IMF Executive Board Concludes 2017 Article IV Consultation for Mongolia www.imf.org

On May 24, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the 2017 Article IV Consultation[1] with Mongolia.

Mongolia’s longer-term prospects are promising given its large natural resources. In recent years, however, the economy has faced substantial challenges, as external shocks and expansionary fiscal and monetary policies have compounded structural weaknesses. The new government that took office in 2016 has expressed a strong commitment to strengthen macro policies and implement structural reforms in order to stabilize the economy and lay the basis for sustainable, inclusive growth in the future.

Mongolia remains heavily exposed to external shocks, given its export profile, and a key challenge will be to avoid the boom-bust cycles of the past. The discussions thus focused on improving the fiscal framework and strengthening policy discipline, complemented by structural reforms to boost diversification and competitiveness and by efforts to strengthen and better target the social safety net.

Executive Board Assessment[2]

Executive Directors noted that Mongolia had been hit hard by the fall in commodity prices and a slowdown in key export markets. Efforts to offset the impact of these external shocks through expansionary policies had proved unsustainable, leading to large fiscal deficits, high and rising debt and a fall in international reserves. Directors commended the new government for a strong commitment to restore stability and lay the foundations for sustained, rapid, and inclusive growth through sound macroeconomic policies and structural reforms, as reflected in its Economic Recovery Plan. Coordinated financial assistance from development partners, sizeable fiscal adjustment and continued engagement with private creditors will help restore debt sustainability as envisaged under the program to be supported by the IMF’s Extended Fund Facility Arrangement.

Directors stressed that fiscal consolidation and discipline are central to regaining durable debt sustainability. They supported plans to reduce non-essential expenditures, and increase tax revenues and pension contributions. Directors supported the commitment to implement the rules-based fiscal framework, including an end to quasi-fiscal operations of the Bank of Mongolia and the Development Bank of Mongolia, and the establishment of an independent fiscal council. They welcomed plans to strengthen public financial management and tax administration, and tighten the framework for public-private partnerships. Directors underlined the need to enhance the social safety net, strengthen the pension system, and improve program targeting to protect the most vulnerable sections of society.

Directors underscored that monetary policy should remain appropriately tight to contain inflationary pressures, even as there will be room to lower the policy rate from the current high level if inflation remains low and confidence is restored. The exchange rate should remain flexible and market-determined with intervention limited to addressing disorderly market conditions.

Directors stressed the need to strengthen the banking system through special audits and recapitalization of banks as well as upgrades to the regulatory and supervisory framework. Directors welcomed steps, including the new Bank of Mongolia law, to strengthen the independence and governance of the central bank. The renewed focus on implementing an effective anti-money laundering framework would help attract foreign investment.

Directors emphasized the need to promote inclusive growth through a focus on sustainable mining, economic diversification, and further regional integration. In addition, structural reforms should aim to improve the business climate, address supply-side bottlenecks, and deepen access to finance.

Final stage of project on mother and child health launched www.vom.mn

‘Innovation in maternal and newborn health services in Mongolia: from pilot to institutionalization’, the exit phase of the Telemedicine project is successfully launched.

Wind turbine installed in Gobi Desert www.vom.mn

The first steps towards erecting turbines at the 50MW Tsetsii wind farm in Mongolia have been taken as the unfavorable weather conditions have cleared said Vestas, a Danish wind energy company.

‘Achieving a New Balance on Global Stage’ at St. Petersburg International Economic Forum www.rt.com

Russia is ready to host the annual St. Petersburg International Economic Forum (SPIEF 2017) on Thursday. Among the issues to be discussed are problems in the global economy and Russia’s economic growth after the recession.

Mongolia's population is getting younger each year www.montsame.mn

Ulaanbaatar /MONTSAME/ The initiative to observe the first day of June as an International Day of protecting children's rights first came up as one of the results of the 1925 Assembly of the League of Nations, held in Geneva. Mongolia joined the UN Convention on the Rights of the Child in 1990 as its fifth member. The International Children's Day is observed every year since June 1 of 1996 in Mongolia.

Children under age of 18 constituted 34.6 percent (one million 79 thousand 730 children) of the total population of Mongolia by the end of 2016, making it a very "young" nation. A total of 79,382 babies were born last year, according to the National Statistics Office.
Under six-year-old children make up for 28 percent of all children, and 77.6 percent of them go to kindergarten.
Mongolian parliament amended the law regarding prizes for mothers who gave birth to and raised many children in 2011. Since then, the number of mothers with the "Glory of Mother" Order grew 1.6 times within just one year. The order is awarded to mothers, who gave birth to four or more children.
As of 2016, there were over 210 thousand awardees of Glory of Mother Order. The number is forecast to grow in the coming years.
Likewise, the population is estimated to get younger year by year.

