Press Release No. 18/404

IMF Executive Board Completes Fifth Review under the Extended Arrangement for Mongolia and Approves US$ 36.22 Million Disbursement

October 31, 2018

• Mongolia continues to perform well under the Fund-supported program, posting strong economic growth and significant over-performance on key fiscal targets.
• Select banks are in the process of addressing capital shortfalls identified by the Asset Quality Review by the end-December 2018 deadline.
• With still high public and external debt, the authorities’ dedicated implementation of reform program is key to build resilience against shocks and ensure sustainable and inclusive growth.

On October 31, 2018, the Executive Board of the International Monetary Fund (IMF) completed the fifth review of Mongolia’s performance under the program supported by a three-year extended arrangement under the Extended Fund Facility (EFF). Completion of the review enables Mongolia to draw the equivalent of SDR 26.2088 million (about US$ 36.22 million), bringing total disbursements under the arrangement to SDR 157.2454 million (about US$ 217.33 million).

Mongolia continues to perform well under the program. The combination of strong policy implementation and a supportive external environment has helped the authorities meet all end-September 2018 quantitative targets under the program, with significant over-performance on fiscal targets. Progress has also been made on structural reforms, albeit with some delays.

Mongolia’s three-year extended arrangement was approved on May 24, 2017, in an amount equivalent to SDR 314.5054 million, or about US$ 434.3 million1 at the time of approval of the arrangement (see Press Release No. 17/193 ). The government’s Economic Recovery Program, supported by the IMF, aims to stabilize the economy, reduce the fiscal deficit and debt, rebuild foreign exchange reserves, introduce measures to mitigate the boom-bust cycle and promote sustainable and inclusive growth.

Following the Executive Board’s discussion of the review, Mr. Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director, said:

"Mongolia continues to make good progress under the Fund-supported program. Helped by favorable commodity exports, a recovery in confidence, and strong program implementation, growth has accelerated further, leading to improvements in the fiscal position and debt dynamics. The fiscal accounts have posted a primary surplus, reflecting both a sharp increase in revenues and continued expenditure restraint. Meanwhile, past over-performance allowed the authorities to meet key reserve targets, despite a recent rise in balance of payments pressures.

“In the financial sector, the focus remains the follow-up to the Asset Quality Review (AQR). Select banks are in the process of booking the results of the AQR and subsequent on-site inspections. They are also now raising the needed capital to address identified shortfalls by the end-December 2018 deadline. The Bank of Mongolia will remain focused on ensuring financial sector stability throughout the process.

“Notwithstanding this progress, Mongolia remains vulnerable to external and domestic shocks. It is therefore crucial to take advantage of the still favorable economic environment to further bolster fiscal and external buffers, strengthen the banking sector, and improve the investment climate. In addition, the authorities should continue efforts to protect social spending, strengthen tax administration, and improve public financial management. A dedicated implementation of the authorities’ reform program is key to build resilience against shocks and ensure sustainable, inclusive growth.”