FISCAL CHALLENGES AND

SOCIAL WELFARE REFORM IN

MONGOLIA
Philip Chang, Principal Economist
East Asia Department, ADB

Disclaimer: The views expressed in this document are the views of the author(s) and do not necessarily reflect the views or policies
of the Asian Development Bank (ADB), or its Board of Directors or the governments they represent. ADB does not guarantee
the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice,
opinion, or view presented, nor does it make any representation concerning the same.

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
CONTENT
• Macroeconomic and Fiscal Challenges
• Challenges of Social Welfare System
• ADB’s Social Welfare Support Program Phase 2
• Implementation of Reform Measures
• Future Reform Directions

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Macroeconomic and Fiscal Challenges
• Macroeconomy in dire situation
‒ GDP growth decelerated
‒ Fiscal deficit widened
‒ Government debt increased
‒ Balance of payments pressure
• Given continued deterioration of the economy, the
government sought assistance from the IMF under the
extended fund facility (EFF)
• Fiscal consolidation a key policy action under EFF

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Challenges of Social Welfare System
• Social welfare programs designed to support the poor and
vulnerable
• Ministry of Labor and Social Protection administers 71
social welfare programs
‒ social welfare pensions; social welfare allowance; community-
based welfare services; allowance for the elderly with state merit;
allowance for the elderly; allowance for the disabled; allowance for
mothers and children; food stamp program; and child money
program
• Mongolia’s current social welfare programs
‒ Fragmented, wide in coverage and targeted by category

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Social Welfare Support Program Phase 2
• Loan size: $150 million
• 2 Tranches: (i) $100 million; (ii) $50 million
• Impact: mitigation of adverse impacts of economic
slowdown and fiscal consolidation on the poor and
vulnerable
• Outcome: maintained fiscal expenditure on social welfare
programs for the poor and vulnerable
• Outputs: (i) improved fiscal policy management; and (ii)
improved policies and regulations to support targeting and
consolidation of social welfare programs

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Implementation of Reform Measures
• The release of tranche 1 was delayed
• On 4 July 2017, the government universalized benefits
under the Child Money Program (CMP) until end of 2017
• The government acknowledged that this policy change
deviated from the general thrust of SWSP Phase 2
• It reaffirmed its commitment to reform the country's social
welfare system, and to implement targeting to 60% of the
children under the CMP from 1 January 2018
• As a result, US$100 million under tranche 1 was
disbursed on 2 November 2017

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Implementation of Reform Measures
• Verifying compliance of policy actions under Tranche 2
• Recent developments
‒ Based on 2016 Household Socioeconomic Survey released in
October 2017, poverty rate increased significantly from 21.6% in
2014 to 29.6% in 2016.
‒ Against this backdrop, the government sought ADB’s support to
reduce CMP targeting from 60% to 80% of children under 18
‒ On 4 April 2018, ADB agreed to this proposed change. IMF, World
Bank, and JICA were also fully supportive of this change.

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Future Reform Directions
• Given the importance of continuing support to reform
social welfare programs to ensure their effectiveness,
ADB has initiated dialogue on the next generation of
reforms based on 4 key principles
i. improved targeting to ensure fiscal sustainability
ii. inclusion of incentives to behavioral change in recipients through
conditional transfers that provide opportunities to move out of
poverty
iii. improved monitoring of welfare programs through better
databases on registered households
iv. introducing time-bound subsidies

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
 Thank You

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan