2023 Budget Law passed with 1.4 trillion MNT deficit

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     Last Friday, Parliament approved the draft 2023 Budget Law and draft amendments to the Law on Budget Framework Statement for 2023 and Law on Budget Assumptions for 2024 to 2025 among other fiscal bills.

In the state budget, revenue is projected to be about 19 trillion MNT, or 34.9 percent of the GDP, and spending is estimated to be around 20.4 trillion MNT, or 37.6 percent of the GDP. In other words, the state budget was passed with a deficit of 1.4 trillion MNT.

Under the Law on State Austerity, the government will take measures to keep the budget deficit at the target level, stabilize the economy and maintain fiscal discipline at all levels next year, Finance Minister B.Javkhlan said.

The government expects the economy to grow by about 5 percent and plans to reduce the inflation rate to a single-digit level next year.

The government will make the following salary system reforms under next year’s budget:

• Salaries of state administrative and special government employees will be calculated the same way and without hierarchy.

• Salaries of low-wage public service workers will be increased by 6 percent due to the increase in the minimum wage.

• The additional bonus provided to civil servants based on length of service will be calculated annually.

• Local state administrative employees will be given 20 to 100 percent additional salary.

During the plenary session, Speaker of Parliament G.Zandanshatar highlighted that Parliament lowered the budget deficit by 127.6 billion MNT by cutting ineffective expenses, before saying, “Households in cities and towns with a population of more than 10,000 will receive a discount on electricity tariffs. Next year, 173,600 households are expected to enjoy this discount.”

He remarked, “In order to prevent cancer, the Whole Liver – Mongolia Program will be continued. We have increased the budget for child protection measures. Specific funding has been decided to implement national programs, such as the New Revival Policy, Port Revival Policy, Tourism Development Program and Food Supply and Security Program. These measures will be financed from the above savings.”

The speaker underscored that the policy of not making new investments and completing previous investments by 2023 has been legalized and emphasized that for the first time in history, the state budget was publicly discussed and reflected issues raised by citizens.

“As part of the budget reform, Parliament approved a resolution. In order to improve the fiscal discipline and responsibility of state-owned companies and improve transparency and openness, the budget law stipulates the creation of a unified e-registration and information system, the registration of contracts related to all stages of mineral extraction, processing and transportation in the unified tax system and the presentation of all sales and purchase contracts to Parliament every quarter. Ad hoc committees are working to fight against coal theft, check the difficulties encountered in cargo, transport, coal transportation at border ports and the operation of free zones, and monitor the problems related to Development Bank of Mongolia,” Speaker G.Zandanshatar added.

Chairman of the Standing Committee on Budget G.Temuulen informed, “We focused on reducing the budget deficit and cutting unproductive expenses. As the economy is expected to be ‘tough’ next year, we have followed the direction that the government should take responsibility and reduce fiscal expenses.”

The expenses of state administrative organizations, ministries and agencies have been minimized. In addition to creating savings from the limited operational costs of ministries and agencies, the costs related to financing other foreign loans were reduced. Funding of about 90 billion MNT for feasibility studies, drafting of projects and measures and consulting services was reduced by 50 percent, according to the legislator.

He informed, “There was a need to make budget reforms. In the past years, due to weak fiscal discipline, investments worth trillions of tugrug were stalled. This year alone, investments worth 2.7 trillion MNT are being completed. In 2024 and 2025, the financing of construction and development works is expected to reach 2 trillion MNT. This is due to the government’s lack of responsibility and fiscal discipline. Therefore, we decided to fundamentally amend other related fiscal laws and draft the necessary bills within this month. The reform works will be carried out this year.”

The mining sector accounts for 25 percent of the revenue to be collected in the state budget. In next year’s budget, coal export is projected to be 36.5 million tons. On estimation, 2.5 trillion MNT will be collected from mineral royalties and 1 trillion MNT from the corporate income tax, parliamentarian G.Temuulen said.

Finance Minister B.Javkhlan explained that the budget law will come into effect on January 1, 2023. The three main social ministries – the Ministry of Education and Science, the Ministry of Health and the Ministry of Labor and Social Protection – have the largest current expenditures and public investment expenditures, the minister mentioned.

He noted, “Major investments in education will continue. In the infrastructure sector, the road investments that started this year and last year will also resume. About 86 percent of next year’s budget investments, or 916 out of 1069 projects, will be completed next year. Ongoing investment projects that have not been completed since 2018 and 2019 will be finished next year.”

“The biggest risk we face this year is the balance of payments. In the last two years amid the pandemic, the border has been closed and exports have been limited. When the state budget was amended last May, 18 million tons of coal were estimated to be exported. But as of last September, 19 million tons have been exported. At this rate, we can export 36 million tons of coal next year.”

The minister also said that next year, the monthly child allowances will be given to a more targeted group. About 90 percent of all children are expected to receive cash allowance every month. Specifically, in 2023, families with a monthly income of less than 3.5 million MNT will receive 100,000 MNT per child, he added.

DP: OVERLY OPTIMISTIC BUDGET SHOULD NOT BE APPROVED WHEN THE COUNTRY IS AT RISK OF BANKRUPTCY

In connection with the newly-approved state budget, the Democratic Party (DP) caucus in Parliament made a statement. 

Chairman of the caucus D.Tsogtgerel said, “DP has opposed the draft budget since the beginning. Citizens are becoming poorer and the national debt is increasing and there is a risk of bankruptcy. One out of every three people in Mongolia used to be poor but today, one out of every two people is poor. The fiscal policy of the authorities is wrong. Therefore, the DP caucus is demanding them to implement and fulfill their promises. As soon as 2023 passes, the issue of budget amendments will be raised. An overly optimistic budget should not be approved when the country is at risk of bankruptcy.”

Deputy Speaker S.Odontuya commented that although the authorities said they would cut down costs, current expenses have increased by 480 billion MNT.

“The total current expenditure of the budget is estimated at 15 trillion MNT, which is unprecedented in history. We are talking based on the poverty graph released by the National Statistics Office. Therefore, we will continue to focus on increasing business opportunities,” she expressed.

Misheel Lkhasuren

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