Source: English.News.mn, Montsame    Date: May 5, 2010

IMF Country Representative P. Ramlogan told Parliament Speaker D.Demberel on Monday 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.

Mr. Ramlogan suggested that the deficit be controlled by cutting down on unnecessary expenditure. He also urged progress in restructuring the banking sector, adopting the fiscal stability law and streamlining the welfare package. He offered to organize a workshop on inflation and monetary policy in cooperation with the Mongolian Parliament.

The Speaker assured him that Parliament was well aware of the need to keep to the agreement with the IMF, but pleaded for “understanding”. The current economic and social situation in the country “does not allow us a chance to put any extra budget income into a special fund,” he said, adding that political imperatives in a democracy at times make it impossible to ignore “widespread popular pressure”. He hoped the IMF would consider the special situation and appreciate why the terms of the revised budget cannot be kept.  He assured Mr. Ramlogan that Parliament would review expense proposals stringently and requested him to recommend to the IMF Board that the Mongolia-IMF agreement be continued for another two years.