The good news is that the Government of Mongolia has agreed with the International Monetary Fund on the terms of financing of USD 440,000. The total current external financing for Mongolia is USD 5.5 billion. Negotiations on the current financing agreement have been ongoing since August of last year.
The agreement is preliminary, and has to be approved by the IMF’s Executive Board; however, in most cases the Executive Board will not overturn a preliminary agreement. The agreement will also depend on the Government of Mongolia meeting a series of agreed actions, which include the ceasing of certain off the record activities of Mongol Bank, and performing a diagnostic on the Mongolia banking system.
According to experts at the IMF, Mongolia’s loose budgeting in past years is a major cause of the country’s current economic troubles and relatively high debt. As a result, the IMF is requiring the national budget to be tightened. The agreement allows for the continuance of certain social spending for low income populations.
The government will be required to implement several fiscal reform actions. A Council will be established to provide independent budget forecasts and review expenditures. The Ministry of Finance will have to approve the budgets for any proposals.
The agreement with the IMF if implemented is expected to strengthen Mongolia’s prospects for sustainable growth going forward. Finance Minister B. Choijilsuren compared the reform package to a medicine that is “Bitter,” but helps to “heal.” LehmanLaw Mongolia is excited to see the agreement as it demonstrates both the belief the IMF has in the Mongolian economy as well as the determination of the government of Mongolia to accept difficult reforms in favor of a more sustainable path toward economic growth. With this agreement reached, there has never been a better time to come to Mongolia and see what unique business opportunities may be had in this unique developing country.