Mongolia Considers Raising Country’s Debt Ceiling to Facilitate Infrastructure Development

Mongolia Considers Raising Country’s Debt Ceiling to Facilitate Infrastructure Development


The Ministry of Finance has prepared and presented a plan to raise Mongolia’s debt ceiling that would give opportunity to the country to sell more foreign debt to pay for infrastructure development. The country’s current debt ceiling is 40 percent of GDP. The plan is to increase it to 70 percent, according to Mr. K. Ganzorigt, the State Secretary of the Ministry of Finance who announced the new plan while meeting with diplomats and foreign press. He mentioned that raising of the debt ceiling would form part of the new debt management plan in Mongolia. Mongolia is currently reviewing various financing options for infrastructure projects that will ultimately facilitate transportation of commodities to China and Russia as the foreign direct investment level keeps dropping. Back in November 2013, the Parliament of Mongolia blocked a bill to raise the debt ceiling to 60 percent, which resulted in Moody’s opinion as “credit positive” to this decision. Raising of the debt ceiling is one of the several changes proposed by the Ministry of Finance. The plan also suggests a 20 percent limit on the State guarantees, as well as the way the Government calculates its debt. Since March 2012, Mongolia has raised US$2.3 billion in sovereign debt. As the new plan has been announced, Standard and Poor’s has lowered Mongolia’s long-term sovereign rating to BB- from B+. Th present 40 percent debt ceiling went into effect this year as part of the Fiscal Stability Law, which was adopted in 2010 as a way to control budget spending and accrue savings from commodities revenue. In 2013, government debt was 49.5 percent of GDP, just below the 50 percent mark allowed for that year.

Source: www.mongolia-briefing.com

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