An Analysis of the New Budget Law of Mongolia of 2011

The government of Mongolia developed and passed a new Budget Law on 23 December 2011 in order to improve the legal framework for budgeting, budget relations and fiscal management by integrating the Budget Law of 2002 and Public Sector Management and Finance Law. The purpose of new Budget Law is to ensure fiscal stability, enhance the efficiency and predictability of resource allocation, and to increase citizens’ participation in the budgeting process. The new Budget Law in its 11 chapters and 66 articles redefines the budgeting principles, scope, composition, classification of the budget, clarifies expenditure and revenue assignment, improves authorities and responsibilities of the bodies that participate in the budgeting process, and improves regulations on budget transparency and accountability. The key new regulations introduced by the Budget Law concern the following areas: • Public investment budgeting; • Government debt management; • Program budgeting; • Public private partnership; • Formula based transfer allocation; and • Citizens’ participation in budgeting. The most important change introduced by new Budget Law is a reform of the intergovernmental fiscal relations system towards greater decentralization. The law clarifies expenditure assignments by clearly defining delegated functions and differentiating the functions among sub-national governments. It also introduces a formula based transfer allocation that will allow predictability and sustainability in the local budgeting process.