Mongolian Parliament approves adjustments to the 2013 State Budget

Expenditures cut by Tgs 814.8 billion

On October 25, parliament approved a law to revise the Budget Law for 2013 and cut investment
expenditures by Tgs 425.7 billion. In total, the sum of 2013’s budget income was disrupted by Tgs1.8 trillion and the budget balance deficit was going to reach 6.8 percent of GDP. In this situation, the government presented parliament with a draft budget adjustment for this year. According to the adjustment, the 2013 budget was cut by Tgs799.2 billion; total expenditures by Tgs814.8 billion; and thus the budget deficit will be
Tgs340.8 billion, equaling 2 percent of GDP.

“The adjustment made to the budget is more realistic. In order to ensure 2 percent of GDP, there is no
other way but to cut expenditures. Investment expenditures will be cut by Tgs425 billion. About Tgs280 billion will be saved from current expenditures. We are working to save money and not create new debt. We
decided to cut unnecessary, unplanned and uncontrolled budgeting. The budget adjustment lays the basis for
the 2014 budget to be more realistic,” declared Finance Minister Ch.Ulaan. He underlined that buildings, the
completion of which were not clearly defined, the drafting and projecting of which were not ready and will
not be implemented this year, will be postponed. “The world economic situation is not stable, internal reserves are not steady and the market situation of our two big neighbors is not clear enough. This unfavorably affects our economy. We made adjustments to improve the budgeting. Introducing
a budget adjustment at the time of income abundance makes the budget worse, but in difficult situations,
the adjustment makes the budget improve,” reiterated Ch.Ulaan.

In the first nine months of this year, budget income shortage reached Tgs1.2 trillion, Tgs150 billion was
not provided to budget due to the deficit of export production. The price of Mongolia’s export products
such as copper, gold and coal on the global market dropped which influenced the budget income.
“Breaking off a significant amount of income was caused by the foreign market environment. Income worth
Tgs350 billion was cut due to import shortage and this is related to mining investment. With regards to the
Tavan Tolgoi mine, coal sales for some period stopped as there was no possibility to sell it for the devalued
price made according to the previous contract. It was planned in the 2012 budget that the Oyu Tolgoi agreement would be revised with an intention to introduce Tgs445 billion income injection. But this income failed to be realized. 

The Oyu Tolgoi agreement was signed at a time when windfall tax became invalid and incremental
taxation was imposed. Oyu Tolgoi did not pay royalty tax. Now, talks  are underway to get this tax from
Oyu Tolgoi. As a consensus was not reached, budget income was disrupted by Tgs445 billion. However budget income deficiency was caused mostly due to outside factors. We are pursuing an aim to mobilize our home reserves, generate income domestically and surpass income by Tgs200 billion,” commented the Finance Minister.

As budget income was disrupted, the government proposed to withdraw 265 projects from the list of planned investment projects to be financed in 2013. This was the major reason for making the budget adjustment. In his report to parliament, Prime Minister N.Altankhuyag reprehended the growing number of unfinished, cost growing construction projects and reminded them to terminate this situation in the future. 

There were two major deficiencies in the construction projects that were built from the state
fund. First, most construction remained unfinished for years, some for even 6 years but continued to receive money from the budget. The budgetary cost for this period grows ten and even a hundred times. We have plenty of these kinds of construction projects,” said Ch.Ulaan.

Removing the construction objects from the list of the 2013 budget investment was at the focus of MPs
attention. The members supported the proposal to include and implement more than 100 construction projects in the 2014-2015 State Budget and terminate some projects. The members agreed to investigate the reasons for the growing budget cost of some construction projects and programs in cooperation with the State Auditing Authority and the government, and submit them for parliament’s consideration. It was decided to study and assess every unfinished construction of buildings. It was decided to finance road and
energy projects from the Development Bank. The majority MPs welcomed the proposal to set up a state authority to be responsible for building and construction projects from budget funds and start operating in 2014.

Source:Mongol Messenger


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