Source: English.News.mn   Date: May 20, 2010

Everything is hush-hush, but indications are that there are second thoughts in the Government and among MPs about proceeding with proposals in the revised budget. The IMF has given a gentle but firm reminder that Mongolia’s failure to follow the terms of the standby agreement would “make it difficult” to provide further assistance and the World Bank is reported to have pitched in. There has been no formal announcement, but it is believed that sensitive financial issues were discussed at a “secret” meeting on Monday attended by members of the Standing Committee on the Economy, and representatives of the IMF, the Central Bank, and the National Statistics Office. They talked mainly about the budget deficit and the threat of inflation.

The Finance Ministry has proposed revisions to the 2010 budget following the increase in the price of copper and gold. If this has meant MNT 364.2 billion in extra revenue, the decision to increase the salary of civil servants by 30 percent, and reinstatement of the child allowance will lead to more expenses.  Some new public projects have also been proposed. Taken together, these will take the budget deficit beyond the proposed 5% of GDP as stipulated by the IMF. The Government’s hopes of keeping inflation under six percent have been belied. It has already reached 10 percent and many analysts predict an even darker future with inflation hovering around 27 percent by the end of the year.

The IMF, which has lent money to keep the budget deficit within manageable limits, and the World Bank are strongly recommending continuing with austerity measures. There seems to be rethinking in the Finance Ministry and Parliament has suspended further discussion on the revised budget.