Mongolia’s Social Welfare Programs to be Supported by ADB $150 Million Loan

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The FINANCIAL — The Asian Development Bank (ADB) has approved a $150 million loan to support reforms needed to sustain and improve the management of social welfare services in Mongolia, such as food stamps or cash transfers, to ensure they deliver maximum impact for the poor, during the period of economic difficulties.

“Social welfare programs account for a large share of the poor’s income in Mongolia, and have significantly contributed to poverty reduction in recent years,” said Yolanda Fernandez Lommen, an ADB Principal Economist. “However, there are some weaknesses in the current programs, including limited beneficiary targeting and programs’ fragmentation, that need to be addressed. This assistance will give the government the fiscal space it needs to sustain the needed support for the poor and to carry out necessary reforms.”

Mongolia’s economy has been adversely affected by a slide in global commodity prices and growth moderation in the People’s Republic of China that have slowed down economic growth and reduced government revenue. The rollout of the government’s Comprehensive Macroeconomic Adjustment Program for 2015-2016, which, among several key structural reforms, aims to consolidate fiscal expenditure, is also having a contractionary effect on fiscal revenue collection, according to ADB.

The loan will fund short-term revenue shortages, which if unaddressed, would result in significant cuts in welfare programs in 2015. The assistance supports a range of fiscal policy management and social welfare policy reforms, including consolidating budget expenses, improving fiscal transparency, and establishing a sovereign wealth fund. Other measures include increasing funds for the Food Stamps program, initiated in 2008 with ADB support, and subsidizing health insurance contributions for households in need of social welfare.

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Social welfare-related reforms include measures to improve poverty targeting of benefits, and development of a plan to consolidate programs to reduce implementation costs and avoid duplication of benefits.

Of the total $150 million loan, $100 million will be released shortly. The remaining $50 million is scheduled to be released next year with the government’s continuing efforts to sustain and improve social welfare services.  

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.

 

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