In the new century, the Mongolian parliament has adopted an abnormal habit. The primary duty of our parliament is supposed to be passing laws and making sure that the executive branch ensures implementation. However, our parliament now constantly changes the very same laws they passed in the first place, which has allowed the government to self regulate and decide on their own what to do and when. Our government today prepares their own amendments to the law, and have their desired legislation approved by the parliament. This would be one of the ‘advantages’ that the ‘double deel’ (incumbent MPs holding ministerial positions) offers.
A clear example is the law on public budget. Under the name of budget amendments, the authorities have been repeatedly redistributiing public funds. The term of our government averages six months, and expenditures have been on the rise given the public budget is amended two or three times a year.
Parliament Speaker who turns the law into brass
The laws must be a set of golden rules that everyone has to adhere to. But our government has already passed a special law that would allow them to turn these golden rules into brass laws. Gold and brass look similar on the outside, but are completely different when it comes to quality. If you think of the initial law the parliament passed on public budget as a golden rule, the amended versions would have the quality of brass. This is the habit our parliament has taken up.
The law requires the public budget for next year to be finalized and approved within 15 November this year. Racing against this deadline, MPs have spent the recent days in frenzy, trying to pass the second amendment to the 2017 public budget, and approve the 2018 budget. The parliament already expects the 2018 budget to be amended, so MPs have been trying to pass a raw budget for next year and looking to increase public expenditures after the 15th passes, claiming that they are making amendments.
The key reason for the budget amendment this time appears to be that budget revenue ‘exceeded’ its previously set expectation by 500 billion MNT. This would come from increased coal exports and revenue collected through taxes. The public budget is then amended to reflect it because the government did not establish a fund that would collect this type of additional revenue to make up for deficits later on. Chile, Norway, Botswana, and other countries whose budget revenues depend on commodity prices each have a Soverign Wealth Fund for this purpose. Our authorities are not keen on setting up such a fund because spending additional revenue is more beneficial for them. If we had a similar fund, we would never face the need to make amendments to the public budget. All it would take would be a set of legal regulations on the fund.
Government extravagancy with loans
If a person is strangled by debt and has entered a situation where they have to raise another loan to pay off previous debts, their top priority would be reducing the amount of debts, even if they made little profit, and saving interest payment costs. Governments do the same by buying back their bonds and reducing pressure on budget expenditure. However, there is not a single person in our government and parliament who is raising this issue. Instead of paying off debts and decreasing deficits, they keep increasing public spending.
Our government debt has grown as big as 76.1 per cent of GDP, and our budget deficit has reached 2.7 trillion MNT (8.6 per cent of GDP). In these circumstances our MPs are deciding to use the additional revenue of 500 billion MNT to increase spending rather than reducing debts. This shows how disconnected the authorities are from our economic reality, and how weak their understanding is on how the public budget works.
The 2018 public budget was approved yesterday (14 November 2017) with revenue of 7.2 trillion MNT (23.8 per cent of GDP) and expenditure of 9.6 trillion MNT (31.8 per cent of GDP), which puts the deficit at 2.4 trillion MNT (8 per cent of GDP). However, every MP is well aware that this budget will be amended once or twice and it will result in increased spending. If they become short of cash, they will repeat the habit and borrow more.
When the government is issuing bonds with fancy names to settle previous debts, they are increasing the total debt by one or two hundred million USD each time. Our interest payment has increased, and the term has been extended. However, we haven’t yet paid off a single dollar of our external debt. The authorities have not reported on where the previous loan money went, but are confusing the people by positioning additional loans as a magnificent feat.
More loans and bigger interest rates mean weakened tugrugs. We – the people – pay for these loans not only through taxes but also due to increased prices. It is time for us to see this clearly and demand that the public budget can no longer be amended time and time again.
2017.11.15
Trans. by B.Amar