Chapter

TURKMENISTAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Turkmenistan is the Turkmen manat.
Exchange rate structureDual.
Classification
Conventional pegged arrangementThe official (cash and noncash) exchange rate is determined at a weekly auction conducted by the Central Bank of Turkmenistan (CBT), in which authorized commercial banks participate. The official rate is manat 5,200 per $1. Access to the foreign exchange auction is limited to authorized banks, and bids are screened by the CBT and the Foreign Currency Committee (FCC). Banks participate in the auctions on behalf of their customers and for transactions approved by the CBT and the FCC. Bids are submitted at the rate established in the previous auction; if demand exceeds the foreign exchange supplied by the CBT, the excess demand is shifted to the next session.
Exchange taxExchange taxes of 50% and 30% are levied on receipts from exports of natural gas and oil and petroleum products, respectively, and allocated to the Foreign Exchange Reserve Fund (FERF) of Turkmenistan.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements with other countries are made through a system of correspondent accounts. Settlements with countries with which Turkmenistan has bilateral payments arrangements are effected in accordance with the procedures set forth in these agreements. Barter transactions, other than natural gas exports, must take place through the State Commodity Exchange. All other transactions are settled in convertible currencies.
Controls on the use of domestic currencyYes.
Use of foreign exchange among residentsYes.
Payments arrangements
Bilateral payments arrangements
OperativeYes.
InoperativeBilateral agreements with Malaysia and the Islamic Republic of Iran are inoperative.
Barter agreements and open accountsThere are barter trade agreements for natural gas exports to Russia and Ukraine.
Administration of controlThe CBT is empowered to issue exchange control regulations, depending on the type of operation involved. The use of official foreign exchange reserves is controlled by the government of Turkmenistan.
International security restrictionsNo.
Payments arrears
OfficialYes.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeYes.
Controls on external tradeA license is required to engage in international trade in gold.
Controls on exports and imports of banknotesForeign banknotes may be imported and exported freely, provided funds are declared on arrival and departure.
Resident Accounts
Foreign exchange accounts permittedJuridical and natural persons may hold foreign exchange accounts with local commercial banks.
Held domesticallyThese accounts may be opened and maintained by juridical persons if the holder possesses a certificate of registration issued by the State Service for Foreign Investments under the president of Turkmenistan. All external payments made from these accounts must be approved by the CBT; however, cash withdrawals in foreign currency may be made without the approval of the CBT.
Held abroadTurkmen citizens residing overseas may open foreign exchange accounts abroad for the duration of their foreign residence.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyConversion is permitted only through foreign exchange purchases in the Interbank Exchange Market (IEM) of Turkmenistan.
Nonresident Accounts
Foreign exchange accounts permittedJuridical and natural persons are eligible to hold these accounts.
Domestic currency accountsYes.
Convertible into foreign currencyNo.
Approval requiredCBT approval is required.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsn.a.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementsYes.
Preshipment inspectionYes.
Letters of creditYes.
Import licenses and other nontariff measures
Negative listImports of a small number of goods on a negative list (e.g., arms, narcotics, and antiques) are prohibited.
Import taxes and/or tariffsExcise taxes are levied on alcoholic beverages, cigarettes, jewelry, and cars.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirementsThe private sector and public enterprises in the cotton sector are exempt from surrender requirements. Sectors subject to surrender requirements are public enterprises, 50%; joint ventures with state participation, 10%; and the natural gas sector, 25%. The surrender requirement is fulfilled by the sale of proceeds to the IEM.
Financing requirementsn.a.
Documentation requirements
Letters of creditYes.
Export licensesAll exports, except natural gas, are to be channeled through the Stock Commodity Exchange.
With quotasQuantitative and price restrictions are imposed on exports of cotton and other raw materials to protect domestic supplies.
Export taxes
Taxes collected through the exchange systemThere is a 50% foreign exchange tax on natural gas and a 30% tax on oil and petroleum products, the proceeds of which are allocated to the FERF. Also, 0.01% of the value of licensed products paid for with convertible currencies is collected as a fee. The fee on exports to the Baltic countries, Russia, and other countries of the FSU is 0.1% of the ruble value of the licensed product. The customs department also charges an administration fee of 0.2%.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersAll payments require prior approval of the exchange control authorities. Foreign exchange for a few invisible payments—medical treatment abroad, educational support for students abroad, official travel by public officers, and travel abroad due to the death of an immediate relative—is available at the commercial banks’ cash foreign exchange window.
Trade-related payments
Prior approvalYes.
Investment-related paymentsIn accordance with the law on foreign investments in Turkmenistan, after payment of taxes, profits may be reinvested in Turkmenistan, held in bank accounts in domestic or other currencies, or transferred abroad.
Prior approvalYes.
Payments for travel
Prior approvalYes.
Personal payments
Prior approvalYes.
Foreign workers’ wages
Prior approvalYes.
Credit card use abroad
Prior approvalYes.
Other payments
Prior approvalYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsThese transactions are subject to the regulations of the CBT and the Ministry of Economy and Finance (MEF).
Controls on capital and money market instrumentsBoth inward and outward capital transfers are subject to CBT and MEF approval.
On capital market securitiesSecurities may be issued and circulated in Turkmenistan after registration with the MEF.
Shares or other securities of a participating nature
Purchase locally by nonresidentsA nonresident’s share in the equity of a resident company is limited to 49%. Nonresidents may purchase only registered shares.
Sale or issue locally by nonresidentsThese transactions are subject to quotas by the Cabinet of Ministers (CM).
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On money market instrumentsControls apply on all transactions in money market instruments.
Controls on derivatives and other instrumentsMarkets for transactions in derivatives do not exist.
Controls on credit operationsCredit institutions operate under CBT license and controls apply on all credit operations.
Controls on direct investment
Outward direct investmentYes.
Inward direct investmentInvestments by juridical persons are permitted in all sectors. Investors are required to register at the State Service for Foreign Investments under the president of Turkmenistan. If the amount exceeds $500,000 or its equivalent, the approval of the CM is required.
Controls on liquidation of direct investmentForeign investors have the right to recover investments within six months of liquidation.
Controls on real estate transactions
Purchase abroad by residentsYes.
Controls on personal capital transactions
Transfer of gambling and prize earningsYes.
Provisions specific to commercial banks and other credit institutionsA CBT license and CM authorization are required. Provided the license is granted, no controls apply to individual transactions.
Borrowing abroadYes.
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)Yes.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeSecurities denominated in foreign exchange are not issued.
Provisions specific to institutional investorsThe CBT’s short- and long-term investments abroad and their share in a company’s total gross foreign assets require approval of the government of Turkmenistan. For other investments, a CBT and/or an MEF license is required, depending on the type of institutional investor.
Other controls imposed by securities lawsInstitutional investors require a special license issued by the MEF to invest in the equity market.
Changes During 2003
No significant changes occurred in the exchange and trade system.

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