It has been over month since Prime Minister Ch.Saikhanbileg’s cabinet was approved by the parliament. Having not been able to achieve what they promised to do, the government that offered solutions not only grew bigger, but also became distracted. Meanwhile, the MNT rate against USD, which mirrors how the economy is doing, soared from 1,880 to reach 1,940.
Although Ch.Saikhanbileg established a general, but objective, diagnosis for economic conditions and proposed direct measures such as cutting expenditure, supporting the private sector, promoting investment, and properly managing debt, he is currently stuck; unable to actually carry out those actions with consent from the relevant authorities.
The primary cause of the current government’s distraction is the parliament. It is because members of parliament have all been infected by populism, and have been approaching everything by thinking only about how they can get re-elected in the upcoming election. Therefore, they are hindering the making of decisions required during a crisis situation, which ultimately holds back the long-term economic growth of Mongolia.


When the last government was replaced, the 2015 budget was approved with no clear owner. That is why they are making amendments to the budget after only two months of its approval. The newly appointed ministers have noted that the economic conditions are worse than imagined.
The major indicator for not only the quality of the public budget, but also the capability of the parliament, is the extent of deficit, rather than the total amount of budget revenue and expenditure. This was understood by the government after the 2008 economic crisis. This is why there was a decision to set the debt ceiling at two percent of GDP under the fiscal stability law, which was implemented in 2013. Furthermore, it was put into law that the the external debt ceiling was not to exceed 40 percent of GDP.
However, the budget deficit today equals five percent of GDP, not two percent, while the external debt ceiling is 60 percent of GDP, not 40 percent. The new finance minister has discovered that the previous government was providing inaccurate information about external debt. The sudden hike in the exchange rates has also influenced the debt ceiling being penetrated by the dollar bullet. The bullet would naturally go upwards, since the government has been issuing a lot of bonds without designating their specific use. Having raised a loan of 2.3 billion USD from foreign capital markets, the government has been paying six million USD each month, which means more than 70 million USD a year.
The Mongolian People’s Party (MPP), which has taken its time to make decisions, has recently entered the coalition government. The MPP has supported another “Zaisan-ing” (To Zaisan: An action by the Mongolian government to break the law and then change the law to avoid consequences), and passed a law to extend the debt ceiling to 60 percent. It can be clearly seen that this political party has become very good at doing this.
Just like how a household economy works, a country must also live on what they create and earn. However, the “actors” of parliament are talking about raising the debt ceiling to 10 percent of GDP (S.Byambatsogt, the MPP’s caucus leader, plays the leading role) and extending the external debt ceiling to 70 percent of GDP (roles being played by other MPP actors). It looks like a desperate series of borrowing more to pay back existing loans is about to begin. The two political parties are not capable of doing anything other than borrowing more to settle debts.
After his appointment, Prime Minister Ch.Saikhanbileg was confident about seeing reality objectively and resolving long-standing issues in a prompt manner. When he first addressed the parliament, he quoted Winston Churchill, a former Prime Minister of the United Kingdom, about offering blood, toil, tears, and sweat. Nevertheless, only after a month and a half, the Prime Minister is talking about raising the debt ceiling, which will have phased reductions over time, to acquire foreign loans. The parliament did not support measures to cut budget expenditures and reduce social welfare spending.
The important moves that started with the stated intentions of the Prime Minister have been stopped by the “actors” of parliament. Those moves included ending the provision of 20,000 MNT to children from households whose monthly income is more than several hundred thousand MNT, providing the 70,000 MNT student stipend to only those who have a high GPA, providing a pension equal to one’s service when a civil servant retires, stopping the provision of money granted to mothers of the Mother’s Honor medal if their children have grown up, and restricting government involvement in the business sector. These were timely actions that came with no other choice.


It can be said that Prime Minister Ch.Saikhanbileg currently lacks a quality that was demonstrated by another former British Prime Minister, Margaret Thatcher. It should be said, that despite facing strong opposition from the people and receiving harsh criticism, Margaret Thatcher implemented major spending cuts, such as privatizing state-owned enterprises, reducing taxes, and stopping the provision of milk for children. As a result, the private sector was greatly catalyzed and the economy was revived quickly (read more on http://jargaldefacto.com/five-lessons-from-thatcherism/).
Ultimately, accountability goes to the Prime Minister, not to the “actors” of parliament. If Prime Minister Ch.Saikhanbileg realizes this, his government can truly offer solutions. Otherwise, if his government depends too largely on the parliament and gets distracted, the country will not be able to get out of the recession and his government will end up becoming another “comedy”.
The economy can be revived and the trust of investors can be earned by taking measures other than cutting budget expenditure and increasing taxes, such as dramatically improving the business environment for the private sector, supporting fair competition, turning state-owned companies into publicly-owned companies, and stopping all kinds of government subsidies. The current fall in exchange rates is caused by a deficit of capital, which is caused by a lack of trust. These deficiencies can only be fixed by the confident vision of the government and its actions to support the private sector.
Otherwise, Mongolia will become a lost, debt-ridden country, where a few populists rule the nation in turn, while the government becomes richer as the people get poorer. Those who have the means to do so will start abandoning the country.
A doctor often faces the need to perform surgery in order to save the life of a patient, despite how much pain the operation could cause. In this crisis, the Prime Minister must be smart, knowledgeable, and decisive.
Trans. by B.AMAR

Short URL: http://ubpost.mongolnews.mn/?p=13238

Posted by on Jan 26 2015. Filed under Opinion. 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.


  1. “To Zaisan: An action by the Mongolian government to break the law and then change the law to avoid consequences”! NOW, I understand. Thank you for that useful definition, De Facto!

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