Cereal production (mainly wheat) declined for the fifth consecutive year in 1996, as a consequence of reduced rainfall and continuing problems in the sector, brought on by economic transition and market reforms. The country is classified as being Low Income Food Deficit (LIFDC). Although it is not food insecure in the normal sense, nor is it facing an emergency which may result in widespread famine, it does, like transitional economies in the CIS, have a growing population of low income groups, who are experiencing a dramatic fall in nutritional standards due to changes in their economic circumstances. As a result, like several CIS countries which are currently receiving food aid, increasing poverty in Mongolia has become a pressing problem, requiring international assistance. The unemployed, the elderly, female headed households, children, pensioners and small herders are identified as those who most bear the social cost of transition. These segments of the population have limited financial resources to purchase food from a market which is being increasingly liberalized. Even those in employment face considerable problems in meeting household demand for food as inflation remains high and increases in food prices have so far substantially outpaced wages in the public sector.
Dwindling domestic cereal supplies have resulted in further deterioration in the country�s ability to feed its people and large imports will be necessary in the 1996/97 marketing year to meet requirements, a situation further compounded by low cereal reserves, a decline in export trading and the country�s capacity to import sufficient quantities of grain commercially to meet the deficit. Moreover, a fall in world copper and cashmere prices, important revenue earners, will undoubtedly reduce further Government income and expenditure in the year ahead.
The overall cereal import requirement for 1996/97 is estimated at 235 000 tons of wheat and 3 000 tons of rice, making a total of 238 000 tons. Of this it is estimated that the Government could finance the commercial import of some 87 000 tons, similar to last year, leaving an overall deficit of 151 000 tons, with which the country needs assistance, through emergency and programme food aid. For the most vulnerable groups in society, those categorized as being absolutely poor, it is recommended that some 22 000 tons be provided in emergency food aid, leaving a balance of 129 000 tons to be met by concessional credits and programme food assistance. In order to promote imports of wheat flour and grain, the government has introduced custom tax exemption and other incentives All but a few flour mills have stopped production because of shortage of grain produced domestically.
Early this year, the state emergency commission allocated an additional 8.7m tugriks for transportation of forage to Hovsgol Province for livestock which were facing a difficult winter.