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Minister of Finance J.Erdenebat: ‘It might take 4 to 5 years to lower debt to 40 percent of GDP’

By Ch.KHALIUN

News.mn spoke with Minister of Finance J.Erdenebat about the current economic situation, solutions, and future plans of the ministry to overcome the economic crisis.

 The Mongolian People’s Party (MPP) opposed increasing the debt ceiling, but there are rumors that the debt ceiling will be increased. Could you give our readers an official explanation?

 I didn’t say that the debt ceiling will be increased. As for the preliminary data, the debt ceiling is 49.9 percent, which means that it has already exceeded its limit according to the law on budget sustainability. And it might reach 53 percent by the end of this year, because of the changes in exchange rates and interest rates. The MPP is trying hard to avoid increasing the debt ceiling. We have to find solutions on better debt management, and policy to reduce debt to 40 percent of GDP. But now the debt ceiling has exceeded 50 percent, so it might take some time to lower it. It might take four to five years. As of today, it’s impossible to lower the debt ceiling to 40 percent to suit the law.

 Is a decrease possible next year?

 The current state budget is to be approved with seven trillion MNT. If we want to reduce it to 40 percent of GDP, we will have to cut two trillion MNT to meet legal requirements. In order to do this we will have to repay commercial bonds and commercial loans.

We have to improve debt management and change debt structure. Up until now, we have been paying debt through high interest commercial loans and we also took on high-cost bonds from foreign countries. In this situation, the service costs increase. We are discussing the possibility of changing these loans to long-term concessional loans.

 Some parliamentarians believe that if we don’t take more money from overseas, the economic situation will get worse, while others believe that the most important thing is to not add to the nation’s debt. How do parliamentarians see this issue inside the government?

 People are expressing various positions, but we have to seek all possible opportunities. For example, we should increase the resources of the credit guarantee fund and create an investment fund. Projects and programs are being funded mainly through commercial loans. We can change loan conditions to mitigate the service expenditures. Instead, we can invest through long-term, low interest loans. We could involve investment organizations in these efforts.

Some people say that it’s possible to transfer debt to private sector projects implemented through bonds and release bond investment. Do you think it’s possible, as the Minister of Finance?

Yes, some people believe this is possible, but it’s not, because we can’t transfer these loans. If so, the private sector would demand a government guarantee, but there are solutions available without government guarantees. We are studying all possible solutions. The MPP strictly stands against amending the law on budget sustainability, because of the debt ceiling and budget deficit. However, the law is already being violated, so we have to make plans to fix it as soon as possible.

 Can you say how long it will take to survive the economic crisis?

 We are processing debt management. We will be able to repay loans within their terms, if we can improve the economy. After three or four years, we will see the possibility of mitigating debt to 40 percent of GDP. First of all, it’s important not to increase the economic growth, but of course, we will try to decrease the debt within a year or two to follow the law.

 

 

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Posted by on Dec 24 2014. Filed under Politics. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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