Only a stability fund can stop mining revenues from being squandered

Parliament is currently debating the guidelines for the economic and social development of the country in 2010. It was not so long ago when Mongolians saw how extravagant and non-productive economic expansion could lead to an implosion. Nonetheless, from what we hear about the discussions, the results of which will mould the budget, it is clear our members of Parliament have got over their gloom, got back their enthusiasm for spending, and want an “expansion” budget. That will give Mongolia the dubious distinction of being a country that has not learned its lesson from the crisis that debilitated its economic life.

The 2010 budget will almost certainly provide for payment of a share of the mining resources to all Mongolian citizens. Exactly a year ago, when the world financial crisis was at its peak, draft legislation about distribution of the Motherland Allowance was about to be submitted to Parliament. It was not done as the State coffers were empty and were sure to remain so for some more time, but now our political party leaders have resumed their vigorous push for the measure.  This time the legislation has been drafted by the working group and subgroups formed in June this year.

Those who drafted the law want in effect the Mongolian Parliament to debate and adopt two different budgets every year. The first is the usual and mandatory State budget and the second an ad-hoc budget for the Motherland Wealth Fund. This threatens to enmesh the country’s financial and economic policy in countless contradictions and discrepancies. The proposed Fund will be made up of taxes and royalties that usually accrue to the State budget and, indeed, are a major part of State revenue. We are now told that most of the taxes paid by the holders of strategic deposit licenses will be allocated to the Motherland Wealth fund and then distributed among the populace as social welfare hand-outs.

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