Along with the submission of the draft of 2019 State Budget, the Minister of Finance Khurelbaatar Chimed announced that the bill allocated around MNT 500 billion to the Future Heritage Fund (FHF). However, the fund, which was supposed to have over MNT 800 billion in its initial plan, is still under deficit and the fiscal plan may affect the Government’s initiative to create the treasury until 2030. Approved by the Parliament in 2016, the Law on Future Heritage Fund took effect last year. The purpose of the fund is to save certain portion of mining sector revenue to cover budget deficit and major debt repayments. Finance Minister Khurelbaatar previously announced that the fund will not be touched until 2030 with the revised plan for the fund. The FHF was previously called the Human Development Fund (HDF), which was responsible for several social welfare, such as the child money program, and had an accumulated debts of MNT 1.71 trillion by the FHF was established. The Government’s idea was to finance the fund from the State Budget in an amount equal to about 70 percent of mining revenue. Accordingly, a total of MNT 357.7 billion was allocated last year and MNT 508.7 billion is expected to be financed this year. But the balance of FHF is currently under deficit as the fund’s asset was drawn for fiscal balance and HDF debt repayments.

10 percent of FHF net profits to be drawn to budget starting from 2030
On the contrary, the budget bill expects around MNT 3 trillion from mining sector in revenue. 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. Thus, failure to fulfill this target may affect potential financing to the fund.

According to the Ministry of Finance, the budget estimation is calculated in a triennial basis. The draft of 2019 budget bill allocated about MNT 1.1 trillion to the fund, of which MNT 600 billion will be spent to settle HDF debts and MNT 553 billion will remain in the fund according to a spokesperson of the Ministry of Finance. As for 2020, the ministry currently estimates MNT 754.5 billion financing for the fund and MNT 774.4 billion in 2021. The FHF will be financed from the State Budget until 2030 and will continue to operate as a sovereign wealth fund. The fund’s 10 percent of net profit will be drawn to the State Budget starting from 2030 according to the Law on FHF. Additionally, Finance Minister Khurelbaatar previously noted that the first MNT 500 billion will be circulated to raise fund as same as wealth funds of other countries and remarked, “We are currently studying Singaporean Temasek Holdings and Government Pension Fund of Norway.” Regarding the management, the Law on Future Heritage Fund states that a state-owned enterprise Future Heritage Fund Corporation will be responsible for the fund’s operation. A spokesperson of the Ministry of Finance informed that the ministry is currently drafting the rules and regulations of the corporation.

Published Date:2018-10-23