‘The fact that the country cannot measure its fiscal efficiency is extremely regressive’
- By Misheel Lkhasuren -
- Oct 21,2022
The Secretariat of Parliament organized the “Budget-2023” public discussion on October 19 at the State Palace.
The open discussion, held for the first time, brought together members of Cabinet and Parliament and more than 700 online and in-person participants, including ambassadors, economists and researchers.
At the beginning of the discussion, Speaker of Parliament G.Zandanshatar informed that over the past 10 days, 15,293 people have viewed the draft 2023 Budget Law online and 798 citizens submitted their opinions and recommendations through the D-Parliament website. As strengthening budget control is a priority, a public discussion on the state budget will be held every year, he said.
Most of the suggestions submitted by citizens were about cutting costs, developing welfare policies for only target groups and reducing the budget deficit. In specific, 46.1 percent of the voters raised education and science issues and 23.8 percent economic and financial issues.
Moreover, 49.6 percent of them touched on capital expenditures and 24.6 percent on policy measures. Although the government is following a policy of not making new investments, Speaker G.Zandanshatar highlighted that new investment proposals made by citizens will be prioritized and submitted to the government.
Many people also suggested including the necessary funds for constructing the new building of School No. 12 in Songinokhairkhan District, repairing seven apartment buildings in Sukhbaatar District and constructing the Santsagaan soum kindergarten in Dundgovi Province in next year’s budget.
Prime Minister L.Oyun-Erdene presented in detail the policies and concepts adopted by the government in developing the draft 2023 Budget Law and the measures to be taken to avoid the economic crisis in the future.
“This year, conditions have been created to carry out the budget reforms that have been talked about for many years. However, we have to take into account that the 2023 budget is being discussed at a time of geopolitical uncertainty and during a time when the acceleration of the post-pandemic economic recovery is most necessary.
First of all, it is critical for Mongolia in the coming years to ensure the macroeconomic balance of the economy and keep the annual economic growth stable at 5 to 6 percent. Next year’s budget was developed to take concrete policy measures against the increase in the prices of goods and products, currency reserves and the depreciation of the tugrug,” he reported.
Minister of Economy and Development Ch.Khurelbaatar informed participants about the pre and post-pandemic economic situations, the factors affecting the increase in the exchange rate and decline in reserves and the possible risks.
Due to the deceleration of economic growth, rising inflation and decreasing employment, conditions for stagflation have been created today and inflation is expected to be higher than the target level in the next year as well, he says. Therefore, next year, in order to intensify economic growth, the government plans to implement policies to ensure macroeconomic stability and support exports and the private sector, which in turn, is anticipated to lead to GDP growth of 5 percent, according to the minister.
Finance Minister B.Javkhlan presented the results achieved through the Law on State Austerity, tax policies and the possibilities to introduce a “results-based” salary system. He underscored that the government estimates to save 1 trillion MNT in 2023 by implementing the Austerity Law. The budget deficit is expected to decline from 5.1 to 2.8 percent. In terms of macroeconomics, the government aims to increase quality exports, increase economic growth to 5 percent, reduce inflation to below 10 percent by the end of the year and maintain its credit ratings, Minister B.Javkhlan noted.
MACROECONOMIC PROJECTIONS WITH CLEAR ESTIMATES PROPOSED
Within the framework of the discussion, four separate discussions were held on topics: “Budget Transparency”, “From Welfare to Labor”, “Stable Economy” and “New Revival Policy – Port Revival”.
At the discussion on budget transparency, Program Manager of Open Society Forum NGO D.Oyunbadam emphasized the need to classify the income estimates for the next two years into tax and non-tax income, reflect the macroeconomic projections with clear and relevant estimates and inform the debt structure in detail in order to improve the transparency of the state budget.
Head of the Mongolian Health Workers’ Union Ch.Narantuya proposed to ensure the transparency of the health sector’s budget and increase wages and labor values in accordance with the growth of inflation and economic conditions.
The Business Council of Mongolia mentioned that it has submitted a proposal for draft amendments to the Tax Law and that it is necessary to coordinate the draft budget law with the economic development policy.
During the discussion, enterprises strongly opposed the increase in electricity prices and instead, proposed setting up a budget monitoring council under the budget governors at all levels, avoiding increasing taxes to increase budget revenue and implementing the recommendations of the Fiscal Stability Council.
