Daily Business News Mongolia

The draft law of placing some fund of the Mongolia Development Fund was initiated by MPs N.Batbayar, R.Amarjargal, G.Batkhuu, Ts.Bayarsaikhan, R.Bud, D.Damba-Ochir, G.Zandanshatar, O.Chuluunbat and proposed to the Speaker of the State Great Khural. Some more clarification was made from the initiator.

Q: What was the main reason of initiating this law?
MP N.Batbayar: World financial crisis is affecting countries of the world and countries are taking various measures to handle it. USA allocated 700 billion US$ and it is equal to its 5% of GDP. As for Mongolia, situation in economy is relatively healthy and potential. Therefore, there is a proposal of placing 300 US$ of the Mongolia Development Bank in commercial banks, if compares with USA, proportionally, it is about 200 million US$ for USA. The income from the windfall tax was divided into three different purposes and 1/3 of it or about 300 million US$ was reserved for the securing the domestic crisis. According to the law, it is kept at the Central Bank. Therefore, in order to support commercial banks and fund them, draft law on granting the right to place it at banks to the Government was proposed.

Q: What kind of benefit it will bring for the commercial banks?
MP N.Batbayar: The loan giving of banks will be more unrestricted. Businesses can get loan to run their businesses as well. Therefore, this law can regulate real legal environment. I hope it will be discussed and adopted within the next week. After the law the businesses will be in normal operation and loan can be provided.

Q: Is the state budget in risk if place this money in commercial banks?
MP N.Batbayar: It will not be spent. It will be placed. This money is kept by the Mongol Bank with 0.5% interest rate. It will probably be placed at commercial banks with 4-5% interest rate.

Q: Banks will give loan with that money, what will happen then?
MP N.Batbayar: The risk is not because of loan payback failure. In anatomy, loan is like blood circulation. There must be a healthy system that any loan can become production and service. Therefore, this loan must be provided without interruption like nutrition.

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