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  • Writer's pictureAmar Adiya

Mongolia Starts Austerity Measures

Following youth demonstration in April and skyrocketing inflation, Prime Minister Oyun-Erdene Luvsannamsrai has started to implement a series of austerity measures. Mongolia's economic growth expects to be weak this year in the range of 1-2 percent.

People demonstrating on the main square
Demonstration in front of the Government Palace on April 7, 2022

Oyun-Erdene is pushing to remove import tariffs on foods that are not produced in Mongolia like rice, cooking and sugar.

As part of inflation relief, a 50 percent rebate on social insurance payments by low-earning employees will be implemented until end of this year.

On top of that, the government is backing domestic agricultural sector and crop & vegetable growers with tax relief and subsidized electricity tariffs.

The parliament supported Oyun-Erdene's proposal and approved subsidizing fuel importers and meat & flour producers with cheap loans. The government will also provide a special dollar exchange rate for fuel importers to prevent gasoline prices at the pump stations go out of control.

One of the top demands by the youth demonstrators in April was to cut down the government’s wasteful expenses.

In response, the prime minister put forward to open up some of state-owned entities in utilities and infrastructure sectors. The proposal is to offer 34 percent equity in state companies on the Mongolian Stock Exchange.

Another set of public enterprises would be restructured and consolidated, which are expected to improve governance and bottom lines of state-owned enterprises.

As part of austerity measures, Oyun-Erdene also promised to cut down administrative costs of the government by limiting the use of vehicles, business travel and in-person workshops by pushing for more digital transformation as part of e-Mongolia program. Senior level positions will be consolidated to save general administration costs.

An opposition lawmaker criticized that the government needs deeper cuts as the number of state employees still remained high. Another opposition MP called for cutting the value-added tax by half, which could help businesses and households.

The government’s social assistance like children’s allowance and pensions increased during COVID over the past years. This spendings makes up a large share of the state budget and would remain in the near future. The IMF advises the country to make social spending more targeted towards the vulnerable and the poor.


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