🏦 BOND TRADING | CONSTITUTIONAL AMENDMENT | + ₮1.8 TRILLION BUDGET

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🤔 DID YOU KNOW?

🏦 BOND TRADING

Securities companies in Mongolia have traded bonds worth $38.8 million (₮134.7 billion) in the primary market since January, with Golomt Capital leading the pack.

Main player

Golomt Capital, which has also introduced the country’s first open, closed, insured and bank-guaranteed bonds, accounted for 49.6% of the primary market trading. The company has raised $72 million from its bond issuance and paid back $30.2 million to its customers, who have earned $4.6 million in interest over the past year.

Key insights

• Most of the bond trading in the primary market, or 86.3%, took place in the over-the-counter market, while the remaining 13.7% was done through open bond trading.

• In the open market, securities companies traded Sendly and Invescore bonds worth $5.3 million, with Tavan Bogd Capital and Golomt Capital handling 38.8% and 23.5% of the trading respectively.

• In the over-the-counter market, bonds worth $33.5 million were traded, involving companies from the oil, mining, construction and banking sectors.

The bond market in Mongolia is open to all investors who want to diversify their portfolio and earn stable returns.

📈 DATA STORY: Banks’ Ad Expenses

Mongolia’s banks are spending huge on advertisements over the last few years as they have prepared for IPOs.

🚀 BUDGET SPENDING BOOST

The Mongolian government has announced a ₮1.8 trillion ($510 million) increase in its state budget for this year, as it seeks to boost social welfare and public sector salaries amid a strong economic recovery and in prospect of upcoming parliamentary elections.

The budget amendment, which will raise total spending by 8.8% to ₮22.3 trillion, comes after the landlocked country recorded a 7.9% growth in gross domestic product in the first quarter, driven by a rebound in exports of coal and other minerals.

Mongolia's GDP per capita also surpassed $5,000 for the first time in its history, while its budget revenue exceeded the target by 30%.

The government said it would use the extra funds to address some of the social challenges facing the population of 3.3 million, where poverty and inequality remain high despite its vast mineral wealth.

• About 22% of the additional spending will go towards closing the pension gap and raising pensions by 10% across the board.

• Another 55% will be allocated to increasing the base salary of civil servants and raising the minimum wage to ₮1 million ($280) per month.

• The government also plans to restore child benefits for some families who had been excluded due to budget constraints, and to provide back payments for the past six months. This will cost about ₮168 billion, or 9% of the extra spending.

• Another ₮187 billion, or 10% of the increase, will be spent on easing traffic congestion in Ulaanbaatar, which has long suffered from lacklustre planning, heavy traffic and inefficient public transit.

The budget boost marks the first time that Mongolia has been able to raise all pensions and allowances after exceeding its revenue target. But it also raises questions about the sustainability and prudence of its fiscal policy.

• Foolhardy: The government expects to finance the spending increase by raising its coal exports from 36 million tonnes to 50 million tonnes this year. However, this may prove overly optimistic as global demand for coal has fallen and prices have dropped by 60% since the start of the year.

• Inexpedient: The budget amendment also risks fuelling inflation, which is already running at 11% as of April. The economists warned that increasing wages and pensions could add more pressure on prices and undermine its efforts to bring inflation down to a single digit.

• Myopic: Analysts have criticized the government for following a populist pattern of handing out cash and raising salaries ahead of elections. Mongolia is due to hold a parliamentary election next year, with the ruling party facing tough challenges amid a series of extensive corruption cases.

The case of Turkey, where President Recep Tayyip Erdogan has repeatedly used fiscal stimulus to win votes but has also presided over a sharp depreciation of the lira and an economic crisis, offers a cautionary tale for Mongolia.

🏃 QUICK STORIES

🔵 Number of Parliament Members to be raised to 126 from 76. The State Great Khural approved the Law on Amendments to the Constitution of Mongolia on May 31. The 2024 parliamentary election will be held under a mixed electoral system of majoritarian and proportional where 76 will be elected by a majoritarian system or directly by voters in constituencies while 48 members by proportional system or from a political party list.

🔵 The first extraordinary meeting of shareholders of the Trade Development Bank (TDB) has been announced. The meeting is scheduled to be held on July 7. In addition, at the meeting, the members of the board of directors of TDB will be elected and the bank's rules will be approved by determining the share capital.

🔵 The Bank of Mongolia introduced the Mobile Payment Token System, funded by the ADB. The system converts the user's payment card information into a token and then allows it to be used for payment. Within this framework, the Bank of Mongolia will cooperate with SocialPay and QPay.

🔵 The Minister of Energy submitted a bill to amend the Law on Enterprise Income Tax. The draft law envisages a 90% discount on the operating income tax of enterprises producing electric power source equipment.

⭐ WATCH: Why 99.7% of Mongolia is Completely EMPTY

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Editor: E.Zolbayar
Writer: A.Purevjargal & A.Bilguun

Disclaimer: The information Inside Mongolia provides is for educational and informational purposes only. It is not intended to be and does not constitute financial advice, trading advice, or any other advice. The decision whether to consider the information we provide is solely our readers' independent decision.