Parliament ended the last day of their spring session yesterday. During these meetings, parliament members were able to discuss 79 laws, regulations and resolutions. Of these 79, nine of them were independent laws, which were all passed. In addition, they were able to change 43 current laws by adding major improvements.
During this spring term, the laws that were passed will hold a big impact in the Mongolian community. For example, the nine big laws that were passed include a law related to the announcement of the overall budget of 2015, a law related to the budget of 2016 and 2017 as a future projection, priorities to develop the society of Mongolia, priorities to develop the economy of Mongolia, cultural heritage protection law, oil law, transparency law, minerals law and an animal index insurance law.
More regulations were passed as well including measures to boost economic growth, to enhance the green development policy and to implement the midterm programme approval. In relation to the Tsagaan Suvarga mine that contains copper and molybdenum deposits, parliament also discussed how much of these deposits the state can own.
Resolutions regarding monetary policy also came under play as parliament members targeted an inflation rate of 8% this year and 7% in the next two years in hopes to insure a stable macroeconomic environment. However, as of May this year, inflations levels remained at 13.7%, providing the government with little hope that it would hit 8%.
Besides inflation, foreign currency income rests at lower levels than expected. The budget income is facing a shortage and bad loans issued to sectors are now starting to deteriorate. The current account is also not in a good situation. It has experienced a fall of 56%, which is equal to USD 728.2 million. To add on to the fall of the current account balance, the country is facing a deficit of USD 580.5 million.
Z. Enkhbold, parliament speaker, said “Given the current situation and given the current fall in foreign direct investment, the government is trying to keep boosting the growth of Mongolia by pushing the mining sector. The current account balance lost its stability, Mongolian currency is facing depreciation, and high inflation rates will require the nation to tighten its macroeconomic policy. If we continue down this path, we might get trapped in this situation and will have to limit supply.”
If the current policy is continued, the Development Bank of Mongolia will have financing equal to 5% of GDP outside the budget, says International organizations If they carry on funding projects and programmes outside of the budget, the budget deficit will increase to levels consistent with 10% of GDP.
Financing from the Chinggis and Samurai Bond, in addition to other budget operations, needs to be reflected in a general budget and then total deficit needs to be cut down until it meets the level consistent with the Fiscal Stability Law, which rests at 2%. In order to do this, budget amendments should be processed and submitted to parliament next month and parliament members will need to announce an off-season session in August.
SOURCE: Mongolian Economy