A. Introduction

1. Economic performance in 1997 was impressive. Aided by strong political support for rapid reform and a generally favourable external environment, financial policies were tightened, and significant reductions in inflation were achieved (Figure 1). Broad based structural reforms were also undertaken, including steps to restore confidence in the banking system.

Mongolia: Economic Developments, 1994-97

Citation: IMF Staff Country Reports 1999, 004; 10.5089/9781451826777.002.A001

Sources: Mongolian authorities; and staff estimates.1/ An increase indicates appreciation.

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Mongolia: Economic Developments, 1994-97

Citation: IMF Staff Country Reports 1999, 004; 10.5089/9781451826777.002.A001

Sources: Mongolian authorities; and staff estimates.1/ An increase indicates appreciation.

• Download Figure
• Download figure as PowerPoint slide

Mongolia: Economic Developments, 1994-97

Citation: IMF Staff Country Reports 1999, 004; 10.5089/9781451826777.002.A001

Sources: Mongolian authorities; and staff estimates.1/ An increase indicates appreciation.

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• Download figure as PowerPoint slide

2. Conditions changed abruptly in 1998 as a deterioration in the external environment and domestic political problems combined to erode the momentum for reform (Box 1). The Asian crisis caused steep declines in the prices of Mongolia’s major export commodities, resulting in a deterioration in the fiscal and external accounts. Declining profitability and financial distress among export producers reduced liquidity in the banking system, and weakened the failing financial position of several large banks. Domestic political problems severely limited government’s ability to take corrective action. Monetary policy, however, remained relatively tight throughout the year, and inflation fell further.

B. Real Sector Developments

3. Economic growth picked up to 4 percent in 1997, led by sharply higher mining sector production. Gold production increased by 50 percent, as several small locally-owned mines came on-stream. Copper production increased by 20 percent, as the Erdenet mine modernized, and a joint-venture tertiary recovery plant expanded its production. Performance in the rural sector was mixed. Output of the three staple crops—cereals, potatoes, and vegetables—expanded rapidly, but production of meat declined as lack of marketing arrangements led producers to increase herd sizes. Growth in trade, construction and services was strong, reflecting the expansion of private sector activity. Output in the manufacturing sector, still dominated by state enterprises, fell by over 16 percent reflecting ongoing structural problems, including a deficiency of management expertise, obsolete equipment, lack of working capital, and lack of access to financial resources or expertise.¹

4. In 1998, growth slowed only marginally to an estimated rate of 3½ percent. Momentum was maintained partly because of the Erdenet copper mine, which increased its output despite suffering financial losses in the face of lower world prices. In the agricultural sector, output of vegetables increased under the green development program, while production of grains and other products remained flat. The manufacturing sector lagged, while the service sector was buoyed by privatization and the development of tourism.

C. Financial and Structural Policies in 1997

5. Inflationary pressures, intensified at the start of 1997. Real interest rates were significantly negative, creating a strong incentive for currency substitution and commodity hoarding. These pressures were reinforced by speculation in the foreign exchange market, which led to a rapid depreciation of the exchange rate, especially in February and March.

6. The BOM responded by tightening monetary policy significantly in late March 1997. The interest rate on central bank bills was raised from 3 percent per month at end-1996 to 5 percent per month in March 1997, and the BOM announced that it would fully meet demand for central bank bills by banks which met the reserve requirements and other prudential guidelines. The central bank also raised the interest rate on loans to bank, and required that all such loans be fully collateralized, effectively eliminating the demand for central bank credit. In addition, the BOM intervened heavily in the foreign exchange market to fend off the speculative attack on the tugrik.

7. These policies were successful in restoring financial confidence, With significantly positive real interest rates, central bank bill sales absorbed excess liquidity, and monthly inflation turned negative at mid-year, cutting the 12-month inflation rate by half to 22V2 percent, by end-1997. Following the exchange market intervention, the exchange rate appreciated sharply from over Tug 900 per US$1 to around Tug 750 per US$1 before stabilizing in the 810-820 range for the remainder of the year.

8. Fiscal policy also played a key role in the stabilization process.² Despite the cost of bank restructuring—interest on bank restructuring bands amounted to 1¾ percent of GDP—the overall deficit was held to 8½ percent of GDP in 1997, 2 percentage points below the budget target. The decline in the deficit reflected strong revenue performance, particularly from the copper sector, overflight fees, and privatization. With significant disbursements of foreign financing at end-year, net credit to government from the banking system declined by 3½ percent of GDP during 1997.

9. Significant structural reforms were also carried out to remove economic distortions and promote private sector development. These included the elimination of remaining price controls on electricity, heating, water, and rent; the elimination of almost all customs duties; the broadening the coverage of the sales tax to include construction, electricity, and telecommunications; a simplification of the structure of the personal and corporate income taxes, and a reduction in the corporate income tax rate, for all but the largest taxpayers; and increases in government fees and charges to improve cost recovery. Budgetary assistance to state-owned enterprises was also curtailed, hardening budget constraints. The accelerated privatization of state-owned assets contributed about 1½ percent of GDP to the budget.

D. Developments in 1998

10. In late 1997 and early 1998, weakening demand throughout the Asian region contributed to steep declines in the prices of copper, cashmere and gold, Mongolia’s main export commodities (Box 1). The most immediate impact was on fiscal revenues particularly in the copper sector where taxes and dividends are expected to decline by 2 percent of GDP in 1998, to near zero.

11. Secondary fiscal effects of the Asian crisis were also significant. Despite being unprofitable, Erdenet continued to produce, incurring operating costs which contributed to large financial losses. These were financed, in part, by an accumulation of arrears to domestic suppliers, mainly coal mines and the Central Energy System (CES) some of which, in turn, failed to meet the full amount of tax obligations. In addition, the government found it necessary to extend a credit to the CES to ensure smooth winter operations.

12. The condition of the banking system sector deteriorated sharply in 1998, reflecting poor bank management, weak internal controls, inadequate enforcement of prudential regulations, and the impact of low export prices on enterprise profitability.³ The resulting draw down of deposits on increase in nonperforming loans contributed to a deterioration in the liquidity position and net work of some banks.

13. As the prospects for an early recovery in the terms of trade faded, the government began formulating a policy response to shore up the budgetary finances in the near term, and to reduce reliance on the copper sector over the medium term. The package included an introduction of the VAT at 13 percent rather than the 10 percent originally envisaged, the imposition of a US$7 dollar per ton excise on petroleum, and a 13 percent export tax on gold. However, a series of domestic political developments delayed early implementation of the measures.

• On April, Prime Minister Enkhsaikhan and his cabinet—who were not members of Parliament—resigned to make way for a new Democratic Coalition government under Prime Minister Elbegdorj and other parliament members.⁴

• In June, the opposition walked out of parliament in protest over the government’s decision to merge the state-owned Reconstruction Bank (RB) with privately-owned Golomt Bank.

• The boycott effectively halted the conduct of regular business in parliament.

• In July, the two month old government of Prime Minister Elbegdorj lost a confidence motion in parliament after some members from the Democratic Coalition crossed the floor to vote with the opposition.

• Since July, several candidates have been proposed for Prime Minister, but they either failed to win strong support within the Democratic Coalition, or they were rejected by the President (who belongs to the opposition party). In the interim, Mr. Elbegdorj had continued to head a caretaker government.

• Parliament subsequently convened and passed the pending tax legislation. The VAT rate and petroleum excise became effective on September 1; the gold tax was vetoed by the President.

14. Despite the external shocks, monetary policy remained relatively tight, and inflation continued on a downward trend. The central bank bill rate, which had eased from 35 percent in January 1998 to 25 percent in April, was raised to 40 percent in July in response to downward pressure on the exchange rate and renewed inflation concerns. After picking up briefly in March-April, inflation turned negative in June-July and remained low in August.⁵

15. Exchange rate management was strongly influenced by the 1998 monetary policy guidelines approved by parliament which called for the BOM to maintain the exchange rate within 5 percent range of the end-1997 level.⁶ In an effort to adhere to these guidelines, the BOM intervened heavily in the foreign exchange market, especially during the months of July and August, generating a substantial decline in the level of international reserves.

16. The external current account shifted from a small surplus in 1997 to a sizable estimated deficit (12 percent of GDP) in 1998. The reversal was associated with the large deterioration in the terms of trade, an appreciation of the real exchange rate, and the long-term lease of an aircraft. The value of nongold exports declined by 27 percent during the first eight months of 1997, despite a 6 percent increase in the volume of copper exports. The volume of gold exports declined moderately following the destocking in 1997. Import values increased by almost 13 percent higher. The current account deficit was financed to a large extent by a decline in the net foreign assets of commercial banks.

A. Overall Developments in 1997 and 1998

19. In 1997, revenue performance strengthened significantly, despite the elimination of most custom duties and other tax reform measures that reduced revenues. However, due to significant increases in bank restructuring costs and foreign financed capital expenditure, the overall budget deficit widened by a half percentage point to 8½ percent of GDP, and the current budget surplus fell from 4½ percent of GDP in 1996 to 1¾ percent in 1997. With large disbursements of foreign financing in the latter part of the year (equivalent to 12 percent of GDP), the stock on net banking system credit to government declined by 3¾ percent of GDP.

20. The increase in the revenue-to-GDP ratio in 1997—by 1¾ percentage points to 29½ percent of GDP—reflected the implementation of the comprehensive tax package and a sharp increase in privatization receipts. The broadening of the base of the sales tax, and the reforms of enterprise and individual income taxes yielded an additional 2 percent of GDP in revenue. A number of other tax measures, particularly the increase in excises on petroleum products, spirits and wine, and a new export tax on raw cashmere and camel wool, contributed further to revenue by about 1 percentage point of GDP, while the elimination of all import duties (except on alcoholic spirits) reduced revenues by about 1½ percent of GDP. Privatization receipts rose by 1 percentage point to about 1½ percent of GDP, as about 236 state-owned enterprises were sold.

