Interview: Chultem Ulaan
What instruments are at your disposal to reverse the trend of depreciation in the turgik and ensure its stability in the long term?
CHULTEM ULAAN: Providing stability for the national currency is one of our fundamental goals. Much of the government’s budgetary and economic activities are directed towards achieving this. The ministry of finance has conducted an in-depth analysis of the key causes of this continuous depreciation, and we are now working to level the balance of payments and increase the flow of foreign currency into our market. Mongolia needs to attract more foreign direct investment and increase its domestic industrial production.
We have recently adopted a new investment law that guarantees more favourable and sustainable conditions for foreign investors doing business in Mongolia in the long term. A key provision of this new law is that tax conditions for investors will remain untouched for a certain period of time, depending on the amount invested. This will help create the right legal framework and business environment, providing investors with greater stability and sending a positive signal that Mongolia is open for business in the long run.
To what extent can the issuance of the Chinggis bonds be considered a success, and how might this experience shape bond issuance in future?
ULAAN: The issuance of the US dollar-denominated Chinggis bonds has brought various challenges but overall positive experiences. It was quite an achievement for us, and it has, in fact, played a critical role in providing sustainability for the economic development of the country. It is true, however, that we now need to look back and carefully analyse and reconsider specific areas for improvement in terms of the disbursement and use of the funds from the Chinggis bonds.
In that regard, the Chinggis bonds will be used as a learning experience, and will help us improve and issue future bonds in a more efficient and effective manner. Raising the funds, it seems, will not be as complicated and difficult as is the task of using them a way that will bring the most beneficial economic returns. This is actually the biggest challenge.
Because of its vast natural resources, Mongolia’s economic and social development will be very significant in the near future. To support such rapid growth, we are sure to see future bond issuances. We will therefore have to spend this money very wisely, as Mongolia’s growth is now at that stage of its development where it needs to receive a decisive yet smart push if it is to succeed in unlocking its full potential.
How will the ministry of finance shape and formulate its debt management strategy beyond 2014 to reduce the budget deficit?
ULAAN: The 2014 budget includes strict requirements in terms of government spending, and it fully satisfies all four requirements stipulated in the Fiscal Stability Law. In order to do so, we have had to make use of our economic resources in an efficient manner, with the aim of keeping government spending under control in the long run. On a separate note, management of the national budget needs to be more open, transparent and subject to greater scrutiny from the general public. In the end, our government’s income and expenses have to be as transparent as glass, and at the same time strong, clear and effective.
In terms of debt management, the ministry of finance is working towards formulating a law specifically to improve this area. Managing the national debt is particularly important at a time when our government is making such large investments to promote the overall development of the country.
We have to make sure that such investments do not translate into excessive financial burden, which would eventually slow down overall economic activity. To ensure a successful debt management law, the ministry is not only paying attention to current estimates and calculations, but is also attempting to predict, to the best of our abilities, all possible future scenarios.