LOOKING BACK TO LOOK AHEAD

A new economic calendar of Mongolia started on October 1, 2010. It was a  historic moment when our country was once again free to determine its own independent economic policy.

All Mongolians should be thankful to the IMF “Stand-by Arrangement” program for pulling the country from the brink of bankruptcy in the spring of 2009 but it also led to conflicts between the Government of Mongolia and international financial organizations on policy matters. Conditions laid down by The World Bank and the IMF were considered unsuitable for the situation on the ground. Mongolia finally said “good bye” to “Stand-by” in the third quarter of 2010. At the time GDP growth was higher than 8%. A remarkable change had also come out in the national economy. For the first time ever, earning from coal, iron ore and crude oil export exceeded the revenue of the Erdenet copper factory. The new road to development now had many lanes.

The economy will now move forward without foreign instruction and control. For starters, the Government is getting ready for an international bond sale. Market research is progressing for IPOs of state companies on international stock exchanges. Altogether 121 projects have been suggested to foreign and domestic companies for investment and the Government will give loan guarantees on the basis  of the Concession Law. The Government itself wants to take a commercial loan, something it cannot legally do now. But, the law has to change with the needs of changing times. The proposed Law of Government Financial Capital and Debt Management  is meant to give the Government certain legal rights without which it cannot follow its own economic, particularly investment, policy. The Finance Minister has been persuading Members of Parliament that this law is going to be as important as the Budget Stability Law.

Problem One: Growth with caution

The debate in Parliament on the 2011 budget revealed the contours of the new economy. Mongolia has never before adopted such a high-deficit budget. I do not wish to be critical of this but I do wonder why the Human Development Fund is made part of the state budget? Is it not possible to give the Fund a separate and independent identity? We did this with the Development Fund.

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