The following interview covers timely political and financial issues with Member of Parliament and Head of the Parliamentary Subcommittee on Control of Public Expenditure Z.Narantuya.
The Democratic Party (DP) member expressed strong oppositions to the financial report given by Minister of Finance B.Choijinsuren, who is a member of the Mongolian People’s Party (MPP).
Minister of Finance B.Choijinsuren held a conference on Mongolia’s economic situation last week. Is it true that the economy isn’t in a dire situation? Are there any ways out of this situation?
As the head of the Parliamentary Subcommittee on Control of Public Expenditure, I studied Minister B.Choijinsuren’s announcement very carefully. I realized that the new government and newly appointed Minister of Finance haven’t yet found a new method or an escape from the challenges arising in today’s economy. If we were to sum up the announcement, the Finance Minister’s announcement gave the impression that Mongolia has no choice but to take out loans from international organizations and partner with other countries to address the state budget deficit, finance some projects, and pay the state’s debt on schedule.
Politically, the MPP used to criticize the former ruling party, the DP, in the past four years for trying to overcome economic difficulties by releasing bonds and using it to finance some projects and programs as well as for scheduled debt repayments. Now, the MPP is accepting this idea and saying in an indirect way that the economic difficulties can be suppressed only through foreign loans. This is how I interpreted the announcement.
The Finance Minister mentioned that foreign investment has gone down, economic growth has declined by 17 percent, and currency reserve has shrank. He also reported on the state deficit, but all of this isn’t new information. These statistics were discussed when MP Ch.Ulaan was the Finance Minister from 2012 to 2014, when the current Prime Minister J.Erdenebat used to be the Finance Minister, and even when Minister B.Bolor had been assigned to the same position by the DP. The former Prime Minister, Ch.Saikhanbileg, used to constantly make announcements about the general situation and ways to find solutions. The two parties, which had the most seats in Parliament, even worked together and enacted a parliamentary resolution to seek solutions.In particular, a program for measures aimed to overcome economic difficulties was passed through Parliamentary Resolution No.41 in 2015. The Finance Minister doesn’t have to talk about these issues in a loud voice that alarms the public. Most importantly, he should focus on ways to escape from economic challenges that have arisen.
Has the DP group in Parliament discussed this issue?
The DP group discussed this issue and formed a working group, which will analyze revenue and expenditure of the 2016 integrated state budget in detail.
As the Head of the Parliamentary Subcommittee on Control of Public Expenditure, I requested the Finance Minister to send me a report related to his announcement. The Finance Minister stated that there was a gap of some two trillion MNT in the state budget expenditure and revenue as of July. I demanded for detailed information on why there is such a large gap between the revenue and expenditure. He also stated that it’s necessary to increase expenditure. The most serious announcement was about the national deficit reaching 5.1 trillion MNT. Since such a large deficit was reported, I wanted clarification on what kind of additional expenditures resulted in this huge sum of deficit. I believe it is right for the subcommittee to discuss and make an assessment once the Finance Minister responds.
…Bank presidents never reveal the currency reserve amount. The economic situation depends on what they say. The consequences of their words can be very serious. The Mongol Bank’s President said something that could cause the economy to swing and shake. It’s truly unfortunate that he made an announcement that could lead to an artificial shortage of foreign currency…
If reality is as stated, what can be done to overcome economic difficulties besides getting loans from other countries?
As announced, the state budget has a deficit of 5.1 trillion MNT and 3.9 trillion MNT of it was spent on bond payment, and payment of foreign loans and their interests. Nothing was reported on negotiating on the debt repayment graph and other options for resolving the issue without causing extra burden on the state budget. Financial organization of any country can mutually agree on finance and investment terms. This is the first way out.
The second method is cutting the state expenditure and increasing revenue. The new government isn’t doing anything of this sort. For instance, the new government split agencies that were merged by the previous government to reduce expenditure. The General Taxation Department and the General Customs Office were integrated, but now, they have become separate organizations. The Professional Government has retracted the order to abolish deputy ministers, which was enacted to cut expenses. Under such condition, the expenditure will not decrease. It’s important to focus on reducing costs as much as possible considering the current difficulty in the economy.
