Journal Issue


International Monetary Fund
Published Date:
March 2011
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I. Background

1. Context. The Mongolian economy was hit hard by the global economic crisis, due to its high dependence on mineral exports and a history of pro-cyclical macroeconomic policies. By early 2009, the economy was on the verge of collapse: the central bank was running out of international reserves, the budget deficit was not financed, inflation was in the double digits, and the banking system was under stress. An 18-month Stand-by Arrangement (SBA) was approved on April 1, 2009, which succeeded in quickly stabilizing the economy thanks to the authorities’ steadfast policy implementation, financial support from the donor community, and a rebound in global copper prices.

2. Past advice. The authorities have a mixed record with implementing past advice. Fiscal policy in 2010 was prudent, the central bank maintained a flexible exchange rate regime, a landmark Fiscal Responsibility Law was passed, and the SBA was successfully completed. In contrast, the 2011 budget increased spending sharply, a targeted poverty benefit has not been introduced, and a bank restructuring program is not in place.

Contribution to Real GDP Growth


3. Recent developments. Growth rebounded strongly last year to 6 percent. This recovery is all the more impressive in light of the severe winter that led to a sharp contraction in agriculture, especially animal husbandry. The shock to food supply, however, helped drive inflation into the double digits for much of the year, led by rising meat prices. Higher copper prices and a rapid increase in coal production are fueling strong export growth that has helped boost international reserves to an all-time high.

4. Outlook. Growth this year is projected to remain strong and accelerate to around 10 percent. The large increase in fiscal spending underway, however, is creating excess demand that will result in higher inflation and surging imports. Inflation could reach some 20 percent by year-end (Figure 1). The medium-term outlook is favorable, as production from Oyu Tolgoi and Tavan Tolgoi (a large coal project) is expected to start by 2013.

Figure 1.Mongolia—Macroeconomic Developments

Sources: Mongolian authorities; and IMF staff estimates.

II. Policy Discussions

Fiscal policy is being loosened considerably in 2011, fueling inflation and signaling a return to boom-bust policies. Plans to open a development bank and once again permit government guarantees pose additional fiscal risks.

Figure 2.Mongolia—Policy Developments

Sources: Mongolian authorities; and IMF staff estimates.

5. Fiscal policy. The government adopted a 2011 budget that substantially increased spending (by nearly 7 percent of GDP) relative to their commitment in the SBA. In order to fulfill a campaign promise, universal cash transfers are being increased by some 4 percent of GDP relative to 2010. Staff argued that the budget will prove costly to the economy by leading to higher inflation that is especially hard on the poor, driving up imports, and ultimately squeezing the private sector. The authorities agreed that the budget was risky, but highlighted the political necessity of fulfilling their campaign promise. The underlying fiscal position will deteriorate significantly in 2011. Nominal spending, which already accounts for more than 60 percent of non-mineral GDP, is set to increase by some 35 percent. In addition, the welcome replacement of the windfall profits tax with a less burdensome resource tax regime will reduce revenue by some 3½–4 percent of GDP.

Mongolia: Fiscal Indicators, 2006-14 1/(In percent of non-mineral GDP)
Overall balance (In percent of GDP)7.62.6-4.5-5.01.2-3.5-
Structural balance (In percent of GDP)0.2-7.5-10.1-6.8-2.8-6.3-6.5-2.01.8
Non-mineral balance-3.3-16.1-21.2-17.9-18.0-21.9-18.1-13.4-11.6
Non-mineral revenue38.041.936.335.543.341.541.340.939.5
Total expenditure41.358.057.653.561.263.359.454.351.1
Fiscal effort (change in cyclically adjusted) 2/-0.9-13.4-8.57.8-1.7-
Real expenditure growth32.253.311.2-11.416.315.
Memorandum items:
Real non-mineral GDP (growth in percent)10.111.610.3-
Output gap of non-mineral GDP-
Sources: Mongolian authorities; and IMF staff calculations.

