Negotiations between the Government of Mongolia and the International Monetary Fund (IMF) continue as reported disagreements about potential austerity measures persist even after the conclusion of Finance Minister B.Choijilsuren’s three-day working visit to the U.S. on February 9.
It has been reported that the IMF requires the government to cut its budget and reduce its structure. This has reportedly been the main issue of contention, as Mongolian officials are said to be less than eager to shrink the government’s structure and cut its already reduced budget.
One of the main issues that the IMF has focused on is the role and operations of Development Bank of Mongolia (DBM). IMF representatives have stated that the legislation regulating DBM has to be improved, and that DBM must not operate outside of the consolidated state budget. The IMF requires that DBM follow the operational models of development banks around the world, be independent from political bureaucracy, and work to reduce financial risk.
Reducing the state’s budget deficit has also been at the forefront of the discussions between the two sides. Lifting Mongolia out of its current economic crisis by cutting government spending to decrease the budget deficit has been a focus of the discussions.
Early reports following the October 2016 visit of an IMF delegation indicated that the IMF could offer a loan of 1 to 1.5 billion USD. More recent reports seem to signal a preliminary 440 million USD loan designed to help resolve the balance of payment difficulties Mongolia is experiencing is more likely. This loan could help to stabilize the wildly fluctuating MNT exchange rate. According to the IMF, loans to resolve balance of payment difficulties give countries breathing room to implement adjustment policies and reforms that will restore conditions for strong and sustainable growth, employment, and social investment.
These discussions mark the third time the IMF and Mongolia have cooperated to lift the country out of economic difficulty. Mongolia implemented IMF programs in 1991 and 2009, receiving a total of 195.7 million USD in loans. The IMF has provided Mongolia with financing for 136.6 million USD in regular loans.
Most reports and statements made by government officials seem to indicate that the negotiations and discussions will be finished by the end of this week. Finance Minister B.Choijilsuren stated in the past that his ministry expects it to be clear if Mongolia will be enrolling in an IMF program or not by February 15.