President of Mongolia Battulga Khaltmaa put a veto on the Law on 2019 State Budget and the accompanying legislation and parliamentary resolutions. President Battulga handed over an official letter to Parliament Speaker Enkhbold Miyegombo, requesting action in accordance with the corresponding laws and regulations yesterday.

The veto reads, “I have reviewed the Law on 2019 State Budget, which was adopted by the Parliament on November 2 and forwarded to the President’s Office on November 12.

I have no choice, but to veto the 2019 budget and remind the Parliament of the necessity to look back on its budget policy, adopt a tighter and more efficient budget that upholds the national interest and discipline, and fix the following issues that violate the law and contradict the national development policy and vision.”

The letter highlights several issues in the 2019 State Budget Law, including high budget deficit which is MNT 1.9 trillion or 5.4 percent of GDP, “MP’s money” amounting to MNT 8 billion and budget allocation for the construction of facilities without blueprint, and estimation of the mining revenue at MNT 3 trillion, which was concluded as unattainable by the National Audit Office. Furthermore, the President points out that the 2019 State Budget Law creates conditions for abrupt increase of public debt and that the projection of MNT 11.5 trillion budget expenditure is not compatible with the objective to maintain inflation within eight percent next year. In addition, President Battulga stresses that the lawmakers must create conditions for small businesses that are truly considered SMEs to be able to obtain loans with 3 percent annual interest from the SME Development Fund starting from January 1, 2019.

GOVERNMENT PLANS TO REDUCE INFLATION TO 6 PERCENT IN MID-TERM

Later on, the Parliament, at its plenary session, approved the 2019 Monetary Policy Guidelines. Officials highlighted that the monetary policy will focus on overall financial and economic stability, as well as creating legal regulations for consumer protection next year. According to the guidelines, the Bank of Mongolia (BoM) will implement policies to stabilize inflation measured by consumer price index at eight percent for the next two years and reduce it to six percent in the mid-term. “Since external demand and commodity price fluctuations remain high, the monetary policy will be directed towards overall employment in all sectors and preserve inflation within expectation,” said a spokesperson of the Parliament. BoM also viewed that the inflation can be stabilized under the target level in 2018-2019.

In order to reduce the impact of foreign economies, improve the country’s economic vulnerability, maintaining balance of external sectors and creating financial sources to repay foreign debts foreign exchange (FX) reserves must be raised, says the BoM and informed that the guidelines include objectives to increase FX reserves and necessary coordination between government bodies.

The BoM views that the financial market infrastructure and institutes must be strengthened to improve the effects of monetary policy and financial stability. Therefore, the guidelines included several objectives on protecting the rights of financial consumers, creating legal environment, adopting common internationally-approved practices of stable financing, identifying the standards of technology-based financial products and services, as well as ensuring the safety and reliability of customer information.

The monetary policy guidelines also reflected several objectives on improving assets of commercial banks and transparency of the BoM.

MP Javkhlan Bold addressed, “The monetary policy does not have to align with the budget. But the two policies should mutually support their respective objectives. Both revenue and expenditure of the 2019 budget are vastly expanded. The balance of payment and current account are expected to be under a deficit. Accordingly, there is a high possibility that inflation will rise next year; thus, we expect more tight monetary policy.”

Published Date:2018-11-16