6. Fiscal Responsibility Law. There was agreement on the importance of strictly adhering to the landmark Fiscal Responsibility Law adopted last summer. Unfortunately, the 2011 budget was inconsistent with the spirit as well as the letter of the law (since, as required by law, it was not in line with the medium-term fiscal framework that was submitted to parliament). The authorities, however, underscored their commitment to the Fiscal Responsibility Law and emphasized that they would fully comply with the law’s numerical targets that take effect in 2013. They were prepared to exercise the necessary expenditure restraint, and noted that by simply scaling back the universal cash transfers—which are set to expire after the 2012 elections—they could achieve the needed adjustment. Consistent with this, staff fiscal projections assume that spending is sufficiently restrained in 2012–13 to meet the 2013 structural deficit target in the Fiscal Responsibility Law. More broadly, there was agreement that the Fiscal Responsibility Law would provide a welcome anchor for fiscal policy over the medium term.

7. Fiscal risks. The authorities are planning to end the ban on government guarantees, start implementing public-private partnerships (PPPs), and establish a development bank. Staff emphasized that these tools should not be used as a vehicle to circumvent the Fiscal Responsibility Law and highlighted how their use could increase fiscal risks, create large contingent liabilities, and reduce transparency. The authorities understood these risks, are cooperating with donors to follow international good practices, and would proceed prudently by, for example, fully reporting all government guarantees as part of the government debt stock.

8. Structural fiscal reforms. There was agreement on the benefits of introducing a targeted poverty benefit to strengthen the social safety net, increase fiscal flexibility, and replace the inefficient system of universal transfers. With some one-third of Mongolians’ living in poverty, it is essential to have a well-functioning targeted benefit in place. The authorities, with support from the Asian Development Bank and World Bank, are working to forge the parliamentary consensus needed to pass the social transfer reform law that was submitted last summer. The authorities also aim to adopt a modern integrated budget law this year—FAD and the World Bank have provided technical assistance—that would provide a new financial framework for intergovernmental relations, direct central government budget planning towards a medium-term and programmatic orientation, outline a new public investment planning and budgeting process with clear responsibilities among agencies, and provide greater flexibility for line ministries and agencies in implementation of their budgets. In addition, the authorities have made progress in strengthening the large taxpayers’ office and are committed to press ahead with these reforms, including further increasing the office’s staffing with the aim to improve taxpayer services and increase revenue collection efficiency. Some parliamentarians are pushing to replace or weaken the VAT. Staff discussed the benefits of the VAT and emphasized that increasing exemptions or otherwise using the VAT to target preferred sectors would prove to be highly inefficient—as well as ineffective—yet come with the costs of substantially complicating tax administration and risking revenue leakage.

9. Debt sustainability analysis. The updated debt sustainability analysis (DSA) concludes that Mongolia continues to be classified as low risk of debt distress. Mongolia has a strong capacity to repay the Fund, as supported by the DSA, the favorable medium-term growth prospects, and projections of a continued rise in international reserves.

The central bank has not adjusted interest rates, even though inflation is already high and, as a result of the 2011 budget, price pressures are building. The flexible exchange rate, meanwhile, continues to work well and has helped tighten monetary conditions.

Contribution to CPI

(In percent, year-on-year)

10. Inflation. Inflation has remained in the double digits for the past few months and is becoming more broad-based. Price pressures are likely to continue given strong demand, the 30 percent increase in pensions and civil servant wages implemented in October, and the large increase in budget spending planned for this year. On top of this, rising global and Chinese food prices, signs of resurgent credit growth, and the booming mineral sector would all add to pressures. Staff projects that without scaling back budget spending, inflation would surpass 20 percent later this year. The authorities agreed that such a rise in inflation would impose significant economic and social costs, which fall disproportionately on the poor, but the central bank highlighted that there were limits to how much monetary policy could do to offset the fiscal impulse.

Exchange Rate and FX Intervention

(In US$ million, + is salie of US$)

11. Monetary policy. The central bank policy rate has not been increased in line with the outlook for higher inflation, partly reflecting the public pressure for lower interest rates to help boost credit (Box 1). Staff argued that monetary policy has been too passive and a tightening was called for, starting with an immediate hike in interest rates, especially as the policy interest rate is negative in real terms. The central bank was hopeful that it could contain inflation pressures and would continue to watch incoming data to determine its next steps. There was agreement on the benefits of moving to a monetary policy regime with a more explicit focus on inflation, as the authorities plan to do in the medium term.

