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Turkmen-style shock therapy

There is a shock but no therapy is available. The second half of 2012 began with a chain of unpleasant surprises for the Turkmen residents – soaring prices for food, consumer goods and services, inducing those which had been previously subsidized from Turkmenistan’s state budget.

In early July prices for flour and bread increased two to three fold whereas this is the main food product in the Turkmen diet. The so-called “allowances” – the rationing system of selling flour at reduced prices was also abolished. These “allowances” were introduced back under Niyazov’s presidency.

The quotas for free petroleum were introduced under the leadership of the incumbent president. However, starting from 1 July, this social support initiative was also abolished.

Airfares have considerably gone up. Fares for international flights have risen 2 to 2.5 times. Since Turkmenistan has no passenger railroad and automobile service with foreign countries, even neighbouring states, airplanes remain the only type of transport connecting the country’s residents with the outside world. Now trips to pursue educational opportunities, to visit to family members and undergo medical treatment as well as personal or business trips will be much more expensive.

As a result of a 12% price increase for domestic flights coupled with cancelled free petrol quotas the drivers involved in passenger and cargo transportation on intercity routes inflated their fares. Queues at the railway booking offices form as early as 5 a.m.

The price hike for transportation services triggers soaring prices for consumer goods and food. Ashgabat is the major centre for incoming imported goods from abroad which are subsequently delivered across the country. Then the goods and food are sold at local bazaars taken into account increased transportation costs…

Needless to say, transfer to real market mechanisms in economy requires decisive actions, including shock measures. Yet, such an approach also requires many other prerequisites, for instance, competitive environment and legislative framework. Moreover, if a decision is made to shift to the market economy, prices need to be reduced rather than increased to the rates established by the authorities. Otherwise it turns into a state-planned economy.

None of the aforementioned measures have been implemented and even scheduled. Furthermore, the 2012 budget envisaged that “76,7% of funds will be allocated for the development of social sphere”. In other words, expenditures for social services were increased compared to the 2011 budget.

“The 2011-2030 Turkmenistan’s social and economic development program” and “the national program to reform social and living conditions in villages, rural areas, towns of the etraps and etrap centres up to the year 2020” also make no mention of reduced funding for social expenditures. On the contrary, they run that the scope of social support to the residents provided by the state will increase.

The current measures undertaken by the authorities to reduce social spending are nothing else but spontaneous steps designed to fill gaps in the budget.

Over the past years, staff members of foreign and international organizations based in Turkmenistan have argued that the revenue of Turkmenistan’s budget is fulfilled not more than by 40 to 50% and put together a set of recommendations to our government to improve the situation.

However, “Avaza” and other “sparkling” expenditures until the mid 2012 allowed the country’s leaders to ignore the criticism and proudly state that “today’s Turkmenistan is a massive construction site with 2447 objects being currently under construction and the investments amounting to 48 billion US dollars”.

It appears that the government officials suddenly came to realize the situation. Yet, they decided to save on social expenditures rather than the aforementioned 48 billion.

This is a shock. Instead of therapy on 8 July the president of Turkmenistan demanded that the executives of fuel and energy complex “commission the largest gas field “Galkynysh” and other hydrocarbon deposits located on the country’s territory as soon as possible”.

The authorities realize that if they fail to put into operation these gas fields, this might come as a shock for the government.

Source: TIHR