Over 200 projects financed with Chinggis Bonds

MPP group proposes oversight of projects implementation

On November 1, Prime Minister N.Altankhuyag reported to the parliamentary plenary session
on Chinggis bond spending, on Mongolia’s debt and responded to questions of the MPs.

Since 1990, the government of Mongolia borrowed a total of US$2.8 billion loan from International
banking and financial organizations and partnership countries, paying back US$990.9 million. As of the
first half of 2013, Mongolia’s foreign debt reached US$2 billion or Tgs2.9 trillion, equaling about 17 percent of GDP in 2013. There were 189 projects and programs financed from the money borrowed from foreign countries; 161 projects were completed and 28 projects and programs are in progress.

The foreign debt is expected to be paid by 2052, the loan payment to permanently grow by 2024 and then
starting from 2025 radically decrease. The Government of Mongolia traded US$1.5 billion in total at the
global market under the Chinggis bonds in 2012; US$500,0 million for 5 years at 4.125 percent interest and
US$1.0 billion for 10 years at 5.125 percent interest. The interest rate of the bond money needs to be repaid
every year with repayment of the main debt by 2018 and 2022.

Tgs2.0 trillion Chinggis bond money was approved to be spent for the realization of 204 road construction
projects, engineering infrastructure, energy, railways, technical and technological innovation, construction
material production, mining, aviation transport, and housing. As of October 22, 2013, Tgs837.9 billion has been allocated. Tgs256.3 billion was assigned for building local roads. Almost 700 km of roads of the total 1800 km have already been paved, the basis for 250 km of road is being laid. Tgs32.4 billion was assigned for the ‘Gudamj’ (Street) project to renew cross-roads in the capital city where traffic jam frequently occur, build horizontal and vertical high speed roads and build roads and infrastructure in gher districts. There were 13 cross-roads reconstructed, and construction work at three cross-roads is near completion.

Car parking at Hui Doloon Khudag was also built with the bond money. Tgs60.6 billion was allocated for
housing, social and engineering infrastructure constructions, networking, and building engineering
infrastructure in Ulaanbaatar gher districts, etc.

Tgs270.2 billion is being granted through commercial banks to support wool, cashmere, hot houses,
milk and milk production business by renewing their equipment and machinery. US$83.1 million is being
spent from the Chinggis bonds for implementation of a 1800 km railway project in the Tavantolgoi-Sainshand- Choibalsan and Tavantolgoi-Gashuun Sukhait directions.US$7 million was transferred
as 30-percent prepayment of the equipment project to restore a building materials factory. The
factory building maintenance and infrastructure renewal is underway.

The building is envisaged to be complete in one year. The government authorized the Development Bank to
finance US$100 million for starting a government housing corporation for trading government securities. The
Development Bank issued the first round of financing worth Tgs50,0 billion for the Buyant-Ukhaa housing
construction.

The geological and engineering research and assessment of environmental impact for the
construction of the power plant relying on the Tavantolgoi mine was also performed from the Chinggis
bonds. It was agreed to allocate the financing in the national currency worth US$50.0 million through the
Development Bank for an iron ore refinery and construction of a steel framework building.

The MPP group in parliament made the following conclusions in regards to the Chinggis bond spending
and foreign debt of Mongolia. The conclusion was introduced by N.Enkhbold, chief of the MPP
parliamentary group. Spending US$1.5 billion Chinggis bond to a certain extent has favorably influenced
Mongolia’s financial and economic situation.

However, the positive effects of spending this money leaves much to be desired. The MPP group considers that taking this loan when the time was not properly calculated, and when projects were not ready, burdened the country with additional interest. As of 2013, Tgs837 billion of the US$1.5 billion has been used, Tgs110 billion or 10 percent was repaid for interest only. The MPP group reminded that when adding the debt of the Chinggis bond with domestic debt and other potential debts, Mongolia’s foreign debt surpasses 50 percent of GDP. Spending the Chinggis bond is actually out of parliament’s control and causes public suspicion related to corruption, bribery and political financing. The MPP group considers it appropriate to set up a special working group in parliament to oversee  implementation of the projects and programs financed from the Chinggis bonds. The MPP group proposed to stop uncontrolled spending of the bond money by the Cabinet, perform the work by concession agreements with the support and collaboration of the government and private sector, and create favorable conditions for involving and encouraging the creative
private sector.

Source:Mongol Messenger