• Turkmenistan’s economy was among the fastest growing economies in the world in 2011. GDP grew by 14.7 per cent in 2011, driven by increasing hydrocarbon production and surging public infrastructure spending. Increased gas exports to China as well as growing exports of oil have supported the strong external balance.  
  • Prices for food and other products and services remain regulated by the state. The threefold increase in prices for bread in July 2012 and looser controls over meat prices were a step in the direction of price liberalisation, but constituted an unexpected negative shock for consumers. 
  • Some progress has been made in the area of structural reform. State regulation in the agriculture sector has decreased and IFRS accounting standards have been introduced for banks. A number of programmes have been developed in other areas but progress with implementation has been slow.


  • The government should speed up progress with its stated goals to increase the share of the private sector and reduce government intervention in the economy. A number of sectors remain distorted by production targets and subsidised inputs that hamper their productivity and the effective use of resources. The remaining controls on prices, interest rates and the exchange rate should be gradually phased out and production targets should be abolished. 
  • The business climate needs to be further improved. Participating in various cross-country surveys would help the authorities to identify major obstacles to businesses and develop policies to improve the business environment and investment climate. 
  • Further exchange rate regime liberalisation would boost trade and financial intermediation. The new law on foreign exchange regulations is an important step forward, as it allows for advance payments on imports, but faster progress needs to be made with implementing the regulations.


Economic growth in Turkmenistan has been among the fastest in the EBRD region and reached 14.7 per cent in 2011. This was mainly driven by good performance in the hydrocarbon sector and by state-supported infrastructure spending. Inflation remained moderate compared with other countries in the region. However, in July 2012 the price of bread and meat increased, with the price of the former soaring by three times. Further price increases are expected throughout 2012, likely related to lower than expected (targeted) wheat production. Moreover the announced 10 per cent increase in government wages and 15 per cent in pensions from 2013 may lead to a spike in inflation.

Gas exports have become more diversified with increased exports to China and Iran. In May 2012 the governments of Turkmenistan and Afghanistan signed a long-awaited Memorandum of Understanding (MoU) on long-term gas cooperation, while the state gas company Turkmengaz simultaneously signed sales agreements with its Indian and Pakistani counterparts. There are, however, a number of concerns including financial support to the pipeline construction through the territory of Afghanistan due to security reasons. Recently China offered to build another pipeline that would go through Afghanistan to China, offering investment for building the infrastructure.

The country’s vast hydrocarbon revenues have helped create twin surpluses. After having been in deficit for two years, the current account balance turned into a surplus of around two per cent of GDP in 2011, driven by higher oil and cotton exports and lower FDI-related imports. At the same time, the fiscal balance was estimated to have reached a surplus of 3.6 per cent of GDP in 2011. 

Credit growth reached about 30 per cent in 2011, mostly due to state-supported lending programmes financed by stabilisation fund resources. While most banking system lending has continued to be channelled to state-owned enterprises, directed lending by the central bank has decreased and credit to the private sector has started to increase, in part due to state-subsidised lending programmes for small and medium enterprises and agriculture. 

The growth outlook remains positive with balanced risks. In the short term, GDP growth will continue to be driven by hydrocarbon production and further diversification of export routes. The economy is expected to continue to grow at a double-digit rate in 2012. However, heavy dependence on hydrocarbon production and exports and excessive state regulation and intervention impedes progress with market-oriented reforms and will weigh negatively on the outlook in the longer term.


Turkmenistan remains among the least reformed of all transition countries, but the authorities continue to express commitment to gradual privatisation and private sector development. Although small-scale privatisation has proceeded since the start of transition, an estimated 75 per cent of the national economy remains under the control of the state and large-scale privatisation still needs to be started in a significant way. However, the authorities have begun drafting a privatisation law. They have also stated their intention to privatise state banks between 2016 and 2020 and they continue to express their commitment to their stated goal of increasing the share of the private sector to 70 per cent of non-hydrocarbon GDP by 2020.

