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An International Monetary Fund staff team led by Geoff Gottlieb visited Ulaanbaatar from October 18-30, 2017 to conduct discussions on the first and second reviews of the three-year extended fund facility program. Shortly after, the IMF Executive Board completed the first and second reviews of Mongolia’s performance under the program and approved the 79.1 million USD disbursement. Geoff Gottlieb, IMF’s mission chief for Mongolia, gave an exclusive interview to Unuudur and The UB Post.
The IMF’s resident representative, Neil Saker, made a statement last December. He noted, “There have been several positive changes as part of the IMF extended fund facility.” He said that foreign capital and investment has increased, economy and tugrug exchange rate have stabilized, also the interest rate of bonds in the international market has decreased. In your opinion, what are the most important improvements of the past?
The first key improvement came in early 2017 when the authorities agreed to a comprehensive mix of sound policies to stabilize the economy. This strong commitment allowed the authorities to secure substantial financial assistance from the international financial community and thus avert a potential financial crisis which was a real risk earlier last year. The second key improvement is that authorities have followed through on these commitments and used the better than expected external environment to over-perform on their key macroeconomic targets, particularly with respect to the fiscal balance and foreign exchange reserves. This performance has helped stabilize the exchange rate and reduce borrowing costs. The final critical improvement is with respect to the growth outlook. While much of the recent momentum is a function of external events, there has been renewed momentum in other sectors including manufacturing.
Coming into effect on January 1, 2018, some taxes will be increased as agreed upon with the International Monetary Fund. The decision to increase the personal income tax for high-income individuals was made last year. Many people are opposed to this decision. What do you think of this?
A flat income rate at 10 percent is not appropriate for a country like Mongolia especially given rising income inequality. A progressive tax system where richer people pay proportionally more is typical globally and is more equitable. The changes are structured to be pro-poor as the threshold before which the tax rates kick in has been raised from 84,000 MNT to 120,000 MNT and will gradually rise to 240,000 MNT by 2021. 85 percent of citizens will pay less tax than before. The highest rate of 25 percent is still low by international standards and will only apply to those who earn 3.5 MNT per month (three and a half times the average wage). There is scope for further reforms to improve the efficiency and fairness of the tax system and they will be a focus of the program going forward.
I heard that IMF told the Finance Ministry that there was an opportunity to erase the debt. Is it possible? As you know Mongolian debt is still high. Bonds will be maturing in the 2020s.
We are not familiar with this comment. In most cases, debt is not “erased”. Rather the government can ensure that it becomes less of a burden to the economy by reducing the ratio of debt to GDP. This primarily occurs by generating strong GDP growth while limiting the extent of new borrowing with strong fiscal performance. The government can also improve the debt-GDP ratio by lowering their interest bill which can be achieved by exchanging expensive debt with cheaper obligations as confidence returns and Mongolian debt becomes more attractive to investors.
Stepping back, from the outset of this program, we have believed that Mongolia’s debt will become safe and sustainable over the medium term provided the authorities pursued the appropriate policies, mainly with respect to a prudent fiscal policy, stronger financial supervision, and steady completion of mega-construction projects related to the mining sector. Debt is still high but the authorities have made considerable progress since program approval and the current trajectory for public debt is now considerably better than it was before. Public debt is currently approximately 85 percent of GDP and is now projected to fall to 73 percent of GDP by 2022. As a general matter, the fund does support efforts by authorities to take advantage of good market conditions to ensure a smooth repayment profile and low average interest cost.
The economic situation is becoming better because of increased coal export revenue. But I think there are risks. For example, maybe there are downside risks to the coal sector. What risks are there for the future of the Mongolian economy?
All economies that have a significant dependence on commodities are vulnerable to changes in global demand. Mongolia is not alone in this regard. The key is that the authorities use the policy tools at their disposal to limit the scope of these changes to destabilize the Mongolian economy. In particular, during periods of strong commodity revenues, the authorities need to reduce debt and build foreign exchange reserves. Such policies are the focus of the IMF program.
Legal reforms will be made in the banking sector. What is the main impact of legal reforms?
The objectives are to update the legal environment both to reflect the significant changes in the banking system in recent years and to be in line with global reforms passed as a response to the global financial crisis. The reforms will also improve the governance of the Bank of Mongolia (BOM) and its operations, improve the regulatory and supervisory framework, and strengthen the financial sector safety net.
Mongolian commercial banks were going through an AQR. Can you tell us about the results?
The BOM hired outside advisors to conduct the AQR and those advisors are still finalizing the report. We understand that the BOM wishes to make a public statement about the report once it is complete.
A fiscal council will be established. How will the council work?
The Fiscal Council is intended to be a high-level body with the aim of ensuring that the fiscal stance and the annual budget are consistent with the fiscal rules that Mongolia adopted in 2012, including the Fiscal Stability Law. Adherence to this framework would avoid the debt problems of recent years and would strengthen macroeconomic stability. Fiscal councils have been adopted in several countries in recent years and have generally helped in ensuring prudent fiscal policies.
When will an IMF staff team visit Mongolia?