12. Exchange rate policy. The authorities remain committed to the flexible exchange rate regime, which has been working well over the past two years. There was agreement that intervention is necessary given the large and lumpy nature of foreign exchange inflows and the relatively thin interbank market. The foreign currency auction system has provided an effective means for central bank intervention and the authorities are now considering reforms that would help to better develop the interbank market. The nominal appreciation which took place in 2010 was also helpful in tightening monetary conditions and reducing inflation by allowing the adjustment in the real exchange rate to feed through the nominal exchange rate instead of prices (Box 2). The depreciation late last year was due in part to seasonal factors and the exchange rate has been fairly stable this year and the central bank has intervened sparingly.

13. Real exchange rate. Compared to many other resource dependent economies, Mongolia experienced relatively more real appreciation of the currency over the past five years, with the adjustment coming largely through inflation (Figure 3). The appreciation last year, moreover, was particularly sharp and the authorities understood the challenges this posed for the competitiveness and development of the non-mineral economy. They aim to pursue macroeconomic and structural policies that create an environment conducive to private sector development, including by smoothing the real exchange rate adjustment by restraining fiscal spending (per the Fiscal Responsibility Law), substantially improving infrastructure, and building up human capital. With the caveat that it is difficult to assess the real exchange with such major structural transformations taking place, application of the CGER toolkit suggests that the real exchange rate is broadly in line with medium-term fundamentals. The current account, which had a sizeable deficit last year due to mining related imports, is expected to move to a considerable surplus over the medium term as exports from the new mines begin. However, for purposes of the exchange rate assessment, mineral exports are treated as part of the oil balance and therefore the currency is not considered to be undervalued despite the large current account surpluses projected for 2016.

Figure 3.Cross-Country Perspective

Sources: WEO database; APD LISC database; and IMF staff estimates.

Real Exchange Rate Assessments

(Deviation from equilibrium, in percent)

Box 1.Mongolia—Considerations for Raising Interest Rate

Is output growing faster than potential? Measuring the output gap in Mongolia is challenging given data shortcomings, the volatility of output, structural changes, and the seemingly large role for supply shocks. With those caveats, the Blanchard-Quah method, which links the output gap directly with inflation, appears to perform better than standard filters.1 According to this measure, the output gap, though negative at the end of last year, is projected to rise significantly in 2011.


Does food inflation reflect demand or supply shocks? Food prices are a key driver of inflation, and clearly the severe winter and rising global and Chinese food prices are behind a good part of the current food inflation. However, econometric evidence finds that demand factors also play a role. Specifically, spending on social transfers is found to increase food prices and that the increase in universal transfers planned for 2011 could push up food prices by as much as10 percentage points.

Interest Rates

(Percent per annum, end-of-period)

Are interest rates already too high? Interest rates in Mongolia are structurally high reflecting weaknesses in the banking system (as exemplified by high U.S. dollar interest rates) and inflation volatility. Thus, the best way to redress this is through reducing inflation volatility and strengthening the banking system. Moreover, the policy rate is negative in real terms (inflation was 14 percent in December a full 3 percentage points above the prevailing policy rate).

Banking System: Loan to Deposit Ratios

Higher interest rates would attract more capital inflows? This is a possibility, but at the moment there are no signs of widespread speculative inflows. For example, the loan to deposit ratio in foreign currency is falling (suggesting that agents are not shorting the U.S. dollar via domestic banks) and the exchange rate has been fairly stable the last few months during a period when intervention was minimal.

1 J. Bersch and T. M. Sinclair, “Mongolia: Measuring the Output Gap,” IMF Working Paper (forthcoming).

Box 2.Mongolia—General Equilibrium Model: Simulating a Mineral Boom

The Gleaneagles model of scaling up aid is used to simulate a mineral boom.1 Export earnings in Mongolia are set to increase rapidly when the Oyu Tolgoi and Tavan Tolgoi mines start production in a few years. A large increase in foreign currency earnings, whether from scaling up aid or exports, will have similar economic effects that, in turn, depend on fiscal and monetary policies. The model helps illustrate the impact of the export boom, but the quantitative findings should be discounted as available research makes it difficult to caliberate the deep parameters more specifically to Mongolia.

The model looks at an increase in government spending financed by fiscal revenue from a surge in mineral exports. The first simulations examine central bank sterilization and find:

  • Growth is broadly the same with or without sterilization. Fiscal spending boosts growth, but the extent does not depend on sterilization.