Some progress was made with strengthening the banking sector, but state involvement remains prevalent. As part of the government’s programme to develop the banking system during 2010-30, various new laws have been adopted, including a Law on Accounting and Financial Reporting Standards (July 2010), new laws on the CBT and on Lending Institutions and Banking (March 2011) and a Law on Microfinance (April 2011). The government has a banking sector development programme for 2010-30, which also envisages the privatisation of all state banks between 2016-20. Foreign shareholders do not appear to be excluded. In addition to various laws adopted in 2010 and the first half of 2011, two important reforms that will help this privatisation process are: (i) the introduction of IFRS reporting standards in all banks as of January 2012, and (ii) the transfer of all state-directed loans financed by the Stabilisation Fund (constituting an estimated 70-80 per cent of all banking assets) to the newly created State Development Bank as of November 2011. This has helped to clean banks’ balance sheets and could increase competition between banks for private sector projects.

There are plans to develop non-bank financial institutions and securities markets. The government has adopted a programme to develop private insurance companies (currently there is only one insurance company, which is state-owned) and is drafting a new insurance law that is expected to be adopted in 2012. The authorities also aim to establish a notional defined-contribution pension fund in 2012 and the Ministry of Social Affairs is working with the UNDP on pension reform. In addition, efforts are under way to establish a legal framework to support the government’s programme and action plan for securities market development for 2012-16 that was approved in November 2011. The World Bank is offering technical assistance in this area.

Plans to increase private sector involvement in the telecommunications sector have been announced. In 2011 the authorities announced plans to privatise the state-owned mobile operator Altyn Asyr and to create three more private mobile companies with foreign participation under condition of 50 per cent ownership by Turkmenistan. There has, however, been no progress in this area. MTS, the Russian mobile operator, whose license had been suspended in December 2010, has been in negotiations with the authorities and is expected to resume its work in August 2012. 

Negotiations on the Turkmenistan – Afghanistan – Pakistan – India (TAPI) pipeline project have progressed. Turkmenistan has continued its export-diversification policies and has signed a number of important agreements for construction of the TAPI pipeline. The challenge now is to find a commercial champion for the project.

State regulation has decreased in the agricultural sectors. In mid-2012 the government cancelled the flour rationing that had been introduced by the previous President in the early 2000s as part of a social protection package. At the same time, the maximum price of bread increased threefold and controls over the meat price were eased, also leading to an increase in meat prices. 

Some progress was made in the area of foreign exchange and trade restrictions. In particular, local private small and medium‑sized enterprises (SMEs) can now have foreign currency accounts to conduct import/export operations without needing a license or permission from the cabinet of ministers. Moreover, under the new foreign exchange law adopted in October 2011, residents will now be allowed to provide trade credit to non-residents (that is, local firms will be able to make advance payments for imports and deferred payments for exports). In addition, it allows banks to conduct foreign exchange transactions with non-public customers without seeking prior approval from the central bank. These are long-awaited reforms, but they have not yet become effective as the relevant central bank regulations and other enabling legislation remain to be developed. 

The business climate remains weak. The country lags behind other Central Asian countries in terms of reforms. While barriers to entry for new private businesses remain very large, there is evidence that they were reduced somewhat in 2011, including: a reduction in state duties for registration; elimination of the commission needed to register a local company; elimination of the requirement to re‑register a company when adding a shareholder; and the distribution of land for project sites to entrepreneurs in late 2011. This was not reflected in any international business environment surveys (such as the 2012 World Bank’s Doing Business Report), as Turkmenistan is one of the few countries that does not yet participate in them.


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Annual Report 2012
pdf English
pdf French
pdf German
pdf Russian

Financial Report 2012
pdf English
pdf French
pdf German
pdf Russian

pdf Donor Report 2013

pdf Sustainability Report 2012