Mongolia receives 36.2 million USD following fifth IMF review approval

The Executive Board of the International Monetary Fund (IMF) approved the fifth review of Mongolia’s performance under the extended fund facility (EFF) on October 31. This allows Mongolia to draw 36.22 million USD or 26.2 million SDR (special drawing rights), bringing total disbursements under the EFF to 217.3 million USD.

Mongolia continues to perform well under the program, the Executive Board said. The combination of strong policy implementation and a supportive external environment has helped the authorities meet all end-September 2018 quantitative targets under the program, with significant over-performance on fiscal targets, it was underlined in the IMF statement. In terms of structural reform, progress has said to have been made, albeit with some delays.

The EFF was approved on May 2017 and Mongolia is set to receive 434.3 million USD from IMF over the course of the program. The government’s Economic Recovery Program, supported by IMF, aims to stabilize the economy, reduce the fiscal deficit and debt, rebuild foreign exchange reserves, introduce measures to mitigate the boombust cycle, and promote sustainable and inclusive growth.

"Mongolia continues to make good progress under the fundsupported program. Helped by favorable commodity exports, a recovery in confidence, and strong program implementation, growth has accelerated further, leading to improvements in the fiscal position and debt dynamics. The fiscal accounts have posted a primary surplus, reflecting both a sharp increase in revenues and continued expenditure restraint. Meanwhile, past over-performance allowed the authorities to meet key reserve targets, despite a recent rise in balance of payments pressures,” Acting Chair and Deputy Managing Director Mitsuhiro Furusawa noted following the approval of the review.

With high public and external debt, the authorities’ dedicated implementation of reform program is key to build resilience against shocks and ensure sustainable and inclusive growth, IMF highlighted.

“In the financial sector, the focus remains the follow-up to the Asset Quality Review (AQR). Select banks are in the process of booking the results of the AQR and subsequent on-site inspections. They are also now raising the needed capital to address identified shortfalls by the endDecember 2018 deadline. The Bank of Mongolia will remain focused on ensuring financial sector stability throughout the process,” Furusawa added.

While noting the positive results that Mongolia’s policy and the EFF have yielded, IMF also underlined the risks that could derail the progress.

“Notwithstanding this progress, Mongolia remains vulnerable to external and domestic shocks. It is therefore crucial to take advantage of the still favorable economic environment to further bolster fiscal and external buffers, strengthen the banking sector, and improve the investment climate. In addition, the authorities should continue efforts to protect social spending, strengthen tax administration, and improve public financial management. A dedicated implementation of the authorities’ reform program is key to build resilience against shocks and ensure sustainable, inclusive growth,” concluded Furusawa.