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http://zgm.mn/post/1610/

Cabinet raises mortgage financing and keeps interest at 8 percent

Cabinet resolves to annually finance MNT 500 billion for mortgage

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http://zgm.mn/post/1610/


At its regular session yesterday, the Cabinet approved the revision to the mortgage program. Interest rate remained unchanged at 8 percent and the program will be financed from the State Budget and the Bank of Mongolia (BoM) Officials highlighted that the annual financing for the program, which was MNT 300 billion, will be increased to MNT 500 billion. Funding for the mortgage loan will be reflected in the state budget and will be distributed to commercial banks through the BoM under trilateral contract between the Ministry of Finance, Ministry of Construction and Urban Development and the BoM.

Furthermore, the revision will forbid commercial banks from spending the program funding for different purposes, rejecting loan requests on groundless basis and establishing mortgage agreement that prevents citizens from settling the debt before due. The loan will be issued for apartments not bigger than 80 square meters, built in accordance with general urban development plan of local municipality. Mortgage revision also allows loan access up to MNT 60 million for individuals in building a private house not bigger than 120 square meters and energy efficient with essential engineering. Maturity of the loan will be not more than 360 months with an annual interest of eight percent and minimum downpayment of 30 percent of total price. Loan-to-value ratio must not be higher than 70 percent. The lender must be over 18 years of age and legally capable, who has no outstanding loan debts or payables that must be repaid in compliance with court decisions, must be a first-time buyer and have a collateral to receive mortgage. As of September, a total of MNT 233 billion worth mortgage was issued to over 2,700 borrowers.

IMF PROGRAM PREVENTS MORTGAGE INTEREST REDUCTION


After the session, Minister of Construction and Urban Development Badelkhan Khavdislam held a press conference and commented on the Government’s inability to reduce mortgage loan interest rate and downpayment. “Due to our involvement with the International Monetary Fund (IMF) program, we are in no position to reduce down payment and interest rate of mortgage program.

• Mortgage program will be financed from the State Budget and commercial banks. 

• The revision allows loan access up to MNT 60 million for building a private house not bigger than 120 square meters. 

• Loan conditions to ease in 2020 after the program is transferred to Ministry of Finance from BoM.
As negotiated with the IMF, the program will be transferred from the BoM to the Ministry of Finance on January 1, 2020. Loan conditions could be eased off when it happens,” addressed Mr. Badelkhan. He highlighted that the revision focuses more on housing ger district households as it will allow loan access to people who are willing to construct accommodation specified by the general urban plan and first-time buyers will only be able to purchase accommodation built within the frame of city replanning. According to a study conducted by the Ministry of Finance and BoM in May,

● 42,000 people are currently looking for rental apartments, 

● 33,000 people in UB are willing to purchase accommodation with 30 percent downpayment and 14,000 in other provinces. As of September, a total of MNT 115 billion has been financed from the state budget and MNT 220 billion from the BoM to finance the mortgage program.

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Inflation rises above BoM target at 8.1 percent yoy

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National Statistics Office (NSO) released the preliminary results of social and economic situations of November yesterday. According to the report, inflation measured by national consumer price index increased by 7.5 percent from the end of 2017. 

NSO explained that the growth was mainly driven by increases in prices of food and non-alcoholic beverages group by 7.6 percent (non-alcoholic beverages by 5.3 percent and milk, dairy products and eggs by 9.8 percent), alcoholic beverages and tobacco by 8.1 percent, transport by 11 percent, housing, water, electricity and fuels group by 16 percent (electricity, gas and other fuels by 23.1 percent), and health by 12.7 percent. 

In the first 11 months of 2018, total trade turnover reached USD 11.9 billion, of which exports totalled USD 6.5 billion and imports - USD 5.4 billion, with trade balance standing at a billion USD surplus. Compared to the same period of previous year, export decreased by 19 percent and import by 5.5 percent. Foreign trade turnover grew by 23.6 percent, of which exports amounted to USD 794.2 million, which is 14 percent higher than last year and imports - USD 1.5 billion (37.6 percent growth). NSO noted that the growth in trade turnover was driven by increase in mineral products exports, which totalled USD 1.1 billion. 

The equilibrated budget balance, which was MNT 980.4 billion in deficit last year, reached MNT 266.4 billion in surplus in the first 11 months of this year.

Money supply reached MNT 18.6 trillion in November, displaying MNT 321.8 billion growth (1.8 percent) yoy. The currency issued in circulation totalled MNT 895.1 billion in November, a 0.8 percent increase. Additionally, nominal average exchange rate of the Bank of Mongolia (BoM) depreciated by 5.4 percent from the previous month, while MNT depreciated against CNY by 0.6 percent.

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PM to discuss trade opportunities with Japan

Prime Minister Khurelsukh departs to Japan until December 15

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Prime Minister of Mongolia Khurelsukh Ukhnaa is paying an official visit to Japan between December 12 and 15 at the invitation of the Japanese Government. During the visit, Mr. Khurelsukh is expected to make a negotiation with his counterpart Shinzo Abe and pay a courtesy call on key parliamentarians, Japan International Cooperation Agency.

Mongolian delegation also consists of Foreign Minister Tsogtbaatar Damdin, Minister of Mining and Heavy Industry Sumiyabazar Dolgorsuren and Deputy Foreign Minister Battsetseg Batmunkh. 

