By Neil Saker, IMF Asia and Pacific Department
The IMF has approved a three-year, $434 million loan for Mongolia as part of a broader $5.5 billion financing package supported also by Japan, Korea, China, the World Bank, and the Asian Development Bank.
In terms of GDP, this is the fourth-largest package in IMF history, underscoring the international community’s commitment to Mongolia’s economic success.
The program, under the Extended Fund Facility, supports the newly-elected government’s Economic Recovery Plan and focuses on building foreign exchange reserves, putting debt on a sustainable path, strengthening the banking sector, and securing stable, inclusive growth over the long run.
“The authorities have an ambitious program in front of them, but with their strong political backing and steadfast implementation, they can strengthen policies and implement critical structural reforms to stabilize the economy and make it more resilient to future shocks,” said IMF mission chief for Mongolia Koshy Mathai.
Fiscal consolidation is at the heart of the stabilization plan and, combined with donor concessional financing and continued engagement of Mongolia’s private creditors, can help restore debt sustainability.
The fiscal balance will improve steadily, turning from a large deficit to a modest primary surplus by the early 2020s. This will be done in a balanced way, by focusing on reducing excessive expenditures and increasing revenues by moving to a progressive tax system and improving tax administration.