The International Monetary Fund has warned Mongolia risks swelling its deficit and the debt burden by
relying on windfall revenues from a mining boom to finance generous fiscal policies. 
“The envisaged fiscal expansion is likely to lift the deficit and debt paths,” the IMF said in a statement after a
staff visit. “Downside risks to the outlook have intensified, reflecting global and regional instability and domestic
pressures for further tax cuts and spending increases.” Lawmakers are considering a budget for next year that would
hike social spending rather than build buffers in case prices slump for Mongolia’s natural resources. It’s home to the giant
Oyu Tolgoi copper-gold mine, operated by Rio Tinto, which is being expanded to boost sales of the metal underpinning
electrification, the global energy transition and increasing demand from data centers. 
Mongolia’s official data on Friday showed a 79% surge in copper revenues for the first nine months of the year as prices
climb for the red metal. 
Copper has overtaken steel-making coal as Mongolia’s biggest export thanks to higher prices paired with greater
volumes. China buys up nearly all of Mongolia’s natural resources, consuming 93% of its total exports.
Despite the mining boom, the IMF warned of fiscal vulnerabilities if lawmakers chose to use revenues to raise
pensions, public worker wages and social programs. The fund said spending would be financed by a one-time dividend from Oyu
Tolgoi and volatile mining revenues.
“Fiscal policy should focus on rebuilding buffers and reducing vulnerabilities,” it said. “The proposed tax cut
package should be reconsidered, and requests for further reduction in non-mining taxes should be resisted.”
Elsewhere in the economy, spikes in the cost of food and fuel have pushed inflation well above levels targeted by the
central bank in 2026. Fuel is in short supply, at least partly due to Russia’s war with Ukraine, and Mongolia has called on
China and South Korea to assist with more supplies.
Wait times and queues at fuel stations have gotten so bad in the capital city that protesters demonstrated in the streets
earlier this month, blocking trafficking at a main motorway in front of the Government Palace where Mongolia’s parliament
convenes.
The IMF now projects 6.2% economic growth for 2026 on stronger mining activity. Inflation, however is likely to remain
above the central bank’s target for 2027. Mongolia’s central bank held its policy rate at 12.5% in
September, citing uncertainty abroad, as well as higher oil and energy prices.
“If the proposed fiscal expansion were implemented, monetary policy should be tightened further,” the IMF said. 

Published Date:2026-10-12