Copper price down on China’s covid-19 worries www.mining.com

Diesel fuel to be exempt from excise tax until July 1 www.montsame.mn

At today's regular meeting of the Cabinet, a decision was made to exempt the excise tax on diesel fuel until July 1, 2022.

The Government came to this decision to keep the price of diesel fuel at a stable level and ensure its stable supply during the period when the mining, construction, and agricultural season begins. 

Minister of Mining and Heavy Industry G.Yondon and Director of the Authority for Fair Competition and Consumer Protection S.Munkhchuluun were instructed to take appropriate measures to maintain the supply and retail price of diesel fuel at a certain level and monitor their implementation.

Prime Minister holds meeting with entities to receive suggestions on amending 2022 State Budget www.montsame.mn

On April 19, Prime Minister of Mongolia L. Oyun-Erdene held a meeting with representatives of the country’s TOP-100 entities to introduce the bill developed for making amendments to the 2022 State Budget and receive their suggestions. 

“It has been a year since I held a meeting with all of you during the time of strict lockdowns to introduce our MNT 10 trillion program. Although we have returned to our normal way of life thanks to vaccinations, the situation continues to be difficult abroad. Due to this, it has become necessary to amend the 2022 State Budget. 

The amendment consists of three parts: measures against increase in commodity prices, bill on Budget Saving, and measures for decentralization. In the future, it is planned to have the bills we developed discussed by entities through the Mongolian National Chamber of Commerce and Industry prior to the parliament’s first discussion,” said the Prime Minister. 

Following the Prime Minister’s statement, the companies’ representatives put forth suggestions and questions regarding ways to cooperate with the state, and voiced their opinions on a flexible tax policy, workforce shortages, and the implementation of the New Revival Policy initiated by the Government.

Advisor at Nomin Holding LLC A. Shagdarsuren said, “There is a lack of workforce in our country. In order to have Mongolia become a producer country, it is necessary for the state to implement a flexible tax policy. We want to fully process our livestock commodities domestically. The import of these products should be exempt from VAT and customs.”

Director of Jur Ur LLC B. Munkhzul said, “I would like to request that the percentage of VAT be reduced in the framework of the measures against increase in prices. Furthermore, it would be suitable to extend the due dates for large loans being taken by entities for the purpose of investment in their operations. Additionally, as the current legislation states that tax discounts are provided for entities running operations 500 km from the capital city, the distance should be decreased in the framework of the decentralization policy.”

After hearing the suggestions of the representatives, Prime Minister L. Oyun-Erdene said, “So far, 650 public services have become digitally available. If we hold discussions on possible solutions for issues, I believe that there will be a significant change in a year’s time. Thus, we will cooperate with the private sector. In connection with budget saving, there will be changes in the corresponding policy. We shall hold another discussion with entities regarding tax issues. In the framework of the New Revival Policy, works have accelerated, and about 70 percent of projects targeting economic growth have found appropriate solutions.”

At the end of the meeting, he noted that within the framework of decentralization policy, the policy support will be provided for entities creating job opportunities in other parts of the country, and that the article on tax discounts for operations being run at a distance of 500 km will be reconsidered. 

Mongolia reports 51 new COVID-19 infections www.akipress.com

Mongolia's health ministry confirmed 51 new COVID-19 infections on April 20.

45 new cases were recorded in Ulaanbaatar, 6 cases were detected in the regions.

No new related deaths have been recorded in Mongolia since March 10, and the country's COVID-19 death toll remains at 2,108.

Mongolia's economy projected to grow by 2.5% in 2022 www.akipress.com

After a strong initial rebound, Mongolia’s economic recovery stalled in the last three quarters of 2021, and the growth outlook for 2022 is expected to remain modest. Following a contraction of 4.4 percent in 2020 and 1.4 percent growth in 2021, the World Bank’s latest Mongolia Economic Update projects that the economy will grow by 2.5 percent in 2022, reflecting lingering border frictions with China and the impact of the war in Ukraine.

Despite continued policy support and higher commodity prices, economic growth is dragged down by protracted trade disruptions and logistical bottlenecks amid border closures. Headline inflation rose sharply by 14.4 percent (y/y) by March 2022, weighing down real incomes and household consumption. The war in Ukraine amplified external risks resulting in increased demand for foreign exchange, and further erosion of international reserves, says the report.

