The President of Mongol Bank,
L.Purevdorj, answered media questions on Thursday after submitting the monetary
policy document to Parliament Speaker D.Demberel. A selection of questions and
answers follows.

What are
the main features of the monetary policy next year?
Before coming to them, let me give you some data about the situation now.
Inflation stood at 16-17% in the beginning of the year so we raised the policy
interest rate by 1%. The result is that inflation has been brought down to 11%.
We expected this to fall further, around 8% by the end of the year, but now it
is clear we cannot reach this goal. But it should not be more than 10%.

Credit
supply has gone up 30% over last year and has supported economic development.
The total amount borrowed is expected to reach MNT400-500 billion by the end of
2010.

The Mongol Bank has been successful in
regulating the currency conversion rates and our foreign exchange reserves have
grown to stand at a very healthy USD1.6 billion. We should end the year with
some more.

How do
you see the financial situation in 2011?
Inflation will not be under 10%. There will be more monetary liquidity and
credit will be easier to access. The economy has to grow faster than it has
done in 2010. Much depends on what form the State Budget takes when it is
approved by Parliament.

The
success of the monetary policy we have proposed and of the economic policy to
help improve people’s life will depend on the final directions of the budget.
If budgetary spending is much increased, resulting in a deficit, we may be
forced to change our formulations. We have suggested to the Government that if
expenses have to be increased, it may be better to raise the money from sale of
domestic bonds than increasing the budget deficit.

However,
we shall continue to ensure that the MNT remains stable and that the foreign
exchange reserve grows. We have told the Government and Parliament that the MNT
will remain stable for two  years but the
situation will change in 2013 when output from Oyutolgoi goes on sale. A strong
MNT is good for us as it makes imports cheaper. But it also means less profit
from exports and affects the competitiveness of our traditional export sectors.

What will
be your preferred policy interest rate?
We see the possibility of lowering it but a decision can be taken only after
watching how the economy behaves. We shall publish a monthly report.