On his first day of visit, PM Khurelsukh took part in the ninth consultative meeting between public and private sectors of the countries and met with Japan Bank for International Cooperation representatives. Within the frame of the 2017-2021 middle-term Strategic Partnership between the countries, the two countries have agreed to develop cooperation in agriculture, tourism and IT sectors, as well as preparing Mongolian engineers.

As of November, Mongolia imported goods worth USD 517 from Japan, in which automobiles and equipment account for the majority. According to customs statistics, Mongolia exported USD 25.1 million worth goods to Japan. The imports stand USD 266 million higher compared to 2015, before the bilateral economic partnership agreement (EPA) was established, while exports grew by USD 6.4 million compared to the same period. Furthermore, a total of 69 companies issued certificates of origin for 708 products from the MNCCI this year. These include sea buckthorn oil, cashmere blanket, carpet, horse meat and mutton. Specifying the companies, major companies, namely Gobi JSC, Cashmere Holding LLC, Yanmal LLC, APU JSC, Khaan Jims LLC and Ulaanbaatar Carpet JSC have issued the certificates to export products to Japan and the remaining account for small and medium-sized enterprises (SMEs). 

MNCCI highlighted that there were no major changes in export items and quantity to Japan since the establishment of EPA. Businesspeople in Mongolia expressed the need to revise the list of discounted goods and services, noted the MNCCI. 

This year, Oyu Tolgoi LLC successfully conducted a test-export to Japan and a Japanese Okunou Corporation began selling Ulaangom, a cookie made out of seabuckthorn in Mongolian market. Taking these into account, investment experts informed that Japanese SMEs interest in Mongolia are growing in recent years.

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Governor of BoM comments on FX intervention of this year

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Governor of the Bank of Mongolia (BoM) Bayartsaikhan Nadmid has released a statement to explain the current economic situations and measures, in which he highlighted that the bank supplied USD 1.2 billion for foreign exchange (FX) market intervention this year.

According to Mr. Bayartsaikhan, the FX reserves of Mongolia currently stands at a record-high of USD 3.4 billion. “Although the reserves hit USD 4.1 billion in 2012, USD 2.1 billion were raised from Chinggis and Development Bank bonds that year. The current amount may seem high; however, it is still insufficient for the current economic situation. Mongolia needs to settle its foreign debts, which reached USD 27.9 billion. There is a high risk of collapse in global economy. Major bond repayments will mature starting from the second half of 2020. Thus, it is ill-advised to utilize the FX reserves instead of saving it.”

He then explained the depreciation of MNT, saying “Amid high economic growth, FX reserves and stability in the financial market, the MNT rate fell by around 200 points in the last two months. This is due to the vulnerability of the economy that is highly dependent on mining sector. For instance, China started limiting its coal import in November. Compared to October, FX purchase of private entities grew by over USD 240 million in November and the first month of December.”

Mr.Bayartsaikhan also informed that the BoM, in order to stabilize the situation, injected over USD 400 million into the FX market as an intervention; however, the currency rate further sank, which was the indication of a speculative demand for money. This year in total, the bank administered USD 1.2 billion into the market. Last week alone, the bank supplied USD 130 million, said the Governor of BoM. He further suggested the Government to focus on political stability and avoid uncertainty to boost investors’ confidence and support export. “This is critical at the moment as Erdenes Tavan Tolgoi JSC is seeking to issue an IPO at international stock markets.”

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SME demand for green credit totals USD 1.5 billion

MNT 1.3 billion allocated to environmentally-friendly projects

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On the occasion of the five-year anniversary of the National Roadmap for Sustainable Finance, the Sustainable Finance Forum took place this week under the theme “Diversifying from Sustainable Finance”. According to officials, a total of MNT 1.3 billion was allocated to environmentally-friendly projects since the program inauguration.

In 2012, the Trade and Development Bank of Mongolia, in cooperation with Netherlands Development Finance Company, introduced the first Sustainable Finance program “Environmental and Social Management Systems” (ESMS) in Mongolia. As a result, the national roadmap was approved in the following year. The forum was initiated following an imminent need for private and public cooperation to develop and effectively implement policies, actions, and initiatives in line with the commitment of the Government of Mongolia to the global sustainable development agenda and the Paris Agreement, and the unanimous commitment of the banking sector to advance sustainable finance in the country. 

According to the Mongolian Sustainable Finance Association (MSFA), a total of MNT 1.3 billion was granted to environmentally-friendly projects in the last five years. Furthermore, the banking sector financed another MNT 16 billion on environmental projects within this period.

• A total of MNT 1.3 billion allocated to environmentally-friendly projects since the program inauguration.

• Banks financed MNT 16 billion on environmental projects in the last five years. 

• SME demand for green loans stands at USD 1.5 billion.

A market study conducted by the Mongolian Bankers Association (MBA) and MSFA shows that the small and medium-sized enterprise (SME) demand for green loans stands at USD 1.5 billion. Specifying by sectors, construction and processing plants require significant amount of loan. Thus, commercial banks informed that a low-interest credit source will allow them to distribute discounted  loan for environmentally-friendly projects for SMEs.

Traditionally, the MBA annually selects a flagship bank to steer the business organizations towards environmentally and socially-friendly. In this year’s forum, the association picked Khan Bank to be in charge of green development activities in 2019. Thus, the bank will be responsible for protecting cultural heritage, supporting green economic growth and developing transparency.