D.DEMBEREL MP MEETS WB PERMANENT REP

Ulaanbaatar /MONTSAME/ A member of the State Great Khural D.Demberel received Tuesday Ms Coralie Gevers, the Residence Representative of World Bank (WB) in Mongolia. The two sides have talked about Mongolia's present situation of socio-economic and state budget for 2013. Ms Gevers said that the 2013 budget approved by parliament has an important implication as the first annual fiscal plan prepared under the fully effective Fiscal Stability Law (FSL). The budget proclaims that the Government will be committed to the FSL by setting the structural fiscal deficit at 2 percent. While this is a progress toward a more sound fiscal policy, the budget also has significant potential risks of undermining the goal of the FSL with optimistic revenue projections and expansionary spending plans. Total expenditure and net lending is planned to rise by 17.9 percent from the 2012 budget, reaching MNT 7,444.6 billion. Much of the increase relates to a sharp increase in capital expenditure of 44.7 percent. Despite the large increase in capital expenditure, a reduction in capital repairs adds to concerns about maintaining the quality of the new and existing capital investments, Ms Gevers said. "The structural balance is projected to reach 2 percent of GDP, the maximum level set by the FSL. This is clearly a progress to be noted. However, the fiscal target is likely to be hard to achieve, given the potential revenue shortages and the two new spending components that will eventually have to be added to the budget. Exact fiscal impact from the additional spending components remains uncertain at this stage. However, we expect that the fiscal deficit may reach over 6 percent and the magnitude could be larger depending on how the extra spending plans unfold. The fiscal imbalance would be much higher if off-budget financing operations were included in the fiscal outlook of the budget. The fiscal burden from off-budget financing through the Development Bank of Mongolia (DBM) announced in 2012 is estimated to be over 4 percent of GDP in 2013. Large scale off-budget financing operations will significantly undermine the effectiveness of prudential rules of the FSL and likely add to the overheating pressures from the on-budget fiscal activities," Ms Gevers said. Mr Demberel MP has agreed with Ms Gevers on the issues, and admitted that the current expense in the state budget has increased, and benefits for people have been cut slightly. He said Mongolia aspires to collaborate with the WB in budget and bond issues. Ch.Enkhtuya