Yesterday Minister of Finance Mr. B.Choijilsuren reported the current situation of Mongolian society, economy, budget and finance.
Mongolian economic growth:
Mongolian main economic indicators are falling continuously over the past four years. Economy growth was 17.3 percent in 2012 and it is expected to be at 1.3 percent by the end of 2016.
Money supply:
Money supply has increased by 66 percent in 2014 compared to the 2011 and has dropped since 2015 and reached 9,85 trillion in Jan, 2016. In other words, one of the main reason for economic crisis was supplying large amount of money to the market which has not linked to the economic situation when balance of payments deficit has been increased and foreign investment has been declined sharply. As a result, risk in the banking system has increased, foreign currency reserves has significantly reduced and the Tugrik rate has weakened, concluded by the Minister of Finance.
Over the past four years, wrong monetary policy has been implemented. As a result, money supply has exceeded economic growth of more than 85 percent.
Cash flow has risen by 18 percent during 2011-2013 and has declined starting 2014 and reached its lowest level or MNT 655 billion in Feb, 2016. Cash flow has increased by MNT 183.7 billion and reached MNT 839,2 billion over the last four months which resulted cash shortage at first. Then, cash flow has sharply risen and deepened economic crisis.
Risk in the banking system:
As of first quarter of 2016, gross domestic savings was measured at MNT 7.9 trillion, outstanding loans was reached MNT 12 trillion while macro-economic instability was measured by 4.1 trillion MNT.
Deposit rate:
An average deposit rate has fell compared to 2008 but rose back in 2011 and reached 13.8 percent in June, 2016 due to increased demand for cash in the banking system and decreased financial strength of commercial banks. Foreign currency deposit rate increased by 1.9 percent due to decline in Tugrik rate. Commercial banks have increased deposit rate up to 19 percent to attract and find new capital resource.
Loan interest rate:
An average Tugrik loan interest rate has reached 15.5 percent in 2011 and has risen by 5.7 percent and reached 21.2 percent as of June, 2016.
The Government and Bank of Mongolia should receive long-term soft loans from partner countries to decrease loan interest rate.
Foreign investment:
Mongolia has attracted direct investment worth USD 4.62 billion in 2011 and it has declined year by year. In 2015, foreign investment was 110.2 million. As of first quarter of 2016, Foreign direct investment has fallen to USD 35 million. It can be seen as the clearest example of how investors loose their confidence in our country.
Total foreign debt of Mongolia:
As of first quarter of 2016, total foreign debt our country is at USD 23.5 billion which exceeds 210 percent of GDP.
Government debt:
Government debt reaches MNT21.3 trillion which equivalent to 78 percent of GDP.
This year, if the Government pay off both foreign and domestic debt without receiving new loans, only MNT 1 trillion 130 billion is expected to be remained in the state budget. In this situation, the Government will need additional MNT 5.8 trillion for its operation.
Our state budget, economy and financial situation are in difficult situtation. However, our government sees optimistic future and are developing a comprehensive plan to overcome the crisis.
Yesterday Minister of Finance Mr. B.Choijilsuren reported the current situation of Mongolian society, economy, budget and finance.
Mongolian economic growth:
Mongolian main economic indicators are falling continuously over the past four years. Economy growth was 17.3 percent in 2012 and it is expected to be at 1.3 percent by the end of 2016.
Money supply:
Money supply has increased by 66 percent in 2014 compared to the 2011 and has dropped since 2015 and reached 9,85 trillion in Jan, 2016. In other words, one of the main reason for economic crisis was supplying large amount of money to the market which has not linked to the economic situation when balance of payments deficit has been increased and foreign investment has been declined sharply. As a result, risk in the banking system has increased, foreign currency reserves has significantly reduced and the Tugrik rate has weakened, concluded by the Minister of Finance.
Over the past four years, wrong monetary policy has been implemented. As a result, money supply has exceeded economic growth of more than 85 percent.
Cash flow has risen by 18 percent during 2011-2013 and has declined starting 2014 and reached its lowest level or MNT 655 billion in Feb, 2016. Cash flow has increased by MNT 183.7 billion and reached MNT 839,2 billion over the last four months which resulted cash shortage at first. Then, cash flow has sharply risen and deepened economic crisis.
Risk in the banking system:
As of first quarter of 2016, gross domestic savings was measured at MNT 7.9 trillion, outstanding loans was reached MNT 12 trillion while macro-economic instability was measured by 4.1 trillion MNT.
Deposit rate:
An average deposit rate has fell compared to 2008 but rose back in 2011 and reached 13.8 percent in June, 2016 due to increased demand for cash in the banking system and decreased financial strength of commercial banks. Foreign currency deposit rate increased by 1.9 percent due to decline in Tugrik rate. Commercial banks have increased deposit rate up to 19 percent to attract and find new capital resource.
Loan interest rate:
An average Tugrik loan interest rate has reached 15.5 percent in 2011 and has risen by 5.7 percent and reached 21.2 percent as of June, 2016.
The Government and Bank of Mongolia should receive long-term soft loans from partner countries to decrease loan interest rate.
Foreign investment:
Mongolia has attracted direct investment worth USD 4.62 billion in 2011 and it has declined year by year. In 2015, foreign investment was 110.2 million. As of first quarter of 2016, Foreign direct investment has fallen to USD 35 million. It can be seen as the clearest example of how investors loose their confidence in our country.
Total foreign debt of Mongolia:
As of first quarter of 2016, total foreign debt our country is at USD 23.5 billion which exceeds 210 percent of GDP.
Government debt:
Government debt reaches MNT21.3 trillion which equivalent to 78 percent of GDP.
This year, if the Government pay off both foreign and domestic debt without receiving new loans, only MNT 1 trillion 130 billion is expected to be remained in the state budget. In this situation, the Government will need additional MNT 5.8 trillion for its operation.
Our state budget, economy and financial situation are in difficult situtation. However, our government sees optimistic future and are developing a comprehensive plan to overcome the crisis.