21. Parallel to the significant increase in revenue, total expenditure and net lending also rose sharply, by about 2 percentage points to 38 percent of GDP in 1997. Interest payments on bank restructuring bonds—Tug 45 billion were issued in 1996 and 1997—amounted to 1¾ percent of GDP. The total wage bill in relation to GDP declined slightly despite a 20-25 percent nominal increase in May. Expenditure on other goods and services rose by nearly 1 percent of GDP to 11 percent, mainly reflecting the large increase in energy prices in late 1996. Social security payments rose by ¾ percent of GDP due to increases in pension rates. Foreign financed capital expenditure rose by 1½ percent of GDP, as several World Bank, AsDB, and Japan funded projects made large disbursements in 1997. Net lending was scaled back by about 1½ percent points of GDP, reflecting large repayments by the Oil Import Concern (Table 27).

22. Revenue performance deteriorated sharply in the early 1998, as the prices for Mongolia’s major export commodities declined steeply in the wake of the regional financial crisis.⁷ The Erdenet copper mine, which used to be the largest taxpayer in Mongolia, reported a loss of Tug 8 billion in the first eight months of the year. As a result, the budget is expected to lose about Tug 20 billion in revenues from Erdenet’s income tax and dividend payments for the year as a whole. In addition, Erdenet accumulated large arrears to the Central Energy System which, in turn, owed the budget Tug 4 billion in taxes. Revenue from the excise tax on petroleum products was also weak due to a sharp decline in oil imports from Russia and the exemption for a large amount of grant imports. The excise collected on vodka and tobacco was lower than expected, as imports fell dramatically after the excise rate increase in 1997.

23. In an attempt to contain the revenue shortfall, in late August, Parliament approved an increase in the VAT rate from 10 percent to 13 percent and an increase in the excise on petroleum products, both effective September 1, 1998. Despite these measures, total revenue and grants are expected to decline by 4 percentage points to 25½ percent of GDP in 1998.

24. On the expenditure side, the government responded to the deteriorating fiscal situation in 1998 by scaling back capital expenditures. However, expenditures on goods and services in the first eight months of the year were significantly higher than that in the same period of 1997. This reflected the granting of a larger-than-programmed wage increase, delayed payments of utility bills for the winter of 1997, and the MOFs lack of effective control over local government spending.

25. As a result, the overall budget deficit is expected to increase from 8.6 percent of GDP in 1997 to about 10 percent in 1998. As the disbursement of the second tranche of the AsDB’s Financial Sector Program Loan (US$16 million) is unlikely to take place in 1998 as originally scheduled, net domestic bank financing of the budget in 1998 could reach 3¾ percent of GDP.

B. Tax Reform and Tax Administration

26. Before April 1997, Mongolia’s tax system consisted mainly of the enterprise income tax, individual income tax, sales tax, various excise taxes, and customs duties. While possessing the basic elements of a tax system typically found in a market-based economy, the Mongolian system suffered from several problems, including complex rate structures, narrow tax bases, and overly generous exemptions. A comprehensive reform covering the individual income tax, the enterprise income tax, customs duties, the sales tax, and various excises was implemented in May 1997, with an objective to simplify the tax system and to improve the environment for private sector development and foreign investment. The main elements of this tax package included the following:

• the number of corporate income tax rates was reduced from four (15, 25, 35, and 40 percent) to two (15 percent and 40 percent), and the depreciation system was simplified to single rate, and the straight line method;

• the number of individual income tax rates was reduced from five (2, 5, 15, 27, and 40 percent) to three (10, 20, and 40 percent), and the exemption threshold was replaced with a tax credit;

• the base of the sales tax was broadened to include selected enterprises in the food, construction, and communication sectors, and the annual turnover threshold was eliminated;

• all custom duties were eliminated, except a 15 percent duty on alcoholic spirits;

• the excises on petroleum products, spirits and wine were doubled; and

• the royalty rate on minerals was reduced at 2½ percent, from the previous system of negotiated rates in the range of 1½ to 12½ percent.

27. As revenue performance weakened significantly in early 1998, and the prospects of an early recovery in the terms of trade diminished, the authorities recognized the need for new tax measures to prevent a further deterioration in the fiscal position. In May 1998, the government proposed a new tax package—estimated to yield about 2 percent of GDP on an annualized basis—to Parliament, consisting of the introduction of the VAT at a higher rate than previously approved (13 percent rather than 10 percent), an increase in petroleum excise by US$7 per ton, and a gold export tax at a rate equivalent to 13 percent. However, due to the parliamentary impasse in summer 1998, legislative approval of this package was delayed and the VAT was introduced at 10 percent on July 1, 1998. Parliament eventually approved the tax package in late August, although the gold tax was subsequently vetoed by the President. The VAT rate and the petroleum excise increase became effective on September 1, 1998. In addition, a 15 percent customs duty on flour and vegetables was reintroduced on a temporary basis, effective from September 1, 1997 to April 1, 1999.

28. Currently, Mongolia’s tax system consists of the VAT, enterprise and individual income taxes, various excise taxes, import duties, and export taxes, and a number of minor taxes. In the first nine months of 1998, tax revenue accounted for 68 percent of total general government revenue. The enterprise income tax and the sales tax (VAT after July 1, 1998) were the two largest revenue sources, accounting for 30 percent and 24 percent of total tax revenue, respectively. As a result of the tax reform in 1997, excise taxes have gained in importance in total tax revenue, reaching 10 percent in the first nine months of 1998, while import duties and export taxes declined to just one percent of total tax revenue.

29. Tax administration is the responsibility of the General Department of National Taxation (GDNT) which was established as a separate government agency in 1992. The GDNT is under the supervision of the Minister of Finance, and controls 4 city and 18 aimag (provincial) offices. There are 8 district tax offices under the supervision of the capital city office and 360 soum (district) offices under the supervision of the aimag offices and other cities.⁸ The tax administration is responsible for collecting both state and local taxes, and supervises activities of tax education and tax collection methodology.

30. Since 1997, a major task of the tax administration has been the design and implementation of the VAT. With the technical assistance from the IMF, the GDNT prepared the action plan and drafted VAT administrative regulations. The taxpayer registration proceeded as planned; by mid-September 1998, about 1800 taxpayers had registered with the GDNT. However, as of end-September 1998, the VAT refund system had not become fully operational as the establishment of the special refund account was delayed. The administration of the VAT has also been complicated by several ministries’ ad hoc decisions to offer exemptions for the petroleum, construction, and tourism sectors.

C. Public Expenditure Management Reform

31. The current budget process is based on the Budget Law amended in 1996. Budget formulation is largely—but not entirely—driven from the bottom up. In July or August, budgetary agencies, provinces, and districts submit budget request to the MOF. The MOF then calculates budgetary allocations for each ministry and transfers to each aimag, based largely on the previous year’s expenditure and known price increases, subject to the government’s overall revenue and financing constraint. The Cabinet submits the draft central budget (including transfers to aimag level governments) to Parliament for approval in October for passage no later than December 1.⁹

32. With technical assistance from the AsDB and New Zealand, the government has drafted a far-reaching Public Sector Management and Finance Act. The Act, which was submitted to Parliament, is intended to provide a powerful instrument to rationalize government functions, and enhance efficiency in the delivery of public services through output-based budgeting and delegation of input decisions to managers of line ministries and government agencies, civil service reform, and establishment of strict accountability mechanisms for all budgetary units. The draft Act has been revised extensively to accommodate the concerns of some MPs, and the government now expects that it should be possible to win passage in early 1999. Since April 1998, pilot implementation work has been conducted with four government agencies, including the Ministry of Finance, the State Audit Board, the State Service Council, and the General Department of National Taxation. Output specifications and their corresponding measures are being developed in these agencies.

33. The government has recognizes the need to reform the treasury system to enable the MOF to closely monitor budgetary bodies’ expenditures and to improve cash and debt management, Mongolia’s current treasury management, which was developed under the former centrally planned economy, disburses money from the central treasury to budgetary agencies’ accounts without effective monitoring of actual expenditures. Cash management is hampered by the MOF’s inability to obtain timely and accurate information on the budgetary agencies’ bank account positions and by the absence of electronic links between the MOF, the BOM, and commercial banks. The lack of marketable treasury bills also poses a constraint to effective debt management. In early 1998, the AsDB funded Public Administration Reform Project (PARP) developed a treasury reform proposal for Mongolia. So far, however, only limited progress has been made in implementing reforms in this area. Although a few ministries’ bank accounts were moved to the BOM, most budgetary entities continue to maintain their accounts at commercial banks and some budgetary entities have opened multiple accounts for fear of the worsening liquidity problem with some banks.¹⁰ The government and the BOM are discussing a possible banking services contract to reduce the uncertainty and enhance the attractiveness for budgetary entities to hold their balances with the central bank.

D. Public Expenditure on Education and Health

34. Mongolia’s health and education indicators are relatively high compared to other countries at similar income levels. At end-1997, there were 645 primary and secondary schools with 435,000 students, and 125 higher and vocational institutions with 63,000 students. The enrollment rate for primary and secondary schools declined significantly in early 1990s due to rising school fees and privatization of livestock, but has risen gradually since 1993 to about 84 percent in 1997.

35. Current expenditure on education accounted for about 22 percent of total current government expenditure in 1997, which is high by international standards. Funding for education is the joint responsibility of the central and local governments, with central government transfers depending on local fiscal resources. For the five richest provinces/cities, the central government provided no transfers to local budgets, while for poorest aimags, almost the entire education budget is provided by the center. Beginning January 1999, localities will be provided funding based on several quantifiable variables (including the number of students) to encourage schools to increase enrollment rates, reduce redundant workers, and increase wages to attract and retain qualified teachers.

36. Comprehensive reforms are being implemented under the AsDB-funded “Education Sector Development Program”. A US$6½ million component of the policy program is designed to enhance the effectiveness, efficiency, and rationalization of the education structure, including through downsizing of the education staff.¹¹ Over the past two years, 4,000 teaching and non-teaching positions were eliminated under this program, and those who were made redundant were offered a severance package financed by the AsDB loan.¹² An investment component of the program is providing US$9 million for renovating school buildings, building laboratories, and training teachers.

37. Mongolia’s health indicators stagnated in early 1990s but have improved significantly since 1993. From 1993 to 1997, infant mortality per thousand live births fell from 62 to 40, and the total number of maternal deaths fell from 124 to 72. Over the same period, budgetary allocation for current health expenditure as a share of total government current expenditure remained at about 14 percent, higher than in many countries with similar per capita GDP.

