Friday, May 14, 2010



May 14, 2010
Our Parliament members have started to make another budget clarification (amendment) for 2010. Several years had passed since Mongolia started the ill practice of clarifying the annual budget any time the Parliamentarians want to increase the expenditure. May be we have the state budget approved every month instead of calling it annual budget?

It would be great if the Parliament will meet everyday without any break to celebrate Naadam Festival and the Tsagaan Sar Holiday. The MPs will have something important to be busy with. This time they have a good reason to increase the expenditure of the budget because the original budget was made based on estimation of world market price for copper at $5800 per a ton.
This time, our MPs cannot sleep in order to divide the windfall income because copper price jumped up to $7000 recently. They know well that it is not so easy to distribute such windfall ‘fairly’. There are only few clarifications on which OK buttons are pressed easily without any rejection. For instance, it is OK to add some MNT2.4 billion to foreign trip costs for our MPs and ministers. It is a matter of great honor for MPs to get some more money for their related constituency by fighting tooth and nail. On the contrary, if the copper price drops down, none of our MPs would never ever say a single word about trimming their budget expenses or making such clarifications, they even stand firmly for their position to spend what is planned in the budget expenditure.

This clarification to the budget that is made by our Mongolian lawmakers every time the copper price goes up is clarification to completely different things for Mongolian civic society. This is the clarification of how the management capacity of Mongolian state and government has deteriorated. The budget clarification of this time clarifies how seriously Mongolia is infected with the Dutch disease, how weak is our public governance management capacity and emergency needed for intensive care for the Mongolian economy.

Mongolia is vibrated nationwide when the price of only one mineral commodity vibrates at international market, which shows how seriously Mongolia was infected with the Dutch Disease. When the copper price jumps, blood pressure of MPs and minister get high in the fight to share windfall, but when the copper price declines they pretend as if they are not aware of the decline. This deteriorates normal function of the government and demonstrates how absolutely our socio-economic life relies on copper price at international market.

It has been almost three decades since civilized countries created a special mechanism that regulates their budget money when the market price fluctuates. They save the windfall earned due to increase of major export price at world market instead of hurrying up to waste it right and left, and releases it to spend when the price goes down in order to keep the country’s budget financing stable. For instance, Chile raises funds for its Stability fund in such a way. They place the Fund abroad in order to control inflation and, using the interest, finance economic reform, productivity increase and research initiatives.

As a result, Chile managed to liberalize its economy, explore new economic branches not dependant on mining and develop the country by means of cluster. Another clarification we, the citizens, clarified is the malfunction of the government after legislative and executive governments are mixed and it became a standard that parliament members become cabinet ministers. There is no subject to bear responsibility when the government shows their superiority every time the copper price jumps, when its speed exceeds economic growth and when their expense is bubbling, which made it possible to increase their expenses through the clarification to state budget any time they wish to. The management of Mongolian government is based on external factors not on firm principles, which led to the loss of foresight and prudence of governance and further the loss of long-term policy for social and economic development. The government has become incapable to fulfill their dreams and can see nothing beyond election.

The third clarification we, the citizens discovered is that there is a real threat that short-sighted actions of few irresponsible persons playing a game of political party might bring the budget deficit of Mongolia to unmanageable level and bring the country into bankruptcy, if we will not strengthen our governance management. There is a standard that normal function is provided well if we manage to keep the budget deficit below 5 percent of GDP. EU requirement is 3 percent. In case of Greece, because their budget deficit reached 14 percent, this country is on the verge of bankruptcy and all Europe is doing their best to rescue them. As Europeans has a single currency unit, they have no choice but uniting their efforts. What about us, Mongolians. We pledged to keep it below 5 percent to IMF in order to get large amount of money and recently the Finance minister said the deficit is 6.4 percent. Thus, it is not so difficult to understand that their so-called ‘clarifications’ are indeed the clarification of unaccountability. The only way to control the budget deficit is to approve a budget stability law as soon as possible.

The law is already ready and waits for approval only. If it cannot be passed before the end of this spring parliament session, it would have to wait until next parliament forms. The reason is our MPs cannot reject their golden chance to spend state budget funds for winning next elections.

At the end, if they are not able to make clarifications to budget, then they will have nothing to do basically.

Esteemed MPs do not pass that damned law. May the Unaccountability Prosper! Long Live Budget Clarification!

Translated by P.Shinebayar


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