Mongolia cuts budget spending by ₮1.4 trillion to fund pension and salary increases

ULAANBAATAR — Parliament on October 16 approved the final revision of the 2026 state budget, cutting government spending by ₮1.4 trillion and allocating the savings to protect household incomes and support social measures. Under the revised plan, 435,000 older citizens will receive monthly pension increases of ₮100,000-₮300,000 from November 1, while salaries for employees in some public-service sectors will also rise. However, with food and other consumer prices continuing to erode household purchasing power, the key question is how much these measures will improve people’s real living standards.

Key figures in the revised budget

Under the approved revision, consolidated budget revenue is projected at ₮31.9 trillion, while total expenditure is set at ₮34.0 trillion. The budget deficit is planned at approximately ₮2 trillion, equivalent to 2 percent of gross domestic product.

The government said that, in addition to cutting spending by ₮1.4 trillion, the savings will be used to protect citizens’ incomes and livelihoods, prepare for energy needs and mitigate the effects of rising prices.

This does not mean that every category of budget spending has been cut by the same amount. Rather, it reflects a policy choice to restructure expenditure and place greater emphasis on social protection and immediate needs. Assessing the results will require examining both whether the savings are achieved in practice and whether the new commitments can be financed sustainably from budget revenue.

Pensions and public-service salaries to increase

One of the main provisions of the revision is the earlier-than-planned implementation of pension increases. From November 1, 435,000 older citizens will receive an additional ₮100,000-₮300,000 in monthly pension payments, with ₮196.3 billion allocated for the measure, according to the government.

Healthcare workers will receive a 20 percent pay rise, while salaries in other public-service sectors, including culture, sports and meteorology, will be increased by up to 50 percent. Reducing disparities in pay levels across sectors is intended to help retain the public-service workforce and improve the availability of personnel.

However, a nominal increase in pensions and salaries does not guarantee an equivalent rise in households’ real incomes. If prices continue to rise rapidly, a significant share of the additional income could be absorbed by food, fuel, housing and other essential expenses.

Inflation will determine the impact of the measures

Parliament Speaker S. Byambatsogt said, while presenting the budget revision, that inflation had reached 12 percent in September 2026. In such circumstances, higher pensions and salaries could support household consumption, but they would not by themselves address the underlying causes of price increases.

From an economic policy perspective, measures to raise incomes must be coordinated with policies to stabilise inflation. If pressure on food supplies, fuel, energy and transport costs persists as household demand rises, the real benefit of higher incomes may be limited.

The impact of the budget revision should therefore be measured not only by the size of the increases, but also by changes in households’ real consumption, the risk of poverty, prices and budget execution.

Challenge of fiscal sustainability

Cutting spending while increasing social-protection expenditure changes the government’s budget priorities, but it does not resolve the challenge of medium-term fiscal sustainability. The budget deficit, actual revenue performance, mining export revenue and government debt-servicing costs will all affect the budget outlook.

Mongolia’s export earnings depend heavily on commodity prices and external demand, making it necessary to account for the risk that budget revenue could fall short of projections. At the same time, stable sources of funding are essential to cover recurring commitments such as salary and pension increases.

In the coming months, the key indicators of the budget policy’s success will be the actual implementation of spending cuts, the inflation trend, household purchasing power and budget revenue performance. If these indicators improve, the revision could become more than short-term support and serve as an effective measure to protect household livelihoods.