Justifying the expanded budget for the election year 2024 

The Mongolian Mining Journal. Nov.2023 

А. Khaliun 

The 2024 budget figures can be explained by the upcoming elections, but if you look at them carefully, the budget includes the inevitable increase in salaries, pensions, and allowances approved by law,” Finance Minister B. Javkhlan said. 

The Government has long expressed its position on the annual increase of salaries, pensions, and benefits in line with the inflation rate. Accordingly, it was decided to increase these by 10% and to include it in the budget. However, the Prime Minister said that a 10% increase in pension does not provide real support to pensioners with a low pension of 550,000 MNT. Members of the Mongolian People’s Party (MPP) group in Parliament discussed and decided to increase pensions by 100,000 MNT, which was reflected in the draft budget. 
The decision to raise wages and pensions from April 1 has drawn criticism as a traditional stunt by the authorities aimed at buying votes ahead of parliamentary elections. 

The balanced budget revenue for 2024 was approved at 25.9 trillion MNT, an increase of MNT 6.4 trillion over the previous year. In addition, it was decided to distribute 100,000 MNT to all children regardless of parental income, leading to a budget amendment of 1.9 trillion MNT in June 2023. However, budget expenditure in 2024 will be 27.4 trillion MNT resulting in a budget deficit of 1.5 trillion MNT or 2% of GDP. 

Next year, Mongolia is estimated to export the following commodities, which will be the main source of budget revenue: 
•    60 million tons of coal 
•    1.5 million tons of copper 
•    8.4 million tons of iron ore 
•    20 tons of gold 

In 2023, economic growth reached 6.45% due to growth in mining, transportation, logistics, and foreign trade sectors and it is believed that this achievement can be improved to reach 7% next year. In addition, the government presented a draft budget for 2024 with an optimistic expectation that if GDP reaches 74 trillion MNT, inflation will fall to single digits. It was unanimously approved by parliament. 
As of October 2023, inflation was 9% nationwide and 9.4% in Ulaanbaatar, a decrease of one point from the previous month. The Mongol Bank announced its intention to pursue a monetary policy aimed at stabilizing inflation around 6% plus/minus 2 percentage points in 2024, which did not deviate much from  government policy. 
However,  Mongol Bank executives fear that the country’s over-bloated budget will hamper monetary policy next year and wreck inflation forecasts. 
The Ministry of Finance expects economic growth in 2024 to be 7%, while the Mongol Bank is somewhat more cautious and expects this  to be 5.5%. At the same time, the European Bank for Reconstruction and Development gives an optimistic forecast of 7-8%, while the IMF cautiously states 5.4%. 

At the annual meeting of the World Bank and IMF held in Marrakesh, Morocco, on October 9-15, 2023, the world economic growth forecast was lowered from 3% in 2023 to 2.9% in 2024. 
Isn’t it an achievement that Mongolia’s economy will grow at 6% while world economic growth is expected to be less than 3%? 

Undoubtedly, the main factor  that determines our country’s economic growth  is coal of which 60 million tons will be exported next year, . This growth will be augmented by copper and iron ore exports. Hence  there is an optimistic forecast that 93% of all export revenues will be derived from mineral exports. In accordance with the Law on Procurement of Goods, Works, and Services with State and Local Funds, a working group was established under the Ministry of Finance, and based on requests from customers and bidders, state procurement inspectors conducted inspections for approximately six months. As a result, the right of 61 legal entities to participate in the tender was restricted, and their names became public. In the mentioned “blacklist” there were 40 legal entities, and 61 others were added.. This information was made public at the same time as the announcement of next year’s public procurement. 

Within the framework of the Public Procurement Law and Budget Reform, for the first time, within 10 days after the approval of the state budget, a list of public procurement activities was developed by the general budget governor. 
Previously, this list was released with a big delay - between late December and February of the following year. The Minister of Finance noted that the delay in approval hindered the implementation of projects and programs within the budget year. Now ordinary citizens should understand the process, not just the minister who manages  state funds.  

In addition, projects and programs with completed technical design and feasibility studies are included in the budget. It was made clear that any work without a technical design and drawings would not be included in the 2024 budget. 

In the past, when tenders were held for projects and programs implemented with state budget financing, the organization that offered the lowest price won. Deputy Prime Minister S. Amarsaikhan said that from the new budget year, priority will be given to projects and programs that offer high-quality work. 

“In 2024, we plan to implement 692 projects and activities with state budget funding. Meetings with business entities on public procurement will start in the last week of November. In the past, we used to select the lowest offer, but now we pay attention to quality. The construction of buildings financed from the state budget is poorly done, with professional inspectors exercising discretionary judgment. These mistakes and violations increase the cost of projects, delay and freeze them, and cause losses, so starting from the 2024 budget this problem will be solved in accordance with regulatory requirements” he said, informing that preparations are underway to digitize public procurement. 

Expanding the budget in an election year carries the risk of damaging the economy, but there is less to fear if mining prices and physical output reach budgeted levels. 

The Government has drafted the 2024 budget in accordance with the New Revival Policy. With this, the Government intends to protect the real incomes of the population, support urban and rural revitalization, carry out development-oriented work, and use the benefits of natural wealth for local development next year.