Previous Quarterly Editions
Expropriation Risk: 78 77 77 76 ►Political Violence Risk:48 48 48 39 ▼Terrorism Risk:48 46 46 44 ►Exchange Transfer and Trade Sanction Risk: 73 73 73 73 ►Sovereign Default Risk:56 55 55 65 ▲
TREND ▲
Protest intensity to date* 2022 2023 Low LowUnrest risk in 2024**Cost of living: MediumAnti-austerity: High
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Amid a total lack of governmental disclosures about its debt situation, Turkmenistan’s external debt was last assessed by the International Monetary Fund in 2021 to be US$7.1 billion (approximately 11% of GDP), down from US$9.1 billion (19.8% of GDP) back in 2017.
According to Fitch, the country’s general government debt-to-GDP ratio stands at around 5.2%, mainly due to repayment of all domestic debt, and should be flat through 2025. Fitch also projects, as of August, external debt service at 8% of expected external receipts in 2023, a clear improvement on the 2021 ratio of 14.8%; however, a total lack of transparency of Turkmen public finances makes forecasting and analysis extremely difficult.
The bulk of Turkmenistan’s external debt is concentrated in the strategic gas industry, with TurkmenGas alone having previously received loans totaling US$8 billion from the China Development Bank. According to official announcements from Ashgabat, the loans were repaid in full by 2022.
Even after factoring in the opaqueness surrounding the true state of Turkmenistan’s financial situation, its current debt load is unlikely to have notable implications for either regime stability or the wellbeing of its citizens — which is much more affected by poor governance, corruption, the lack of rule of law and the autarchic economic model.
TREND ►
Amid a severe economic crisis that began in 2020, the Turkmen government has since sought to engage with the international investment community, most notably international financial institutions. The focus has been on securing long-term capital investment to upgrade production capacity in key sectors such as energy and agriculture; however, these efforts are fitful at best. Despite applying for accession to the World Trade Organization in February 2022, Turkmenistan has yet to convene the first meeting of a working party to begin negotiations on membership.
The Turkmen economy remains extremely closed to foreign investment, with most economic activity controlled by the state via sprawling state-owned enterprises. Decision-making processes remain extremely opaque and personalized; the rule of law is weak, and the judicial system is subordinate to the executive branch. Investors also face pervasive corruption risks and the threat of politically motivated expropriation at the behest of the central government.
In June, the Washington-based International Centre for Settlement of Investment Disputes rejected a US$2 billion lawsuit that was originally filed in 2018 by Russian telecom company MTS against Turkmenistan. The aggrieved investor had been claiming compensation for the allegedly arbitrary termination of a profit-sharing agreement with the Turkmen government in 2017.
TREND ▼
Political violence and protest are largely unknown in Turkmenistan. There is neither organized political opposition nor independent media or non-governmental organizations that might exert pressure on the government.
Protest, as it exists in Turkmenistan, is largely atomized, usually involving small groups of individuals animated by a local grievance and seeking redress from local authorities. Nevertheless, they do not present a serious threat to the Turkmen government, which typically responds by a combination of picking out individuals for sanction and addressing some elements of the grievance.
The return of former President Gurbanguly Berdymukhamedov to the political scene in January 2023 — after handing the presidency to his son less than one year earlier —signaled tension within the ruling elite. Ultimately, however, the conflict appears to have been resolved peacefully behind closed doors and has not resulted in any form of political violence or elite discontent.
The government has been typically extremely vigilant toward the threat of Islamic extremism, owing to Turkmenistan’s common border with Afghanistan and ever-present concerns about the possibility of Islamic State fighters returning from abroad. For this reason, terrorism has been one of the few areas where the Turkmen government has sought to engage with the international community.
Despite the government’s concerns, there is no evidence of a significant threat from terrorist organizations. With the collapse of Islamic State between 2017 and 2019, the Turkmen government became more concerned about militants returning to Turkmenistan and Afghanistan from Iraq and Syria; however, there has been no manifestation of this terrorist threat within Turkmenistan itself.
Moreover, it is possible that the Turkmen security services overinflate the risk to secure more funding from the budget as well as, potentially, from Russia, which still largely guarantees security in Central Asia.
The Turkmen national currency, the manat, is heavily regulated by the government to the extent that the official exchange rate has little bearing on its value in the Turkmen informal market. Recent estimates suggest that the market rate for the manat is currently 20 manat to the U.S. dollar (down from 40 manat in 2021) — far below the official rate of 3.5 manat to the U.S. dollar, which has not changed since 2015.
With the onset of the Russian war in Ukraine in February 2022, Western allies have increasingly focused their attention on Russia’s Central Asian allies, fearing that they may be facilitating sanctions-busting activities. Throughout 2022 and into 2023, several high-level visits of Russian officials to Ashgabat have taken place, all pursuing deeper economic cooperation.
Given its historical economic ties to Russia, Turkmenistan could represent a conduit for the flow of illicit goods to Russia in violation of sanctions. The country also has the potential to attract more Russian outward investments, given the limited options currently facing Russian state-owned enterprises and private companies alike.
The true state of the Turkmen government’s finances is a closely guarded secret, meaning that no reliable data are available to provide an independent assessment. One proxy for the government’s finances has been Chinese imports of Turkmen gas, which is a primary source of revenue for the country. In 2020, Turkmen gas exports to China collapsed, creating serious budgetary constraints that, while not discussed by officials in public, were acutely felt by the population in the form of austerity measures.
While gas exports have since largely recovered, the population continues consistently to experience wage arrears and shortages of currency and basic consumer goods. While it is difficult to assess independently the risk of sovereign default, it is highly likely that, in the event of a crisis, either Russia or China will step in to shore up Turkmen’s finances.
Fitch is the only global rating agency to assign a sovereign credit rating to Turkmenistan. In August 2023, it reaffirmed its long-term B+ rating with a positive outlook.
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