Fresh thoughts likely on revised budget

Sensitive financial issues were discussed at a “secret” meeting on Monday attended by members of the Standing Committee on the Economy, and representatives of the International Monetary Fund, the MongolBank, and the National Statistics Office. They talked mainly about the budget deficit and the threat of inflation. 

The Finance Ministry has proposed revisions to the 2010 budget following the increase in the price of copper and gold. If this has meant MNT 364.2 billion in extra revenue, the decision to increase the salary of civil servants by 30 percent, and reinstatement of the child allowance will lead to more expenses. Some new public projects have also been proposed. Taken together, these will take the budget deficit beyond the proposed 5% of GDP as stipulated by the IMF. 

The resultant inflation may nullify the 30 percent increase in salary.  The Government’s hopes of keeping inflation under six percent have been belied. It has already reached 10 percent and many analysts predict an even darker future with inflation hovering around 27 percent by the end of the year. 

The IMF, which has lent money to keep the budget deficit within manageable limits, is strongly recommending austerity measures. There seems to be rethinking in the Finance Ministry and Parliament seems to have suspended further discussion on the revised budget. These are likely to resume on Monday, after MPs will have considered what was discussed at the meeting.