The general reaction of MPs to the government’s
performance in regard to the economy last year was one of dissatisfaction as
Parliament discussed in Friday a report on execution of the general budget of
2009 and another report by the National Audit Agency on the budget. The reports
put the budget income at MNT1 trillion 994 billion, or 32.9 percent of GDP,
while expenses stood at MNT 2 trillion 336.6 billion, or 38.6 percent of the
GDP.

The report said the main reason why income fell short of
the estimated MNT 2 trillion 78.5 billion, was that the quantum of tax revenue
was MNT 189.5 billion less than expected, because of fluctuation in currency
exchange rates. Besides, the recession led to 24,510 companies closing down or
failing to make a profit. Some, including state-owned companies or joint
ventures, did not pay tax, with no clear legal justification. The report claims
Ulaanbaatar Railway, jointly owned by Mongolia and a Russian State-owned
company, should have paid MNT 806 million, the Mongolian Stock Exchange MNT 27
million, and Mongolshuudan Bank MNT 125 million, while Mongolbank did not
distribute any dividends.

The Government sold bonds to keep itself going. According
to the National Audit, a total of MNT 446 billion worth bonds were traded in
2009, way above the figure for the year before. This meant the government paid
2.7 times more as interest. A cross section of MPs criticized the way MNT 219
billion was taken from the Mongolia Development Fund to cover the budget
deficit, calling it “extremely poor financial management”. They also said this
was one reason behind the inflation, the fall in MNT value, and general
economic weakness.

Finance Minister S.Bayartsogt defended the sale of bonds
by saying the Government had no choice. MNT 90 billion of bonds were sold to
meet constant budget expenses, MNT 6 billion more raised the money to provide
apartments to government employees, and another MNT 75 million was spent on
providing support to gold miners. He justified these by saying the Government
expected demand for apartments to revive construction companies, and increased
gold production would replenish foreign currency, arresting the fall of MNT and
halting inflation. Since there were no savings from the past when the country
had spent all that it earned, the Government could stave off a crisis only by
selling bonds and seeking help from the IMF and the World Bank to meet a
shortfall of MNT 700 billion.

He reminded MPs that another reason why the Government
sold bonds was to save Zoos Bank from going bankrupt. This required MNT 100
billion. He said the Government had been unaware that Ts.Myanganbayar of Mongol
Gazar had mortgaged the company’s Olon Ovoot license with Anod Bank.