MP B.BATTUMUR TALKS ABOUT IMF PROGRAM ENROLLMENT AND DOWNSIZING THE GOVERNMENT’S WORKFORCE
MP B.Battumur, a member of the Mongolian People’s Party, sat down with Zuunii Medee to discuss a wide range of topics regarding the Mongolian economy, including IMF program enrollment, government employee downsizing, Mongol Bank, and more.
The Finance Minister remarked that the approval of IMF program enrollment was a green light for the economy. How do you think the money should be spent?
Mongolia will receive 5.5 billion USD in financing as part of the program. This is aid to help improve the health of the economy and get us out of crisis. It is not a project to develop the Mongolian economy. Outside of the swap agreement with the central bank of China, 3.5 billion USD will be transferred to Mongolia. This money must be spent wisely.
It is now up to the government, Parliament, and Cabinet to implement their policy correctly. If the money is used to invest in fruitless sectors that have no real benefit, our debt will only increase. Based on the support that the IMF has extended, the government must negotiate a 20-year development loan with the IMF. By doing this, large projects can be implemented, the energy dependence of the nation will be alleviated, and finished mining products can be exported by Mongolia.
Many people believe that the money should be spent on reducing the budget deficit. Are there any ways we can activate the economy?
Receiving loans from external sources to cover the budget deficit is a very big mistake. If the budget is in deficit, we should cut expenditure. There are many costs that have no benefit. The government has ways to increase budget revenue from state-owned companies such as Baganuur, ShiveOvoo, and Erdenet.
We need to decrease unnecessary costs and gradually downsize the hundreds of thousands of civil servants. A large workforce must be transferred to the private sector. It is important for the government to alleviate its workload.
The IMF has transferred 38.6 million USD to Mongol Bank as part of the first stage of financing. In meetings, have there been discussions on how to spend this money?
It is too early to say what it will be spent on. In my personal opinion, it should be used to foster economic growth and increase employment.
The IMF has insisted that savings from better targeting of the Children's Money Program will be used entirely to increase spending on a food stamp program for the most vulnerable. There was also talk of downsizing the number of those employed by the government. How will this affect the country?
In sectors and agencies outside of education, health, defense, and emergency services, the government will not replace retiring employees. For every two people that retire, only one person will be hired to replace them. The IMF has insisted we decrease the number of civil servants that receive salaries from the state.
The government must focus on its core issues and delegate the responsibility of employment to the private sector. Many countries around the world have done this. Our General Taxation Department has a workforce of 2,000 people. Meanwhile, in Singapore, they contract private businesses for taxation. The government must always be cutting down on its workload and pressure. It must support the movement of employment to the private sector. There are around 100,000 businesses in Mongolia. Why can’t that number be 200,000?
Seven taxes were increased in May. Is there a guarantee that the government will not increase more taxes seeing as how the IMF program has been approved?
Taxes are a tool for the government to regulate the economy, so it would be irresponsible to say they will definitely not increase or decrease. There is a possibility that the final amount of taxes will not increase, but that certain aspects of taxes will either be lowered or raised. Once the economy reaches a certain point of development, taxes will be reduced. Whenever a new tax is introduced, in most cases, an existing tax is cut. There are ways to avoid increasing the tax burden for citizens while making adjustments within taxation.
IMF representatives are currently working with the General Taxation Department. The Finance Ministry has stated that it is important to bring Mongolia's taxation system up to international standards. How will the system be reformed?
The taxation system has not been reformed since 2008. Tax reform is long overdue. Corporate revenue tax and personal income tax will be decreased eventually. The amount being taxed is not so important, as long as taxes are being paid.
Mongolia has a lot of real estate, yet its use is not adequate. Therefore, the real estate tax must be reformed. There is also the issue of gifting. Gifting an estate should not be free. Certain taxes must be imposed. The system must be reformed in this way.
The results of the investigation of Mongol Bank were released to the public. There have been complaints that the investigation was conducted by politicians and not professional agencies. What are your thoughts on this?
Mongol Bank is a non-profit organization, yet they have a deficit of three trillion MNT. If the government is to issue bonds to cover the deficit of Mongol Bank, the external debt of the nation will be around 60 trillion MNT, and the domestic debt will be 14 to 15 trillion MNT. Mongolia has entered into a debt cycle. Professional agencies must begin additional investigations.
Looking at the findings, the bank was involved in many illegal actions. There are many projects that were not profitable or beneficial. People must be held accountable for this. While the central bank had a deficit of three trillion MNT, they increased the salaries of their employees by 25 percent. This has become a large obstacle for economic development.
The resolution requiring foreign companies to funnel all transactions through Mongolian banks was annulled as a result of pressure from the IMF. Is there a possibility this resolution will be reintroduced?
It is possible. The MNT has been depreciating drastically. It has stabilized in light of the IMF program. The MNT to USD exchange rate could drop to 2,000 MNT if this trend continues.
Mongolia has been fully encompassed in debt pressure and needed to cooperate with the IMF. This is why Parliament made an amendment to Resolution Number 29. Parliament did not amend the resolution because we do not love our country or are not patriotic. In a certain period of time, we can make amendments.
On the other hand, it is a false hope to believe that foreign companies will funnel all their transactions through a Mongolian bank just because of a resolution from Parliament. There are many international agreements that have to do with this issue and Mongolian law will not surpass international law.
What foreign companies have said is that Mongolia does not have a bank with an A rating. They are wary because of the many banks that have gone bankrupt.