Case Study, Paper

Mongolia: Budget Credibility and the Sustainable Development Goals

Mongolia has been working toward achieving the Sustainable Development Goals (SDGs) since 2016 when the country adopted its Sustainable Development Vision 2030. The government has much to do to achieve the SDGs by 2030, however. In 2020, Mongolia’s national poverty rate stood at 27.8 percent. Although this number is 0.6 percent lower than in 2018, it still means that some 900,000 of Mongolia’s residents live in poverty. At the same time, overall income inequality has been deepening in the country, especially for the unemployed, who represented seven percent of the population in 2020, when the most recent figures were collected. Compounding Mongolia’s income disparities are unequal access to quality education and healthcare services as well as the disproportionate impact of air pollution on less privileged communities. The situation is expected to worsen further due to the ongoing impact of the COVID pandemic in Mongolia, where the country’s economic activities have slowed significantly and mineral exports to China have dropped due to the latter’s stricter border measures. 

With reduced government revenues, Mongolia is already struggling to make progress toward the SDGs. Reversing that trend will mean mobilizing financing and prioritizing spending that promotes inclusive growth and better services for the country’s most vulnerable. More to the point, accelerating progress toward the SDGs’ 2030 milestones will take effective allocation of national resources and implementation through government budgets. 

However, budget credibility is a challenge in Mongolia, where the government tends to spend less than the budget approved at the start of the year, which is also known as underspending. Based on 2018 and 2020 data on approved expenditure allocations compared to actual year-end expenditures, it is clear that the Mongolian government did not achieve its expenditure targets for these years (in 2020, for example, the government missed those targets by eight percent). Yet budget credibility issues at the sectoral level are not part of public discussions in the country. While the issue of budget credibility comes up in state audit reports, only a few news outlets report on the differences between planned and actual expenditures shown in those reports. 

This brief provides an overview of the status of Mongolia’s SDG implementation, by examining budget credibility trends for government expenditures in general as well as in seven sectors connected to key SDG targets: agriculture and food; education; environment; gender equality; health; social protection; and water and sanitation. The brief then connects these trends back to country-level progress in achieving the related SDG goals. 

Mongolia’s lagging progress toward achieving the SDGs is at least somewhat connected to budget deviations at the sectoral level. It is no accident, for example, that underspending in all seven SDG-related sectors has yielded significant challenges in six of them (with the education sector being the sole exception). 

This brief therefore recommends that the Mongolian government improve its budget credibility by introducing SDG- and gender-sensitive budgeting, the latter being key to accelerating progress on gender equality goals. The brief also urges the government to investigate the drivers of budget credibility challenges and seek public input into how to resolve those challenges. As part of its audits, the Mongolian National Audit Office also needs to closely examine any shift in funds between administrative units, current-year budget implementation, and the drivers and consequences of underspending. Finally, the government is recommended to report on causes of underspending and explain decisions made in budget reallocations.

This publication is a part of Connecting Budget Credibility to the Sustainable Development Goals.

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Mongolia: Budget Credibility and the Sustainable Development Goals

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