Source: Onoodor, Montsame                       Date: 03 December, 2010

Parliament passed the draft combined budget late in the evening on November 25, with 79.1% support from MPs present. Some earlier readings had received 97% support, and the reason for the later lack of enthusiasm was not clear, as there were few changes of any real import. The approved budget shows a total deficit of MNT779.5 billion or 9.9% of GDP, 1.3% more than estimated in the original draft that was later revised before final submission to Parliament.

The main source of income is from copper export and the average price has been taken as USD8,425 per ton, as against the present USD8,900. If global prices fall, the Government and Parliament would seek an alternative source of income. The price of gold has been estimated at USD1,350 an ounce and that of processed coal at USD98.8 a ton.

The budget income includes MNT163.2 billion to come from Oyu Tolgoi LLC and MNT207.7 billion from the Erdenet factory. Non-tax income would be MNT385.4 billion and MNT69.8 billion will come from the oil exploitation sector. Marine transportation fees will bring in MNT300 million and the Central Bank will pay MNT5 billion. Privatization of state property in 2011 will yield MNT98.4 billion and MNT8 billion will come as foreign aid.

The state budget alone will spend MNT737.9 billion, while the original draft had fixed this at MNT600 billion. Both the MPP and the DP supported paying a monthly allowance of MNT21,000 to every citizen. This would require MNT702.5 billion from the Human Development Fund. Paying MNT500,000 as tuition fees for each of 160,000 students would mean MNT102.5 billion more. The Government has included MNT504 billion as revenue without clearly indicating its sources.

Contrary to speculation, the passage of the budget was smooth, with well-orchestrated shuffling back and forth between the full session and the Standing Committee on the Economy. The day began with Parliament going through a second reading of the draft. It was then sent to the Standing Committee for preparation for the third reading. This came back to Parliament at 9 pm, was returned to the committee and finally the full session approved the draft after a fourth reading when every provision was individually put to the vote.

The budget expects the economy to grow by 7.5 percent, but warns that a bad winter can hurt the agricultural sector. Manufacturing and service industries are likely to grow beyond 10 percent. Inflation rates from 2011 to 2013 will be within 8-9 percent.