Policy Paper Proposal
Monetary and Fiscal Policy responses to the COVID–19 in Mongolia
Statement of the Problem
Mongolia has imposed severe domestic embargoes on logistics and strict lockdowns to reduce the plague’s spread due to an outbreak of COVID–19, which resulted in reducing overall economic activity. For example, they have reduced the level of income of households and businesses, and increased the level of expenditure. As a result, it is negatively affecting the living standards of households, reducing consumption, reducing the activity of business firms, and in turn creating job cuts. Furthermore, increasing the rate of non–performing loans (NPLs) in the banking and financial sector has deeply hurt the economy as a whole.
Source: Bank of Mongolia
The Government of Mongolia spent a total of MNT 2,821.1 billion in 2020 and MNT 3,188.5 billion as of September 30, 2021, to support the overall economic activity of the COVID–19 period. In addition, MNT 5,719.0 billion was disbursed to 58,387 borrowers under the “10 trillion health protection and economic recovery program” (Bank of Mongolia). In this regard, the policy measures being taken in Mongolia are as follows:
In terms of household policy measures: Increased welfare by MNT 100,000, increased child allowance by MNT 100,000, deferred repayment of consumer and mortgage loans, and provided financial support during the quarantine period.
In terms of corporate policy measures, business loans have been restructured, electricity and heating bills have been reduced, and soft loans at 3 percent per annum have been provided under the 10 trillion program.
As for policy measures aimed at businesses and households, social insurance premiums have
been reduced and tax breaks have been provided. As for the banking and financial sector, the policy interest rate has been reduced.
The government’s policy measures are aimed at increasing the overall economy by increasing aggregate demand and aggregate supply by supporting the activity of households and business firms. This raises the important question of whether the government’s policy measures are reaching its target audience and whether they are being spent as intended.
For example, can the inclusion of large firms that do not require social security contributions and tax breaks be effective in policy implementation? Also, how effective can the 10 trillion programs be for small and medium–sized firms that do not need to take out a soft 3 percent loan? Has the money from this soft loan been spent on what it will be used for? Or the important question is whether it was spent for its intended purpose.
Research Questions
1. How effective and efficient were the policy responses to the COVID–19 in Mongolia
2. Were the policies reach their intended target group?