38. The government recognizes the need for reform to ease the budgetary burden of health care by improving efficiency of public health services and introducing a new health insurance system. The health insurance system was reformed in 1995, as part of the social insurance reform. Under the current system, health insurance requires 6 percent of wage in premiums, with 50 percent contributed by employers and the other 50 percent by employees. However, due to poor premium collection and the lack of effective expenditure control, premia paid to the Health Insurance Fund cover only about 60 percent of its expenditure. In April 1997, the government introduced a 10 percent co-payment for some medical services to improve the efficiency of their utilization, while waiving these for pensioners, children, students, soldiers, the disabled, mothers of infants, herders, and other low income persons.¹³

39. In early 1998, the government approved a comprehensive restructuring program—the Health Sector Development Program—with support from a three year AsDB project loan amounting to US$11.9 million.¹⁴ The main objectives of the program are to strengthen primary health care, encourage private sector participation in health service delivery, rationalize health care personnel, and upgrade staff qualifications. Under the program, doctors and other medical staff from a large number of local health centers will become family doctors and their operations will be mainly financed by the health insurance system. This program has already been implemented in three aimags, one district, and Ulaanbaatar City.

E. The Pension System

40. Mongolia’s social insurance system consists of the Pension Insurance Fund, Benefits Insurance Fund, Work Injury Fund, Unemployment Insurance Fund, and Health Insurance Fund. Under the 1995 Social Insurance Law, employers and employees under formal labor contracts are required to make contributions to these funds, with a total contribution rate of 29-31 percent of employee wages. The Pension Fund, the largest component of the social insurance system, operates on a pay-as-you-go basis, with contribution rates of 13½ percent for employers and 5½ percent for employees. Participation in the pension system for the self-employed is voluntary, at the rate of 9½ percent. The operation of the social insurance system—the collection of contributions and the making of payments—is administered by the State Social Insurance General Office (SSIGO).

Table 1.

Mongolia: Rates of Contribution to Social Insurance Funds

^1/The 13.5 and 5.5 percent rates are for nongovernment employees. Government employees contributions to the Pension Fund are 1.1 percent of wage and the government contributes 17.9 percent on their behalf.

Table 1.

Mongolia: Rates of Contribution to Social Insurance Funds

	Employess under a labor contract			Self-employed
	Employer	Employee	Total
Pension insurance1	13.5	5.5	19.0	9.5
Social benefits insurance	1.0	1.0	2.0	1.0
Work injury insurance	1.0 to 3.0	…	1.0 to 3.0	1.0
Unemployment insurance	0.5	0.5	1.0	…
Health insurance	3.0	3.0	6.0	Tug800
Total	19 or 21	10.0	29 or 31	11.5+Tug 800

^1/The 13.5 and 5.5 percent rates are for nongovernment employees. Government employees contributions to the Pension Fund are 1.1 percent of wage and the government contributes 17.9 percent on their behalf.

View Table

Table 1.

Mongolia: Rates of Contribution to Social Insurance Funds

	Employess under a labor contract			Self-employed
	Employer	Employee	Total
Pension insurance1	13.5	5.5	19.0	9.5
Social benefits insurance	1.0	1.0	2.0	1.0
Work injury insurance	1.0 to 3.0	…	1.0 to 3.0	1.0
Unemployment insurance	0.5	0.5	1.0	…
Health insurance	3.0	3.0	6.0	Tug800
Total	19 or 21	10.0	29 or 31	11.5+Tug 800

^1/The 13.5 and 5.5 percent rates are for nongovernment employees. Government employees contributions to the Pension Fund are 1.1 percent of wage and the government contributes 17.9 percent on their behalf.

41. The normal retirement ages for men and women in the social insurance system are 60 and 55, respectively. A contributor with 20 years of service can receive a pension of 45 percent of his/her highest consecutive five-year average wage. For each additional year of service, 1½ percent of the five year average wage is added to the pension. Pension benefits for those who have had less than 20 years of service are proportionally smaller. Currently, the minimum pension is Tug 12,000 per month (equivalent to the minimum wage).¹⁵ In 1997, the average replacement rate was about 39 percent, much higher than the 20 percent recorded in 1994, as a result of the 1995 pension reform and several ad hoc increases in pension benefits, but still significantly lower than the level in 1991 (nearly 50 percent). With high and erratic inflation rates over the past years, and the absence of automatic adjustments of pension benefits for changes in prices or average wage rates, the link between contributions and benefits has been tenuous, limiting the incentive to contribute.

42. There are several salient problems with the pension system:

• The pension system is not self-financing. In 1997, the Pension Fund ran a deficit of ¾ percent of GDP—pension benefits were 3¾ percent of GDP and pension contributions were 3 percent of GDP. Transfers from the budget are necessary to cover the pension fund deficit and, without reform, this system is unlikely to be sustainable in the long run unless inflation is allowed to erode benefits.

• Contribution arrears to the Pension Fund remain large. At the beginning of September 1998, total contribution arrears—accumulated by budgetary bodies, state-owned enterprises, and private enterprises—reached Tug 5¼ billion.¹⁶

• The base for pension contributions is narrow relative to the coverage of pension recipients.¹⁷ In July 1998, pension fund contributors from state-owned enterprises, budgetary bodies, and other enterprises with formal labor agreements numbered around 387,000 (about one-half of total employment); private sector voluntary contributors numbered only 7,587.

43. With the assistance of US AID, the government has developed a plan to reform the current pension system by introducing notionally defined individual accounts in the near future. This plan is embedded in the draft “Law on Individual Pension Accounts,” currently being reviewed by Parliament. The main objectives of this reform are: (1) to establish a closer link between paid contributions and benefit accruals, thereby improving the incentive for compliance by existing contributors and increasing voluntary participation of the self-employed; (2) to offer a better benefit structure for controlling future pension costs than does the current pension system; and (3) to create a basis for the future transition towards a partially funded system.¹⁸ Under this plan, individuals who were born after January 1, 1960, and are covered by pension insurance under the provisions of the Social Insurance Law, will have individual accounts.¹⁹ A mechanism of indexing pension benefits to average wages will also be introduced together with this reform. As part of a long-term reform package, the government has drafted the “Principle Guidelines for Pension Reform in Mongolia,” which envisages the equalization of the retirement age for men and women at 60, the elimination of early retirement provisions for persons working in hazardous conditions, and the elimination of early retirement provisions for mothers of four or more children.

A. International Reserves

B. Foreign Exchange Markets

58. The tugrik is fully convertible for current account transactions. Due to the low and erratic volume of transactions on the interbank foreign exchange market, the BOM continues to publish an official exchange rate calculated as the average of the prior week’s exchange rates on the interbank market.

59. The foreign exchange market in Mongolia consists of an interbank market plus an informal cash market.²³ Due to the low and erratic volume of transactions on the interbank market,²⁴ the BOM continues to publish an official exchange rate calculated as the average of the prior week’s exchange rates on the interbank market. The official exchange rate is principally used for valuation purposes for government transactions but, at times the BOM has stood ready to purchase/sell foreign exchange to commercial banks at that rate. The BOM’s principal method of foreign exchange intervention has been through its purchases from/sales to commercial banks.

60. A new Reuters based system is being introduced that would permit real-time on screen trading in the interbank market. The BOM has introduced regulation designed to monitor foreign exchange exposure and minimize settlement risk under the new system. In early October, nine commercial banks plus the BOM were issued licenses to trade on the system. Consistent with the interim regulations for the Reuters system, in cases of unsettled transactions, the party failing to credit payment will be subject to a daily penalty.

C. External Debt

61. Official external debt is not high by international standards and the majority of the debt has been contracted on highly concessional terms. However, there remains a substantial unresolved transferable rouble claim held by Russia relating to Mongolia’s transactions with the former Soviet Union. Limited data are available on foreign debt contracted by the private sector, including with commercial bank guarantees.

62. Data on official external debt are compiled and reported by the External Debt Division of the Treasury in the MOF on a monthly basis. Data on disbursements and debt service are published; data on the overall debt stock are not publicly available, though they are contained in the documentation submitted to Parliament along with the budget submission. The data on official external debt cover external obligations contracted directly by the government and the BOM including debt that is subsequently on-lent to recipient budgetary entities and state enterprises. External debt guarantees issued by the government or BOM have not always been captured in the debt data, at least until the guarantee has been called. In addition, external debt contracted or guaranteed by public enterprises or state owned commercial banks is not included in the official debt statistics. Reflecting the development of domestic financial markets, there are no nonresident holdings of government or central bank securities.

63. At end-1997, total official external debt amounted to US$605 million (64 percent of GDP). Short-term debt on an original maturity basis is small, reflecting the debt management strategy pursued by the government. However, principal repayments of US$29½ million were made during 1997. Almost half of this debt represents long-term obligations to international financial institutions, including the AsDB (US$193 million disbursed, 32 percent of total debt). The principal bilateral official creditor is Japan (US$112 million, 19 percent). Obligations to the Fund at end-1997 amounted to US$47½ million (8 percent).

64. A number of project loans from the AsDB and the World Bank have been on-lent to budget entities which directly service the loans and, therefore, do not appear in the debt service reflected in the budget. The recipients of such loans include the Civil Aviation Authority, the CES, Mongolian Railways, and the Road Authority. To date, these recipient agencies have serviced the debts in a timely manner.

65. The government and the BOM have extended guarantees on a number of occasions. A number of government (and BOM) guarantees were extended in the early 1990s on commercial loans to finance new capital investment in the industrial sector. Such loans included the construction of metal processing, milk, meat, copper, gold mining, wool and leather plants as well as lines of credit for commercial banks. With the exception of the guarantees to the copper sector and the commercial banks, these guarantees have been called as the enterprises, which have only just entered into operation, were not able to service the loans. In the case of the guarantees extended by the government, the recipient enterprises are 100 percent state owned.

66. Data on the external debt stock exclude a number of unresolved transferable rouble claims that stem from the period prior to the dissolution of the Soviet Union. Transferable rouble claims held by the former German Democratic Republic, Hungary, China, and Bulgaria have been cleared. The very large unresolved claim held by Russia adds considerable uncertainty to the interpretation of existing debt stock and debt service indicators.

