Press Release No. 19/16

IMF Continues Discussions on the Sixth Review of Mongolia’s Extended Fund Facility

January 31, 2019

• Growth remains strong and fiscal policy has been tight leading to an overall surplus in 2018.
• The authorities have taken measures to dampen excessive domestic demand that is limiting international reserves accumulation. They stand ready to tighten further.
• It is crucial that the efforts to rehabilitate the banking system are completed speedily to ensure that banks are well capitalized and adequately supervised.

An International Monetary Fund (IMF) staff team led by Mr. Geoff Gottlieb visited Ulaanbaatar during January 28–30, 2019 to continue discussions on the sixth review of the three-year Extended Fund Facility (EFF) arrangement approved on May 24, 2017, in an amount equivalent to SDR314.5054 million, or about US$434.3 million [1] (see Press Release No. 17/193 ).

At the conclusion of the visit, Mr. Gottlieb made the following statement:

“The economy continues its recovery, with growth exceeding 6 percent in 2018, amid supportive external conditions and sharply rising domestic demand. Both the strong growth and the authorities’ commitment to discipline on public spending have resulted in large over-performance on fiscal targets under the program.

“To tackle signs of overheating pressures that are a headwind on further international reserve accumulation, the Bank of Mongolia has raised the policy interest rate and introduced macro-prudential measures to rein in excessive credit growth. The authorities stand ready to tighten further if necessary.

“The rehabilitation of the banking system is a core part of the program. The IMF staff team continues to work with the Bank of Mongolia on the follow-up to the Asset Quality Review that was completed in 2017. The authorities have committed to taking decisive actions regarding the recapitalization or resolution of under-capitalized banks before the next IMF Executive Board meeting on the sixth review. Over the coming weeks, discussions with the authorities will continue from IMF headquarters.

“The team thanks the authorities for their cooperation, constructive dialogue, and hospitality during its stay in Mongolia.”