  • Real currency appreciation is the same regardless of sterilization. Higher government spending increases demand for non-tradables, driving up non-tradable prices and thereby appreciating the real exchange rate. The extent of real appreciation is not affected by sterilization.

  • Inflation is lower with sterilization. Sterilization allows the adjustment of the real exchange rate to happen through the nominal exchange rate reducing domestic price pressures and inflation.



A second simulation looks at how the composition of fiscal spending. In particular, a scenario based on the increase in spending in the 2011 budget, which is tilted to cash transfers, is compared to one where a larger share of spending is on public capital expenditure (“Benchmark” in text figure). The main conclusion is:

Real GDP

(Percentage deviation from the steady state)
  • Tilting fiscal spending toward capital expenditure would yield higher growth. This derives from the model’s inclusion of public capital as input to production. In the end, though, it is not public spending on capital that matters but rather how that spending is turned into productive public capital, which depends on the strength of governance, project selection, and procurement practices.

1 The simulation results are based on S. Park, “Mongolia: Macroeconomic Impacts from a Large Scale Fiscal Spending,” IMF Working Paper (forthcoming). The Gleneagles model is from A. Berg, J. Gottschalk, R. Portillo, and L. Zanna, “The Macroeconomics of Medium-Term Aid Scaling-Up Scenarios,” IMF Working Paper 10/160.

14. Multiple currency practices. Mongolia maintains two multiple currency practices (MCPs) subject to Fund jurisdiction. One arises from the multi-price auction system since there is no mechanism in place that ensures the exchange rates of accepted bids at the multi-price auction do not deviate by more than 2 percent from the commercial rates.1 Given that this MCP is non-discriminatory among IMF members, retained for balance of payment reasons, and temporary, staff recommends the Executive Board to approve a further extension of the maintenance by Mongolia of this measure until March 15, 2012, or the next Article IV consultation, whichever is earlier. The other MCP arises from the official exchange rate (reference rate), which the government is required to use for its transactions, because it lacks a mechanism to ensure that the commercial rates and the reference rate do not deviate by more than 2 percent. Given that the criteria for approval of this MCP are not present, staff does not recommend Executive Board approval of said measure.

Financial sector reform is moving ahead on some fronts, but the bank restructuring program has stalled in parliament.

15. Banking system. Although indicators of banking system soundness had improved by end-2010, these ratios are likely to deteriorate with the tighter rules on the treatment of lending to related parties and restructured loans that took effect January 1. Staff argued that implementation of the Empowering the Banking Sector and Capital Support Program would offer a transparent and fair means of providing temporary government capital support to any bank that needs time to come into full compliance. The authorities agreed on the merits of the plan submitted to parliament, but explained that it lacks parliamentary support. As a second best, the central bank would start bank-by-bank negotiations with any banks that are out of compliance with prudential requirements and agree to time-bound restructuring plans. Staff emphasized the importance of strict enforcement of bank supervision regulations, which means replacing supervisory forbearance with resolute action to deal with distressed banks. Moreover, staff engaged in detailed discussions with the authorities as part of a Financial Sector Assessment Program update (see corresponding Financial System Stability Assessment). The authorities intend to have the budget cover all bank restructuring costs and reimburse the central bank for expenses already incurred.2

Banking System Excl. Anod And Zoos

(In percent)

16. Financial sector reform. The authorities are working to strengthen the financial system. Planning has begun to replace the blanket deposit guarantee with a deposit insurance system as market conditions allow. At the same time, the authorities are working to expand and deepen the non-bank financial sector. This includes plans to strengthen the local equity market by partnering with a foreign stock exchange, improve the legal environment, and foster development of the insurance market.

III. Staff Appraisal

17. 2011 budget. The large increase in fiscal spending this year will do more economic harm than good. Any immediate benefits will be dissipated through higher inflation, crowding out of private sector activity, and faster real exchange rate appreciation. So, in the end, real household purchasing power could actually go down, imports will surge as they become cheaper relative to domestically produced goods, and local business will become less competitive with knock-on effects for investment and employment. International experience also shows that such high inflation—particularly given its concentration in staple food items—will have an especially hard impact on the poor whose consumption basket contains a high share of such foods and who have little means to shield themselves from the impact inflation has in eroding their real incomes. Therefore, the 2011 budget should be amended to reduce spending substantially.