67. External loans contracted directly by the commercial banks are included in the external liabilities recorded on the balance sheets of commercial banks that are published (in aggregate) domestically. The data do not, however, explicitly decompose the external liabilities of the banking system. Loans guaranteed by commercial banks include foreign credit lines that are on-lent to domestic enterprises; a credit line financed by KfW that has been on-lent to small and medium-sized enterprises and a loan from an Austrian bank was on-lent to a number of carpet factories.

68. State enterprises (both 100 percent state enterprises and majority owned) have also directly contracted external loans. Such loans do not appear to contain a formal government guarantee. Responsibility for the oversight of such operations lies with the State Property Committee. These directly contracted loans are not currently included in the official debt statistics, though data on such loans could be derived from the annual reports submitted to the government by the larger state enterprises. No data are currently compiled on the external debt of the private sector.

69. According to BIS data at end-March 1998, outstanding external obligations contracted by the nonbank sector amounted to US$1 million, though this is likely to be an underestimate due to the limited number of creditors reporting to the BIS and potential misreporting of claims on joint ventures.^{25 26} In comparison, the BIS data indicate deposits of the Mongolian nonbank sector of US$7 million. In addition, MI AT, the fully state owned national airline, has recently entered into a long-term lease for an Airbus which requires annual debt repayments of about US$5 million.

A. Background

70. The Mongolian financial system underwent a major restructuring in December 1996 to eliminate insolvencies in the banking system, restore confidence, and halt disintermediation that had resulted from nonperforming loans, inadequate management, and weak supervision (Box 3). Two large insolvent banks, which together accounted for nearly fifty percent of banking system assets, were closed; two new, government-owned banks—Reconstruction Bank and Savings Bank—were created; a debt recovery agency, the Mongolian Asset Recovery Agency (MARA) was also established.²⁷ The Reconstruction Bank was initially set up as a narrow bank, but was allowed to evolve into a full lending institution offering universal banking services. The Savings Bank was also a narrow bank, intended only to take deposits and hold government bonds. The bank, however, began to make limited loans secured by deposits held in the bank itself The largest of the remaining problem banks, Agriculture Bank and ITI Bank, were placed under rehabilitation through Memorandums of Understanding (MOUs) between the banks and the BOM.

71. Aided by a favourable external environment, conditions in the banking sector initially improved in the aftermath of the bank restructuring. Bank deposits grew, and the ratio of nonperforming loans to total loans, though still high, began to decline. Steps were taken to strengthen the financial and regulatory framework through the creation of a credit information pool, amendments to the banking laws to facilitate collateralize lending, norms relating to loan loss classification were tightened, and manuals and a supervisory handbook drafted. Banks set up credit departments to assess loan applications and credit risk, and a credit information pool was established to monitor loan defaulters. The capital adequacy ratio of the consolidated banking system rose to 12½ percent, exceeding the prescribed 10 percent minimum. Liquidity conditions improved, and the prescribed liquidity ratios—in local and foreign currency—were met. Profitability improved, and banks increased loan loss provisions.

72. Despite these important gains, several weaknesses and institutional inadequacies persisted. Three banks were unable to meet the required capital adequacy ratio, and the average capital adequacy ratio for the five largest banks was under 9 percent. The proportion of substandard loans in nonperforming loans went up. The appropriateness of loan classification and adequacy of loan loss provisions came under serious questioning as banks were found to be improperly rescheduling their loans. Nine banks were short of making the required provisioning while four banks were unable to meet the required reserve ratio on a regular basis. The increase in total deposits and loans was concentrated in a few banks, while some of the large banks lost market shares.

B. Developments in 1998

73. Conditions in the banking system deteriorated significantly in 1998, reflecting the impact of the large external shock on the profitability and cash flow of major corporate clients and the emergence of serious managerial and governance problems at the Reconstruction Bank. The Savings Bank also exhibited considerable vulnerability due to the structure of its balance sheet and problems were encountered in rehabilitating the banks under MOUs. The financial positions of three small private banks weakened. The problems were exacerbated by supervisory shortcomings and parliamentary intervention in banking system oversight. Noncompliance with prudential requirements rose and by mid-1998 the system had turned fragile, characterized by weak capital positions, deep insolvencies, a high stock of nonperforming loans, and declining profitability.

74. Based on BOM data, the weaknesses in the banking sector are reflected in a number of indicators, including;

• Decline in the overall risk weighted capital ratio of commercial banks from 11½ percent in June 1997 to 6½ percent in August 1998;

  • An increase in the number of banks not meeting the prescribed capital adequacy ratio from four to six. The total capital deficiency of these banks is an estimated Tug 12 billion (about 1¼ percent of GDP);

• A tightening of liquidity stemming from the growing stock of nonperforming assets, high overhead costs due to excessive branching and overstaffing at three large banks, a large stock of arrears and claims on the government, and the absence of any credible market mechanism for raising funds;

• Insufficient provisioning for nonperforming loans and other assets. Nine out of the 18 banks, including the three large insolvent banks, have failed to set up loan loss reserves at the required level Compared to the required provisioning of Tug 17½ billion, banks had made provisions of only Tug 11 billion;

• A sharp decline in banking system profitability. In June 1997, gross banking system profitability was minus 0.1 percent of total assets, and fell to minus 3 percent in August 1998, mainly on account of a steep rise in the noninterest expenses;

• Low indicators of financial intermediation: total loans and broad money comprising only 10 percent and 20 percent of GDP, respectively. The loans-to-assets and loans-to-deposits ratios were also low;

• Fall in total deposits from Tug 13 billion in January 1998 to Tug 109 billion in August 1998; a decline in banking assets by 3 percent during the first eight months of 1998, compared to a growth of over 40 percent in 1997; and

• Wide, though declining, spreads between the deposit and lending rates (currently an average of 18 percent, down from 36 percent).

75. The high incidence of nonperforming loans lies at the core of the financial problems of the banking system. At end-August 1998 such loans equaled Tug 31½ billion, or 41½ percent of total loans outstanding (30 percent at end-December 1997). Over 50 percent of the nonperforming loans were of the substandard or less category. In addition, banks held a stock of non income earning and illiquid government bonds as assets, on which the government was either not paying interest or paying irregularly.

Table 1.

Nonperforming Loans and Provisioning

(in billions of tugriks)

Sources: Bank of Mongolia; and staff estimates* BOM has recently revised the figure to Tug 15 billion; ** BOM has recently revised the figure to Tug 31.4 billion.

Table 1.

Nonperforming Loans and Provisioning

(in billions of tugriks)

		1996	1997	1998 1/
Nonperforming loans (NPLs)		32.9	14.5 *	25.6 **
	Principal in arrears	8.1	4.5	8.4
	Substandard	3.5	2.1	3.1
	Doubtful	7.0	3.1	7.1
	Lost	14.4	4.7	7.1
Provisioning (as percent of NPLs)		56.0	44.0	35.0
Provisioning deficit (million tugriks)		539.6	850.4	6,478.7

Sources: Bank of Mongolia; and staff estimates* BOM has recently revised the figure to Tug 15 billion; ** BOM has recently revised the figure to Tug 31.4 billion.

View Table

Table 1.

Nonperforming Loans and Provisioning

(in billions of tugriks)

		1996	1997	1998 1/
Nonperforming loans (NPLs)		32.9	14.5 *	25.6 **
	Principal in arrears	8.1	4.5	8.4
	Substandard	3.5	2.1	3.1
	Doubtful	7.0	3.1	7.1
	Lost	14.4	4.7	7.1
Provisioning (as percent of NPLs)		56.0	44.0	35.0
Provisioning deficit (million tugriks)		539.6	850.4	6,478.7

Sources: Bank of Mongolia; and staff estimates* BOM has recently revised the figure to Tug 15 billion; ** BOM has recently revised the figure to Tug 31.4 billion.

76. External audits of bank accounts have only recently begun, and completed for only one of the five large banks. In the absence of a proper evaluation of assets and reserves, the existing capital ratios need to be viewed with caution. A determination of whether banks are making adequate provisions for tax liabilities and depreciation of financial assets is also required.

C. Factors Underlying the Banking System Deterioration

77. The systemic factors that contributed to the deterioration in the banking system include:

• The adverse external situation and the resulting fiscal stress strained the financial system. Banking sector claims on the government rose to Tug 37 billion (19 percent of total assets) and the government was irregular in making interest payment on its securities. A decline in corporate health led to an increase in loan rescheduling requests.

• Deficient bank management and poor operational control. A general lack of trained personnel, in particular credit officers, within most commercial banks prevented the creation of appropriate risk management and internal control systems. Most banks lacked credit and loan review policies necessary to minimize credit risk. There was also a high incidence of insider lending. Weak internal control systems failed to prevent the loss of bank assets through fraud and theft, and in some cases directly contributed to the problem.

• Weak prudential requirements and delayed supervisory intervention. The BOM has not yet adopted the Basle Core Principles for Effective Banking Supervision. In the absence of a strong regulatory and supervisory framework, noncompliance with single borrowers limit, insider lending limit, and foreign currency exposure limit was frequent at some banks.²⁸ The provisions of the Banking Law were not always enforced to the full extent of the law, in particular BOM’s powers to take corrective action including conservatorship and receivership. Prudential and loan classification requirements were not strictly enforced, as the BOM supervision department faced resource constraints. Bank supervision lacked a focus on risk assessment and management of asset and liability mismatches. Bank licencing policy was not geared to ensuring that only well managed banks operated.

• Inadequate legal, regulatory, and accounting framework. The legal system was unable to provide proper assistance to creditors for unpaid bank debts, or enforce collateral seizure. The law was not consistently enforced and there were lengthy delays in loan recovery. This resulted in a cumbersome collection process, with many avenues for delay available to delinquent debtors; and contributed to the creation of a financial culture not firmly rooted in the principle of honouring debt obligations. Against this background, the performance of MARA was less than satisfactory. The loan classification and loan loss provision guidelines did not conform to best practices: loans were classified as nonperforming only when principal payments were not made on schedule; when interest payments were missed, the loans continued to be classified as performing and the unpaid interest was accrued and treated as income.²⁹ Some banks were also rescheduling loans automatically, and classifying them as performing loans despite them being long overdue and never being cleared. The accounting and financial reporting standards for banks did not conform to international standards, and discouraged preparation and submission of reliable and timely banking data. A regulatory framework for nonbank financial intermediaries does not exist as yet.

