Surprising figures from pre-election year budget

ZGM DAILY

2018-10-15 12:40 GMT+8

The Parliament is currently discussing the draft bill on 2019 State Budget. As expected of a pre-election year, a significant amount of financing has been allocated to local budgets. On the other hand, the mining revenue, which is expected to account for 27 percent of total budget revenue, was increased by 76.4 percent compared to 2018 budget.

Considering the external environment, the World Bank and Asian Development Bank recently upgraded their outlook on Mongolia’s economy; however, both banks warned the Government to remain wise on expenditure. “In some senses, the revenue performance has increased, so it does give the Government more flexibility.

What they have got to do is to use that flexibility wisely. I would say to them that the best course of action going forward is to continue the focus on building up the buffers and keeping control of current expenditure,” said Declan Magee, Senior Economist at ADB.

As for the World Bank, the recent regional economic report stated that the “Growing political uncertainty could induce a sudden relaxation of the government’s commitment to structural reforms.

Mongolia’s growth prospects could be adversely affected by the consequences of an escalating trade war and a potential reduction in global demand-mainly from China-for coal, copper and other commodities and the resultant decline in global commodity prices. Weather related shocks, resumption of non-trade barriers at the border with China, could also significantly affect Mongolia’s coal exports.”

Expenditure

The draft of 2019 budget allocated MNT 2.08 trillion on construction and another MNT 1.2 trillion on 877 development projects. Both the allocations double the last year’s amount. These will be spent on constructing 117 schools, 143 kindergartens, 62 extension of primary care centers and 34 dormitories.

As the Prime Minister highlighted, the local budgets have been increased dramatically. A total of MNT 189 billion will be financed for local budget. The amount triples the 2018 budget, which was only about MNT 59 billion. Furthermore, allocation to the Local Development Fund raised by 62 percent, to MNT 144 billion, compared to MNT 89 billion in 2018.

Revenue

Under the tax reform, the budget expects MNT 8.58 trillion in tax revenue, which was MNT 6.2 trillion in the 2018 budget. Additionally, the mining revenue is facing a heavy criticism as the 2019 budget is in plan to collect MNT 3 trillion from mining.

This is around 76.4 percent higher than 2018 expectation of MNT 1.7 trillion. The draft expects to fulfill this amount by exporting 42 million tons of coal and 1.4 million tons of copper. As of August 2018, Mongolia exported 23.4 million tons of coal, 960,000 tons of copper ores.

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