18. Medium-term fiscal framework. A sound fiscal policy is necessary for ensuring that Mongolia’s mineral wealth leads to lasting prosperity for all Mongolians. In practical terms, this means managing public spending growth in a way that (i) helps smooth economic growth (through a counter-cyclical fiscal policy); (ii) leaves room for the private sector to thrive; and (iii) provides buffers to insulate the budget—and the economy—against a downturn in global commodity prices. The adoption of the Fiscal Responsibility Law last year was a landmark achievement in this regard. However, the 2011 budget is a big step backwards. The Fiscal Responsibility Law will succeed only if it is strictly adhered to in letter and spirit; failure to do so will undermine its credibility and limits its effectiveness in preventing a recurrence of the policy driven, boom-bust cycles that Mongolia has experienced in the past. Compliance will entail expenditure restraint in the coming years, for example, by keeping spending roughly frozen in real terms in order to reach the 2013 structural deficit target. Moreover, it is equally important not to circumvent the law by using off-budget vehicles or government guarantees that would, in effect, undo the economic benefits of adhering to the law and come with the additional costs of an increase in fiscal risks and a loss of transparency. The Development Bank, public-private partnerships, and public guarantees are sources of such quasi-fiscal risk and, if such operations are to proceed, need to be managed prudently and in line with international good practices.

19. Structural fiscal reforms. The efforts underway to advance structural fiscal reforms are welcome and should proceed. A top priority is the introduction of a targeted poverty benefit, as part of social transfer reform that would help Mongolia’s most vulnerable citizens and increase fiscal flexibility. Other priority areas include plans to adopt an integrated budget law and strengthen the large taxpayer office.

20. Monetary policy. Inflation is already too high, and the substantial increase in fiscal spending underway will push it up further. There are limits to what monetary policy can achieve if budget spending this year is not scaled back. Nonetheless, the central bank should be more proactive in fighting inflation and promptly initiate a tightening cycle, starting with an up-front hike in interest rates. Inevitably, such a tighter monetary policy stance will lessen the availability of credit to the private sector and slow private activity. This crowding out of the private sector, while undesirable, is better than the alternative of allowing inflation pressures to build up further. However, responsibility for such crowding out lies firmly in the decision to put in place a very loose fiscal policy that the monetary authorities now need to offset with the tools at their disposal. This ongoing fight against inflation would be greatly helped by giving the central bank a more explicit mandate to make inflation the primary objective of monetary policy.

21. Macroeconomic policy mix. The expansionary fiscal policy and concomitant need for a tighter monetary policy is an inefficient policy mix. It results in macroeconomic volatility and higher inflation. The higher inflation also carries large social costs and it takes an especially hard toll on those already living in poverty, as the spike in prices reduces their purchasing power significantly. It also erodes the real value of savings and hurts those on a fixed income, such as retirees. A better macroeconomic mix would significantly scale back the increase in government spending this year and thereby reduce the amount of monetary tightening needed. This mix would result in lower inflation this year and next, a smoother growth path, lower interest rates, and less real exchange rate appreciation. Outcomes that would help improve the competitiveness of the local economy and create a better environment for the private sector.

22. Exchange rate policy. The flexible exchange rate regime has been working well over the past 1½ years. International reserves are at an all time high, and the nominal exchange rate has evolved in line with market conditions. The central bank has succeeded in dampening excess volatility in the exchange rate stemming from large and lumpy foreign exchange flows, and this intervention strategy remains fully appropriate for the period ahead. Moreover, the nominal appreciation that took place last year helped to tighten monetary conditions and reduced the increase in inflation. Looking forward, the flexible exchange rate regime will continue to be well suited for the Mongolian economy. Specifically, it will help control inflation, provide a shock absorber against external shocks, and facilitate the real exchange rate adjustment that is likely to take place over the medium term with the rapid growth in the mineral sector.

23. Banking system. A healthy banking system is important for promoting the development of the private sector. This includes ensuring that entrepreneurs, farmers, and businesses all have access to credit on reasonable terms while safeguarding depositors’ money through effective supervision and regulation. The recent progress, therefore, in strengthening the framework for banking supervision is welcome. Now, it is critical to strictly enforce existing regulations and replace supervisory forbearance with resolute action against any banks that are not in compliance. In addition, prompt passage of Empowering the Banking Sector and Capital Support Program should be a top priority.

