Fiscal revenue rises 21% in first quarter of 2018

Fiscal revenue surged 21 percent while net international reserves increased by 200 million USD in the first quarter of 2018, driven by a strong external demand, the IMF staff team reported during the conclusion of a working visit to Ulaanbaatar.

An IMF staff team led by Geoff Gottlieb concluded and reached an agreement with the government regarding the fourth review of the extended fund facility program. The team was in Ulaanbaatar from May 2 to 17 to conduct discussions on the fourth review of the three-year extended fund facility (EFF).

The staff team found that macro-economic performance under the program remains positive, with all quantitative targets met.

However, despite the progress that has been made with the program, the staff team said that risks remain, including lower external demand for commodities, a slowdown in structural reforms, rising domestic spending pressures, and adverse changes to the investment climate.

“On fiscal policy, the authorities’ program for 2018 envisages continued budgetary restraint and strengthening tax administration. In addition, the authorities are taking concrete steps to improve public financial management particularly with respect to concessions, public investment projects, and the operations of Development Bank of Mongolia,” Geoff Gottlieb said.

Following the asset quality review on the 14 commercial banks in the country, the government is undertaking steps to strengthen the banking system. The banks have until the end of 2018 to rectify any capital shortfalls found during the asset quality review.

“A law that sets out, under appropriate conditions, when public funds can be used to stabilize banks is expected to be passed shortly. The authorities are also moving ahead with reforms that will allow for more rapid non-performing loan resolution and strengthening banks’ balance sheets,” Gottlieb added.

The government has reiterated its commitment to maintaining a monetary policy stance that is vigilant against inflation and supporting further strengthening in the balance of payments.

“It is critical to maintain progress in building reserves to help insulate the economy from external shocks. Sound macro-economic policies accompanied with structural reforms of the banking system will help durably reduce interest rates,” a statement by the IMF staff team said.

The government and the IMF staff team have reached a staff-level agreement regarding the fourth review, which is subject to the approval of the IMF Executive Board.