November 29, 2011 on: Economical

Interview with D.Khayankhyarvaa, the head of the Mongolian Standing Committee on Budget, about the proposed 2012 state budget.

Q: The committee has decided to cut about MNT 1 trillion from the proposed 2012 budget. Why? A: The proposed 2012 budget had a budget deficit of 4.1 percent of GDP. Economic growth was estimated at 25 percent, but the proposal was criticized by economists, the World Bank, and international organizations. Even Mongol Bank sent a note warning that if expenditures weren’t reduced by MNT 1 trillion, we would not curb inflation. The committee decided to accept these warnings. Also, the MPP and DP caucuses decided to concentrate on the country’s economy when passing the proposed budget. Q: What principles guided you in making the cuts? A: The committee took the position that economic stability after the end of the parliamentary session was more important than political issues. First, we cut expenditures on new office construction; second, we reduced investment by 24 percent. In conclusion, about MNT 1 trillion will be cut. Q: What about current expenses? A: An increase in the number of state workers has been canceled from current expenses. But the issue of salary and pension increases was difficult to decide, because it might cause inflation and hurt small- and medium-sized businesses. Specifically, if salaries were increased before the Tsagaan Sar celebration, and if the elderly and disabled received their MNT 1 million allowances, much cash would flow into the economy. In this case, citizens would suffer. Therefore, the committee decided to increase salaries from April 1, 2012 and October 1, 2012. The MNT 1 million allowances will be granted between March 1 and June 1. A total of MNT 900 billion has been cut from budget expenditures, and the budget deficit has been reduced by 1.1 percent. Q: Do you think the changes meet the requirements of the International Monetary Fund and World Bank?  A: I think the budget will meet the requirements of the IMF and WB. Q: Budget discussions are continuing. Could there be other cuts discussed by the committees?  A: I think large changes will not be discussed. The Finance Ministry is working on controversial suggestions for the budget. According to the ministry, the budget is the country’s basic document for development, and there could be demands for things that would be the responsibility of the Government. Q: Some people oppose the budget. For example, some kindergarten teachers went on strike for raises beginning January 1, not later in the year. But the committee has decided to push those raises back until April or May. What do you have to say about that? A: I understand that employees of state organizations have the right to demand promises from political parties and the government. But the world recognizes there is an economic crisis, and many countries are limiting budget increases and cutting expenses. The committee agreed to increase salaries. But if we increase them too soon, we will not curb inflation, and the country would be put at risk. Q: How has the 2012 election affected the budget proposal?  A: The original budget proposal was too political. MPs said that election promises should be implemented and that required capital. But MPs now understand that the budget should not be affected by political rhetoric. Q: What about a draft election law?   A: The MPP and DP have reached an agreement on the draft election law in principle. I think some issues of election procedures still need to be decided.


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