It was resolved to release bonds worth Tgs100 billion to foster State Bank which was established on the roots of Zoos Bank.

At its plenary meeting on December 25, Parliament approved a resolution to allow the release of government bonds. The Government is authorized to issue bonds worth Tgs100 billion. During discussion of the government proposal, there were some MPs who opposed the bond issuance saying that it’s inappropriate to spend such huge amounts of money to foster the failed bank and it is doubtful whether the money can be repaid to the State. But at last 70.9 percent of MPs supported it.

Finance Minister S. Bayartsogt explained to MPs that it is intended for the bank to be further privatized when State Bank’s activity returns to normal, so that there is no loss to the State. He said, “State Bank will repay the bonds. The State Bank was established by sorting out valid assets from the failed Zoos Bank. It will be privatized when it becomes valuable. It is a version with the lowest cost to defend savings and accounts without burdening the state budget.” As Mongol Bank’s first deputy governor B. Enhhuyag said, Zoos Bank had abnormal loans worth Tgs26.8 billion, doubtful loans worth Tgs26.8 billion, and bad loans worth Tgs43.5 billion as of November 24, 2009. Loans taken by Mongol Gazar Company and its subsidiaries reached Tgs45 billion. Authorized representatives of Mongol Bank bear the duty for working on loan repayment issues.

Tgs100 billion worth of bonds are likely to be sold to the central bank (Mongol Bank) but MPs were not told about interest and repayment terms because of secrecy. It is necessary to release bonds worth Tgs140-170 billion in connection with savings and current accounts at Anod Bank which is also in a very difficult position. The Finance Minister told MPs that it will not be recovered and will be a pure loss.

MP B. Choijilsuren pointed out to MPs that the Government was previously authorized to release bonds worth Tgs250 billion. Now, if bonds worth Tgs100 billion for State Bank, and Tgs170 billion for Anod Bank’s savings and current accounts are released, the total bonds’ amount will reach Tgs520 billion. He expressed his concern that all revenues of the centralized State Budget would be spent for financing bonds.

<< BACK