The current plan is to visit Mongolia in the second half of January as part of the Third Review Mission.
Do you think the Mongolian economy will have a full recovery when the IMF program ends?
The main goal for the program is to ensure that key macro-policies (e.g. fiscal balance and exchange rate policy) and structural reforms (toward a more stable banking system, a stronger tax code) are adequate to lay the groundwork for high and sustainable growth. If this is achieved, vulnerabilities will have been substantially reduced. Nonetheless, given the size of challenges that Mongolia faced at the time of program approval, more time may be needed for a full recovery....
Amendments to the Minerals Law of Mongolia came into effect on January 1, 2018.
The changes to the law include a 30 percent tax for the primary shareholder of a mineral license if ownership of the license is transferred. Land available for license tenders will be determined by state agencies and then decided on by the Ministry of Mining and discussed by Cabinet.
The Mineral Resources and Petroleum Authority will accept outside suggestions when preparing a tender. An assessment committee will open, assess, and report on the tender process.
The Ministry of Finance expects that 36 billion MNT will be generated from issuing mineral resource permits and that the newly amended law will end special permit controversies.
Ulaanbaatar /MONTSAME/ Expansion works of Altanbulag border checkpoint in Selenge province and Zamyn-Uud border checkpoint in Dornogobi province are to be conducted with soft loan from Asian Development Bank and non-refundable aid from China respectively.
Renovating of the Altanbulag border checkpoint will make three entrance lanes into eight and four exit lanes into 15.
Currently, 900 passengers, 100 passenger vehicles and seven freight vehicles cross the Zamyn-Uud border check point an hour while as a result of the expansion, it will have capacity to cross 2700 passengers, 500 passenger vehicles and 35 freight vehicles an hour.
China’s Inner Mongolia admits cooking economic data, puts key road and subway projects on hold www.scmp.com
A second major Chinese region has admitted to severely inflating fiscal and economic data, pledging to mend its ways and tame government borrowings in the next few years in part by halting various debt-burdened public projects.
The admission by the authorities in the Inner Mongolia autonomous region comes after Beijing made preventing financial risk one of its top economic priorities for the next three years at a key national policy conference chaired by Chinese President Xi Jinping last month.
At a two-day economic policy meeting last week, the government of Inner Mongolia said its industrial output figure for 2016 should be revised down by 40 per cent, and its fiscal revenue for that year was 26 per cent less than initially stated, the official Xinhua news agency reported on Wednesday.
The northeastern rust-belt province of Liaoning made a similar confession last January, when the authorities said its cities and counties had fabricated fiscal data between 2011 and 2014.
Does halting of subway project mark end of line for China’s infrastructure building boom?
The meeting in Inner Mongolia confirmed for the first time that the government had halted a 30.5 billion yuan (US$4.7 billion) subway project in Baotou, the region’s biggest industrial city, financial news outlet Caixin reported on Sunday.
The meeting also yielded confirmation that another three subway projects in the regional capital Hohhot were on hold, according to Xinhua.
In addition, an expressway project linking Hohhot and Ordos had been suspended, Caixin reported, citing banking regulators.
China is struggling under a mountain of local government debt which analysts say is a source of fragility for China’s financial system and economy. The Ministry of Finance released figures last month that put the debt pile at 16.6 trillion yuan at the end of November.
Concern about the borrowings prompted rating agencies Moody’s and Standard & Poor’s to downgrade China’s sovereign credit rating last year.
In a separate report, Caixin quoted an Inner Mongolian finance department official as saying that since last year, the regional government had stopped setting revenue growth targets for lower-level governments, and eliminated them as factors in officials’ performance appraisals.
Can you still trust China’s economic data after province admits cooking books?
But a local government finance department official said local officials were not just cooking the books for their own benefit – better fiscal figures meant better credit ratings and cheaper debt issues.
Xinhua quoted Wu Wenming, a district chief in Hohhot, as saying that local governments were now committed to make “sensible” investment decisions to prevent “unreasonable debt”.
“Governments should live within our means and avoid excessive borrowing and irresponsibly creating [financial] risks,” Wu was quoted as saying.
Xinhua reported that after the adjustments, Inner Mongolia government revenue in 2017 should be 170.3 billion yuan, up 14.6 per cent up on 2016.
The report did not say how the corrections would affect Inner Mongolia’s gross domestic product, which grew 7.3 per cent in 2016 according to previously announced data....
The hundreds of thousands of bitcoins stolen from the Mt. Gox exchange four years ago could be recovered, but there are powerful forces against it, according to bitcoin entrepreneur William Mook.
The Tokyo-based virtual currency exchange handled around 80 percent of global bitcoin trades. Mt. Gox shut down and went bankrupt in February 2014 after suffering the biggest cryptocurrency heist on record.
The exchange said it had lost about 850,000 bitcoins – then worth around half a billion US dollars – and $28 million in cash from its Japanese bank accounts.
Mt. Gox blamed hackers for its lost bitcoins, pointing to a software security flaw. Later in March, it said that had found 200,000 of the missing tokens.
