Support independent journalism in Central & Eastern Europe.
Donate to TOL!

× Learn more
No, thanks Photo: Abbas Atilay
back  |  printBookmark and Share

State Fund Scandal Roils Mongolian Politics

Prime minister is clinging to power after surviving his own party’s attempt to oust him.

6 December 2018

Mongolia’s ruling Mongolian People’s Party (MPP) initiated last Friday’s vote of no confidence in the government of Prime Minister Ukhnaa Khurelsukh (pictured). The party controls 85 percent of the country’s 76-member parliament, but only 40 parliamentarians voted in favor of Khurelsukh, with 33 voting against.


“This factional public infighting is unprecedented for the MPP, a party long seen as a disciplined and united force compared with the rival Democratic Party (DP),” the South China Morning Post writes.


Suspicions of high-level corruption have hovered around many of Mongolia’s typically short-lived governments. Khurelsukh took office just over a year ago vowing to end a system which channeled money from business interests to politicians, but the ongoing scandal centered on a state development fund could be one of the most damaging in recent memory.


The Small and Medium Enterprises Development Fund charges around 3 percent interest on its loans, compared to up to 20 percent for a typical bank loan, Nikkei Asian Review wrote recently.


Allegations that three cabinet ministers obtained low-interest loans for businesses controlled by them or their family members soon spread to include more than a dozen lawmakers and police officials.


The head of the fund, the state auditor, and the minister overseeing the fund have been dismissed, and other officials are under investigation. Last week, Khurelsukh said the 20 other state funds would be audited for suspicious activity, according to the SCMP.


Defending his premiership in parliament on the day of the no-confidence vote, Khurelsukh said an elite group of “30 families” the controls both the MPP and DP wanted to oust the government to stop its interference in their business activities.


The Mongolian National Chamber of Commerce and Industry has called on its 3,500 member companies to suspend tax payments until the fund scandal has been resolved. The chamber is also calling for a constitutional amendment to increase public oversight of government finances.


Khurelsukh’s predecessor, also from the MPP, was dismissed in September 2017 amid charges of incompetence and corruption.



  • Years of low commodity prices have hobbled Mongolia’s economy, heavily dependent on coal and metal exports, and forced the country to agree to a $5.5 billion bailout program with the International Monetary Fund.


  • For years, governments have struggled to balance demands for greater local control of mineral resources with the need to work with multinationals that run much of the mining industry.


  • The average lifespan of a government in the quarter-century since Mongolia adopted a democratic constitution is just 1.5 years, the Guardian says.

Compiled by Ky Krauthamer

back  |  printBookmark and Share


Transitions magazine = Your one-stop source for news, research and analysis on the post-communist region.


Sign up for the free TOL newsletter!


Moldovan diaries

The Moldovan Diaries is a multimedia, interactive examination of the country's ethnic, religious, social and political identities by Paolo Paterlini and Cesare De Giglio.

This innovative approach to story telling gives voice to ordinary people and takes the reader on the virtual trip across Moldovan rural and urban landscapes. 

It is a unique and intimate map of the nation.


© Transitions Online 2018. All rights reserved. ISSN 1214-1615
Published by Transitions o.s., Baranova 33, 130 00 Prague 3, Czech Republic.