The report notes that main drivers of growth included recovery in the service sector and a short-lived rebound of the mining sector in Q1 2021. On the demand side, domestic investment was the key driver of growth, underpinned by a substantial buildup of mineral inventories. However, private consumption contracted by 4 percent in 2021, despite the government’s stimulus program. The report also notes that disruptions in bilateral trade with China in 2021 hampered mining exports and the import of vital inputs for domestic production.

Over the medium-term, the report projects economic growth to accelerate to above 6 percent in 2023-2024, as the underground mining phase of Mongolia’s largest copper mine Oyu Tolgoi (OT) is expected to become operational during the second half of 2023.

Policy space is increasingly constrained after two years of expansionary fiscal policies, with persistent fiscal imbalances threatening long-term sustainability, says the report. Public spending increased in 2021, driven mainly by generous but poorly targeted welfare programs. Meanwhile, public debt, including the central bank’s swap agreement, increased sharply to about 92 percent of GDP in 2021, driven by large COVID-related fiscal measures to support the economy.

The headline budget deficit nonetheless narrowed to 3.1 percent of GDP – with a one-off tax arrears collection (2.3 percent of GDP) and the financing of the Child Money Program through the Future Heritage Fund, which weakened the fiscal framework and long-term sustainability.

“Mongolia is currently facing strong headwinds, including an economic slowdown, high inflation, widening fiscal and external imbalances and high debt burden,” said Andrei Mikhnev, World Bank Country Manager for Mongolia. “Mounting instability and heightened risks call for adjustments in macroeconomic policies, including monetary policy adjustments to return to a credible inflation anchor, strengthening the central bank’s operational independence, fiscal consolidation to stabilize debt, and better targeting of welfare programs. In addition, Mongolia also needs to implement structural reforms to help lay the foundation for more diversified and hence more resilient growth in the medium term.”

The report highlights that monetary policy needs to return to a credible inflation anchor, raise interest rates further, curtail quasi-fiscal activity, and allow the exchange rate to absorb adverse external shocks. Fiscal consolidation is necessary to stabilize debt and ensure external and public debt sustainability. Importantly, fiscal measures that better target the poor can help contain fiscal imbalances and sustain support to the most vulnerable households. The report also notes the need for structural reforms including measures to reduce trade and transport costs, facilitating foreign investment, and promoting domestic entrepreneurship that would help strengthen growth in the medium term.

The HU performs at Coachella-2022 www.montsame.mn

The Coachella Music and Arts Festival is taking place in Indio, California on April 15-24.

On the second day of the Coachella Festival, the Mongolian folk rock band - The HU performed their song ‘Shikhikhutag’ at the stage of one of the world’s most famous music festivals.

After two years of COVID-19 cancellations, the Coachella Music and Arts festival is back, bringing together artists including Justin Bieber, Billie Eilish, Harry Styles, and Snoop Dogg.

The Coachella Valley Music and Arts Festival is an annual and arts festival held at the Empire Polo Club in Indio, California.  The event features musical artists from many genres of music, including rock, pop, indie, hip hop and electronic dance music. 

Parliamentary Visit to Mongolia www.daniel4shrewsbury.co.uk

As the PMs trade envoy to Mongolia, I have just completed a four-day visit to this country.  We had the opportunity of visiting the single largest foreign investment in the country which is the British/Australian copper mining investment run by Rio Tinto.  This is the third largest copper mine in the world.  We were taken 1.3k underground to inspect the vast honeycomb network of tunnels where excavation is taking place to mine copper and gold.  This is an investment of over $12b and a hugely strategic important investment.

Mongolia a country sandwiched between Russia and China inevitably finds herself in a precarious situation dependent on energy and trade from Moscow and Beijing.  They view the UK as an extremely important third-party neighbour and want to engage with us as much as possible to make them less dependent on the two giants that straddle their borders.

One of the companies I met was a local Mongolian dealer selling JCB machinery.  I had the huge privilege of meeting the owners and their team and asked them how do they compete with cheaper Chinese products.  They replied unequivocally it is the strong British brand, the quality of British manufacturing and the strength of the service of products that has allowed them over a very short period to capture a significant portion of the market and they are expanding rapidly.

