Johanna Popjanevski - The Central Asia-Caucasus Analyst

16Central Asia-Caucasus Analyst, 12 December2007body, the President dedicated the two-day session toworking out new ways of raising the productivitylevel in rural areas. In this connection, expeditingpayment processes for harvesting and attracting thedaikhans or agricultural workers to the creditallocation system had been set forth. But in thecabinet session on November 12,Berdimuhammedov expressed his majordissatisfaction to the heads of the agriculturalDaihanBank and the Central Bank regarding the paceof credits being allocated to agricultural workers.The DaihanBank chief, T. Mammedov, was removedfrom his post and similarly, a severe reprimand wasofficially issued to Central Bank chief G. Abylov.The head of the Turkmen Parliament was alsohighly criticized for not filing newrecommendations on purchasing cotton from cottonproducers in the fields.Speaking on the issue of removing the majorimpediments and raising productivity levels incotton production, Berdimuhammedov ordered theintroduce of new mechanisms of payments todaikhans. Particularly, he said that payments forcotton production should be issued half in Turkmenmanats and half in US dollars. He further notedthat a special trade organization should be created tooversee the purchase of cotton from agriculturalworkers at international market rates, and facilitatean immediate payment processes. Previously,daikhans all over the country would receive theirannual income from cotton harvesting with a year’sdelay. Hence introducing above-mentioned reformsis expected to create added financial incentives inthe agricultural sector. The President’s main statedobjective was to allow more self-sufficiency foragricultural workers in the near future. At theNovember 29 meeting of the Cabinet,Berdimuhammedov spoke of reforming the bankingsystem to fit international standards, and gavepersonal directives to study experiences andestablish cooperation in this regard with the world’slargest banks. It is also noteworthy that, as wasdeclared by the President in September,Turkmenistan will denominate its nationalcurrency starting from 2009.In the context of overhauling the financial system,the president also spoke of adjusting officialcurrency exchange rates. Turkmenistan has beenkeeping a fixed exchange rate officially, with thedifference with the black market rate at almost afactor of four. An official currency exchange ratehas never legally existed in practice, and hence thedifference where one dollar costs 5,200 manatsofficially, but 23,000 manats in the black market. OnNovember 12, the President gave the Central Bankchief and the Ministry of Economy and Finance aten-day time limit to work out the details ofadjusting the two exchange rates. The givendeadline has already passed, and nothing specificappears to have come out yet. The expected adjustedexchange rate also remains uncertain and a majorsubject of rumor in the country.The president’s move to set a single exchange ratecame out especially in light of the latest efforts toattract more foreign direct investment into thecountry’s opening economy. However, his televisedspeech to abolish the fixed currency rates produceda lot of mixed reaction in the population, and causedthe exchange rate to the dollar to drop by nearly 50percent within a day. Rumors over a weakeningdollar traveled fast, and caused a certain level ofpanic among the population. Caught up by fear ofcurrency devaluation, many people ironicallyexchanged their last dollar savings into the nationalcurrency at a relatively low exchange rate. Somewith relatively big savings were reported to havecaught heart diseases over the plummeting price ofthe dollar.Thus, President Berdimuhammedov appears tohave tightened his grip over the shortfalls of hisCabinet members. Considering the pace of thereforms, especially in the financial system andthe agricultural sector, it can be inferred thatTurkmenistan is not too far from modernizingits economy to a greater extent.