Inflation

There are many things going on with Mongolia’s economy that has certain economists worried. Mainly, poorer nations that discover natural resources can fall prey to one of two pitfalls: Dutch Disease or Resource Curse.

Dutch Disease is when natural resources drive up the value of the currency, making other goods more expensive for other nations to buy, thus hurting many sectors. The Resource Curse is when a nation with natural resources (mostly non-renewable ones like fuel) fails to develop as quickly as one without, mainly due to corruption, mismanagement, or fluctuating global prices of their “cash crop,” so to speak.

I think the Resource Curse is the more likely of the two to afflict Mongolia. Resource debates are a very real thing out here, and a main point of contention amongst those with differing political philosophies. How does this all affect the people?

Well, for one, Mongolia’s inflation rate is high. Quite high. A few months ago, the tugruk to dollar value was around 1800 per USD. Upon my arrival in 2012, it was closer to 1500. The inflation rate hovers around 13-14% every year (at least since 2008).

Over the course of my service, I’ve seen the price of one liter of milk go from 1800 tugruk to 2200, 2400, and with some brands, up to 2600 tugruk (a 50% increase in price). Eggs shot up from less than 200 per egg to 450 per egg, but they have dropped back down to 400 at most stores, and I even found them for as cheap as 200 and 300. Onions went up from 800 per kilo to 1200, and every time you step into a restaurant, you can see they’ve taped over the menu’s old prices with new, adjusted ones.

In Peace Corps, we have an annual living allowance survey where we catalogue everything we’ve purchased and send the data to HQ, who, in turn, sends it to Congress who then decides if our costs merit a raise in our stipend. PC Mongolia has the best response rate out there, and during a meeting of financial officers from different countries, they asked our former finance caretaker to present on how he got volunteers to turn in the surveys. He told them plainly that if we don’t do the surveys, we won’t keep up with inflation, and every volunteer is acutely aware of that.

It’s hard to imagine how Mongolians keep up with the prices, especially larger families or those with limited incomes. The influx of wealth can be a curse if not handled well. I hope that Mongolia figures out a way to improve everyone’s lives with the money from their mines.