July, 2009 - The fiscal situation continues to look grim in the first half of 2009. Revenues have fallen by nearly a third in real terms (29.2 percent) compared with the first half of 2008. Total expenditure was relatively stable, except for an increase in net lending by the government to the private sector. The resulting 12-month rolling fiscal deficit deteriorated to 9.0 percent of GDP in June, from 8.1 percent in May. However, the adjusted fiscal deficit (which excludes net lending) shows a slight improvement to 6.5 percent of GDP in June from 6.8 percent in May.


In June, Parliament amended the 2009 annual budget. Expenditure was increased by MNT 104.6 billion. MNT 47.4 billion was allocated to ensure payments for the Child Money Program for the remaining two quarters of 2009 from the Mongolian Development Fund (MDF), and MNT 57.2 billion was allocated to domestic investment from the MDF. The fiscal gap of the amended budget is now 5.8 percent of 2009 GDP, up from 5.4 percent under the March amendment.
The 12-month rolling trade deficit is narrowing, because imports continue to fall faster than exports, pointing to a continued slowdown of the economy. Exports dropped by 40.2 percent compared with the first half of 2008 due to lower commodity prices. There were also no gold exports recorded in June. The exchange rate depreciated slightly against the USD, and the Bank of Mongolia (BoM) increased its net international reserves by $95 million to $648 million at the end of June. Commercial banks’ net international reserves increased by $66 million to $715 million at the end June.