Thirdly, I’m very worried because the Finance Minister and President of Mongol Bank made such a shocking announcement that could make the economic situation even worse. Moreover, the President of Mongol Bank made a very unprofessional political statement.
Bank presidents never reveal the currency reserve amount. The economic situation depends on what they say. The consequences of their words can be very serious. The Mongol Bank’s President said something that could cause the economy to swing and shake. It’s truly unfortunate that he made an announcement that could lead to an artificial shortage of foreign currency. The reason why the President of Mongol Bank is changed every six years and the ministers changed every four years is so that they can supervise one another and ensure that the economy doesn’t swing from excessive fiscal expansion and monetary supply. Yet, the Mongol Bank President made a statement as if he was a politician. I wish that people in high position would maintain their professional approach to issues.
It was reckless of the Finance Minister to say that the potential deficit is 5.1 trillion MNT. It’s irresponsible that he included every debt payment, including for 2017 and 2018, in this amount, instead of talking about the amount projected in the state budget.This has alarmed the public. I’ve mentioned some solutions just now and other solutions have been mentioned by the Prime Minister and Finance Minister. The DP is observing what kind of solution the new government can come up with within 100 days. We’ll see how the new government executes its action plan.
The new government, which rose to enforce their action plan, must take decisive steps. Yet, the government is reducing revenue by 1.8 trillion MNT and increasing expenditure by 2.4 trillion MNT when they are about to make a supplementary budget. Logically, this goes against their fundamental political party target.
The Finance Minister’s announcement gave the impression that the current situation is a result of an incorrect policy implemented for four years by the DP. He said that over 530 billion MNT was allocated without discussing it with MPs for the Good Fence, Good Herder and Good Student programs. Can you explain this?
The former [Speaker of Parliament] notified that not a single penny was being spent from the state budget for implementing the “Good” programs, launched in spring this year. The programs were, for sure, financed by a loan established between the Mongol Bank and commercial banks. The report about doing unauthorized financing and budgeting funds that weren’t projected in the fiscal is false. Finance Minister B.Choijinsuren should have initially studied everything very carefully. He should’ve reviewed the agreement between the Mongol Bank and commercial banks. Launching these programs didn’t cause trouble for the state budget.
Among loans, the loan for herders has the best repayment rate. The government doesn’t aid the repayment of herders’ loans. Only herders repay their loans. Decreasing interest rate of this loan, which charged under 30 percent interest rate, was a policy to promote household production of herders.
In addition, there weren’t any instances in the past when herder’s loan caused some kind of difficulty for commercial banks. The minister’s announcement indirectly indicated that these programs, which are operating normally, should be stopped.
Hasn’t the cabinet decided to stop Good Student and Good Herder programs at their latest meeting?
I will not say that “Good” programs were wrong. For example, the Good Student program lessens burden on every member of the public. I’ll only say that it’s better for any political party that gains political power to learn to accept and continue beneficial programs in the correct way.
Mongolia’s foreign debt amounted to 23.5 billion USD, which is approximately 50.7 trillion MNT. On top of that the Finance Minister announced that this year’s fiscal deficit will equal the total national revenue, indicating that providing wages to government officials and civil servants will be challenging. Many people started to think that the former ruling party, the DP, had played with the Mongolian economy in the past four years. What’s your position on this?
That’s right. I think that the Finance Minister tried to make people understand it’s crucial to get loans from different sources by listing a bunch of excuses, including the fact that the national debt has become extremely large and that it’s become difficult to hand out wages and pensions as merely 1.3 trillion MNT remain in the state budget.
On the other hand, from my perspective as a politician, I think that he has slightly hinted that the MPP can’t implement their action plan. The MPP promised many things at the parliamentary election this year. They promised to continue giving children’s monthly cash allowances and to increase wages. Now, the MPP is trying to say that it can no longer carry out their social welfare action plan.