Mongolia’s economy has been hit hard by a sharp decline in commodity prices and a slump in foreign direct investment and the International Monetary Fund (IMF) is coming in to help.
In a statement, the IMF said it and other partners have agreed to extend more than USD5 billion in loan package to help Mongolia bring back its economy on track.
The terms of the loan stated that the IMF will provide USD440 million over three years while partners Asian Development Bank, World Bank, Japan and South Korea have agreed to provide up to USD3 billion.
The IMF statement added that China’s central bank, the People’s Bank of China, is also expected to extend Rmb15 billion (USD2 billion) with Mongolia for at least another three years.
“The total external financing package will thus be around USD5.5 billion and will support the authorities’ “Economic Stabilization Program,” which intends to restore economic stability and debt sustainability as well as to create the conditions for strong, sustainable, and inclusive growth, while protecting the most vulnerable citizens,” the IMF said.
The agreement is subject to the confirmation of financing assurances, the completion of prior actions by the authorities, and the approval of the IMF Executive Board. The Board is expected to consider Mongolia’s request in March.
The loan agreement will also force Mongolia to strengthen its banking system and adopt fiscal reforms to ensure that budget discipline is maintained, the IMF added.
“The Development Bank of Mongolia (DBM) will henceforth operate in an independent, purely commercial manner, as laid out in the recently passed DBM law, and the Bank of Mongolia (BOM) will not engage in additional quasifiscal activity, with the mortgage program now operating essentially as a revolving fund,” the IMF said.
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In addition, the IMF stressed that the law on concession projects will be reformed, and the public investment program (PIP) will be rationalized and better aligned with national development priorities. – BusinessNewsAsia.com