MPs criticize bond sales in 2009

The general reaction of MPs to the government’s performance in regard to the economy last year was one of dissatisfaction as Parliament discussed in Friday a report on execution of the general budget of 2009 and another report by the National Audit Agency on the budget. The reports put the budget income at MNT1 trillion 994 billion, or 32.9 percent of GDP, while expenses stood at MNT 2 trillion 336.6 billion, or 38.6 percent of the GDP.

The report said the main reason why income fell short of the estimated MNT 2 trillion 78.5 billion, was that the quantum of tax revenue was MNT 189.5 billion less than expected, because of fluctuation in currency exchange rates. Besides, the recession led to 24,510 companies closing down or failing to make a profit. Some, including state-owned companies or joint ventures, did not pay tax, with no clear legal justification. The report claims Ulaanbaatar Railway, jointly owned by Mongolia and a Russian State-owned company, should have paid MNT 806 million, the Mongolian Stock Exchange MNT 27 million, and Mongolshuudan Bank MNT 125 million, while Mongolbank did not distribute any dividends.

The Government sold bonds to keep itself going. According to the National Audit, a total of MNT 446 billion worth bonds were traded in 2009, way above the figure for the year before. This meant the government paid 2.7 times more as interest. A cross section of MPs criticized the way MNT 219 billion was taken from the Mongolia Development Fund to cover the budget deficit, calling it “extremely poor financial management”. They also said this was one reason behind the inflation, the fall in MNT value, and general economic weakness.

Finance Minister S.Bayartsogt defended the sale of bonds by saying the Government had no choice. MNT 90 billion of bonds were sold to meet constant budget expenses, MNT 6 billion more raised the money to provide apartments to government employees, and another MNT 75 million was spent on providing support to gold miners. He justified these by saying the Government expected demand for apartments to revive construction companies, and increased gold production would replenish foreign currency, arresting the fall of MNT and halting inflation. Since there were no savings from the past when the country had spent all that it earned, the Government could stave off a crisis only by selling bonds and seeking help from the IMF and the World Bank to meet a shortfall of MNT 700 billion.

He reminded MPs that another reason why the Government sold bonds was to save Zoos Bank from going bankrupt. This required MNT 100 billion. He said the Government had been unaware that Ts.Myanganbayar of Mongol Gazar had mortgaged the company’s Olon Ovoot license with Anod Bank.
source: www.news.mn