💰 Budget x3 | Mining week 2023 | Cigarette Import

Happy Monday! FYI, the Mongolian Mining Week 2023 and the Asia Pacific Research Committee's annual conference are to kick off in Mongolia this week.

Back to the newsletter, in today's edition, we got…

• Budget Expenditures in the last 8 years

• Mongolia’s Cigarette Import

• Mongolian Mining Week 2023

Let's get started!

💰 Budget spending tripled in 8 years

The budget proposal for the upcoming year has been unveiled, and it's quite noteworthy. Budget spending will go up by 22.3% YoY, reaching a whopping ₮27.4 trillion ahead of the 24’ election. What's the story behind this?

Big numbers:

• ₮25.4 trillion: Budget revenue is estimated to be 21% higher YoY, reaching ₮25.4 billion.

• ₮2.1 trillion: And above figures result in a budget deficit of ₮2.1 trillion.

So, the problem?

Budget revenue and expenditures keep growing year after year. This results in a deficit in the budget every year. Should we continue this trend of expanding the budget and running a deficit?

It's like a tug of war between monetary and fiscal policy. While the Bank of Mongolia is striving to control inflation by keeping interest rates at 13%, the budget keeps growing like an eager child. In this scenario, the Bank of Mongolia can't ease the monetary policy. Hence, interest rates remain high, and we continue to face steep interest rates on loans.

Another factor is the election year. It's natural for budget spending to spike ahead of the election. In fact, budget spending has increased by an average of 15% over the last decade. However, the budget expenditure for the election years of 2016 and 2020 was twice as high as the average. The growth in budget expenditure for the upcoming election year is also projected to be 7.3 percentage points higher than the average.

If public expenditure continues to rise at this pace, it can lead to several adverse consequences, including heightened inflationary pressures, soaring interest rates due to budget deficits, instability in the exchange rate, and a drop in credit rating. As a result, policymakers need to adopt a more balanced approach when managing both the budget and monetary policy.

DATA STORY: Cigarette Imports Reach Record High 🚬

As of last August, the import of cigarettes reached 2.2 billion pieces. In 2022, cigarette imports reached 3.5 billion pieces, which was a historical record. That implies Mongolians' consumption of imported cigarettes has folded 1.8 times in 10 years.

⛏ Mongolian Mining Week 2023

The Mongolian Mining Week 2023 forum, a major event in the mining industry, commences today aiming to develop responsible and transparent mining practices.

All about the Mining Week 2023

The Mongolian Mining Week 2023 forum is being held for the second year by the Ministry of Mining and Heavy Industry and the National Mining Association of Mongolia. This year, the forum is expected to attract over 300 investors from 20 countries, including Australia, Canada, and the United States, as well as over 3,000 local enterprises.

Highlights of the 5-day forum include:

• Participating: Major players in the industry, including Oyu Tolgoi LLC, Xanadu Mines (XAM.AX), Steppe Gold, and Erdenes Mongol LLC.

• Panel discussions on a wide range of topics, including the lifespan of the Oyu Tolgoi group of deposits and Zuuvch Ovoo uranium exploration. In addition to these traditional mining topics, the forum will also explore new topics such as the exchange trading of mining products and critical minerals.

Booming Mongolian mining industry

This year, the Mongolian mining industry has had a successful so far, with the export of coal, the main export product, reaching $5.8 billion in the first 8 months of the year, a 50.6% increase from the same period last year. Additionally, the Oyu Tolgoi underground mine was inaugurated this year, marking a major milestone for the industry.

Lastly, the Mongolian Mining Week 2023 forum is expected to be one of the hot topics during this week, bringing together representatives of the government, the private sector, and investors to discuss the latest trends and developments in the Mongolian mining industry.

🏃 QUICK STORIES

🔵 MIK Holding JSC (MIK) is celebrating its 17th birthday. According to the company’s 2022 annual report, MIK made a profit of ₮6 billion and total assets reached ₮4.6 trillion an increase of 7.8% from the previous year. The company has been purchasing mortgages without recourse from commercial banks in Mongolia and securitizing the receivables due from individual borrowers from these mortgages for the last 17 years.

🔵 Mongolia’s first rated bond, Simple II bond’s pre-order subscription has started. The bond’s annual coupon rate is 17.5% with a credit rating of BBB+ by MIRA (Mongolian Investment Rating Agency). The coupon payment is monthly; the term to maturity is 12 months with a face value of ₮100,000. The issuer Ashid Capital LLC will distribute bonds to increase its loan portfolio.

🔵 Nyambaatar Kh. has been appointed as mayor of Ulaanbaatar city. He gave up his former position as the minister of Justice and Home Affairs of Mongolia. In his place, Enkhbayar B. appointed as the new minister of Justice and Home Affairs of Mongolia.

🔵 Golomt Capital and TDB Capital have been granted permission by the FRC to operate as a commodity exchange broker. Additionally, permission was granted to the Mongolian Stock Exchange to enforce the "Regulations for establishing and implementing standards for commercial contracts for feldspar ores and concentrates".

⭐ TOP NEWS

• Politics: Mongolia’s Search for a Third Way (ForeignAffairs)

• Religion: Boy at the Heart of a Fight Over Tibetan Buddhism (TheNewYorkTimes)

• Economic: IMF Finalizes 2023 Article IV Mongolia Consultation (IMF)

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Editor: E.Zolbayar
Writer: M.Khulan & Skh.Angirmaa & G.Aminaa

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.