Impact of Fiscal Consolidation on the Mongolian Economy

41 Pages Posted: 19 Sep 2019

See all articles by Ragchaasuren Galindev

Ragchaasuren Galindev

Queen's University Belfast

Tsolmon Baatarzorig

Independent

Nyambaatar Batbayar

National University of Mongolia - Economic Research Institute

Delgermaa Begz

National University of Mongolia - Economic Research Institute

Unurjargal Davaa

National University of Mongolia - Economic Research Institute

Oyunzul Tserendorj

National University of Mongolia - Economic Research Institute

Date Written: September 17, 2019

Abstract

The Government of Mongolia began implementing an IMF program under the Extended Fund Facility agreement (EFF) in May 2017. Under the program, the government has decreased expenditures and increased taxes to achieve debt sustainability via fiscal consolidation and stable growth. At the same time, the government has faced challenges because of its commitment of fiscal consolidation to the IMF: the rising price of fuel and its own fuel-subsidy policies. We used the PEP standard static CGE model to examine the impact of fiscal consolidation on the Mongolian economy under various conditions. Moreover, we used a poverty (microsimulation) model to analyze those impacts at a household level. Our analysis of the impact of fiscal consolidation under pessimistic and optimistic mineral-commodity-price scenarios showed that Mongolia’s economy was closely tied to international commodity prices. Our examination of the government’s alternative policies on fuel subsidies in an environment of fiscal consolidation demonstrated that the effect of increased fuel prices on the economy depended upon government fuel-subsidy policy.

Keywords: CGE model, Mongolian economy, Mining, Fiscal consolidation

JEL Classification: D58, E62, I32, Q33

Suggested Citation

Galindev, Ragchaasuren and Baatarzorig, Tsolmon and Batbayar, Nyambaatar and Begz, Delgermaa and Davaa, Unurjargal and Tserendorj, Oyunzul, Impact of Fiscal Consolidation on the Mongolian Economy (September 17, 2019). Partnership for Economic Policy Working Paper No. 2019-20. Available at SSRN: https://ssrn.com/abstract=3455319 or http://dx.doi.org/10.2139/ssrn.3455319

Ragchaasuren Galindev (Contact Author)

Queen's University Belfast ( email )

25 University Square
Belfast, BT7 1NN
Ireland

Tsolmon Baatarzorig

Independent ( email )

No Address Available

Nyambaatar Batbayar

National University of Mongolia - Economic Research Institute ( email )

Suite 503, Building #5
Ulaanbaatar
Mongolia

Delgermaa Begz

National University of Mongolia - Economic Research Institute ( email )

Suite 503, Building #5
Ulaanbaatar
Mongolia

Unurjargal Davaa

National University of Mongolia - Economic Research Institute ( email )

Suite 503, Building #5
Ulaanbaatar
Mongolia

Oyunzul Tserendorj

National University of Mongolia - Economic Research Institute ( email )

Suite 503, Building #5
Ulaanbaatar
Mongolia

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