MONGOLIA MAKES FIRST REPAYMENT OF CHINGGIS BOND
The first round of repayment of 500 million USD for the 1.5 billion Chinggis Bond issued in 2012 was completed with Prime Minister U.Khurelsukh in attendance to witness the event. Marking the first maturation of the Chinggis Bond, 500 million USD was transferred to investors. The first repayment of 500 million USD matured on January 5, 2018 while the remaining one billion USD will mature in 2022.
In October 2017, Mongolia issued Gerege, a 5.5year 800 million USD bond at an interest rate of 5.625 percent, in order to repurchase previous bonds maturing in 2018.
The proceeds from the bond were used to repurchase 500 million USD of the Chinggis Bond’s first payment and will also be used to repay the 151 million USD Dim Sum bond maturing on June 2018. The remainder of the bond capital will be used to meet other debt obligations of the government.
At the time, it had been reported that the Ministry of Finance was eyeing a 650 million USD bond at 6.1 percent interest rate. Due to demand exceeding expectation, the government was able to increase the amount of the bond while decreasing interest.
The completed repayment of the 500 million USD debt and the future completion of the Dim Sum bond maturing on June 2018 will leave no major foreign debt obligations for Mongolia until 2021.
The Head of the State Treasury Department at the Ministry of Finance S.Narantsogt took the opportunity to report the economic performance of Mongolia in 2017 to the prime minister and the media.
“Preliminary calculations put GDP growth in 2017 at around 3.8 percent. The export of Mongolia reached 6.2 billion USD for the first time in history and subsequently the trade balance had a surplus of 1.9 billion USD. In addition, the foreign exchange reserve has exceeded three billion USD. The main factor for this increase was a twofold increase in foreign direct investment,” said S.Narantsogt.
Moving forward, the Ministry of Finance will be maintaining a policy of repaying foreign debt swiftly. For the first time in five years, the account balance of the state budget has surpassed 405 billion MNT. In terms of total volume, the ministry reported that the assets in the state budget increased by a total of 1.3 trillion MNT.
The prime minister said that the irresponsibility of the previous Cabinet appointed by the then ruling Democratic Party pushed Mongolia to the brink of a default. According to him, the previous Cabinet issued a 1.5 billion USD bond without adequate research or a plan.
“The current administration is working to repay the money stolen from the Development Bank and from the pockets of the Mongolian people, and will continue efforts to repay external debt on time,” said U.Khurelsukh.
He also addressed the issue of the tax increases, which have seen a lot of pushback from the public.
“The issue of the tax increases is a major topic currently. The public is very frustrated with this decision. I have been corresponding with the Finance Minister in regards to this issue. An IMF team will arrive on January 25. We will discuss the issue then,” the prime minister said.
U.Khurelsukh noted that his Cabinet did not increase taxes and has been actively making efforts to stabilize the price of petroleum since October. He stated that the global market price of petroleum has increased and that fuel importing companies were losing money. The price of fuel might increase due to global market forces, the prime minister said.
“The year 2018 is the year to repay domestic debt. No matter how you look at it, one major impending issue that was facing Mongolia has been alleviated with this repayment,” said U.Khurelsukh.