Ulaanbaatar's (UB) population hasswollen from half a million in 2001 to approximately 1.2million in 2011, accounting for over 40 percent of thecountry's population. This trend is likely to continueas economic growth is increasingly concentrated in UB. Withits growing population and concerns in rising inequality,the city is facing increasing pressure to maintain andexpand service provision (especially infrastructure). Thelocal tax on wages is expected to continue to providesubstantial revenues to the UB government, which will assistthe growing demand for services. Additionally, a new'capital city tax' is expected to come into effectin 2013. The decision of the central government (CG) topursue further decentralization gives greater leadership tothe UB government and its districts. It also provides localbroader decision-making authority as well as opportunity forcitizen's participation and for the improvement ofgovernance and transparency. Therefore, a key challenge forUB and its districts is ensuring that the local fiscalsystem is sound and ready to handle a greater volume ofrevenues to achieve sustainable and inclusive growth. Thecity also needs to develop a robust and transparent fiscalmanagement system if it is to make an effective use of newrevenue sources. The main objective of this study is tounderstand the inner workings of the municipal financesystem in Ulaanbaatar and its districts.
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