IMF
Country Representative .P. Ramlogan told Parliament
Speaker D.Demberel yesterday that reported provisions in the revised budget for
2010 violated Mongolia’s agreement with the IMF, and that if these were not
reviewed, the Fund “would find it difficult” to continue with the agreement.

That
the budget deficit will become 6.4 percent of the GDP was not so important as
the Fund had agreed to exclude the costs of bank restructuring from State
budget expenses, and when that is done, the deficit remains under the
stipulated 5 percent. However, the Finance Minister’s move to include income
from increased copper prices in the budget revenue violated Mongolia’s
promise to put all extra income into a special fund. 

Ramlogan suggested that the deficit be
controlled by cutting down on unnecessary expenditure. He also urged quicker
restructuring of the banking sector, approval of the fiscal stability law and streamlining
the welfare package.

The
Speaker assured him that Parliament was aware of the need for these to keep to the
agreement with the IMF but also asked Ramlogan to “understand that the current
economic and social situation in the country does not allow us a chance to
allocate extra budget income into a special fund”.

Appreciating
the support from the World Bank, the IMF and other international financial
institutions to help Mongolia overcome the economic crisis, Demberel said it
was not always possible to ignore “widespread popular pressure” to fulfill political
parties’ pledges to increase salaries and pensions, distribute some allowances,
and resume paying the child allowance. He hoped the IMF would consider the
political imperatives and appreciate the terms of the revised budget.  He assured Ramlogan that Parliament would
review expense proposals stringently and take up restructuring of the banking
sector, fiscal stability and coordination of social welfare measures. He
requested Ramlogan to recommend to the IMF Board that
the Mongolia-IMF agreement should be continued for another two years. He was
also enthusiastic about a proposal from the IMF Mongolia Office to organize a
workshop on inflation and monetary policy in cooperation with the Mongolian Parliament.