The International Monetary Fund is planned to close its Resident Representative Office in Mongolia by April 1 2009. Mongolia joined in this fund in February 14 1991. The International Monetary Fund cooperated with Mongolia and implemented many programs. Here is the interview with Mr. Byung Kyoon Jang, IMF Resident Representative in Mongolia.
Q: What was the main reason to shut its rep. office in Mongolia?
B.K.Jang: IMF is going under the structural reformation at it’s headquarter. Due to this reason, it has to decrease its employees and minimizes its budget. Also there are many Residence Representative Offices are being closed in many countries, where IMF doesn’t implementing any programs.
Q: But, why exactly is IMF Mongolia closing its Resident Representative Office?
B.K.Jang: If any country is implementing a joint program with IMF, it implies that its economy is in troublesome or it is enduring poor economy. Especially, those countries with negative payment balance borrow money from IMF to finance its loss. As for Mongolia, your economy growth is so high in recent years. Also your foreign currency reserve became sufficient enough. By 2004, the official foreign reserve was 208 million US$, but by the end of 2006, it reached to 718 million US$ and last year was one billion US$. It should be noted that it is not because IMF considers the Mongolian economy is poor. Also it doesn’t say anything about that IMF will not cooperate with Mongolia in future. Our cooperation will continue and enrich in the future and IMF working group will visit Mongolia regularly to assist.
Q: How many Offices are being closed?
B.K.Jang: In Asia except Mongolia, there are several other countries; Republic of Korea, Hong Kong, East Timor (Timor Leste. editor), Papua New Guinea Cambodia. Also it is closing many in other continents throughout the world.
Q: What is your opinion towards IMF aids and grants? How effective they were?
B.K.Jang: The answer is the current situation of the Mongolian economy. You can easily compare the economy in 10 years ago and now. It is because of the increased price of gold and copper commodity, the main exports of Mongolia, in the world market. Also the reformation measures of the Government has brought some good results.
Q: IMF advises Mongolia to decrease its budget expenditure. The State budget has increased drastically in recent years.
B.K.Jang: On one hand, increased budget expense can be explained that the increasing income from the mining and mineral sectors. The new tax law has taken its effect in January 1 2008. According to the new law, the tax levy rate decreased, but the windfall tax strengthened the state budget decisively. As the budget increases, the Government increased its investment. Also Government spent much money on social welfare issues such as children’s money, subsidiary for the new marriages and salary of the state servants. But today, when the inflation rate is high, Government shall take measures to harness the inflation.
Q: How would you evaluate the implementation of IMF advice in Mongolia?
B.K.Jang: Government makes decision, after receiving advice from IMF. Recently, IMF advised that the Mongolian Government shall avoid any ineffective budget expenditure in order to build up reserve and to use it when the economic situation deteriorates. As for today, inflation rate is so high. Much of it was imported, but there are some domestic factors fueling it up. As for the distribution wise, the Mongolian economy is so limited. In other words, Mongolia cannot produce sufficiently enough products in Mongolia. If you want import, then transportation costs add up on the original price. The Government of Mongolia is taking measure to solve this issue, but it takes long to be completed. In order to decrease inflation, Mongolia shall decrease its internal or domestic demand.
Q: But how to decrease the demand?
B.K.Jang: There must be the strict budget and monetary policy. Ineffective, budget investments with less priority shall be decreased or postponed. Bank of Mongolia shall increase its interest policy again. Then loans from Commercial banks will be increased and loan interest rates will be increased. Mongolia shall make important decision right at this moment.
Q: But The Bank of Mongolia already increased its interest and now it is 9,75%.
B.K.Jang: Regardless this interest rate increase up to 9,75%, inflation rate is high and the loan for the private sector is high also. Therefore, the Bank of Mongolia shall increase its interest rate again. Also the Government shall decrease its expenditure. Furthermore, some promises that are made during the election campaign shall be postponed.