Not long after the exchange’s collapse, the public was shocked by the death of a virtual currency exchange First Meta’s CEO. The 28-year-old Autumn Radtke was found dead, having fallen from her apartment building in Singapore. Some media reported it was a suicide while others referred to it as a “questionable financial-sector death.”
“Autumn Radtke and her team and others, quietly found half the bitcoins that were supposedly stolen by Mt. Gox,” Mook told RT exclusively.
That shows the strength of the blockchain technology, he said, adding “We had hopes the balance of the 'lost' Mt. Gox coins could be recovered as well.”
According to him, Radtke was found dead shortly after a Japanese court was advised of the finding. “Her team and others associated with the effort disappeared. Websites closed down. This is a frightening development. That person and that team, me included, were frightened off.”
A cryptocurrency exchange in South Korea said it is shutting down and filing for bankruptcy after it was hacked for the second time this year. It lost 17 percent of its assets in the cyberattack.
The loss at the Mt. Gox exchange was judged by some investigators to have been a cyberheist, but it remained unsolved and pummeled bitcoin prices at the time. It was a significant setback for bitcoin with the value of the cryptocurrency plunging to $440 after Mt. Gox went offline. The value of bitcoin then slid to a 3-month low after the currency reached record highs above $1000 at the end of November 2014.
“Think about what a successful return of Mt. Gox's stolen bitcoins would have done to the value of bitcoin in the spring of 2014?” said Mook, adding “We would have seen $10,000 per bitcoin by that summer.”
However, Mook insists the case "does not change the nature of the blockchain technology or of bitcoin. It merely delays its adoption."�
The exchange’s bankruptcy has prompted Japan’s government to decide how to treat bitcoin, with local regulators starting licensing cryptocurrency exchanges. Japan has become the first country to regulate digital currency exchanges at the national level.
The Japanese regulations have required banks and other businesses to verify identities, keep records and report suspicious transactions.
Meanwhile, a group of Mt. Gox creditors has recently urged a Tokyo court to allow the exchange to emerge from bankruptcy now that its bitcoins have rocketed in value to more than $3 billion. They argued the 40-fold price surge since the exchange’s collapse means the company’s assets now dwarf its liabilities. However, depositors raise fears bitcoin’s recent rally would allow its disgraced former chief executive Mark Karpeles to emerge as a multibillionaire.
Karpeles who’s currently fighting charges of embezzlement in Tokyo, controls the company that owns almost 90 percent of Mt. Gox. At the current bitcoin price, Mt. Gox could meet all its liabilities and, under Japanese law, Karpeles would then receive his share of the surplus, a theoretical fortune worth well in excess of $2 billion....
Ulaanbaatar /MONTSAME/ On January 5, Mongolia paid off debt of Chinggis Bond as Prime Minister U.Khurelsukh confirmed debt repayment transaction of the Chinggis Bond at the Ministry of Finance.
In 2012 Government of Mongolia released Chinngis Bond, raising USD 1.5 billion. Out of the USD 1.5 billion loan remaining balance of the USD 127 million and its interest of USD 2 million were repaid today.
At the event of transferring the debt repayment, Minister of Finance Ch.Khurelbaatar said "Mongolia will repay debt amounted to MNT 3.5 trillion in 2018. Today, the debt of Chinggis Bond was completely repaid." The Minister also noted that the Ministry of Finance opened a notebook, writing a list of debts on it to remember every single day that Mongolia has debts to repay. He then handed over the notebook to the Prime Minister.
Ulaanbaatar /MONTSAME/ Coal transport in route Tavantolgoi and Gashuuunsukhait now runs normally.
The National Road Transport Center concluded agreements established with coal transportation entities and over 4700 trucks of about 60 entities that met requirements of national laws and regulations started coal transport in this direction. As of January 4, 120 coal trucks carrying 7800 tons of coal passed Ganshuunsukhait checkpoint and no jam has been created, informed officials.
The NRTC is collaborating with related organizations to run coal transportation normally preventing from cause of jam. In specific, the Center delivered their request to the Ministry of Mining and Heavy Industry to have information on volume of coal to be exported in 2018. Coordinating volume of coal to export with transportation plan is considered to create possibility to prevent from any jam and queue in coal transport, said the officials.
From 1 January, the Mongolian National Registration and Statistics Office has begun to change Mongolian travel passports to biometric e-passports. The cabinet initiated the changes to Mongolian passports to speed up clearance through immigration and for the prevention of identity fraud.
Mongolian passport holders do not need to extend the validity of their existing foreign passports. From 3 January Mongolian Consulates and Embassies in other countries are introducing the new biometric e-passports.
HOHHOT, Jan. 4 (Xinhua) -- A large silver reserve has been found in north China's Inner Mongolia Autonomous Region, local authorities said Thursday.
According to the Inner Mongolia department of land and resources, the reserve was found in Shuangjianzi Mountain in Inner Mongolia, south of the Greater Hinggan Mountains.
The reserve contains more than 110 million tonnes of silver ore. More may be found at greater depth or nearby, according to the department.
The silver reserves of Australia, Chile, China, Peru and Poland account for more than 80 percent of the world total.
Silver is widely used in industries such as aerospace, new energy vehicles and solar cells.