The Government has submitted the draft 2027 state budget, proposing to expand both revenue and expenditure by nearly 10 trillion MNT each. This remarkably ambitious expansion is reportedly linked to the Government’s expectation that it will begin receiving dividends next year from state-owned enterprises and the Oyu Tolgoi mine.

To mask the scale of the budget’s sudden expansion within a single year, Prime Minister N.Uchral has emphasized a series of politically appealing measures, presenting them in attractive terms that are likely to resonate with the public. Under the slogan “Mongolia’s Wealth for Mongolians”, he unveiled nine decisions and asked citizens how the anticipated windfall should be spent.

Appealing directly to voters with phrases such as “Your money, your share, your future”, the prime minister pledged to raise pensions to 1.3 million MNT next year, increase the salaries of public servants, and make 16,000 apartments available through six-percent mortgage loans and rent-to-own schemes. The government claims that the expanded budget will help revive the economy.

The opposition, however, has criticized the proposal, warning that such a sharp fiscal expansion could place excessive pressure on the economy, further fuel inflation and ultimately make life more difficult for ordinary citizens.

N.Uchral is well aware of these risks. Yet next year will also see Mongolia hold its presidential election. For the ruling party, what matters is securing voter support through short-term, popular measures, and the votes that may follow.

EXPENDITURE IN A DECADE

The draft 2027 state budget projects 41.3 trillion MNT in adjusted revenue, 43.6 trillion MNT in expenditure and a 2.3 trillion MNT deficit. By comparison, the approved 2026 budget set revenue at 31.6 trillion MNT, expenditure at 32.9 trillion MNT and the deficit at 1.3 trillion MNT. In other words, expenditure is set to increase by 10.7 trillion MNT, or 32 percent, in just one year.

Over the past decade in power, the Mongolian People’s Party (MPP) has continued to expand the state budget year after year. In 2016, government expenditure stood at 9.7 trillion MNT. Today, it has grown 4.4-fold.

As the economy expands and the country becomes wealthier, people’s living standards should, in principle, improve accordingly. In Mongolia, however, the relationship has seemingly been the opposite. Budget expansion has not translated into greater benefits for households or businesses.

The fact that Mongolians today are once again queuing for fuel as they did in the 1990s, facing restrictions on when and how they can drive their cars, struggling under a heavy tax burden and being squeezed by rising prices is evidence of this disconnect.

MP J.Bayarmaa described the proposed budget as a serious threat to economic stability by saying that “This is not an ordinary expansion, but a massive risk that will test the economy’s capacity. The government pledged to keep inflation below seven percent in 2026, yet it has already reached 13 percent. While the Bank of Mongolia has raised its policy rate to 12.5 percent to counter inflation, the Government is moving in the opposite direction by expanding the budget and adding fuel to the fire.”

“Domestic supply will not be able to keep pace with demand. As a result, inflation, import and exchange-rate pressures will intensify, further eroding people’s purchasing power. The policy rate will remain high, while the burden of business loans will also fail to ease. Consequently, businesses will continue to face constrained financing and sluggish activity,” she said. 

J.Bayarmaa then continued, “When revenues are strong, the government should reduce debt, build savings and prepare reserves for periods of economic downturn—in other words, pursue countercyclical fiscal policy. But we have never been fortunate enough to see that approach. Instead, those in power continue to spend as much as they can today. Tomorrow, citizens will pay the price through debt, taxes and inflation.”

MP B.Jargalan also criticized the proposal, saying, “This government’s foolishness cannot be accepted.”

The government expects to receive 3.5 trillion MNT in dividends from state-owned enterprises and is also counting on returns from Oyu Tolgoi, which it has cited as justification for expanding the budget to an unprecedented scale. There have been numerous instances in the past when overly optimistic revenue projections failed to materialize. Budget revisions to make up for revenue shortfalls have also become something of a tradition.

The 2026 budget is now set to be revised after projected revenue fell short by MNT 2.4 trillion. Against this backdrop, there is a strong possibility that the government is once again setting overly ambitious revenue projections for 2027, only to revise the budget later if those expectations fail to materialize.

