Turkmen banks suspend operations of locally issued Visa cards amid sparse hard currency

Turkmen banks suspend operations of locally issued Visa cards amid sparse hard currency
The growing economic crisis in Turkmenistan has already seen the end of the era of heavily discounted utility prices. Pictured is a fish market in Turkmenbashi.
By Kanat Shaku in Almaty February 28, 2018

Turkmen banks have entirely suspended operations of locally issued Visa cards both inside and outside Turkmenistan, Radio Azatlyk, the Turkmen service of RFE/RL, reported on February 25. The only money transfers currently allowed in the country are limited to parents whose children are studying abroad - specifically, MoneyGram and Western Union money transfer services still allow Turkmen parents to send their children no more than $300 at a time.

The Turkmen authorities are attempting to keep hard currency circulating within the remote and tightly controlled Central Asian country amid an economic downturn caused by low world hydrocarbon prices as well as failed energy deals that have left the hydrocarbon export-dependent Turkmenistan with China as its sole export destination for gas. Yet even China has been ramping down imports from the Central Asian nation recently - exports of natural gas to China declined 14% y/y in January. The resulting economic troubles have hurt the Turkmen state budget, with government revenues depleted.

As locals were barred from access to converting the manat to foreign currency at the official rate, they started transferring money from their local cards to Visa cards and then cashing the Visa cards abroad, since such bank card transactions are carried out at the official rate. The authorities initially adopted a policy restricting such transfers by setting a monthly limit of $500. However, that measure only sufficed for a couple of months prior to the authorities wholly suspending the Visa card operations altogether.

Prior to that measure, Turkmen officials announced a squeezed limit on cash withdrawals that Turkmen citizens are allowed to make from ATMs abroad in November. The State Bank of Foreign Economic Activity (TDDYIB) said clients travelling or residing abroad would not be able to withdraw more than $50 or its equivalent on any given day from ATMs in other countries. At the time, it marked the third time in 2017 that the authorities had adopted the measure in an attempt at keeping money in circulation within the Central Asian country. In March, the TDDYIB set the daily limit at $250, down from $1,000. It then cut the limit to $100 per day in October.

The now complete suspension of Visa cards demonstrates how desperate the Turkmen government has grown amid its ongoing economic crisis.

Given the financial squeeze, the government has ended the era of discounted gas, water and electricity prices for citizens in Turkmenistan; made contributions to Turkmenistan’s Pension Fund by business owners mandatory from 1 January; and even imposed more fines on car owners and Turkmen fortune tellers, whose occult services are popular in Turkmenistan.

Despite addressing some difficulties, Turkmen authorities appear to be driving the country further into economic difficulties as seen by the dubious spending habits of Turkmen President Gurbanguly Berdimuhamedov.

Despite his country’s economic mess, the Turkmen leader unveiled Turkmenistan's first golf course, a designer 18-hole attraction in a country where golf is virtually unheard of. The country also spent $10bn on hosting the Asian Games last year, which turned out to be another vanity project – the preparations for the Asian Games also included a $2.3bn airport.

All of this is happening amid the country’s commitments to fund 85% of the construction costs for the $10bn Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline, the construction of which has just entered its Afghan phase.