A Cabinet working group tasked with investigating the operations of the Development Bank of Mongolia (DBM) uncovered 1.3 trillion MNT in financial violations, according to the head of the working group, Vice Minister of Justice B.Enkhbayar.
Vice Minister B.Enkhbayar held a press conference on October 10 to discuss the findings of the investigation and release a report.
DBM was founded to provide loans to execute large development projects. From 2011 to 2016, the government presented DBM with 160 resolutions to fund different projects. The working group’s probe found that some of the DBM-funded projects were notapproved by Parliament. The bank is responsible for getting parliamentary approval in order to fund projects each year. Other violations were also found during the process of the investigation.
Failure to issue Chinggis Bond funds in USD resulted in a loss. Interest on the bond has increased due to the money being in MNT. The loss was calculated to be 694 billion MNT as of the day the investigation took place. Vice Minister B.Enkhbayar said, “This is a matter of incompetence on the part of the Development Bank administration.”
The Vice Minister also pointed out that DBM had accrued excessive operational costs, such as 3.2 million USD in legal advice and technical consultation with a price tag of three million USD.
The working group found that DBM did not take precautionary steps regarding exchange rates. Looking at the bank’s sources of funding, 1.5 billion USD was from the Chinggis Bond, 600 million USD came from the Euro Bond, and 24.3 billion JPY from the Samurai bond. The report compiled by the working group stated that DBM did not account for the risks of rising exchange rates, and experienced loss due to transferring the JPY Samurai Bond to other currencies. When the JPY exchange rate changes by one yen, the loss increases by 25 billion MNT.
The spending of DBM executives was also included in the report. DBM CEO N.Munkhbat is currently under investigation by the Independent Authority Against Corruption. The working group found many violations linked to the CEO, and his travel expenses were considered to be excessive. In an evaluation of expense reports, one employee spent 1.24 million MNT a day on a trip to Saint Petersburg, Russia, and four employees spent 11.92 million MNT in four days.
Two examples of unapproved funding included a loan issued to the Mongolian Stock Exchange and a loan for the construction of an apartment complex in Yarmag. DBM is also accused of inflating the prices of projects. A one kilometer road in Yarmag was first estimated to cost 440 million MNT but the final cost of its construction was 1.8 billion MNT.
The working group will later report on which businesses received loans from DBM and the remaining balances for the loans.