June, 2009 -Revenue in the year to May 2009 was 22.8 percent lower than in 2008, but it improved compared to April 2009. Total expenditure was relatively stable, while expenditure on maintenance increased. The World Bank’s Monthly Economic Update for June 2009 highlights the importance of protecting the maintenance of basic infrastructure during the downturn, by taking the power sector as an example. The resulting 12-month rolling fiscal deficit deteriorated slightly in May compared to April.

The trade balance is improving as imports are still declining, due to the domestic slowdown. Exports have picked up somewhat from April to May, thanks to some positive developments in copper, gold and crude oil exports. The exchange rate has been very steady against the USD, and the Bank of Mongolia (BoM) has been able to accumulate international reserves. The BoM and the banking system’s net international reserves increased further to $553 million and $648 million at the end May, respectively.

Inflation is sharply down to 7.4 percent year on year in May, from 12.6 percent yoy in April, led by a decrease in core inflation, giving further evidence of the economic slowdown. The BoM lowered its policy rate, the 1-week central bank bill rate by mid-June, to 11.5 percent from 12.75 percent. This cut was not as large as the drop in inflation though, so in real terms, the policy rate is now strongly positive.

Total deposits at commercial banks increased, while MNT deposits fell and FX deposits increased. Part of this decrease in MNT deposits is in line with seasonal variations in MNT deposits.