World Bank Supports Mongolia’s Reforms with USD120 Million Financing
The World Bank’s Board of Executive Directors approved USD120 million in financing to support Mongolia’s efforts to restore debt sustainability and strengthen the social protection system.
The World Bank’s Board of Executive Directors approved USD120 million in financing to support Mongolia’s efforts to restore debt sustainability, strengthen the social protection system, and enhance the competitiveness of the economy. Although Mongolia’s legal system includes controls over fiscal deficits, these controls were largely circumvented in the past several years through off-budget expenditures. By consolidating off-budget and quasi-fiscal expenditures, spending priorities will be debated during budget negotiations. Reducing capital expenditure – the largest source of spending increase in 2016 – is also a priority target. Measures to boost revenues include a more progressive personal income tax system that will reduce taxes for lower income groups, as well as increases in excise taxes on alcohol and tobacco, supporting both health and revenue objectives. Other reforms to expand the tax base will follow in the coming years. The program also endorses the government’s efforts to rebalance the social welfare system in favor of the poor, notably by strengthening the Food Stamp Program and laying the foundation for a poverty-targeted benefit. The program includes reforms aimed at making the pension system sustainable. Strengthening the investment climate will help Mongolia to unlock its long-term potential and reduce its reliance on commodity exports. Important reforms in this area include strengthening investor protection, streamlining permit requirements, strengthening animal health management to promote livestock production and exports, and improving the trade environment. Policy reforms are expected to promote specific development outcomes that contribute to poverty reduction.
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