• Bank insolvencies. As of end-August 1998, five banks—representing about 30 percent of banking system assets—were insolvent and illiquid.³⁰ Of these, three large banks account for 70 percent of the total nonperforming loans of the banking system (Figure 2; Table 2). The Reconstruction Bank (RB), which accounts for 10 percent of total assets, was declared insolvent in August 1998 after its failed merger attempt with Golomt Bank (a small private sector bank, comprising about 7 percent of the total banking assets), and insolvencies of the Agriculture Bank (AB) and the ITI Bank deteriorated further. According to preliminary BOM estimates, the total realizable assets of all the three banks stood at Tugs 34 billion against total liabilities of Tugs 56 billion, thus leaving a gap of around Tugs 21 billion. Nearly 60 percent of the liabilities consist of government and public enterprise accounts.

• Liquidity imbalances among insolvent banks has worsened. The BOM had to provide liquidity support to two insolvent banks. In the aftermath of the “demerger”, the RB faced deposit withdrawals. Other banks, including the ITI Bank, also witnessed deposit withdrawals, in part due to the financial distress of the bank’s large corporate depositors.

Mongolia: Nonperforming Loans, 1997-98

(In percent of total outstanding loans)

Citation: IMF Staff Country Reports 1999, 004; 10.5089/9781451826777.002.A001

Sources: Bank of Mongolia; and Fund staff estimates.

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Mongolia: Nonperforming Loans, 1997-98

(In percent of total outstanding loans)

Citation: IMF Staff Country Reports 1999, 004; 10.5089/9781451826777.002.A001

Sources: Bank of Mongolia; and Fund staff estimates.

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Mongolia: Nonperforming Loans, 1997-98

(In percent of total outstanding loans)

Citation: IMF Staff Country Reports 1999, 004; 10.5089/9781451826777.002.A001

Sources: Bank of Mongolia; and Fund staff estimates.

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Table 2.

Mongolia: Financial Indicators of Insolvent Banks

(As of August 1998)

Source: bank of Mongolia

^1/Prescribed ratio is 10 percent.

^2/Prescribed ratio is 18 percent, and is calculated as the ratio of liquid assets to total deposits. RB had received a liquidity support of Tugs 2.6 billion from BOM in August 1998.

Table 2.

Mongolia: Financial Indicators of Insolvent Banks

(As of August 1998)

	Reconstruction Bank	Agriculture Bank	ITI Bank
	(In percent)
Nonperforming loans	84.5	65.2	55.3
Capital adequacy ratio 1/	-9.1	-164.1	-3.9
Capital (Tug million)	-929	-4,951	-867
Profit(+)/loss(-) (Tug billion)	-3.4	-5.9	-4.0
Liquid asset ratio 2/	49.0	11.7	11.1

Source: bank of Mongolia

^1/Prescribed ratio is 10 percent.

^2/Prescribed ratio is 18 percent, and is calculated as the ratio of liquid assets to total deposits. RB had received a liquidity support of Tugs 2.6 billion from BOM in August 1998.

View Table

Table 2.

Mongolia: Financial Indicators of Insolvent Banks

(As of August 1998)

	Reconstruction Bank	Agriculture Bank	ITI Bank
	(In percent)
Nonperforming loans	84.5	65.2	55.3
Capital adequacy ratio 1/	-9.1	-164.1	-3.9
Capital (Tug million)	-929	-4,951	-867
Profit(+)/loss(-) (Tug billion)	-3.4	-5.9	-4.0
Liquid asset ratio 2/	49.0	11.7	11.1

Source: bank of Mongolia

^1/Prescribed ratio is 10 percent.

^2/Prescribed ratio is 18 percent, and is calculated as the ratio of liquid assets to total deposits. RB had received a liquidity support of Tugs 2.6 billion from BOM in August 1998.

78. The “demerger” of the Reconstruction Bank (RB) and Golomt Bank in August 1998—less than thee months after the two institutions were merged—had an adverse effect on the confidence in the entire banking system. The RB is the fourth largest bank with a staff of over 850, over 80 branches and subbranches, and 2,000 enterprise clients. It is the largest provider of financial services to the government and public enterprises. From its inception, the operations of the RB were hampered by lax management and weak internal controls. Despite management changes and other initiatives to strengthen its operations, the performance of the RB continued to weaken; its nonperforming loan portfolio increased from around Tug 0.2 billion in February 1997 to Tug 8½ billion in August 1998 (about 85 percent of outstanding loans) and the bank began to face serious liquidity problems from the beginning of 1998. The government provided liquidity support to the bank, but by April the bank began to loose deposits, cash, and foreign assets. The growing problems prompted another management change and the MOF issued a directive to stop lending; the directive was largely ignored. In an attempt to contain the deterioration, bids were invited for the bank at end-May, and within a matter of days, the bank was “merged” with Golomt Bank, a small private sector bank. The merger sparked a political crisis and a prolonged boycott of parliament by the opposition. In mid-August, the bank was “demerger” following a parliamentary resolution. As of end-August 1998, the bank had a capital adequacy ratio of minus 9 percent, a negative net worth of Tug 900 million, and a total loss of Tug 3½ billion.

79. Efforts to strengthen the AB and ITI Bank have also had limited success.³¹ The banks were placed under rehabilitation programs embodied in MOUs supported by financial and technical assistance by the AsDB. Despite efforts under the programs, both the banks failed to meet the criteria relating to capital, operating expenses, and liquidity, and have negative net worth.

• The AB, with a network of over 300 branches and subbranches, and 1300 employees, performs a number of nonbank payments functions on behalf of the government, such as pension and social welfare payments, in almost all administrative units. The bank was profitable in 1997, but has turned into a loss making bank in 1998. The share of nonperforming loans in the bank has increased. At end-August, the bank had a negative net worth of Tug 5 billion, and a loss of Tug 6 billion.

• The ITI Bank, with over 50 branches and subbranches and nearly 630 employees was profitable in 1997. However, between end-1997 and August 1998, the share of nonperforming loans in the bank increased from 46 percent to 55 percent. At end-August, the bank had a capital adequacy of minus 4 percent, a loss of Tug 4 billion, and a negative net worth of Tug 900 million; the bank also failed to meet the required liquid asset requirement of 18 percent and was reportedly booking a monthly loss of Tug 254 million.

80. The Savings Bank, with a network of over 40 branches and subbranches and 360 employees, was profitable in 1997, and remains so in 1998. Nevertheless, the bank has a number of weaknesses, including failure to meet the capital adequacy ratio and mismatches in its asset (mostly nontraded bank restructuring bonds) and liability structure. The financial situation of two other banks—EXIM Bank and Innovation Bank—is also weak.

D. Bank Supervision and Regulation

81. Steps were taken in September to strengthen the regulatory framework and to improve the overall standards of prudential compliance. In this connection amendments were made to the Banking Law, including:

• Increase in the minimum capital requirement from Tug 400 million to Tug 1 billion, effective September 1999. Currently, seven banks do not meet the requirement. The higher capital requirement is likely to result in some consolidation or mergers in the banking system.

• Fit and proper management: The BOM has been empowered to ensure better governance within banks: individuals of doubtful character can be prohibited from holding managerial and executive board positions; resignation, suspension, and nomination would require prior consultation with the Governor; and the BOM can convene shareholders meetings, if necessary.

• Financial disclosure: The legal basis for bank audit standards was established; financial reporting by banks was made explicit; and issuance of misleading information prohibited. Auditors are now required to report directly to the BOM. The legal basis for secrecy of bank-related information was also established.

82. The BOM has also taken steps to strengthen the prudential regulation of banks and its supervisory tools through changes in:

• Loan Classification: Automatic loan rescheduling for defaulting borrowers has been prohibited. Definitions have been tightened to ensure proper classification of overdue loans and prevent banks from accepting nonmarketable and unsaleable fixed assets in lieu of nonpayment of loans.

• Accounting and bookkeeping standards: A new industry wide accounting standard, effective January 1999, has been developed with technical assistance from AsDB. The chart of accounts of banks has been modified and balance sheet disclosure standards improved. Bank reporting to the BOM has been made monthly instead of quarterly.

• Risk Weights: The weights for calculating the risk-weighted capital ratio for government securities and interbank borrowing and lending has been raised, reflecting the illiquidity of government bonds and delays in government interest payments.

• Treatment of risks: Banks are now required to emphasize proper risk management practices in addition to maintaining the prudential standards. Adherence to the latter will not be a substitute for proper risk management.

• Liquidation criteria: The criteria have been made more explicit, and now include negative net worth as a condition for closure and liquidation.

• The BOM has issued guidelines for licensing of audit firms allowed to undertake bank audits and a supervision manual is in the draft stage.

Table 1.

Mongolia: Selected Economic Indicators, 1995-97

Nominal GDP (1997): $943 million

Population (1997): 2.36 million

Quota: SDR 37.1 million

Sources: Mongolian authorities; and Fund staff estimates and projections.

^1/Excludes official transfers.

^2/Excludes claims of 10 billion in transferable roubles held by Russian and other former CMEA countries.

^3/Excludes servicing of medium- and long-term claims in transferable rubles held by Russia and other former CMEA countries.

Table 1.

