Parliament debates on budget expenditure

Concerns raised about Mongolia’s foreign debt ceiling

Parliament began the second phase debating of the Law on State Budget for 2014. On October 10, the first
discussion of the budget law discussion took place. The government draft envisaged the State Budget income
for the next year to be Tgs6.8 trillion, expenditures Tgs7.2 trillion and budget loss equaling two percent of
GDP. Prime Minister N.Altankhuyag said they intend to cut off ineffective expenditures from next year’s budget. The Tgs7.4 trillion expenditures for 2014 will be reduced to Tgs7.2 trillion saving Tgs200 trillion, commented the head of the government.

Projecting of school funding by each district or soum (for example, of a school building for 320 children)
will be changed. Making projections their own way cost the State Budget Tgs18 trillion a year, said the Prime Minister. “We will change this and follow the principle of building a school for 320 children by one and the same scheme. This will enable us to spend Tgs12 trillion for other things,” he added. Planned budget changes and increases due to the slackening of construction work, difference in budget expenditures of building of the same construction must be changed, commented N.Altankhuyag, indicating that expenditures could be saved if rightly preparing budget and exercising budget control. For example, construction of the hospital building in the Khan-Uul district started with Tgs17 trillion but now reaches Tgs31 trillion. Difference
between budget and cost for school buildings to be built in the neighboring three soums was Tgs1 trillion.

Operating budget expenditures in 2014 was calculated by reducing it 5 percent against the previous year.
Vacancy staff of budget agencies will not be increased, new financial expenditure investment was restricted.
Budget expenditures in 2011 increased sharply by Tgs2 trillion going rapidly up since then along with growing purchase of material property, overseas assignments, receiving foreign guests, holding seminars and meetings, etc.

Next year, these expenditures will be cutoff. The excess of government expenditures will be controlled but
responsible budgeting, investment and construction will continue, assured the Prime Minister. In 2014, budgeting from the state fund will be assigned for the construction of 58 kindergartens, 64 secondary education schools, 48 hospitals, 9 cultural centers, and for building one kilometer of bridges.

Road construction will be performed with Chinggis bond money. Tgs200 trillion was budgeted for
operating expenditure growth or wage and pension increases. Depending on labor productivity and sector specifics, the growth will be different. Granting Tgs20,000 in child allowence and monthly student’s stipend will continue, Tgs45,000 allowance given to students of professional educational centers will increase to Tgs70,000 for which an additional Tgs12.5 trillion will be needed. A total of Tgs400 trillion is envisaged as additional expenditure, namely, Tgs34 trillion for education, Tgs44 trillion for the health sector, Tgs23 trillion for new investment and workforce and Tgs31 trillion for compensating for years of
service and retirement insurance fees.

The MPP group in parliament considers that next year’s draft budget was not well processed by
the government and some provisions violate relevant law. They are concerned with Mongolia’s foreign
debt reaching nearly Tgs10 trillion. Today the foreign debt of this country climbs to Tgs8 trillion, but the
government is planning to increase this sum next year by 2 trillion.

According to the budget stability law, Mongolia’s total debt in 2014 was legalized to be less than 40 percent of GDP. “This law can only be changed by two-thirds of MPs attending the plenary session. This law was debated, approved and supported to become state policy by three governments and two parliaments. But today, cabinet members and rulers intend to draft the law bringing the debt amount to 50- 60 percent of GDP. This will seriously impact the state policy and quality of continuity. Secondly, next year’s
debt rate and the following year’s will reach 70 and 80 percent creating uncertainty and a risk situation in the
future. In the final run, the people will bear all responsibility for the situation the MPP group considered, and urged parliament to strictly follow the law on budget stability,” said N.Enkhbold, chief of the MPP parliamentary group.

Mining revenue occupies a significant role in the budget income. Members emphasized that budget
income directly depends on the objective mineral resource price calculation. “ Actual price of copper
in 2012 was US $7,872; in 2013 by pending actual cost, it is calculated to be US $7,336. Meanwhile in 2014, the copper price is expected to be US $6,800 or about US $50-1000 less. Today, coal is being sold for US $50. In 2013, the planned price of one ton of coal was calculated at US $81. Unreasonable calculations create more problems. How objective and reliable are these calculations? ”asks PM M.Enkhbold.

Price calculations on copper and coal were made relying on the average cost in the past 12 years announced by an international organization – gold between US $1269-US $70, raw coal between US $64.5-US $120, copper US $6,837, zinc US $1,987,iron ore, US $101-US $110, fluorite US $210-US $316, said Mining Minister D.Gankhuyag.

According to answers of the Prime Minister, cabinet ministers, the budget cost for the construction
of one kilometer of road in 2013 was approved at Tgs530 million, in 2014 the same cost was calculated with an additional 10 percent. Tgs10 trillion will be financed from the Development Bank for projecting construction of the Sainshand industrial complex.

Earlier, 1072 shares of the Erdenes- Tavantolgoi company were given to citizens. When will these shares will
be converted into money, asked MP Ts.Nyamdorj. “Erdenes Tavantolgoi is a shareholding company today.
Every Mongolian citizen enjoys 1072 shares. This is intangible property. The government implemented actions to increase the Tavan Tolgoi company value. According to Parliament Resolution 39, we now have to select a strategic investor and preparations for that are almost complete. The value of Tavan Tolgoi shares will increase when new shares are issued. At that time, the cost of the 1072 shares in the hands of the citizens will go up. This is the principle rule of free market” replied the Mining Minister.

The government has submitted the draft law on the adjustment of 2013 budget law to parliament as
this year’s budget income has been interrupted and conditions emerged that make it insufficient for financing
some planned projects.

Source:Mongol Messenger


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