IMF Chief Steven Barnett: Economic increase can’t be defined by only number, quality is important too
The following interview was with IMF Chief Steven Barnett.
-This year, Mongolia will produce Gross Domestic Products (GDP) which cost 18 trillion MNT. What’s your opinion on this?
-GDP’s actual increase was planned to be 25 percent and deflator was planned to be raise by 20 percent. But in the framework of monetary policy, the goal to maintain inflation in a digit was set. These two things are not interrelated. GDP’s indication is very important when producing budget project. If this indication were taken higher, budget income’s plan would become higher. If GDP’s rising plan were taken lower income would decrease. There is law a about stability of budget. The law must be implemented from 2013. As we think, if people will follow the law in 2013, budget expense should decrease by 25 percent by actual result. Total budget expense has risen by 50 percent 2011. Budget project was suggested to rise by 20 percent in 2012. But it should be decreased by 25 percent according to the law in 2013. After 2 years of high increase, it should be decreased.
-How will this influence the budget?
-Budget expense plays important role in economics and it consists big part of economics. Mineral export has key role in State economics. I really don’t understand the current policy of Mongolian Government.
-Some economists criticized that “the Government calculated the expenses before releasing the GDP numbers, which conditioned the expenses. That’s why budget is higher.” What’s your opinion about this?
-GDP was higher than we were pretending. There are tendency like this in much countries. In particular, income should be higher to increase budget expense. GDP is released higher to increase income.
-Did Government agree that deflator is 20 percent?
-GDP of 2012 is 18 trillion MNT. GDP’s deflator is one of measures which define inflation. But deflator is 20 percent and government aims to hold inflation 10 percent. One is 10 and another is 20, so we are criticizing this. By theory, deflator can be higher than consumption price index, but there is no condition in 2012.
-Mongolian economics exceeded 17 percent in August and 20 percent in October. Is this an actual increase? Does it reach to public of Mongolia?
- Economic increase can’t be defined by only number, quality is important too. International Monetary Fund Conducted a survey which is about reaching the economic increase to the public in Asian countries.
Economic development started 20-30 years ago in Asian countries. Before 20 years, when there was economic change, benefit used to reach to the public equally. But in last ten years, citizens who have low income haven’t been reached.
-A wage is to be increased in 2012. What would you do if you were Minister of Finance?
- I’m lucky that I’m not. If wage of civil service and pension increases by 50 percent, private sectors will need to increase the wage. As a result of increased wage, manufacturing expense will increase and production price will rise. By increasing wage, poor people will be incurred. Wage of civil service was increased by 35 percent in 2010, and will increase by 50 percent in 2012. So it means wage increased by 80 percent in last two years.
-This year, Mongolia will produce Gross Domestic Products (GDP) which cost 18 trillion MNT. What’s your opinion on this?
-GDP’s actual increase was planned to be 25 percent and deflator was planned to be raise by 20 percent. But in the framework of monetary policy, the goal to maintain inflation in a digit was set. These two things are not interrelated. GDP’s indication is very important when producing budget project. If this indication were taken higher, budget income’s plan would become higher. If GDP’s rising plan were taken lower income would decrease. There is law a about stability of budget. The law must be implemented from 2013. As we think, if people will follow the law in 2013, budget expense should decrease by 25 percent by actual result. Total budget expense has risen by 50 percent 2011. Budget project was suggested to rise by 20 percent in 2012. But it should be decreased by 25 percent according to the law in 2013. After 2 years of high increase, it should be decreased.
-How will this influence the budget?
-Budget expense plays important role in economics and it consists big part of economics. Mineral export has key role in State economics. I really don’t understand the current policy of Mongolian Government.
-Some economists criticized that “the Government calculated the expenses before releasing the GDP numbers, which conditioned the expenses. That’s why budget is higher.” What’s your opinion about this?
-GDP was higher than we were pretending. There are tendency like this in much countries. In particular, income should be higher to increase budget expense. GDP is released higher to increase income.
-Did Government agree that deflator is 20 percent?
-GDP of 2012 is 18 trillion MNT. GDP’s deflator is one of measures which define inflation. But deflator is 20 percent and government aims to hold inflation 10 percent. One is 10 and another is 20, so we are criticizing this. By theory, deflator can be higher than consumption price index, but there is no condition in 2012.
-Mongolian economics exceeded 17 percent in August and 20 percent in October. Is this an actual increase? Does it reach to public of Mongolia?
- Economic increase can’t be defined by only number, quality is important too. International Monetary Fund Conducted a survey which is about reaching the economic increase to the public in Asian countries.
Economic development started 20-30 years ago in Asian countries. Before 20 years, when there was economic change, benefit used to reach to the public equally. But in last ten years, citizens who have low income haven’t been reached.
-A wage is to be increased in 2012. What would you do if you were Minister of Finance?
- I’m lucky that I’m not. If wage of civil service and pension increases by 50 percent, private sectors will need to increase the wage. As a result of increased wage, manufacturing expense will increase and production price will rise. By increasing wage, poor people will be incurred. Wage of civil service was increased by 35 percent in 2010, and will increase by 50 percent in 2012. So it means wage increased by 80 percent in last two years.
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