Mongolia: Selected Economic Indicators, 1995-97

Nominal GDP (1997): $943 million

Population (1997): 2.36 million

Quota: SDR 37.1 million

			1995	1996	1997
			(Percent change)
Real GDP			6.3	2.6	3.0
Consumer prices (period average)			56.8	46.7	50.7
Consumer prices (end period)			53.1	44.8	31.0
			(In percent of GDP)
General government revenue			33.7	27.8	27.2
General government expenditure			40.4	36.0	37.6
Current balance			7.9	4.5	1.3
Overall balance			-6.4	-8.2	-10.5
Bank financing			-4.8	2.1	-1.7
			(Percent change)
Net foreign assets			45.2	65.2	103.2
Net domestic assets			56.9	59.9	-15.5
Domestic credit			-20.6	127.7	1.7
Credit to enterprises			18.0	23.2	40.5
Broad money			32.9	25.8	23.0
Reserve money			…	36.2	…
Broad money velocity (GDP/BM)			4.2	4.6	5.0
Annual interest rate on central bank bills (percent)			71.3	63.3	…
			(In millions of US dollars)
Current account balance 1/			-52	-101	-102
	(In percent of GDP)		-5.5	-10.0	-11.2
Trade balance			-3	-87	-81
	(In percent of GDP)		-0.3	-8.7	-8.9
Exports, fob			486	423	463
	(Percent change)		32.3	-12.8	9.3
Imports, cif			489	511	544
	(Percent change)		32.0	4.5	6.4
Capital account balance			19	41	76.6
	(In percent of GDP)		2.0	4.1	8.5
Gross official international reserves			115	98	117
	(In weeks of imports)		12.2	10.0	11.2
External debt 2/			504	542	638
	(In percent of GDP)		52.8	54.0	70.6
Debt service 3/			64.2	56.6	52.0
	(In percent of exports of goods & services)		12.1	11.8	9.8
Exchange rates and trade prices
		Tugriks per US dollar (end of period)	474	694	882
		Tugriks per US dollar (period average)	450	584	850
		NEER, end-period (Dec 95=100)	100.0	76.5	…
		REER, end-period (Dec 95=100)	100.0	106.8	…
		Export prices (US dollar, percent change)	23.7	-21.6	6.8
		Copper price (US dollar, percent change)	40.2	-36.9	8.4
		Import prices (US dollar, percent change)	9.1	2.6	-0.4
		Terms of trade (percent change)	13.4	-23.6	7.2
Nominal GDP (billion tugriks)			429	587	768

Sources: Mongolian authorities; and Fund staff estimates and projections.

^1/Excludes official transfers.

^2/Excludes claims of 10 billion in transferable roubles held by Russian and other former CMEA countries.

^3/Excludes servicing of medium- and long-term claims in transferable rubles held by Russia and other former CMEA countries.

View Table

Table 1.

Mongolia: Selected Economic Indicators, 1995-97

Nominal GDP (1997): $943 million

Population (1997): 2.36 million

Quota: SDR 37.1 million

			1995	1996	1997
			(Percent change)
Real GDP			6.3	2.6	3.0
Consumer prices (period average)			56.8	46.7	50.7
Consumer prices (end period)			53.1	44.8	31.0
			(In percent of GDP)
General government revenue			33.7	27.8	27.2
General government expenditure			40.4	36.0	37.6
Current balance			7.9	4.5	1.3
Overall balance			-6.4	-8.2	-10.5
Bank financing			-4.8	2.1	-1.7
			(Percent change)
Net foreign assets			45.2	65.2	103.2
Net domestic assets			56.9	59.9	-15.5
Domestic credit			-20.6	127.7	1.7
Credit to enterprises			18.0	23.2	40.5
Broad money			32.9	25.8	23.0
Reserve money			…	36.2	…
Broad money velocity (GDP/BM)			4.2	4.6	5.0
Annual interest rate on central bank bills (percent)			71.3	63.3	…
			(In millions of US dollars)
Current account balance 1/			-52	-101	-102
	(In percent of GDP)		-5.5	-10.0	-11.2
Trade balance			-3	-87	-81
	(In percent of GDP)		-0.3	-8.7	-8.9
Exports, fob			486	423	463
	(Percent change)		32.3	-12.8	9.3
Imports, cif			489	511	544
	(Percent change)		32.0	4.5	6.4
Capital account balance			19	41	76.6
	(In percent of GDP)		2.0	4.1	8.5
Gross official international reserves			115	98	117
	(In weeks of imports)		12.2	10.0	11.2
External debt 2/			504	542	638
	(In percent of GDP)		52.8	54.0	70.6
Debt service 3/			64.2	56.6	52.0
	(In percent of exports of goods & services)		12.1	11.8	9.8
Exchange rates and trade prices
		Tugriks per US dollar (end of period)	474	694	882
		Tugriks per US dollar (period average)	450	584	850
		NEER, end-period (Dec 95=100)	100.0	76.5	…
		REER, end-period (Dec 95=100)	100.0	106.8	…
		Export prices (US dollar, percent change)	23.7	-21.6	6.8
		Copper price (US dollar, percent change)	40.2	-36.9	8.4
		Import prices (US dollar, percent change)	9.1	2.6	-0.4
		Terms of trade (percent change)	13.4	-23.6	7.2
Nominal GDP (billion tugriks)			429	587	768

Sources: Mongolian authorities; and Fund staff estimates and projections.

^1/Excludes official transfers.

^2/Excludes claims of 10 billion in transferable roubles held by Russian and other former CMEA countries.

^3/Excludes servicing of medium- and long-term claims in transferable rubles held by Russia and other former CMEA countries.

Table 2.

Mongolia: Gross Domestic Product, 1993-97

(At current prices)

Sources: State Statistical Office, and the National Development Board; and Fund staff estimates.

Table 2.

Mongolia: Gross Domestic Product, 1993-97

(At current prices)

		1993	1994	1995	1996	1997
		(In billions of tugriks)
Gross domestic product		166.2	283.3	429.2	586.5	755.0
	Industry	51.3	86.4	119.3	120.6	182.0
	Agriculture	58.3	104.7	157.9	216.0	253.3
	Construction	2.7	6.0	11.5	22.2	25.3
	Transportation	5.4	12.9	14.6	27.6	39.6
	Communications	2.3	3.5	5.0	6.2	10.5
	Trade	26.5	33.3	72.7	107.5	139.3
	Services and other	19.6	36.6	48.2	86.4	105.1
Net factor income from abroad		-11.6	-11.0	-5.8	-8.2	-12.0
Gross national product		154.6	272.2	423.4	578.4	743.0
		(In percent of GDP)
GDP		100.0	100.0	100.0	100.0	100.0
	Industry	30.9	30.5	27.8	20.6	24.1
	Agriculture	35.1	36.9	36.8	36.8	33.5
	Construction	1.6	2.1	2.7	3.8	3.3
	Transportation	3.2	4.6	3.4	4.7	5.2
	Communications	1.4	1.2	1.2	1.1	1.4
	Trade	16.0	11.7	16.9	18.3	18.4
	Services and other	11.8	12.9	11.2	14.7	13.9

Sources: State Statistical Office, and the National Development Board; and Fund staff estimates.

View Table

Table 2.

Mongolia: Gross Domestic Product, 1993-97

(At current prices)

		1993	1994	1995	1996	1997
		(In billions of tugriks)
Gross domestic product		166.2	283.3	429.2	586.5	755.0
	Industry	51.3	86.4	119.3	120.6	182.0
	Agriculture	58.3	104.7	157.9	216.0	253.3
	Construction	2.7	6.0	11.5	22.2	25.3
	Transportation	5.4	12.9	14.6	27.6	39.6
	Communications	2.3	3.5	5.0	6.2	10.5
	Trade	26.5	33.3	72.7	107.5	139.3
	Services and other	19.6	36.6	48.2	86.4	105.1
Net factor income from abroad		-11.6	-11.0	-5.8	-8.2	-12.0
Gross national product		154.6	272.2	423.4	578.4	743.0
		(In percent of GDP)
GDP		100.0	100.0	100.0	100.0	100.0
	Industry	30.9	30.5	27.8	20.6	24.1
	Agriculture	35.1	36.9	36.8	36.8	33.5
	Construction	1.6	2.1	2.7	3.8	3.3
	Transportation	3.2	4.6	3.4	4.7	5.2
	Communications	1.4	1.2	1.2	1.1	1.4
	Trade	16.0	11.7	16.9	18.3	18.4
	Services and other	11.8	12.9	11.2	14.7	13.9

Sources: State Statistical Office, and the National Development Board; and Fund staff estimates.

Table 3.

Mongolia: Gross Domestic Product, 1993-97

(At 1993 constant prices)

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

Table 3.

Mongolia: Gross Domestic Product, 1993-97

(At 1993 constant prices)

		1993	1994	1995	1996	1997
		(In billions of tugriks)
Gross domestic product		166.2	170.0	180.8	185.0	192.5
	Industry	51.3	52.2	61.3	60.0	62.7
	Agriculture	58.3	59.9	65.6	68.7	72.0
	Construction	2.7	3.0	3.3	3.5	3.3
	Transportation	5.4	5.4	5.3	5.7	5.9
	Communication	2.3	2.1	2.2	2.4	2.5
	Trade	26.5	26.5	26.6	27.2	28.3
	Services and other	19.6	20.9	16.6	17.5	17.7
Net factor income from abroad		-11.6	-10.6	-11.0	-10.1	-11.0
Gross national product		154.6	159.4	169.8	175.0	180.1
		(Percent change)
GDP growth		-3.0	2.3	6.3	2.4	4.0
	Industry	-6.4	1.7	17.4	-2.0	4.4
	Agriculture	-2.7	2.7	9.5	4.7	4.8
	Construction	-16.2	10.5	10.6	5.0	-4.9
	Transport	-9.5	0.1	-2.1	7.3	4.2
	Communication	8.6	-7.8	1.2	11.5	5.6
	Trade	5.3	0.0	0.1	2.5	4.1
	Services and other	-2.2	0.1	0.5	5.6	1.3
Net factor income from abroad		160.7	-8.4	3.5	-8.4	9.0
Gross national product		-7.4	3.1	6.5	3.1	2.9

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

View Table

Table 3.

Mongolia: Gross Domestic Product, 1993-97

(At 1993 constant prices)

		1993	1994	1995	1996	1997
		(In billions of tugriks)
Gross domestic product		166.2	170.0	180.8	185.0	192.5
	Industry	51.3	52.2	61.3	60.0	62.7
	Agriculture	58.3	59.9	65.6	68.7	72.0
	Construction	2.7	3.0	3.3	3.5	3.3
	Transportation	5.4	5.4	5.3	5.7	5.9
	Communication	2.3	2.1	2.2	2.4	2.5
	Trade	26.5	26.5	26.6	27.2	28.3
	Services and other	19.6	20.9	16.6	17.5	17.7
Net factor income from abroad		-11.6	-10.6	-11.0	-10.1	-11.0
Gross national product		154.6	159.4	169.8	175.0	180.1
		(Percent change)
GDP growth		-3.0	2.3	6.3	2.4	4.0
	Industry	-6.4	1.7	17.4	-2.0	4.4
	Agriculture	-2.7	2.7	9.5	4.7	4.8
	Construction	-16.2	10.5	10.6	5.0	-4.9
	Transport	-9.5	0.1	-2.1	7.3	4.2
	Communication	8.6	-7.8	1.2	11.5	5.6
	Trade	5.3	0.0	0.1	2.5	4.1
	Services and other	-2.2	0.1	0.5	5.6	1.3
Net factor income from abroad		160.7	-8.4	3.5	-8.4	9.0
Gross national product		-7.4	3.1	6.5	3.1	2.9

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

Table 4.

