Lkhagvasuren: Domestic Companies Need to Carry Out Mining Transportation
Economy
Ulaanbaatar, March 14, 2023 /MONTSAME/. On March 9, the Governor of the Bank
of Mongolia Mr. Lkhagvasuren presented on the current economic situation to the
journalists.
-What measures are taken to reduce and cover the current account
deficit by the Bank of Mongolia?
Last year, the current account and
payment deficit reached about USD 720 million. According to the projection, it
was supposed to be USD 1.8 billion but decreased to USD 700 million at the end
of the year. This deficit reduction was mainly driven by coal export. As of the
end of 2022, a total of 31 million tons of coal were exported and it resulted
in a decrease in the payment deficit, especially in the current account
deficit. Another way to reduce the current account deficit is improving the
service sector, in particular transportation services. With the stagnation in
the mining sector, the transportation sector tends to become stagnant as well.
In this sense, even though the Mongolian economy increased by 4.8 percent, the
mining and transportation sector showed a decline.
If the production and export of the
mining sector improve, the transportation sector will revive. In particular,
the current account deficit of the service sector can be reduced if domestic
companies and enterprises carry out the mining transportation. To that extent,
it will reduce the payment deficit. Another positive impact could be an
increase in foreign exchange reserves which will be resulted in stabilizing the
foreign exchange rate.
According to the Ministry of Economy and Development, Mongolia
can export 40-45 million tons of coal this year. If coal is transported by
domestic companies from the mine-mouth to the border port at the border price,
there is a possibility of making a profit of USD 1.6-2.4 billion, gaining
additional income, and maintaining a balance of payments without deficit.
- The exchange rate and inflation rate are still the main
concerns of people. What are your expectations in this regard?
In this regard, the balance of the payment should be improved.
Since the international geopolitical tension started in February 2022, we
observed its most prominent impact in May. The price index reached a
record-high 16.5% and the foreign exchange reserves dropped to USD 2.4 billion.
Comparing that period with today, the inflation rate is 12.3% and the foreign
exchange reserves have reached USD 3.4 billion. These are, indeed, good signs.
We are expecting that the inflation rate would be within our targeted level or
down to 8%. These are the outcomes of the raise in the policy rate of the Bank
of Mongolia. If this positive trend in the economy continues, the foreign
exchange reserves will increase and the exchange rate will become more stable.
Enterprises and citizens still have expectations that the US dollar will rise
against MNT. Therefore, they are still preferring dollar deposits over MNT
deposits.
- Can all commercial banks complete
their IPOs within this year?
According to the amended Code on Banks, five systematically
important commercial banks are obliged to become public companies and offer
their shares to the public. Last year, Golomt Bank and State Bank listed their
shares, while Khan Bank received their approval. Now the IPOs of Khas bank and
Trade and Development Bank are pending. The code amendment that is pushing
Mongolia’s banks to go public requires all systemic banks to list 20% by June
30, 2023. Since there is deadline, we are expecting their IPO’s will complete
within this year.