Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

TURKMENISTAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Turkmenistan is the Turkmen manat.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe official (cash and noncash) exchange rate has remained constant at manat 5,200 per $1 since 1998. Direct access to foreign exchange is limited to authorized banks, which buy and sell on behalf of clients, and for transactions approved by the Central Bank of Turkmenistan (CBT) and the Foreign Currency Committee (FCC).
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 (COMEX). All other transactions are settled in convertible currencies.
Controls on the use of domestic currency
For current transactions and paymentsYes.
Use of foreign exchange among residentsThe manat is the sole legal tender in Turkmenistan.
Payments arrangements
Bilateral payments arrangements
OperativeYes.
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, while the CBT administers the assets of the FERF. Reserves under control of the CBT are limited and used mainly for authorized imports.
International security restrictions
In accordance with UN sanctionsYes.
Payments arrears
OfficialYes.
PrivateYes.
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 and manat may be imported or exported freely, provided funds are declared on arrival or 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 Turkmenistan’s State Service for Foreign Investments. All external payments made from these accounts must be made in accordance with CBT procedures; cash withdrawals in foreign currency may be made without CBT approval.
Approval requiredJuridical persons require a certificate of registration issued by Turkmenistan’s State Service for Foreign Investments.
Held abroadYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyCBT approval is required.
Nonresident Accounts
Foreign exchange accounts permittedJuridical and natural persons are eligible to hold these accounts.
Approval requiredApproval is required in accordance with CBT procedures.
Domestic currency accountsYes.
Approval requiredCBT approval is required.
Blocked accountsn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsYes.
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 requirementsUnder the Currency Regulations Law, foreign exchange proceeds from all current and capital transactions with nonresidents must be repatriated to Turkmenistan.
Surrender requirementsThe private sector and public enterprises in the cotton sector are exempt from surrender requirements. State-owned enterprises and joint ventures with government participation must sell a portion of their foreign exchange proceeds at the interbank currency exchange.
Financing requirementsn.a.
Documentation requirements
Letters of creditYes.
GuaranteesYes.
Export licensesAll exports, except natural gas, are required to be registered with COMEX.
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.
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.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirements
Surrender requirementsThe private sector and public enterprises in the cotton sector are exempt from surrender requirements. State-owned enterprises and joint ventures with government participation must sell a portion of their foreign exchange proceeds at the interbank currency exchange. Banks are obliged to resell to the CBT all foreign exchange received from their clients.
Restrictions on use of fundsYes.
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. Sale or issued locally by nonresident are subject to quotas by the Cabinet of Ministers (CM).
Shares or other securities of a participating natureControls apply to all these transactions.
On money market instrumentsControls apply to all these transactions.
On collective investment securitiesControls apply to all these transactions.
Controls on derivatives and other instrumentsMarkets for transactions in derivatives do not exist.
Controls on credit operationsControls apply to all credit operatives. Credit institutions operate under CBT license and controls apply on all credit operations.
Controls on direct investment
Outward direct investmentYes.
Inward direct investmentInvestors are required to register with the State Service for Foreign Investments. 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.
Purchase locally by nonresidentsYes.
Controls on personal capital transactions
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
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.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsYes.
Liquid asset requirementsYes.
Credit controlsYes.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsYes.
Liquid asset requirementsYes.
Interest rate controlsYes.
Credit controlsYes.
Investment regulations
Abroad by banksYes.
In banks by nonresidentsYes.
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 president 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 2004
No significant changes occurred in the exchange and trade system.

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