Due to the COVID-19 pandemic, recent years have seen a further increase in unemployment and destitution, and a general worsening in the basic conditions of life, including an absolute impoverishment of the mass of the population. Unfortunately, parliamentarians called on people to live frugally, not knowing what real life is like and how people are actually coping.
Particularly, during the parliamentary plenary session on March 31, Speaker of Parliament G.Zandanshatar said, “Government is not an almighty god. The state budget is limited. The amount of money and foreign exchange earnings is limited. Therefore, our people need to move to austerity mode and understand the shadow of global events in Mongolia. Political forces also need to be realistic without politicizing the country’s issue.”
His untimely and unrealistic call has drawn criticism and resentment. This is because in reality, thousands of shipping containers are stuck on the Mongolian-China border and Mongolians are suffering from food shortages, high inflation, loss of income, unemployment, business closures, a crippled export sector, and a decimated tourism industry. In particular, as many as 260,000 Mongolians had slipped into poverty in 2020, increasing the poverty rate to 33.6 percent, while 35.2 percent of households reported a decline in income.
To make matters worse, inflation skyrocketed to 9.6 percent, with the prices of food, solid fuels and gasoline increasing the most. Ten months into the pandemic, meat prices in Ulaanbaatar had risen by 16 percent and fuel prices by 38.8 percent.
In other words, at a time when people are barely earning money for food, and their lives are deteriorating, politicians are “insulting” their citizens by instructing them to cut down luxury expenses and live frugally. It is unfortunate that the country is being ruled by people who do not even know the current living situation of the general public.
During the Magic Bag project last December, for instance, I had a chance to see in person that life in ger areas, especially on the outskirts of Ulaanbaatar, has become more heartbreaking than ever before. A young family we visited complained that they lost their jobs due to the COVID-19 pandemic and were able to afford food and firewood only with their children’s money and allowance for mothers, which are both provided by the state. Some suburban children couldn’t join online classes because their families didn’t have smartphones. Most of the homes were freezing, didn’t have briquettes or wood to make a fire, and often starved. Moreover, people’s debt to the grocery store is increasing and some people are even buying vegetable oil in milliliters. This confirms that the middle class is getting poorer. Therefore, Speaker G.Zandanshatar must clearly explain what citizens should cut back on when life is so difficult.
During the session, lawmaker Kh.Bolorchuluun also commented that Mongolians eat the cheapest food and that a loaf of bread costs just over 1,000 MNT. According to him, Mongolians buy bread and meat at the lowest prices in the world and enjoy the most luxurious life in the world. However, it’s been long since the price of a loaf of bread surpassed 2,000 MNT, which is twice higher than politicians think it to be.
In addition, at the irregular Congress of the Social Democratic Mongolian Youth Union, legislator N.Uchral said, “There are a lot of families living on VAT refunds. People wait for VAT refunds. Therefore, there is a need to increase VAT refunds. We are planning to initiate a bill to increase the VAT refund rate to up to 4 percent on consumer goods such as milk, bread, flour, rice, meat and fuel. This is seen as the right solution in the current context where inflation is having a negative impact on livelihoods. However, refunds for non-essential products such as alcohol and tobacco should be zeroed.”
His remark drew a lot of criticism. Two percent of all purchases registered with the tax system are refunded on a quarterly basis on top of a monthly VAT lottery. In fact, hundreds of thousands of people receive a very small amount of money in the form of VAT refunds. Some people aren’t using the VAT receipt application or Ebarimt because they have no access to the internet or even smartphones. There are many people who don’t go to stores that provide VAT receipts and buy food from the market where it is cheaper. All this shows that politicians do not really know the lives of citizens, so they are not able to make decisions that benefit the people.
Economists say that Mongolia is facing difficulties due to the wrong policies made by the previous and current governments. This is because the government “forcibly” controlled the prices of fuel, electricity, and water in order to win the parliamentary, local, and presidential elections in 2020 and 2021. This has pushed up inflation, increased the prices of goods and services, and devalued the tugrug. However, politicians dare to “insult” the public by blaming them for their wrong policies and actions and calling on them to exercise financial austerity when they barely make ends meet.
Citizens, on the other hand, want the government, Parliament, the Office of the President, and the Ulaanbaatar Mayor’s Office to moderate their expenses. However, instead of cutting expenses, Parliament Speaker G.Zandanshatar issued Resolution No. 42 of 2020, which raised the salaries of some government officials. In specific, according to the resolution, the President’s Office, the Parliament’s Office, and the Cabinet Secretariat increased their salaries by 50 to 270 percent in the form of coefficients. Coefficient means that the base salary is multiplied by the number of coefficients. For example, if the basic salary of the speaker of the Parliament was 2 million MNT, it has been multiplied by 3.03.
Minister of Finance B.Javkhlan has promised that the government would protect the economy by moving to austerity and cutting costs. During the parliamentary session last Friday, he emphasized, “The world was optimistic about the economic growth in 2022. Mongolia was the same. However, we faced another big challenge this year. Therefore, we will make some changes in our monetary and fiscal policies. The government will move to frugality. It is too early to say whether the budget will be amended.”
Last February, Parliament amended the 2022 State Budget to increase pensions and benefits for target groups, such as the elderly, people with disabilities, single parents and others in need, and unanimously supported freezing the construction of all monuments and projects like the Bogd Zonkhov project. Minister B.Javkhlan’s statement on cutting unnecessary expenditures is likely to lead to budget amendments. However, it is doubtful whether the budget will be used for the right things and whether appropriate measures will be taken to improve the living standards of the people.
Conversely, instead of talking about restricting the consumption of citizens, parliamentarians and the government need to retrieve the public money that those in power have “stolen”. A general audit hearing on non-performing loans of Development Bank of Mongolia took place last week to review the projects and programs financed by the bank. During the hearing, the Ministry of Finance and Development Bank reported that 20 borrowers misused 508 billion MNT based on estimation.
According to Mongol Bank’s audit in 2021, non-performing loans of the bank amounted to 1.8 trillion MNT or 57 percent of total assets. Currently, the total loan portfolio amounts to 3.2 trillion MNT, of which loans worth 1.8 trillion MNT are non-performing and loans worth over 200 billion MNT are at risk. Development Bank has filed lawsuits worth 750 billion MNT against 16 companies that failed to repay their loans on time. The identities of another 17 borrowers with non-performing loans worth 1.6 trillion MNT were disclosed last February.
Unfortunately, lawmakers and government officials did not talk about who would pay for these non-performing loans and who would be held accountable. People who are frustrated by the economic difficulties are protesting against the government’s intentions to offset Development Bank loans. Instead of calling on struggling people to refrain from spending on luxury, state officials should demand those who misused billions of tugrug to repay their loans.
