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Turkmenistan and Turkey to Use Domestic Currencies in Bilateral Trade

Monday 30 January 2012

ASHGABAT (Today’s Zaman) – Turkish Economy Minister Zafer Çağlayan and Turkmen President Gurbanguli Berdymukhamedov signed an agreement Monday to use domestic currencies as opposed to major trading currencies such as the euro or dollar in bilateral trade, which has seen an exceptional increase between the two countries.

The Manat – the currency of Turkmenistan – was introduced on November 1, 1993, replacing the Russian ruble. On January 1, 2009 the new manat was introduced with ISO 4217 code TMT at the rate of 5000 old manat to 1 new manat. The manat has a large disparity between its official and black market rates, with the latter being roughly 21% greater than the official. This results in few institutions outside Turkmen Governmental control supporting the official rate. A few multinational companies have continued to adhere to the official rate but generally only for purchases by Turkmen passport holders in the country itself.
The Turkish lira has been one of the worst-performing emerging-market currencies in 2011. There are two leading indicators that are driving the lira’s underperformance. First, the country’s rising current account deficit is pressuring Central Bank reserves and the exchange rate. Second, the sovereign debt crisis in Europe is driving investors away from emerging market currencies and toward the dollar, further weakening the lira.

The meeting was held in the Turkmen capital of Ashgabat. Çağlayan noted that trading with domestic currencies was requested by Prime Minister Recep Tayyip Erdoğan and that such agreements would improve relations between the trading partners. Berdymukhamedov spoke of work done by Turkish constructors and placed an important emphasis on investments made by Turkish companies.

Çağlayan announced that the Turkmen president will make his first visit to Turkey after his expected win in the presidential elections on Feb. 12. He said, “Feb. 29 marks the 20th anniversary of diplomatic relations between Turkey and Turkmenistan, and the president’s visit will have a positive effect on those relations.”

Turkmenistan tops the list of Central Asian countries in which Turkish companies have participated in construction projects. The total sum of projects undertaken by Turkish companies in Turkmenistan has exceeded $19 billion. Turkey ranks first in terms of the volume of investments in Turkmenistan. According to Çağlayan, “90% of construction jobs [in Turkmenistan] are performed by Turkish firms. Construction totalled US $4.3 billion in 2010 and $3.2 billion in 2011”.

In 2010, the foreign trade volume between the two countries was $1.5 billion. As a result, Turkey replaced Russia as the top foreign trade partner of Turkmenistan.

Noting the rich energy resources of Turkmenistan, Çağlayan said it is crucial that these resources to be transported to Europe via Turkey.

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