that there is no information available regarding 2009 spending, it is not possible to estimate the actual line item amounts to be spent in 2010. End Note) Wages will also be increased by 11% in 2010. Commenting on the 2010 budget, President Berdimuhamedov pointed out that it will not depend as heavily on the revenues from energy exports as it did in the previous years. Instead, as a result of the government's policy of diversification of the economy, agricultural processing, transport, communications, construction and textiles will make a greater contribution. ¶4. (SBU) COMMENT: The adoption of a deficit budget is a public acknowledgement of the impact of the cut-off of gas sales to Russia. If the projected revenue figures are accurate, it also indicates that the Turkmen government still has sufficient currency reserves to easily cover the deficit. The significant percentage increases in social sector spending, although possibly from very low levels, suggests that the government uses its spending in part to maintain a level of public support. Berdimuhamedov's comments regarding the reduced dependence of the 2010 budget on energy exports might indicate that the government is not optimistic about a full resumption of its gas trade with Russia. At the same time, it is difficult to see how other sectors of the Turkmen economy could make up for lucrative gas sales. END COMMENT. CURRAN