‘CALCULATION OF THE POLICY AIMED AT INCREASING CITIZENS’ INCOME IS UNCLEAR’
From October 7 to 17, citizens submitted a total of 75 proposals related to welfare and labor. Deputy Minister of Labor and Social Protection S.Zulpkhar said that in the future, the government plans to implement employment support programs, conduct an employment readiness assessment, provide financial support and low-interest loans to the self-employed and micro-entrepreneurs and introduce an e-job platform for the labor market.
Executive Director of the Mongolian Employers’ Federation Kh.Ganbaatar commented, “We are supporting the government’s five goals, including budget reform, increasing income, saving costs, supporting production, attracting investment and improving budget control. However, the actual calculation of the policy aimed at increasing the income of citizens and how to support production and enterprises in the draft budget law is unclear. It is necessary to keep the policy stable and coordinate the goal of maintaining and restoring economic growth through the budget, investment, tax and monetary policy.”
President of the Confederation of Mongolian Trade Unions S.Erdenebat proposed raising wages by up to 30 percent in line with inflation, lowering personal income tax for low and middle-income citizens and increasing the budget of the Employment Support Fund.
Citizen Ts.Oyunbaatar, representing people with disabilities, said that it is necessary to increase the amount of welfare for people with disabilities in 2023 and pay special attention to the fact that funds have not been budgeted for the housing project for the disabled.
Participants made the following proposals and recommendations, which will be submitted to the government:
• To improve the legal framework
• To ensure coordination between sectors, improve the labor market database based on the advancement of digital technology and train specialists in high demand
• To improve the method of calculating household income, determine household income accurately and follow the policy of providing child allowances to target groups based on a study
• To make development policy, register unemployed citizens and provide employment services and unemployment benefits in accordance with Employment Policy Convention No. C122
• To align the relevant laws with ILO Convention No. 88 and Private Employment Agencies Convention No. 181 and introduce case management and client-centered employment services in employment support activities
• To increase the value of labor, help young people obtain the necessary skills and experience for the transition from education to employment and support youth employment and part-time work for students through policy
• To increase the number of childcare services and nurseries within the framework of supporting the employment of mothers
• To construct milk and dairy factories and support their operations within the framework of generating income for women herdsmen
• To implement Article 25.2 of the Law on the Rights of Persons with Disabilities and increase welfare pensions and allowances for persons with disabilities
• To increase salaries and wages in line with the inflation rate
STABILIZING THE ECONOMY
During the discussion on stable economy, State Secretary of the Ministry of Economy and Development Kh.Batjargal said that 139 of the 155 measures included in the annual government development plan and financed by the state budget and foreign loans have been included in the draft budget law.
Participants highlighted the need to reduce optimistic economic projections, cut ineffective costs, calculate the impact of external factors on the economy and stabilize macroeconomic indicators such as unemployment, inflation and exchange rates.
In particular, CEO of the Mongolian National Chamber of Commerce and Industry T.Duuren suggested developing and implementing a medium-term plan to gradually reduce the government’s foreign debt and paying attention to the fact that the government’s debt is projected to increase over the next three years.
Member of the United Employers Union D.Badarch expressed that the government needs to fully mobilize the resources of the private sector. By supporting public-private partnerships, large resources can emerge, he said.
Professor of the National University of Mongolia Sh.Khashchuluun noted, “The fiscal investment regulation is very weak. Moreover, citizens submitted their opinions only for 10 days. It’s a very short time. We also need to coordinate our budget with the development policy. The fact that the country cannot measure its fiscal efficiency is extremely regressive.”
COORDINATING PORT REVIVAL POLICY WITH PORT DEVELOPMENT PLANNING OF NEIGHBORING COUNTRIES
Currently, six ports are being expanded and upgraded, and their completion rates are 50 to 70 percent. Moreover, 11 ports are being researched, planned and designed, according to State Secretary of the Ministry of Economy and Development Kh.Batjargal.
Experts said that it is important to coordinate the port revival policy with the port development planning of neighboring countries.
Head of the General Authority for Border Protection, Brigadier-General Kh.Lkhagvasuren underscored that hard and soft infrastructure issues should be solved as a top priority to restore international port operations.
Experts expressed that the following measures should be taken in order to comprehensively coordinate ports and expands their capacity:
• To fully connect the border ports by railways and roads in stages, improve the competitiveness of transport and logistics, increase the flow of cargo and create the basic conditions for becoming a transit country in the future
• To use air routes, beast the number of transiting aircraft, continue the liberalization of air transport in stages, create a cargo transportation hub and support the tourism industry
• To increase trade turnover by establishing free economic zones and dry ports in stages based on the concept of regional development of Mongolia