Budget deficit sees a decrease but expected to rise in the second half of 2015


Gogo.mn spoke with the State Secretary of the Ministry of Finance, Kh.Gantsogt, regarding current financial issues, with a focus on the state’s budget deficit.

As of the first half of this year, Mongolia’s budget deficit equaled 534.9 billion MNT. The deficit was down by 716.3 billion MNT from projections. What primarily influenced the decrease? 

Firstly, import has decreased by 30 percent. Import taxes including customs and VAT were not being generated, and that was one of the reasons for the budget deficit. Secondly, revenue from the oil sector was decreased by twice its projections, because oil prices were twice as low as the previous year’s estimations. Due to these two decreases, budget income was cut. The revenues of domestic VAT, personal income tax, and other taxes are at 80 to 90 percent fulfillment.

In regards to expenses, from the beginning of 2015, the Cabinet decided to determine their importance and not finance unnecessary expenditures.

Also, summer is already halfway finished, and the Cabinet decided to not start any new construction work, and cut back on expenses for training, seminars, anniversaries, and conferences.  As a result, the budget deficit is decreasing.

 What about budget deficit estimations as of the end of this year? 

In the first half of the year, the budget deficit was over 500 billion MNT. There are risks that incomes will not be fully met, so in the last half of the year the budget deficit may increase by 200 to 300 billion MNT.

 What choices does have the Cabinet for recovering the deficit? 

Tax organizations are focusing on mitigating the budget deficit quickly, and on improving income accumulation without burdening business owners. If we can’t make up the planned revenue, we have no other choice than cutting on expenses. Sometimes we need to cut on expenditures to overcome difficulties. 

How about the amendments to the law on budget sustainability? 

We haven’t discussed this issue yet. There are some conditions in accordance with the law. For example, amendments will be made if the budget deficit exceeds three percent of the nation’s GDP. As for now, it hasn’t reached that level. 

Mongolia is negotiating with international banks on taking out a development policy loan (DPL) package. How is this issue progressing?

We are negotiating with Asian Development Bank, Japan International Cooperation Agency (JICA), and World Bank, but a final decision has not been made yet. 

How much time is needed?

Quite a long time will be needed, not depending on us, because there are certain processes that must be followed. First, they need to conduct research, and then a governing body makes the final decision. But we believe that a final decision will be made in the near future, maybe ahead of September. 

During the Prime Minister’s visit to the U.S. the World Bank reported that they will issue 100 million USD to Mongolia for budget deficit recovery. Was the money deposited to the state? 

No, at the conference they said that they would research and support a loan. Of course, they will not give us the money the day after. Specialists will conduct research and complete the necessary documents. As for the World Bank, its board of directors will make the final decision. This issue is now continuing, so we cannot say that we will receive the money today or tomorrow. 

In May, the Cabinet decided to release bonds of up to one billion MNT this year. Bonds valued at 161 million USD have been released. When will the next trading be organized?

The next bonds will be released ahead of the new year. Currently, we are studying the bond market. The Government is searching for the most appropriate time for their release, namely with the lowest interest and biggest demand. There are several factors influencing this issue. We are observing Mongolia’s political situation and economic conditions, as well as foreign market conditions.

Due to Greece’s recession, and rumors about the Federal Reserve Bank of the U.S. increasing its policy rate, the bond market is fluctuating a lot. Mongolia will observe these situations and release bonds at the most appropriate time.



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Posted by on Jul 28 2015. Filed under Business & Economics. 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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