S.Bayartsogt, the Minister for Finance: If Government withdraws its money from banks, the risk fund will replace.
Budget of two deputy ministers is not wasteful expense
Copper price decreased and globalised crisis. Banking sector is under huge challenge of getting through it. If Government withdraw its money from banks, some small banks might be collapsed and bankrupted.
Q: Copper price is decreasing. So, the election promises are vanishing?
S.Bayartsogt: Due to the copper price fall, we had to amend the budget project of 2009. Also the Mongolia Development Fund, based on the windfall 60% tax, will be decreased and children and new family money will be decreased accordingly. But “Grant of the Motherland” will be distributed after the realization of the major mining projects. Of course, if it will be distributed by cash, then it surely fuel up inflation. We decided to reconsider all the previously implemented welfare projects. We will take effective and optimal ones and drop out wasteful and ineffective ones. If we can do so, we can provide welfare.
Q: Some say that the Government of Mongolia is offering money when the world economy in crisis. What was the advice of World Bank?
S.Bayartsogt: Decision makers and politicians understand the situation regardless their advice. Financial crisis, copper price fall, high inflation allow us to reconsider what we offered and promised.
Q: There is hearsay that some Ministries will have two deputy ministers. But it is against your policy of shrinking budget?
S.Bayartsogt: I did say anything about to cut all the expenses. State Organizations must have effective structure that can serve its citizens. We will cut what is necessary and we will keep what is necessary.
Q: World economy crisis is affecting mostly banking and financial sectors. What is the current situation for our banks?
S.Bayartsogt: Our commercial banks are operating normally and their situation is sufficiently good enough. But we should have plan to protect ourselves from the approaching risks and dangers. There have to be enough money and capital to get through the crisis.
Q: Do you have that plan and money?
S.Bayartsogt: We have enough currency reserve and there is enough money in the risk fund. We listed the laws that is required to provide financial stability.
Q: How much money is placed at commercial banks by the government?
S.Bayartsogt: Certain resources of the State Fund are placed at banks. At the moment, 76 billion MNT is placed. State Fund must complete transaction and funding for the state service immediately. Also we should think about our profit. It is not profitable if we reserve our capital by us. If we place it at the Bank of Mongolia, the interest rate is so low. We announce tender bid for the commercial banks and place our capital those who offered the best package or interest. Term is 1-3 months. This money doesn’t bring big pressure on commercial banks. If the State Fund has source, we will place our money at banks. It is not much related with the international crisis.
Q: Some sources say that the Government will Some economists say that there is a big deficit in cash at our banks and if the Government withdraw its money from banks, they might go bankruptcy?
S.Bayartsogt: We didn’t say that we will get our money. If necessary we will withdraw it. If the Government withdraws its capital, then banks money and capital will be decreased by certain figures. As for now, budget is good, so we don’t need to withdraw its money.
Q: Most banks are stopped their loan. According to economists, if the Government withdraws its money, there will be big turmoil for the Mongolian economy.
S.Bayartsogt: If the Government withdraws its money, it has enough capacity to replace it from the risk fund. Therefore, if the Government withdraws its money, there will not be problem for the commercial banks.
Q: Do you believe that to save Mongolia from the world economy crisis?
S.Bayartsogt: Our financial system based heavily on banking sector. But foreign economy based on stocks market. Outer situation crisis is deepening. But our saving system is secured by the savings and loans of its people. The index and figures say positive and it is secure. If the loan size is decreased, the previous loans are very healthy and secure also.
Q: Commodity price is decreased I the world market, copper price fall affects Mongolia heavily. Do we have a chance to decrease the negative impacts?
S.Bayartsogt: If Chinese demand will not decrease, our copper will be sold. When the world economy is stabilized, then our economy growth will rebounce.
« Minister for Finance S.Bayartsogt, David Dollar, World Bank Mongolia Director, Rashid Sayed, World Bank Resident Representative made press conference. Our government will cooperate with the world community to overcome the crisis. »