Mongolia: World Bank Calls for Spending Controls to Curb Rising Deficit
The Mongolia Economic Brief released today said the country’s budget deficit in the first three months reached two-thirds of the annual deficit target. Budget revenue collections fell by 11 percent, compared with the same period last year, because of falling export earnings and sluggish economic activity. Meanwhile, capital expenditures nearly doubled in the first three months of 2016, compared with the same period last year and overall expenditures rose by 25 percent.
“Mongolia needs to strengthen its fiscal position now to remain within the sensible limits of the Fiscal Stability Law,” said James Anderson, World Bank Country Manager for Mongolia. “Mongolia’s long-term growth prospects remain strong, but its resilience is being tested by the deteriorating external environment.”
The report says Mongolia’s recent external borrowing could help ease the immediate pressure on the balance of payments, but it would be at the cost of high interest payments. “Despite the recent external financing, the underlying pressure on the balance of payments is expected to remain high in 2017 due to falling exports and large public debt repayments,” said World Bank Senior Economist Taehyun Lee, who is also lead author of the study.
The expected second phase investment in the Oyu Tolgoi gold-copper mine should gradually support import-related taxes in the second half of the year, it said, but overall revenue collections will likely be weaker than budgeted unless the commodity market significantly improves in the near future.
In a special section, the Economic Brief welcomed the recent transfer of subsidized mortgage program to the government and urged that the costs of the program be properly recorded in the government budget.