President’s ban on social insurance fund passes MPP causus www.zgm.mn
According to the MMP announcement on Monday, the President’s partial ban on the law on social insurance funds will be accepted. President of Mongolia Battulga Khaltmaa on Tuesday issued a partial sanction on the 2020 budget law, namely on the expected increase of the social contribution rate. However, other bans including Future Heritage fund and Advocacy Law can not be approved. As stated in the Law on the Parliamentary Procedure, if the President has made a partial ban, the decision will be partially accepted by the Parliament, said the Chairman of the MPP, Togtokhsuren Dulamdorj. The President stated, “As of September, there are about 19,000 companies that are registered on social insurance companies with a social contribution debt of MNT 176 billion. Therefore, if the social contribution rate rises from 2020, those companies’ debt will further grow. It will pose a risk of growing Social Insurance Fund deficit, decreasing the possibility of increasing the wages.” The pension system in Mongolia provides the benefits of a distribution or insurance premium to pension costs. Experts warn that in the future, longer-term retirement benefits and the need for proper and risk-free management of funds should be implemented regarding the increasing number of retirees. According to the updated population estimation, the population of Mongolia is expected to reach four million by 2030 and five million by 2045. Although fertility is steadily growing, the number of aging people is growing rapidly as well. Thus, the number of senior citizens in the total population is likely to reach 12.9 percent in 2030 and 16.3 percent in 2045, which is expected to double from current levels.“Fiscal revenues have overperformed since the start of the IMF‐supported program, but Mongolia’s pension system remains vulnerable. Without increases in the contribution rate, the deficit in the pension system is projected to rise from 2 percent of GDP in 2016 to 6 percent in 2030 and 11 percent in
2050 according to an analysis by the World Bank. This rising deficit primarily reflects an aging population and policy changes enacted in 2012 and 2017 adversely impacted the pension system design and incentives,” said Mr. Yoon Seok Hyun, the IMF Resident Representative in Mongolia.