24. Medium-term outlook. The Mongolian economy has a bright economic future, as development of the mineral sector will lead to a substantial growth and an opportunity to spread prosperity to all Mongolian citizens. Such prosperity, however, is not guaranteed. Many countries have experienced the “resource curse” which underscores that the risk of failure is real, and Mongolia’s recent crisis illustrates that the cost of failure is high. Success will require disciplined macroeconomic policies, including (i) containing fiscal spending pressures and strictly adhering to the Fiscal Responsibility Law; (ii) gearing monetary policy toward containing inflation, including by timely adjusting interest rates in line with the evolving price pressures; (iii) maintaining a flexible exchange rate regime; and (iv) safeguarding the banking system through strict supervision and enforcement of existing prudential regulations. Pursuing such a combination of policies would leave Mongolia well poised to ensure that its mineral wealth translates into strong, sustained, and equitable growth.

25. Other. Staff recommends that the next Article IV consultation takes place on the standard 12-month cycle and extension of the approval of Mongolia’s MCP arising from the multi-price auction system.

Table 1.Mongolia: Selected Economic and Financial Indicators, 2009–12
Nominal GDP (2009): US$4,574 million 1/
Population, end-year (2009): 2.74 million
Per capita GDP (2009): US$1,668 2/
Poverty incidence (2007/08): 35.2 percent 3/
Quota: SDR 51.1 million
Prel.Proj.5th & 6th Review
(Percent change)
Real sector
Real GDP growth-
Consumer prices (period average)6.310.216.416.010.58.9
Consumer prices (end-period)1.914.320.
GDP deflator1.818.014.18.920.38.2
(In percent of GDP)
General government budget
Revenue and grants30.
Expenditure and net lending35.236.038.538.937.135.9
Current balance2.
Primary balance-4.51.7-3.1-3.7-1.5-4.1
Overall balance (including grants)-5.01.2-3.5-3.9-2.2-4.8
Non-mineral overall balance-11.8-10.6-13.3-11.8-11.2-8.2
Structural balance 4/-6.8-2.8-6.3-6.5
(Percent change)
Money and credit
Broad money26.961.645.023.531.018.3
Broad money velocity (GDP/BM)
Interest rate on 7-day central bank bills, end-period (percent)10.011.0
(In millions of US$)
Balance of payments
Current account balance (including official transfers)-410-931-1,302-1,438-805-1,651
(In percent of GDP)-9.0-15.2-15.1-13.6-13.9-22.9
(In percent of GDP, excluding mining related imports)-5.8-
Trade balance-194-278-1,049-1,107-639-1,680
Foreign direct investment4961,5741,130548422849
Gross official international reserves (end-period)1,3282,2903,5864,1271,5991,631
(In months of next year’s imports of goods and services)
Trade prices
Export prices (US$, percent change)-
Import prices (US$, percent change)-
Terms of trade (percent change)-
(In percent of GDP)
Public and publicly guaranteed debt
Total public debt46.643.038.637.158.361.0
Domestic debt 5/3.412.215.817.319.325.8
External debt43.330.822.819.839.035.1
(In millions of US$)1,9772,0232,0642,0972,1412,231
Exchange rate
Togrogs per US$ (end-period)1,4431,259
Togrogs per US$ (period average)1,4411,348
Nominal effective exchange rate (end-period; percent change)-15.83.4
Real effective exchange rate (end-period; percent change)-11.111.3
Nominal GDP (In billions of togrogs)6,5918,25510,38212,1667,9119,162
Sources: Mongolian authorities; and IMF staff projections.
Table 2.Mongolia: Summary Operations of the General Government, 2009–12
Prel.Proj.5th & 6th Review
(In billions of togrogs)
Total revenue and grants1,9933,0733,6394,2592,7622,850
Total expenditure and net lending2,3222,9743,9994,7382,9383,287
Overall balance (incl. grants)-32999-360-478-176-436
