By 2030, it is expected that the National Wealth Fund of Mongolia will reach an accumulation of ₮24 trillion (approximately $6.8 billion).
In the past two years, the fund has radically transformed its structure, moving from discussions to real actions. This means that the active phase of implementing its plans has begun. But what specific tasks does the fund face, and has its work started?
🧐 What is the goal of the wealth fund?
In an economy dependent on natural resources, there is an increase in exports and budget expenditures. However, the question remains: "What will tomorrow bring?" This is where the idea of the wealth fund arises, whose task is to preserve and increase a portion of the income from natural resources for future generations.
⁇ Is it necessary to create a fund? Our economy is subject to fluctuations in commodity prices. When prices rise, revenues increase, but when they fall, it negatively affects the budget, exchange rate, and standard of living. The main task of the fund is to smooth out income cycles.
🔍 Does it work in practice? The idea of creating a wealth fund has been discussed at the political level for a long time, and its establishment was officially registered in 2016. The legal framework was approved in 2024, and the fund began to receive its first revenues. This year, the "Chinggis Khan National Wealth Fund" company was established to manage the fund's assets.
📈 What has been done so far?
As of October this year, ₮5.2 trillion (about $1.5 billion) has been invested in the Future Heritage Fund, and ₮752 billion (approximately $211.69 million) in the Savings Fund. It is expected that by 2030, the assets of the Future Heritage Fund will increase to ₮19.3 trillion (about $5.4 billion), while the assets of the Savings Fund will grow 5.5 times. Currently, a structure for managing the development fund is being developed, and revenues from it will begin in 2029.
📌 What will the funds be used for?
The assets of the Future Heritage Fund will be held in deposits in the largest central banks in the world. Starting in 2030, only 10% of the net income will be transferred to the state budget. The remaining 90% and all accumulations will be passed on to future generations of Mongolia.
🏡 Why is this necessary?
The funds accumulated in the Savings Fund directly affect the standard of living. Each state mining company contributed ₮500 billion (about $140.7 million) to the fund from its profits for 2023 and 2024. In the future, the income from the private sector from the sale of mineral resources will also be taken into account. Currently, the fund's assets are directed towards financing mortgage loans, but in the future, they will be reinvested through borrower payments. The fund's dividends will be distributed among all citizens starting in 2030, when they will be able to use the funds in their accounts.
In conclusion… The concept of a sovereign wealth fund is just beginning to align with international standards and practices, creating a foundation for transparent and accountable management. In the future, issues of control, efficiency, and fair distribution will remain key.
Tatar S. Maidar
source: MiddleAsianNews
