Ashgabat, Turkmenistan, Nov.14
By Huseyn Hasanov- Trend:
The International Monetary Fund expects that Turkmenistan's economic growth will hit 10.1 percent in 2013 and 10.7 percent in 2014, the fund's statement published on Nov.12 said.
"Sustainable economic growth is being observed in 2013 which is caused by high growth rates in the non-hydrocarbon sector being fueled by a large volume of state investments," a report issued on the results of the recent visit of the mission to Turkmenistan said.
The IMF held meetings with the senior staff of the government, ministries and central bank, as well as with the representatives of commercial banks.
Turkmenistan is a key regional supplier of natural gas. Russia, China and Iran are importers.
Meanwhile, the country's leadership has taken a course of diversification of the economy. Oil and gas processing, the textile industry, the cotton processing industry and the production of construction materials develop in recent years.
The IMF report said that the sharp and steady decrease of world energy prices causes the highest possible risk for Turkmenistan's economic growth.
In addition, a certain risk is related to the delays in growth rates in China and Russia, which are the largest trade partners of the country. Meanwhile, according to the IMF, the impact of materialization of these risks will have a limited character in a short-term perspective due to existence of a large volume of international buffer reserves.
The IMF also provided data for the consumer price index.
"It is expected that inflation in 2013 will remain at a relatively low level taking into account the high proportion of imported components in budget expenditures, low level of world food prices, the existence of control over the level of process and fixed exchange rate," the IMF said.
The general inflation figure is anticipated at 5.5 percent for the end of 2013 and six percent for the end of 2014.
The IMF believes that Turkmenistan's official bodies need to create the opportunity to provide greater flexibility of the exchange rate in the longer term.
"The banking sector, which is dominated by the state bank, requires reforms aimed at rendering effective support to the private mediation," the IMF said.
IMF believes that though high public investment volumes focus on increasing production capacity in Turkmenistan, they may negatively affect the long-term sustainability of public finances and weaken the diversification prospects in non-hydrocarbon sector of the economy.
Moreover, improving the potential on monitoring the efficiency and transparency of costs can help reduce corruption, IMF says.
According to IMF experts, increasing the effectiveness of monetary policy requires the rejection of target crediting and taking measures to liberalize interest rates.
"Besides, the exchange rate connection remains an appropriate guiding line for monetary policy," the statement said. "This limits the ability of the economy to counter shocks and to manage the volatility."
The IMF points out that the adoption of international financial reporting standards and the decision on increasing the amount of the banks' capital are the first actions to strengthen the banking system, where the state-owned banks have the dominant position.
A significant acceleration of reforms will be required for the government to complete the task and to privatize 70 percent of the economy (excluding hydrocarbon sector) by 2020, IMF says.
The privatization program must be implemented on the basis of the consultations with the international financial institutions to ensure the application of international best practice.
Stimulating the growth of private entrepreneurship requires improving the business sphere and reducing corruption.
Moreover, additional measures on ensuring the convertibility of the manat and operations on the implementation of the recently announced plans to join the World Trade Organization (WTO) would promote the development of trade, the IMF says.