Non-mineral overall balance-778-873-1,380-1,440-887-751
Structural balance-446-229-652-796
Foreign (net)300-74483919114
Domestic (net)2944311440157322
Privatization receipts (valuation adj.)2611166
Domestic bank financing (net)76-25-50439115189
Domestic non-bank financing (net)-7368361036127
(In percent of GDP)
Total revenue and grants30.
Current revenue29.836.734.734.633.930.7
Tax revenue and social security contributions24.532.430.429.529.926.9
Income taxes7.911.88.17.511.26.4
Social security contributions3.
Sales tax and VAT4.
Excise taxes2.
Customs duties and export taxes1.
Other taxes3.
Non-tax revenue5.
Capital revenue and grants0.
Total expenditure and net lending35.236.038.538.937.135.9
Current expenditure27.227.330.327.929.626.3
Wages and salaries8.
Purchase of goods and services5.
Subsidies to public enterprises0.
Transfers 1/11.511.715.312.413.111.0
Interest payments0.
Capital expenditure and net lending8.
Capital expenditure6.96.97.310.06.77.8
Net lending1.
Overall balance (incl. grants)-5.01.2-3.5-3.9-2.2-4.8
Non-mineral overall balance (incl. grants)-11.8-10.6-13.3-11.8-11.2-8.2
Structural balance-6.8-2.8-6.3-6.5-5.6-6.0
Foreign (net)4.5-
Project loans1.
Program loans3.
Gold financing loan1.4-
Domestic (net)
Banking system (net)1.2-0.3-
Of which: Oyu Tolgoi tax-prepayment2.
Memorandum items:
Overall balance incl. banking sector restructuring costs
(percent of GDP) 2/-5.0-0.3-4.6-3.9-8.8-4.8
Mineral revenue (percent of GDP)6.811.
Non-mineral revenue (percent of GDP)23.024.924.926.724.927.2
Nominal GDP (in billions of togrogs)6,5918,25510,38212,1667,9119,162
Copper price (US$ per ton)5,1657,5019,0008,5006,9117,200
Sources: Ministry of Finance; and IMF staff projections.
Table 3.Mongolia: Monetary Aggregates, 2009–12 1/
Prel.Proj.5th & 6th Review
(In billions of togrog; end of period)
Monetary survey
Broad money2,8804,6556,7508,3333,7724,463
Net foreign assets1,5332,7404,0134,6682,0992,159
Net domestic assets1,3471,9152,7373,6651,6732,304
Domestic credit1,9872,4483,5534,2442,8813,588
Net credit to government 2/-717-836-765-326-11668
Claims on nonbanks2,7043,2844,3184,5712,9973,520
Other items, net-640-533-816-579-1,208-1,284
Monetary authorities
Reserve money7339471,2311,4779031,068
Net foreign assets1,5392,5303,8034,4581,8511,903
BOM defined reserves 3/1,6522,6284,2694,9931,9642,016
Net international reserves (NIR) 4/1,3352,1403,7814,5051,6461,698
Other BOM defined reserves318488488488318318
Other assets, net-114-98-466-536-113-113
Net domestic assets-806-1,583-2,572-2,981-949-835
Net credit to government-265-493-663-324-17410
Claims on deposit money banks1981311516-18-18
Minus: Central bank bills (net)3931,1011,7772,628496499
Other items, net-346-120-147-45-260-327
Memorandum items:(In percent; unless otherwise indicated)
Annual broad money growth26.961.645.023.531.018.3
Annual reserve money growth26.429.
Broad money/reserve money3.
Total loans/deposits104.
BOM defined reserves (in millions of US$) 3/1,1452,0923,3923,9671,3611,397
Net international reserves (NIR, in millions of US$) 4/9251,7043,0043,5801,1411,177
Sources: Mongolian authorities; and IMF staff projections.
Table 4.Mongolia: Balance of Payments, 2009–12(In millions of US$, unless indicated otherwise)
Prel.Proj.5th & 6th Review
Current account balance (including official grants)-410-931-1,302-1,438-805-1,651
Trade balance-194-278-1,049-1,107-639-1,680
Mineral Export 1/1,5602,5213,3823,655
Non-mineral Export316378443428
Oil imports-528-676-903-1,005-722-873
Food imports-311-336-534-555-385-444
For investment in mining 2/-143-576-1,517-1,445-576-1,326
Services, net-164-279-268-291-157-12
Income, net-190-561-133-197-160-106
Current transfers138186147158151147