‘PARTYING’ WITH STATE BUDGET

Let us recall that when L.Oyun-Erdene’s government submitted its draft 2025 budget, it proposed expenditure of 35.8 trillion MNT, an increase of 8.5 trillion MNT from the previous year. At the time, however, only a handful of MPs criticized the proposal for being excessively wasteful and lacking adequate research and calculations.

There was effectively no parliamentary opposition then. The Democratic Party (DP) was part of the ruling coalition, and the Prime Minister had seemingly silenced lawmakers from the other parties. With the exception of four or five MPs, the rest either failed to recognize the recklessness of the proposal or chose to turn a blind eye to it, ultimately approving the budget. In that sense, L.Oyun-Erdene was the first to embark on such a dramatic expansion of the state budget.

President U.Khurelsukh, however, vetoed the budget in its entirety, demanding that wasteful spending be cut and a balanced budget be approved. The previously united Parliament changed course and accepted the presidential veto. The Government was therefore forced to withdraw its draft, revise it and resubmit it.

In the revised version, revenue and expenditure were brought into balance at 33 trillion MNT, effectively eliminating the deficit. That episode is still fresh in our memory. Yet since then, the 2026 and 2027 budgets have grown even larger, with the projected deficit now reaching 2.3 trillion MNT. So, will President U.Khurelsukh speak out this time?

Given that the political landscape has changed significantly from two years ago, he is unlikely to lift even a finger. At the time, divisions within the MPP were deepening and efforts to bring down L.Oyun-Erdene’s government were intensifying, which may have prompted the president to take decisive action.

Today, however, his “adopted son” is serving as prime minister. They are on the same team. It is therefore fair to say that the state budget is being turned into a political show. How else should we interpret the government’s campaign telling citizens, “You know how the money from Oyu Tolgoi dividends should be spent. This is your money?”

When N.Uchral was elected chairman of the MPP, he declared that “the People’s Party will return to the people”. If this is what that return looks like, it appears to be taking shape in a rather familiar form.

The government is raising salaries and pensions and giving the impression that it is listening to the people. Unfortunately, however, these measures are all superficial. The opposition had proposed exempting salaries of up to 2 million MNT from personal income tax, but that initiative was effectively erased along the way, with the threshold instead reduced to 792,000 MNT.

It gives the appearance of action, but in practice it is largely an exercise in smoke and mirrors. The message that “This is your money, so you decide how it should be spent” follows exactly the same approach.

Of course, many elderly people who will receive pensions of 1.3 million MNT next year and many public servants whose salaries are increased will be happy. What they may not realize is that the subsequent surge in inflation could quickly erode those increases, potentially leaving them worse off than before.

Expanding the budget during an election year and using measures designed to appeal to voters has, in Mongolia, effectively become a recurring phenomenon. In essence, it means the government uses its power to introduce policies aimed at attracting votes and winning public approval. N.Uchral appears to be following the same playbook.

DID N.UCHRAL SET ‘TRAP’?

It is only natural that the opposition has begun criticizing the draft budget for being detached from people’s everyday lives, overly unrealistic and largely designed to win public favor and attract votes.

The opposition has already collected the signatures of 41 MPs in support of a motion to dismiss the prime minister and is waiting for the autumn parliamentary session to begin before formally submitting it. In lieu of this, N.Uchral appears to have set another hook for himself by introducing a bloated, election-oriented budget.

In other words, in his attempt to increase the budget by another 10 trillion MNT and position himself with an eye on the presidential election, has N.Uchral inadvertently set a trap for himself as well? Although five ministers from the L.Oyun-Erdene faction are part of the current cabinet, N.Uchral continues to appear determined to consolidate even greater power. Therefore, it cannot be ruled out that 23 of his allies could vote to bring down the current Cabinet.

By using his power to steer the budget toward winning votes, there is no guarantee that the premier will be able to remain comfortably in his seat. To get his dream budget approved, and to keep his cabinet intact, he will first have to reach an agreement with the faction within his own party.