ADB: Mongolian economy growing but wealth gap remains wide

The Bank of Mongolia (BOM) announced to the public that it strengthened its monetary policy rate to 13.05% and also increased the minimum amount of monetary reserve by 1% last week. 

E. Amar, an analyst from the Asian Development Bank says that the BOM has sped up its work on increasing its monetary policy beginning in 2010, and that the ADB supports it, “we see this strict policy as a positive move for the BOM, which slows down inflation.”

On its newly introduced strict monetary policy, D. Khishigjargal, a specialist from the BOM, said, “The central bank has increased its monetary policy by 0.5%. It will significantly influence the amount of money in the economy by changing interest rates, and decreasing the size of loans. This move can be understood as an example of a strict monetary policy.” 

On the question of whether the amount of loans taken by people will decrease, D. Khishigjargal said, “Not so much. I do not agree that it will decrease substantially. As of the past three months, annual loans were recorded at 55%, and we see this as not that much. The decision of BOM is more like a decision of the public rather than a group of people. It is clear that inflation will constantly increase, and it negatively affects people with constant income. BOM is taking these actions to lessen inflation effects.”

The 2012 budget grew by 55%. Analysts say that this budget is exceptional in that it reflects huge investment and funding that Mongolia has experienced before.

The ADB advises that the Mongolian Government should have the money to fund projects that aim to improve crucial social needs like increasing jobs and improving the water supply. ADB’s Head Analyst Jan Hanson says that according to their research, although Asia’s economy is growing very fast, the gap between the rich and poor is very wide. 

It is important that the growth pay attention to its society. This includes a Government strategy to improve education, health and special programs aimed at people with low incomes. Also, the ADB advises that the funding should also be used in developing infrastructure in rural areas of the country; diversify the economy and paying close attention to the progress of small and medium enterprises.

The Mongolian economy is still dependent on international financial market and the price fluctuation of mineral resources. Mongolia needs a long-term plan; and the Government and economic institutions should be improved, and income from mineral resources should be used on the society with fairness and equality in mind.