Mongolia: Output of Major Agricultural Products, 1993-97

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

Table 4.

Mongolia: Output of Major Agricultural Products, 1993-97

		1993	1994	1995	1996	1997
		(In thousands of metric tons, unless otherwise specified)
Meat		445	421	437	537	496
Milk (million tons)		293	313	370	370	419
Butter (metric tons)		712	800	1,200	653	…
Eggs (millions)		10	3.6	3.5	4.9	6.1
Wool		28	26	27	28	26
Cereals		479	331	261	220	240
Potatoes		60	54	52	46	59
Other vegetables		23	23	27	24	31
		(In millions of heads)
Livestock		25.2	26.8	28.6	29.3	31.3
	Sheep	13.8	13.8	13.7	13.5	14.2
	Goats	6.1	7.2	8.5	9.1	10.3
	Cattle	2.7	3.0	3.3	3.5	3.6
	Horses	2.2	2.4	2.7	2.8	2.9
	Camels	0.4	0.4	0.4	0.4	0.4
		(Percent change)
Meat		-13.8	-5.4	3.8	10.3	-7.6
Milk		-4.9	6.8	9.9	19.2	13.2
Butter		-45.9	12.4	50.0	-45.6	…
Eggs		-44.4	-64.0	-2.8	20.0	16.7
Wool		-0.1	-7.1	3.8	3.7	6.4
Cereals		-3.0	-30.9	-21.1	-15.7	9.0
Potatoes		-23.1	-10.0	-3.7	-11.5	19.6
Other vegetables		43.8	0.3	17.4	-11.1	41.7
Memorandum item:
		(In percent of total heads)
Privately owned livestock		89.6	91.5	92.6	93.5	94.4

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

View Table

Table 4.

Mongolia: Output of Major Agricultural Products, 1993-97

		1993	1994	1995	1996	1997
		(In thousands of metric tons, unless otherwise specified)
Meat		445	421	437	537	496
Milk (million tons)		293	313	370	370	419
Butter (metric tons)		712	800	1,200	653	…
Eggs (millions)		10	3.6	3.5	4.9	6.1
Wool		28	26	27	28	26
Cereals		479	331	261	220	240
Potatoes		60	54	52	46	59
Other vegetables		23	23	27	24	31
		(In millions of heads)
Livestock		25.2	26.8	28.6	29.3	31.3
	Sheep	13.8	13.8	13.7	13.5	14.2
	Goats	6.1	7.2	8.5	9.1	10.3
	Cattle	2.7	3.0	3.3	3.5	3.6
	Horses	2.2	2.4	2.7	2.8	2.9
	Camels	0.4	0.4	0.4	0.4	0.4
		(Percent change)
Meat		-13.8	-5.4	3.8	10.3	-7.6
Milk		-4.9	6.8	9.9	19.2	13.2
Butter		-45.9	12.4	50.0	-45.6	…
Eggs		-44.4	-64.0	-2.8	20.0	16.7
Wool		-0.1	-7.1	3.8	3.7	6.4
Cereals		-3.0	-30.9	-21.1	-15.7	9.0
Potatoes		-23.1	-10.0	-3.7	-11.5	19.6
Other vegetables		43.8	0.3	17.4	-11.1	41.7
Memorandum item:
		(In percent of total heads)
Privately owned livestock		89.6	91.5	92.6	93.5	94.4

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

Table 5.

Mongolia: Output of Basic Industrial and Mining Products, 1993-97

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

Table 5.

Mongolia: Output of Basic Industrial and Mining Products, 1993-97

	1993	1994	1995	1996	1997
	(In thousands of metric tons, unless otherwise specified)
Electricity (million kilowatt hours)	2,582	2,715	2,628	2,047	2,078
Coal	5,617	5,158	5,019	5,111	4,924
Fluorspar	537	383	527	565	567
Copper concentrate	334	343	346	351	435
Gold concentrate (kilograms)	1,117	1,789	4,504	6,976	8,451
Bricks (millions)	33	34	22	25	16
Cement	82	86	109	106	112
Lime	51	66	51	55	58
Sawn timber (thousand of cubic meters)	85	50	61	70	37
Scoured wool	4	2	1	1	1
Felt (thousand meters)	241	108	77	96	75
Woolen fabrics (thousand meters)	290	77	71	45	8
Coats (thousands)	1	1	0	0	2
Suits (thousands)	3	3	1	1	1
Leather footwear (thousand pairs)	1,031	407	246	87	42
Leather coats (thousands)	9	35	13	5	0
Sheepskin coats (thousands)	87	57	17	15	3
Meat (excluding pork)	17	11	11	9	8
Sausages	1,245	1,065	639	674	793
Flour	176	127	159	92	68
Bakery goods	46	34	37	30	32
Confectionery	12	11	11	11	13
Milk and dairy products (liters)	13	5	2	2	2
Toilet soap	171	93	263	268	148
Household soap	180	473	290	267	312
Carpets (thousands of square meters)	1,000	682	596	666	644
Processed metal	0	10	16	19	14

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

View Table

Table 5.

Mongolia: Output of Basic Industrial and Mining Products, 1993-97

	1993	1994	1995	1996	1997
	(In thousands of metric tons, unless otherwise specified)
Electricity (million kilowatt hours)	2,582	2,715	2,628	2,047	2,078
Coal	5,617	5,158	5,019	5,111	4,924
Fluorspar	537	383	527	565	567
Copper concentrate	334	343	346	351	435
Gold concentrate (kilograms)	1,117	1,789	4,504	6,976	8,451
Bricks (millions)	33	34	22	25	16
Cement	82	86	109	106	112
Lime	51	66	51	55	58
Sawn timber (thousand of cubic meters)	85	50	61	70	37
Scoured wool	4	2	1	1	1
Felt (thousand meters)	241	108	77	96	75
Woolen fabrics (thousand meters)	290	77	71	45	8
Coats (thousands)	1	1	0	0	2
Suits (thousands)	3	3	1	1	1
Leather footwear (thousand pairs)	1,031	407	246	87	42
Leather coats (thousands)	9	35	13	5	0
Sheepskin coats (thousands)	87	57	17	15	3
Meat (excluding pork)	17	11	11	9	8
Sausages	1,245	1,065	639	674	793
Flour	176	127	159	92	68
Bakery goods	46	34	37	30	32
Confectionery	12	11	11	11	13
Milk and dairy products (liters)	13	5	2	2	2
Toilet soap	171	93	263	268	148
Household soap	180	473	290	267	312
Carpets (thousands of square meters)	1,000	682	596	666	644
Processed metal	0	10	16	19	14

Sources: State Statistical Office, and the Ministry of Finance; and Fund staff estimates.

Table 6.

Mongolia: Composition of Gross Industrial Output, 1994-97

(In percent of total)

Sources: State Statistical Office; and Fund staff estimates.

^1/Includes electric and thermal energy.

Table 6.

Mongolia: Composition of Gross Industrial Output, 1994-97

(In percent of total)

		1994	1995	1996	1997
Gross output		100	100	100	100
	Food	13.2	14.3	18.9	13.0
	Leather and shoes	1.4	0.9	0.7	0.3
	Textiles	7.0	10.5	9.4	5.0
	Clothing	3.0	2.3	1.7	0.7
	Energy 1/	14.5	13.4	13.0	17.3
	Coal	5.4	4.3	5.3	5.5
	Mining of metal ores	38.1	44.4	38.8	47.0
	Non-metalic products	2.9	2.4	2.4	1.8
	Wood processing	1.2	0.8	0.7	0.5
	Chemicals	0.5	0.5	0.7	0.5
	Printing	0.3	0.4	0.9	0.4
	Furniture	7.8	1.5	0.5	1.2
	Other	4.7	4.3	4.7	6.8

Sources: State Statistical Office; and Fund staff estimates.

^1/Includes electric and thermal energy.

View Table

Table 6.

Mongolia: Composition of Gross Industrial Output, 1994-97

(In percent of total)

		1994	1995	1996	1997
Gross output		100	100	100	100
	Food	13.2	14.3	18.9	13.0
	Leather and shoes	1.4	0.9	0.7	0.3
	Textiles	7.0	10.5	9.4	5.0
	Clothing	3.0	2.3	1.7	0.7
	Energy 1/	14.5	13.4	13.0	17.3
	Coal	5.4	4.3	5.3	5.5
	Mining of metal ores	38.1	44.4	38.8	47.0
	Non-metalic products	2.9	2.4	2.4	1.8
	Wood processing	1.2	0.8	0.7	0.5
	Chemicals	0.5	0.5	0.7	0.5
	Printing	0.3	0.4	0.9	0.4
	Furniture	7.8	1.5	0.5	1.2
	Other	4.7	4.3	4.7	6.8

Sources: State Statistical Office; and Fund staff estimates.

^1/Includes electric and thermal energy.

Table 7.

Mongolia: Coal Mining Sector, 1993-97

Source: State Statistical Office; and Fund staff estimates.

^1/Consumption by thermal power stations.

Table 7.

Mongolia: Coal Mining Sector, 1993-97

			1993	1994	1995	1996	1997
			(In thousands of metric tons)
Production			5,617	5,158	5,019	5,110	4,924
Consumption			5,664	5,167	4,994	5,107	4,935
	Intermediate 1/		4,031	3,771	3,883	3,925	3,673
	Final consumption		1,633	1,396	1,111	1,182	1,262
		Industry and construction	711	592	441	523	756
		Agriculture	58	38	28	15	7
		Communal housing and public services	565	561	212	158	282
		Other	299	205	430	486	217
Memorandum item:
Stock, end of year			91	82	107	99	87

Source: State Statistical Office; and Fund staff estimates.

