TURKMENISTAN: SHOW ME THE NEW MONEY

UNCLAS SECTION 01 OF 02 ASHGABAT 001679

SENSITIVE
SIPDIS

STATE FOR SCA/CEN; EEB;
COMMERCE FOR DSTARKS/EHOUSE

E.O. 12958: N/A
TAGS: ECON EFIN PGOV TX
SUBJECT: TURKMENISTAN: SHOW ME THE NEW MONEY

REF: 08 ASHGABAT 1214

ASHGABAT 00001679 001.2 OF 002



1. (U) Sensitive but unclassified. Not for Internet
distribution.


2. (SBU) The Turkmen Central Bank appears to have
successfully phased in its redenominated currency (the
Turkmen manat) over the last year, in accordance with an
order to do so by President Berdimuhamedov in January 2009.
In addition, the Central Bank in November announced it would
introduce 1 and 2 manat coins by January 1, 2010, as
additional monetary reforms. Central Bank Officials told us
the 2 manat coin is a completely new denomination, and the 1
manat coin will accompany the 1 manat bill, but not replace
it. The new coins are minted at the British Royal Mint; the
coins will be multi-metallic, made from brass, nickel, and
copper, similar to the make-up of British coins. The coins
will depict the denomination amount on one side, with the
Independence Monument against the background of a map of
Turkmenistan on the other. There will be no image of current
President Berdimuhamedov on either coin.


3. (SBU) Local Ashgabat shopkeepers we spoke with did not
know anything about the introduction of new coins. They
noted that there are already several coins in circulation.
These coins are called tenge and are available in 1, 5, 10,
20, and 50 denominations, with 100 tenge equaling 1 manat.
They opined that the introduction of two new manat coins
might benefit the government (using coins is less expensive
than replacing worn paper currency),but they saw little
benefit for Turkmen merchants and consumers.

PHASING OUT THE OLD MONEY


4. (SBU) The older currency comprised 500, 1000, 5000, and
10,000 bills, whereas the newer currency, redenominated
manat introduced in January 2009 includes: 1, 5, 10, 20, 50,
100, and rarely seen 500 manat banknotes (reftel). Locals
recounted that when the old manat was in print, the
government refused to print any bills larger than 10,000 for
fear that such high denominations would embarrass then
President Niyazov. This reportedly resulted in the need for
Turkmen to carry large amounts of paper bills to make even
simple purchases for basic needs. In addition, all
denominations of the older bills contained images of former
President Niyazov, while the new currency does not contain
any images of Berdimuhamedov. (NOTE: The 500 new mant bill
has an image of President Niyazov, but no one has seen a 500
manat bill. END NOTE.)


5. (SBU) During 2009, the older currency seems to have been
phased out in an orderly fashion, although most sales persons
still quote prices based on the old currency and then divide
by 5,000 to convert to the new manat. By January 1, 2010,
Turkmen banks will not accept transactions in older manat and
businesses are not to accept any of the old bills. After
January 1, Turkmen will still be able to exchange the older
manat for new manat at the Turkmen Economic Bank. A local
contact told us that his friend, who works at the Economic
Bank, has been shredding old manat in the basement of the
bank for months to ensure that all the old manat were
destroyed by the end of 2009. Turkmenistan's current
exchange rate is 2.842 manat to 1 USD, and both Turkmen
officials and international financial organizations such as
the IMF have lauded Turkmenistan's successful currency
redenomination as a significant economic reform.


6. (SBU) COMMENT: The latest currency change seems to stem
from Berdimuhamedov's desire to have Turkmenistan viewed as
an economically progressive country with a normal monetary
system. The redonomination is one reform that has worked.

ASHGABAT 00001679 002.2 OF 002


END COMMENT.
CURRAN