WHY HAVE PARLIAMENT’S DISCUSSIONS REGARDING THE EFF BEEN POSTPONED?
Mongolia’s 440 million USD extended fund facility (EFF) staff-level agreement with the International Monetary Fund (IMF) has been subject to much discussion, both within Mongolia and internationally. As the program will provide a financial package of 5.5 billion USD and could potentially spur a resurgence of the economy, there has been vocal support for the program from economists and experts alike. On the other end of the spectrum, there is a large majority that opposes the tax hikes and the austerity measures that are inseparably attached to the IMF program. Parliament, with the Mongolian People’s Party (MPP) holding a majority of seats, has repeatedly postponed any discussion of the program. What is behind the MPP’s reason to stall and possibly avoid signing on to the EFF?
Minister of Finance B.Choijilsuren and his ministry carried out negotiations with the IMF to reach a staff-level agreement on the EFF. Seeing as how Minister Choijilsuren is part of the cabinet that is led by key members of the MPP, it is obvious that there has been some conflict within the party on whether or not the EFF should be implemented right now.
In a recent interview, the Finance Minister stated that his ministry’s decision to enroll in the EFF program was made for the good of the country, not the good of his party. Reports indicate that the MPP has been divided on the issue and has been hesitant to fully go forward with the plan to enroll in the EFF, due to public backlash leading up to a presidential election in June 2017. The program's seven tax increases and inevitable austerity measures have not been met well by the public. The situation seems to indicate that the MPP is concerned that enrolling in a vehemently opposed program will only build the opposing party’s case against them in June.
The earliest possible date for discussion of the EFF in Parliament is April 5, when the spring session starts. The MPP’s choice to not schedule an irregular session to review the terms of the EFF is why the discussion has to be postponed until the spring session. It is possibile that the MPP will try to postpone the implementation of the EFF even further, until after the presidential election. The IMF Representative Office in Ulaanbaatar has come out and said that they will remain patient, despite setbacks to moving forward with enrollment in the EFF. However, some analysts have highlighted it would be damaging to Mongolia to not implement the program in March. As cautioned by Independent Mongolian Metals & Mining Research analyst and economist Ch.Erdenedalai, failure to enroll in the EFF could push Mongolia to default.
It is in the MPP’s best interests to fully ensure their competitiveness in the upcoming presidential election. It has been speculated that MPP Chairman and Speaker of Parliament M.Enkhbold and MP Ts.Nyamdorj are the two primary candidates for the party’s nomination, selected in an effort to consolidate its position in Mongolian politics. Holding a majority in Parliament and the Office of the President would allow the MPP to fully exert its power without opposition. While most people would regard the presidency as a mostly symbolic position, the Constitution gives the office considerable power. The President is the Commander-in-Chief, has the power to veto resolutions and bills passed by Parliament, and appoints ambassadors.
It is no wonder that the MPP would want to postpone the discussion in order to maintain voter confidence in the election. However, it has become vital for the party to follow Minister of Finance B.Choijilsuren’s decision to put the interests of the country above the interests of their party. The government has been effective in exchanging the DBM's Euro bond for the new government-issued Khuraldai bond, yet the DBM bond's repayment is only the first in a long line of debt obligations due in the near future. These debts include the Chinggis Bond and the Samurai Bond. It is obvious that the current economic situation will not allow the government to repay its bond debt and foster economic growth without the IMF’s help.
Prior to the establishment of the staff-level agreement with the IMF, Mongolia had almost reached an economic tipping point, and the potential of the EFF has helped breathe new life and hope into the idea that the nation can experience economic recovery. Most investors and credit ratings agencies were uplifted by the EFF, and are now cautiously optimistic about the future of the economy. The IMF has stated that they will remain patient, but we do not know for how long. If Mongolia strings the IMF along for an extended period of time, it is possible that the IMF could back out of the deal.
It is certainly likely that the MPP will lose voters in the presidential election if they implement the EFF. Due to major tax increases, voters may be motivated to vote for an opposing party candidate in order to express their frustration. This has essentially been the basis of Mongolian politics for quite some time: voters flip-flop every election cycle in order to “punish” parties. Even in the face of scrutiny, it is imperative that the MPP fully implement the EFF in order to maximize Mongolia’s capacity to revive the economy.