^1/Consumption by thermal power stations.

View Table

Table 7.

Mongolia: Coal Mining Sector, 1993-97

			1993	1994	1995	1996	1997
			(In thousands of metric tons)
Production			5,617	5,158	5,019	5,110	4,924
Consumption			5,664	5,167	4,994	5,107	4,935
	Intermediate 1/		4,031	3,771	3,883	3,925	3,673
	Final consumption		1,633	1,396	1,111	1,182	1,262
		Industry and construction	711	592	441	523	756
		Agriculture	58	38	28	15	7
		Communal housing and public services	565	561	212	158	282
		Other	299	205	430	486	217
Memorandum item:
Stock, end of year			91	82	107	99	87

Source: State Statistical Office; and Fund staff estimates.

^1/Consumption by thermal power stations.

Table 8.

Mongolia: Petroleum Balances, 1993-97

Sources: Neft Import Concern; and Fund staff estimates.

^1/Fuel for electricity generation and lubricants.

Table 8.

Mongolia: Petroleum Balances, 1993-97

		1993	1994	1995	1996	1997
		(In thousands of metric tons)
Opening Stocks		100.5	185.3	141.1	96.9	65.6
	Gasoline - octane 76	54.8	51.1	36.9	30.6	21.0
	Gasoline - octane 93	0.8	2.3	0.5	0.9	1.1
	Airplane fuel	1.9	10.0	6.0	3.1	4.3
	Diesel	24.2	95.4	80.1	52.0	32.8
	Other 1/	18.8	26.5	17.6	10.3	6.4
Imports		481.4	264.1	228.6	282.5	185.9
	Gasoline - octane 76	153.1	111.0	125.5	168.3	110.5
	Gasoline - octane 93	5.2	3.6	6.0	11.5	17.0
	Airplane fuel	20.9	16.6	13.9	18.8	7.7
	Diesel	236.4	95.2	65.4	78.4	43.0
	Other 1/	65.8	37.7	17.8	5.4	7.7
Domestic production		…	214.0	254.6	24.1	116.3
Total supply		581.9	663.4	624.3	403.5	307.9
	Consumption	396.6	332.3	320.1	313.3	250.5
	Losses	…	190.0	207.3	35.1	1.1
Closing stocks		185.3	141.1	96.9	55.1	65.1
	Gasoline - octane 76	51.1	36.9	30.6	…	17.4
	Gasoline - octane 93	2.3	0.5	0.9	…	1.7
	Airplane fuel	10.0	6.0	3.1	…	3.4
	Diesel	95.4	80.1	52.0	…	36.3
	Other 1/	26.5	17.6	10.3	…	6.3

Sources: Neft Import Concern; and Fund staff estimates.

^1/Fuel for electricity generation and lubricants.

View Table

Table 8.

Mongolia: Petroleum Balances, 1993-97

		1993	1994	1995	1996	1997
		(In thousands of metric tons)
Opening Stocks		100.5	185.3	141.1	96.9	65.6
	Gasoline - octane 76	54.8	51.1	36.9	30.6	21.0
	Gasoline - octane 93	0.8	2.3	0.5	0.9	1.1
	Airplane fuel	1.9	10.0	6.0	3.1	4.3
	Diesel	24.2	95.4	80.1	52.0	32.8
	Other 1/	18.8	26.5	17.6	10.3	6.4
Imports		481.4	264.1	228.6	282.5	185.9
	Gasoline - octane 76	153.1	111.0	125.5	168.3	110.5
	Gasoline - octane 93	5.2	3.6	6.0	11.5	17.0
	Airplane fuel	20.9	16.6	13.9	18.8	7.7
	Diesel	236.4	95.2	65.4	78.4	43.0
	Other 1/	65.8	37.7	17.8	5.4	7.7
Domestic production		…	214.0	254.6	24.1	116.3
Total supply		581.9	663.4	624.3	403.5	307.9
	Consumption	396.6	332.3	320.1	313.3	250.5
	Losses	…	190.0	207.3	35.1	1.1
Closing stocks		185.3	141.1	96.9	55.1	65.1
	Gasoline - octane 76	51.1	36.9	30.6	…	17.4
	Gasoline - octane 93	2.3	0.5	0.9	…	1.7
	Airplane fuel	10.0	6.0	3.1	…	3.4
	Diesel	95.4	80.1	52.0	…	36.3
	Other 1/	26.5	17.6	10.3	…	6.3

Sources: Neft Import Concern; and Fund staff estimates.

^1/Fuel for electricity generation and lubricants.

Table 9.

Mongolia: Electricity Sector, 1993-97

Sources: State Statistical Office; and Fund staff estimates.

Table 9.

Mongolia: Electricity Sector, 1993-97

			1993	1994	1995	1996	1997
			(In millions of kilowatt hours)
Supply			2,779	2,930	3,009	2,997	3,096
	Domestic		2,582	2,715	2,628	2,614	2,720
	Imports		197	215	381	383	376
Utilization, total			2,779	2,930	3,009	2,997	3,096
	Industry and construction		1,177	1,189	1,105	1,226	1,264
	Transport and communications		88	59	69	62	78
	Agriculture		24	49	59	60	33
	Commercial housing and public services		310	430	518	380	414
	Other sectors		407	134	158	208	150
	Loss in transmission and distribution		291	472	502	482	507
	Power stations’ own use		482	597	598	579	608
			(Tugriks per kilowatt hour, annual average)
Tariff
	Industry		12.5	13.0	17.5	34.0	37.0
	Agriculture		10.0	13.0	17.5	34.0	37.0
	Households		10.0	10.0	16.6	26.0	32.0
			(Percent change)
Supply and utilization			-8.3	5.4	2.6	-0.4	3.3
Domestic			-11.8	5.2	-3.2	-0.5	4.1
Imports			93.1	9.1	77.2	0.5	-1.8
Industry and construction			-17.7	1.0	-7.1	10.9	3.1
Transport and communications			-12.9	-33.0	16.9	-10.1	25.8
Agriculture			-45.5	4.2	20.4	1.7	-45.0
Commercial housing and public services			…	38.7	20.5	-26.6	8.9
Other sectors			31.7	-67.1	17.9	31.6	-27.9
Loss in transmission and power stations’ own use in total supply (in percent)			27.8	36.5	36.6	35.4	36.0

Sources: State Statistical Office; and Fund staff estimates.

View Table

Table 9.

Mongolia: Electricity Sector, 1993-97

			1993	1994	1995	1996	1997
			(In millions of kilowatt hours)
Supply			2,779	2,930	3,009	2,997	3,096
	Domestic		2,582	2,715	2,628	2,614	2,720
	Imports		197	215	381	383	376
Utilization, total			2,779	2,930	3,009	2,997	3,096
	Industry and construction		1,177	1,189	1,105	1,226	1,264
	Transport and communications		88	59	69	62	78
	Agriculture		24	49	59	60	33
	Commercial housing and public services		310	430	518	380	414
	Other sectors		407	134	158	208	150
	Loss in transmission and distribution		291	472	502	482	507
	Power stations’ own use		482	597	598	579	608
			(Tugriks per kilowatt hour, annual average)
Tariff
	Industry		12.5	13.0	17.5	34.0	37.0
	Agriculture		10.0	13.0	17.5	34.0	37.0
	Households		10.0	10.0	16.6	26.0	32.0
			(Percent change)
Supply and utilization			-8.3	5.4	2.6	-0.4	3.3
Domestic			-11.8	5.2	-3.2	-0.5	4.1
Imports			93.1	9.1	77.2	0.5	-1.8
Industry and construction			-17.7	1.0	-7.1	10.9	3.1
Transport and communications			-12.9	-33.0	16.9	-10.1	25.8
Agriculture			-45.5	4.2	20.4	1.7	-45.0
Commercial housing and public services			…	38.7	20.5	-26.6	8.9
Other sectors			31.7	-67.1	17.9	31.6	-27.9
Loss in transmission and power stations’ own use in total supply (in percent)			27.8	36.5	36.6	35.4	36.0

Sources: State Statistical Office; and Fund staff estimates.

Table 10.

Mongolia: Employment by Sector, 1993-97

(Number of employees, in thousands at end of year)

Source: State Statistical Office.

Table 10.

Mongolia: Employment by Sector, 1993-97

(Number of employees, in thousands at end of year)

		1993	1994	1995	1996	1997
Total employment		772.8	786.5	794.7	791.9	779.2
	Agriculture and forestry	299.6	338.9	354.2	358.8	373.0
	Industry	123.9	99.4	108.1	104.7	98.8
	Transport and communications	46.0	31.4	31.6	31.6	30.0
	Construction	33.0	27.2	29.5	29.7	27.1
	Education	63.8	51.9	48.5	46.0	42.7
	Health	42.0	45.9	39.1	37.1	34.5
	Science, research, and development	5.4	7.4	8.3	3.6	3.5
	Other	159.0	157.7	148.4	158.8	146.4
	Foreign employees	…	26.7	27.0	22.2	23.2
Memorandum items:
	Labor force	1,084.0	1,094.9	1,111.3	1,137.2	1,162.3
	Unemployed	71.9	74.9	45.1	55.4	63.7

Source: State Statistical Office.

View Table

Table 10.

Mongolia: Employment by Sector, 1993-97

(Number of employees, in thousands at end of year)

		1993	1994	1995	1996	1997
Total employment		772.8	786.5	794.7	791.9	779.2
	Agriculture and forestry	299.6	338.9	354.2	358.8	373.0
	Industry	123.9	99.4	108.1	104.7	98.8
	Transport and communications	46.0	31.4	31.6	31.6	30.0
	Construction	33.0	27.2	29.5	29.7	27.1
	Education	63.8	51.9	48.5	46.0	42.7
	Health	42.0	45.9	39.1	37.1	34.5
	Science, research, and development	5.4	7.4	8.3	3.6	3.5
	Other	159.0	157.7	148.4	158.8	146.4
	Foreign employees	…	26.7	27.0	22.2	23.2
Memorandum items:
	Labor force	1,084.0	1,094.9	1,111.3	1,137.2	1,162.3
	Unemployed	71.9	74.9	45.1	55.4	63.7

Source: State Statistical Office.