As we have left the EU and are this year going to join the new Indo-Pacific CPTPP Trade agreement, recalibrating British global exports to the Far East countries like Mongolia will become increasingly important.   British companies should be encouraged to look to far Eastern markets like Mongolia, who will be critical for our prosperity agenda

During my visit I had the honour of meeting many British companies who had joined me on this trade delegation to promote high quality British manufacturing goods and services.  In addition to the mining sector, they included agriculture, medicine, health care and in financial services.  We must help Mongolia to be less dependent and less vulnerable to overdependency from Russia and China and I am truly humbled by the response we received from our Mongolian friends and partners.

Mongolia: Reforms Crucial to Navigate Stronger Headwinds www.worldbank.org

After a strong initial rebound, Mongolia’s economic recovery stalled in the last three quarters of 2021, and the growth outlook for 2022 is expected to remain modest. Following a contraction of 4.4 percent in 2020 and 1.4 percent growth in 2021, the World Bank’s latest Mongolia Economic Update projects that the economy will grow by 2.5 percent in 2022, reflecting lingering border frictions with China and the impact of the war in Ukraine.

Despite continued policy support and higher commodity prices, economic growth is dragged down by protracted trade disruptions and logistical bottlenecks amid border closures. Headline inflation rose sharply by 14.4 percent (y/y) by March 2022, weighing down real incomes and household consumption. The war in Ukraine amplified external risks resulting in increased demand for foreign exchange, and further erosion of international reserves, says the report.

The report notes that main drivers of growth included recovery in the service sector and a short-lived rebound of the mining sector in Q1 2021. On the demand side, domestic investment was the key driver of growth, underpinned by a substantial buildup of mineral inventories. However, private consumption contracted by 4 percent in 2021, despite the government’s stimulus program. The report also notes that disruptions in bilateral trade with China in 2021 hampered mining exports and the import of vital inputs for domestic production.

Over the medium-term, the report projects economic growth to accelerate to above 6 percent in 2023-2024, as the underground mining phase of Mongolia’s largest copper mine Oyu Tolgoi (OT) is expected to become operational during the second half of 2023.

Policy space is increasingly constrained after two years of expansionary fiscal policies, with persistent fiscal imbalances threatening long-term sustainability, says the report. Public spending increased in 2021, driven mainly by generous but poorly targeted welfare programs. Meanwhile, public debt, including the central bank’s swap agreement, increased sharply to about 92 percent of GDP in 2021, driven by large COVID-related fiscal measures to support the economy.

The headline budget deficit nonetheless narrowed to 3.1 percent of GDP – with a one-off tax arrears collection (2.3 percent of GDP) and the financing of the Child Money Program through the Future Heritage Fund, which weakened the fiscal framework and long-term sustainability.

“Mongolia is currently facing strong headwinds, including an economic slowdown, high inflation, widening fiscal and external imbalances and high debt burden,” said Andrei Mikhnev, World Bank Country Manager for Mongolia. “Mounting instability and heightened risks call for adjustments in macroeconomic policies, including monetary policy adjustments to return to a credible inflation anchor, strengthening the central bank’s operational independence, fiscal consolidation to stabilize debt, and better targeting of welfare programs. In addition, Mongolia also needs to implement structural reforms to help lay the foundation for more diversified and hence more resilient growth in the medium term.”

The report highlights that monetary policy needs to return to a credible inflation anchor, raise interest rates further, curtail quasi-fiscal activity, and allow the exchange rate to absorb adverse external shocks. Fiscal consolidation is necessary to stabilize debt and ensure external and public debt sustainability. Importantly, fiscal measures that better target the poor can help contain fiscal imbalances and sustain support to the most vulnerable households. The report also notes the need for structural reforms including measures to reduce trade and transport costs, facilitating foreign investment, and promoting domestic entrepreneurship that would help strengthen growth in the medium term.

For more information, please visit: www.worldbank.org/mongolia

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China Zijin invests in Xanadu to ink copper-gold resources in Mongolia www.reuters.com

Cooperation agreement for project to construct a crude oil pipeline signed www.montsame.mn