Distribution of MNT 70 thousand for every citizen may sound good but on the other hand it has negative effect on the economy, especially the inflation. Statistics shows that cash flow in the economy in February was increased by 89.0 billion MNT or 3.1 percent from the previous month. Extra cash in people’s hands mean demand will rise for consumer goods and will result in to hype the inflation.
Some economists predict 5 percent of inflation for the beginning of this year but official statistics for January and February are not yet revealed. Major holidays like the Mongolian New year also affected the price of consumer goods during February.
The bad fact of the distribution of 70 thousand MNT of the HDF is that it will bring the price of consumer goods up, therefore the few little cash on people’s hand is worthless in the long run. Additionally, increased cash flow in the economy did not increase domestic production as import already rose by 90.0 million USD or 43.7 percent this year alone. This is one of the worst news as it continues to increase the trade deficit of Mongolia.