General government 3/-14924342924
Other sectors140137123124122123
Of which: workers remittances120102103103102103
Capital and financial account7372,1812,6022,0131,0071,683
Capital account208175969611896
Financial account5292,0072,5061,9178891,587
Direct investment4961,5741,130548422849
Portfolio investment-93879457343-1070
Trade credits, net13533538-19-24
Currency and deposits, net-45-624-506-574-38-31
Loans, net274941,1082,0451,0231,571
Other, net-11632282-483-392-777
Errors and omissions187-3110000
Overall balance5149391,30157520232
Gross official reserves (- increase)-670-962-1,297-540-271-32
Use of IMF credit (+)15623-4-35690
Memoranda items:
Current account balance (in percent of GDP)
Including official grants-9.0-15.2-15.1-13.6-13.9-22.9
Excluding mining related imports-5.8-
Excluding official grants-8.9-16.0-15.4-13.9-14.4-23.2
Gross official reserves (end-period)1,3282,2903,5864,1271,5991,631
(In months of imports of goods and services)
Copper price (in US$ per ton)5,1657,5019,0008,5006,9117,200
Oil price (in US$ per barrel)627990907780
Gold price (in US$ per troy oz.)9731,2251,3621,4051,1831,221
Sources: Mongolian authorities; and IMF staff projections.
Table 5.Mongolia: Selected Economic and Financial Indicators, 2008-16
(In percent of GDP; unless indicated otherwise)
Real sector
Nominal GDP (in billions of togrogs)6,5566,5918,25510,38212,16616,41019,68522,39526,625
Per capita GDP (in US$) 1/2,1081,6882,1943,0463,6894,9525,8196,3297,587
Real GDP growth (percent change)8.9-
Mineral real GDP growth5.
Non-mineral real GDP growth10.3-
GDP deflator (percent change)21.41.818.
Mineral GDP deflator7.9-2.538.75.6-
Non-mineral GDP deflator25.95.46.519.219.711.
Consumer prices23.21.914.320.
(end-period; percent change)
Copper prices (US$ per ton)6,963.55,165.37,501.29,000.08,500.08,000.07,000.06,500.06,500.0
General government accounts
Total revenue and grants33.
Mineral revenue9.46.811.
Non-mineral revenue23.423.024.924.926.723.421.321.020.1
Total expenditure and net lending37.635.236.038.538.931.528.032.435.1
Primary balance-4.2-4.51.7-3.1-
Overall balance-4.5-5.01.2-3.5-
Non-mineral overall balance-13.9-11.8-10.6-13.3-11.8-7.8-6.3-11.1-14.8
Structural balance-10.1-6.8-2.8-6.3-6.5-2.01.8-0.1-0.5
(In percent of non-mineral GDP)
Non-mineral revenue and grants36.235.543.141.341.240.739.339.338.7
Total expenditure and net lending57.653.561.263.359.454.351.160.067.1
Non-mineral overall balance-21.2-17.9-18.0-21.9-18.1-13.4-11.6-20.5-28.2
Monetary sector
Broad money (percent change)-5.126.961.645.023.539.724.418.123.6
Velocity (GDP/M2)
Balance of payments
Current account balance-12.9-9.0-15.2-15.1-
Excluding mining related imports-9.5-5.8-
Gross official reserves (in millions of US$)6581,3282,2903,5864,1274,4524,6015,3996,136
(In months of next year’s imports of goods and services)
Debt indicators
Total public debt31.046.643.038.637.127.323.919.614.6
Domestic public debt 2/0.03.412.215.817.312.610.56.43.6
External public debt31.043.330.822.819.814.713.413.211.0
(In millions of US$)1,6021,9772,0232,0642,0972,1492,2712,4692,654
Sources: Mongolian authorities; and IMF staff projections.

The Executive Board approved the multi-price auction MCP until June 22, 2010 (Decision No. 14365 of June 23, 2009), and its further extension until June 22, 2011 or the next Article IV consultation whichever is earlier (Decision No. 14669 of June 23, 2010).

The costs of resolving the two intervened banks are included in the fiscal projections, but, in contrast to previous staff reports, in line with the authorities’ plans, the staff projections no longer include any additional costs for bank restructuring.

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