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International Monetary Fund. Statistics Dept.
The IMF conducted a remote technical assistance (TA) mission from March 1 to 12, 2021, to help the National Statistics Office of Mongolia (NSOM) compile a monthly indicator of economic activity (MIEA). Experimental results describe monthly economic activity from January 2010 to January 2021 as well as the impact of the COVID-19. This second mission for developing the MIEA was funded by the IMF's Data for Decisions trust fund1 (D4D).
International Monetary Fund. Asia and Pacific Dept
A strong export-led recovery is underway. Despite early actions and a successful vaccination campaign, the pandemic is lingering in Mongolia as positivity rates remain high and borders largely closed. An export-led recovery which began in mid-2020, is gathering steam due to booming prices for Mongolia’s exports. Nevertheless, domestic demand, labor markets and the business sector remain weak. Policies were appropriately supportive during the pandemic. However, large, untargeted and continuing fiscal, quasi-fiscal and financial forbearance measures legislated by Parliament have heightened macrofinancial vulnerabilities: public debt has sharply increased, bank balance sheets have further weakened, and the Bank of Mongolia’s (BOM) operational independence has been compromised. On the plus side, external and fiscal buffers have been built, helped by the 2021 IMF SDR allocation of US$98.3 million (95.8 percent of quota), and the rollover of large external liabilities has increased policy space.
International Monetary Fund. Asia and Pacific Dept
This paper discusses Mongolia’s Request for Purchase Under the Rapid Financing Instrument (RFI). The coronavirus disease 2019 pandemic has taken a large toll on economic activity in Mongolia, giving rise to urgent budget and balance of payments needs. The authorities have already taken several measures to limit the economic contraction and help the most vulnerable. Recent revisions to the budget allow for higher health and social spending as well as tax relief to affected households and businesses. In addition, the Bank of Mongolia has eased monetary and financial policies to help prevent a disorderly contraction in bank lending to the private sector. Emergency financing under the IMF’s RFI will provide much needed support to respond to the urgent balance of payments and budgetary needs. Additional assistance from development partners will be required to support the authorities’ efforts and close the financing gap. The authorities’ commitment to high standards of transparency and governance in the management of financial assistance is welcome.
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper aims to take stock of key challenges and propose recommendations on how to address them. Mongolia has taken important steps to address these challenges, but more should be done to tackle remaining gaps and ensure effective enforcement. Improving governance is a crucial step for Mongolia to achieve sustainable and inclusive growth. In order to substantially reduce corruption, a stronger anti-corruption framework should be accompanied by governance reforms across a range of state functions. On rule of law, the Worldwide Governance Indicators (WGI) place Mongolia above peers in Asia but below regional averages, indicating room for improvement. Although Mongolia has developed a legal framework since the transition to a market economy, observers point out that there are often loopholes and unintended consequences. Weak revenue administration can undermine fiscal sustainability while uneven enforcement of tax rules can damage the investment climate. State-owned enterprises would benefit from better governance, particularly given their central role in output and potential for creating fiscal liabilities.
International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation with Mongolia discusses that economy growth accelerated to 8.6 percent in the first quarter of 2019, over fiscal balance turned into surplus in 2018, and gross international reserves have increased by $2 1/2 billion since 2016. The recovery stems from a stronger policy framework, significant official financing and a rebound in external demand. Notwithstanding the progress, Mongolia remains vulnerable to external shocks given its high debt levels and the economy’s dependence on mineral exports. Structural reforms progressed in several key areas: the budget process is more resilient to political pressure and quasi-fiscal activities were curtailed. In order to achieve sustainable and inclusive growth, it is necessary to advance the current reform efforts by strengthening the rule-based fiscal policy framework, ensuring financial sector soundness and improving governance. Risks are tilted toward the downside in the near term. Shocks to mineral demand can lead to sharp fall in exports, weakening growth outlook and fiscal accounts. A slowdown in growth could trigger financial instability given still inadequate capital buffers at some banks and overindebted households.
International Monetary Fund. Asia and Pacific Dept
A three-year arrangement for Mongolia under the Extended Fund Facility (EFF) was approved on May 24, 2017, in an amount equivalent to SDR 314.5054 million (435 percent of quota, or about $425 million). The arrangement is part of a $5.5 billion multi-donor financing package that supports the authorities’ Economic Recovery Plan. The extended arrangement is subject to quarterly reviews.
International Monetary Fund. Asia and Pacific Dept
A three-year arrangement for Mongolia under the Extended Fund Facility (EFF) was approved on May 24, 2017, in an amount equivalent to SDR 314.5054 million (435 percent of quota, or about $425 million). The arrangement is part of a $5.5 billion multi-donor financing package that supports the authorities’ Economic Recovery Plan. The extended arrangement is subject to quarterly reviews.