New Liabilities for those who Advise Mongolia CEOs www.lehmanlaw.mn

Parliament has recently passed a bill to amend the Mongolia Criminal Code. The Amendments will create new liabilities for adviser’s of corporate CEOs, whose actions result in offenses such as money laundering, terrorism, bribery, environmental abuse, actions that threaten the nation’s economic security, or the abuse of state property.

ADB begins new Mongolia partnership with USD 250 million to avert crisis in social services and banking sector www.adb.org

ULAANBAATAR, MONGOLIA (31 May 2017) — The Asian Development Bank (ADB) Board of Directors has endorsed a new Country Partnership Strategy (CPS) for Mongolia, which envisages total assistance of $1.2 billion over the 2017-2020 period, and also approved two policy-based loans (PBLs) totaling $250 million to start implementation of the new CPS. The loans will help maintain funding for social welfare programs for the poor and vulnerable people and stabilize and restructure the banking industry during the implementation of an extended fund facility of the International Monetary Fund (IMF) approved on 24 May.

The overarching goal of ADB’s assistance during the 2017-2020 period is to help Mongolia sustain inclusive growth during its current economic difficulties. To achieve this, it will focus on three main areas — economic and social stability, developing infrastructure for economic diversification, and strengthening environmental sustainability. Cutting across these pillars are efforts to improve public sector management and gender inequality in Mongolia. Annual lending from ADB will amount to about $300 million a year, with PBLs accounting for about half of this amount.

“The CPS builds on ADB’s role as Mongolia’s lead development partner and improved operational performance in recent years. The CPS is closely aligned with the government’s high-priority areas, and will focus on complex projects requiring significant technical expertise,” said Yolanda Fernandez Lommen, ADB Country Director in Mongolia. “ADB has also closely coordinated with the IMF and World Bank in formulating this CPS.”

Mongolia’s economic performance has slowed down from 17.3% gross domestic product growth in 2011 to 1% in 2016 in the face of falling foreign direct investment and commodity prices, among other challenges. As the economic growth has declined, the fiscal deficit has swollen to 15.4% of gross domestic product, resulting in cuts to some social welfare programs. This risks reversing gains in poverty reduction in recent years and throwing the 35% of the population that is near-poor back into poverty.

To mitigate the adverse impacts of the economic slowdown and fiscal consolidation, a PBL of $150 million will ensure fiscal expenditure is maintained on social welfare programs. Besides strengthening fiscal management, the PBL will help Mongolia consolidate the country’s 71 existing social welfare programs and achieve better targeting to ensure that the poor and vulnerable people are supported.

In restoring growth, the government faces another challenge in reviving the banking industry, which is seeing a rise in nonperforming loans that threatens the solvency of banks. The second PBL of $100 million will support the government’s efforts to restructure and recapitalize the banking industry, reduce nonperforming loans, and enhance regulation and supervision. Under this, government will implement a road map for banking industry rehabilitation and ensure effective management and sale of distressed assets.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2016, ADB assistance totaled $31.7 billion, including $14 billion in cofinancing.

Construction of Mongolia's largest flyover starts in Ulaanbaatar www.montsame.mn

Ulaanbaatar /MONTSAME/ The construction of the largest flyover in Ulaanbaatar city launched today May 31, where a foundation stone laying ceremony of the construction was held. The project has 6 component parts. The main flyover between the Olympics Street and Ikh Mongol Uls Street, passing over Narnii zam (Sun road) and 406th railway crossing will be 470-meter long and 16.5-meter wide, with 4 lanes. Three sub-bridges will be constructed connecting the main flyover with Narnii Zam. The biggest sub-bridge and auto road to the south will be 637-meter long 7.5-meter wide with 2 lanes, while the other two will have a length of 170-meter and 270-meter and width of 7.5-meter and 8.5-meter with one lane each.

Russian Minister of Internal Affairs meets high-level officials of Mongolia www.montsame.mn

Ulaanbaatar /MONTSAME/ Deputy Prime Minister U.Khurelsukh received visiting Russian delegates led by Minister of Internal Affairs Vladimir Kolokotsev on May 31.

2020 Tokyo Games cost-sharing decided www.nhk.or.jp