Mongolia’s foreign exchange reserve surpasses 2 billion USD after Gerege Bond
Mongolia’s foreign exchange reserve increased to two billion USD with the transfer of the 800 million USD Gerege Bond on November 1, the central bank reported.
In May 2017, just after the approval of the extended fund facility, the central bank stated its goal to increase the foreign exchange reserve of the nation to 1.6 billion USD by the end of 2017, and ultimately, to four billion USD by 2020.
The reserve increasing to two billion USD ahead of schedule by November signals a potential appreciation in the value of the MNT as the flow of foreign currency rises.
Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their own issued currency as well as to influence monetary policy.
The central bank reported that it has been increasing its foreign exchange reserves steadily in the last year. The surge in Mongolia’s main exports, copper and coal, resulted in the total export volume to reach 4.3 billion USD in September. The 32 percent increase in exports helped Mongolia reach a surplus of 201.9 million USD in its balance of payments.
In addition, Mongol Bank has been receiving the preliminary transfers of the total 5.5 billion USD financial package part of the IMF program.
The main factor for the increase, however, was the transfer of the 800 million USD Gerege Bond to Mongol Bank. The 5.5-year bond with a 5.625 interest rate was issued in late October and transferred to Mongolia on November 1.
Gold sales to Mongol Bank increasing to 16.8 tons has also been a contributing factor to the increase in the reserve.
The central bank remains confident that the foreign exchange reserve will increase further. With Mongol Bank having extended the 15 billion RMB swap agreement with the People’s Bank of China by three years and refinancing all other external debt and bonds has helped Mongolia postpone all debt obligations to 2021.