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6. Financial Sector

Turkmenistan’s underdeveloped financial system and severe hard currency shortage significantly hinder the free flow of financial resources. The largest state banks include: The State Bank for Foreign Economic Relations (Vnesheconombank), Dayhanbank, Turkmenbashy Bank, Turkmenistan Bank, and Halk Bank. These banks have narrow specializations—foreign trade, agriculture, industry, social infrastructure, and savings and mortgages, respectively. Senagat Bank took over Garagum Bank in 2017 and now is the sole remaining local bank providing general banking services for businesses.

There are also four foreign commercial banks in the country: a joint Turkmen-Turkish bank (joint venture of Dayhanbank and Ziraat Bank), a branch of Saderat Bank of Iran, as well as Deutsche Bank and Commerzbank offices, which provide European bank guarantees for companies and for the Turkmen government; they do not provide general banking services. The National Bank in Pakistan is permanently closing its Ashgabat branch as part of a larger restructuring of its international operations.

Insufficient liquidity can make it difficult for investors to exit the market easily. There were no reported cases where foreign investors received credit on the local market. The Union of Industrialists and Entrepreneurs, a nominally independent organization of private companies and businesspeople, is in fact closely controlled by the government and issues loans with no more than one per cent interest per annum to its member companies to finance projects in strategic sectors, including animal husbandry, agriculture, food production and processing, and industrial development. According to unofficial reports, credit is not allocated on market terms. The European Bank for Reconstruction and Development (EBRD) provides some loans to private small- and medium-sized enterprises (SMEs) in Turkmenistan. There is no publicly available information to confirm whether the government or Central Bank respect IMF Article VIII. There is no stock market in the country.

Money and Banking System

The total assets of the country’s largest bank, Vnesheconombank, were TMT 33.9 billion ($9.7 billion at the official exchange rate) as of December 31, 2019. The bank’s financial statements are published at: .

Vnesheconombank’s list of correspondent banks is available at: .

The assets of other banks are believed to be much smaller. All banks, including commercial banks, are tightly regulated by the state. Commercial banks are prohibited from providing services to state enterprises.

State banks primarily service state enterprises and allocate credit on subsidized terms to state entities. Foreign investors are only able to secure credit on the local market through equity loans from EBRD and Turkmen-Turkish Bank. There are no capital markets in Turkmenistan, although the 1993 Law on Securities and Stock Exchanges outlines the main principles for issuing, selling, and circulating securities. The 1999 Law on Joint Stock Societies further provides for the issuance of common and preferred stock and bonds and convertible securities in Turkmenistan, but in the absence of a stock exchange or investment company, there is no market for securities. The Embassy is not aware of any official restrictions on a foreigner’s ability to establish a bank account based on residency status, though in practice foreigners may only open foreign currency accounts, and not manat accounts.

Foreign Exchange

The government tightly controls the country’s foreign exchange flows. The Central Bank controls the fixed rate by releasing U.S. dollars into official exchange markets. Foreign exchange regulations adopted in June 2008 allow the Central Bank to provide banks with access to foreign exchange. These regulations also allowed commercial banks to open correspondent accounts.

For the last several years, the government has been unable to meet demand for U.S. dollars. For example, debit cards have daily and monthly withdrawal limits. (The limits fluctuate but tend to hover around $15 per day and $150 per month.). The government has also imposed administrative procedures that make withdrawals more cumbersome (e.g., proof of residency is now required). In January 2016, the Central Bank of Turkmenistan further restricted access to foreign currency and issued a press release preventing banks from selling U.S. dollars at the country’s exchange points. In addition, when an individual purchases foreign currency through a wire transfer (limited to the equivalent of the monthly salaries of the individual and his/her immediate family members’ monthly salaries), the currency (at an exchange rate of 3.5 manat per USD) must be deposited onto the individual’s international debit card (Visa or MasterCard). The individual does not receive cash. There have been media reports in the past that Vnesheconombank has blocked the Visa cards of some of its customers without notice. The government also introduced an amendment to the Administrative Offenses Code that raises the fines for illegal foreign exchange transactions (i.e., selling and purchasing foreign currency via informal channels) and also trading in foreign currency on the territory of Turkmenistan.

Turkmenistan imports the majority of its industrial equipment and consumer goods. The government’s export earnings, foreign exchange reserves, and foreign loans pay for industrial equipment and infrastructure projects.

At the end of 2015, a black market for U.S. dollars emerged in Turkmenistan. The official exchange rate is TMT 3.5/USD. During the 2020 calendar year covered by this report, the average black-market exchange rate was TMT 22.2/USD.

Remittance Policies

Foreign investors generating revenue in foreign currency do not generally have problems repatriating their profits; the problem lies with foreign companies earning manat. These companies struggle to convert and repatriate earnings. Some foreign companies receiving income in Turkmen manat seek indirect ways to convert local currency to hard currency through the local purchase of petroleum and textile products for resale on the world market. Since the government of Turkmenistan introduced numerous limitations on foreign currency exchange in January 2016, converting local currency remains a challenge in many sectors. Some foreign companies have complained of non-payment or major delays in payment by the government.

In June 2010, Turkmenistan became a full member of the Eurasian Group (EAG), a regional organization to combat money laundering and terrorism financing. EAG is an associate member of the Financial Action Task Force (FATF). EAG aims to increase the transparency of financial systems in the region, including measures related to correspondent banking, money and value transfer services, and wire transfer services.

The government maintains a sovereign wealth fund known as the Stabilization Fund, which mainly holds state budget surpluses. The government also keeps a separate fund known as the Foreign Exchange Reserve Fund (FERF) for oil and gas revenues. There is no publicly available information about the size of these funds or how they are managed.

Investment Climate Statements
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