Mongol Bank won't take the rap for inflation/price gains
The Bank of Mongolia is now apparently on the defensive after facing criticism from both the Government and the public for last month's price hikes.
D. Delgersaikhan, the director of the International Department at the Bank of Mongolia, said the Central Bank had warned Parliament about inflation to no effect.
Over the past two years the tugrug rate had fallen due to greater dependency on the U.S. dollar, explained the official. In 2010 the economy was on the rebound from the 2008-2009 financial crisis, and a lot of foreign currency was in circulation. While mining operations ramped up, low demand for U.S. dollars pushed the tugrug rate down 13 percent. By 2011 Mongolian experience mining projects were already in full swing.
Although the investment remained unchanged, its output (i.e. government spending) had increased, causing another 11 percent drop to the national currency.
“We had sent numerous requests to Parliament to reduce budget losses, but they still give out cash,” said Delgersaikhan. “I would like to point out that after the Bank of Mongolia warned the government about possible risks, they sat back in silence as if they did not care. But when those risks became a reality, and economic damage was inflicted, they begin looking for someone to blame, as usual.”
Delgersaikhan outlined the Central Bank’s strategy to maintain flexibility with the currency, following supply and demand, and only intervening if any one side grows too heavy. She warned that trying to force the tugrug in either direction without due cause would only result in exacerbating the situation, as happened in 2008 when the exchange rate fell 34 percent.
The Central Bank is now pushing an informative campaign trying to teach the public how and businesses (including petroleum importers) how to guard themselves against price fluctuations. She also said that the Bank would have to deny a request from the National Committee on Social Welfare and Labor to bring the currency to where it stood three months ago because it would betray investors’ trust and create more cracks in the fundamentals of the economy.
Source : bcmongolia
D. Delgersaikhan, the director of the International Department at the Bank of Mongolia, said the Central Bank had warned Parliament about inflation to no effect.
Over the past two years the tugrug rate had fallen due to greater dependency on the U.S. dollar, explained the official. In 2010 the economy was on the rebound from the 2008-2009 financial crisis, and a lot of foreign currency was in circulation. While mining operations ramped up, low demand for U.S. dollars pushed the tugrug rate down 13 percent. By 2011 Mongolian experience mining projects were already in full swing.
Although the investment remained unchanged, its output (i.e. government spending) had increased, causing another 11 percent drop to the national currency.
“We had sent numerous requests to Parliament to reduce budget losses, but they still give out cash,” said Delgersaikhan. “I would like to point out that after the Bank of Mongolia warned the government about possible risks, they sat back in silence as if they did not care. But when those risks became a reality, and economic damage was inflicted, they begin looking for someone to blame, as usual.”
Delgersaikhan outlined the Central Bank’s strategy to maintain flexibility with the currency, following supply and demand, and only intervening if any one side grows too heavy. She warned that trying to force the tugrug in either direction without due cause would only result in exacerbating the situation, as happened in 2008 when the exchange rate fell 34 percent.
The Central Bank is now pushing an informative campaign trying to teach the public how and businesses (including petroleum importers) how to guard themselves against price fluctuations. She also said that the Bank would have to deny a request from the National Committee on Social Welfare and Labor to bring the currency to where it stood three months ago because it would betray investors’ trust and create more cracks in the fundamentals of the economy.
Source : bcmongolia
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