Front Matter

Front Matter Page

© 2009 International Monetary Fund

April 2009

IMF Country Report No. 09/130

Mongolia: Request for Stand-By Arrangement—Staff Report; Staff Supplements; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Mongolia

In the context of request for a Stand-By Arrangement, the following documents have been released and are included in this package:

  • The staff report for the Request for Stand-By Arrangement, prepared by a staff team of the IMF, following discussions that ended on March 7, 2009, with the officials of Mongolia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on March 18, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • A staff supplement of March 18, 2009, on the joint IMF/World Bank debt sustainability analysis.

  • A staff supplement of March 19, 2009, on the assessment of the risks to the Fund and the Fund’s liquidity position.

  • A staff supplement of March 30, 2009, updating information on recent developments.

  • A Press Release summarizing the views of the Executive Board as expressed during its April 1, 2009 discussion of the staff report that completed the review.

  • A statement by the Executive Director for Mongolia.

The documents listed below have been or will be separately released.

  • Letter of Intent sent to the IMF by the authorities of Mongolia*

  • Memorandum of Economic Policies by the authorities of Mongolia*

  • Technical Memorandum of Understanding*

  • *Also included in Staff Report

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

700 19th Street, N.W. • Washington, D.C. 20431

Telephone: (202) 623-7430 • Telefax: (202) 623-7201

E-mail: publications@imf.org • Internet: http://www.imf.org

International Monetary Fund

Washington, D.C.

Front Matter Page

INTERNATIONAL MONETARY FUND

MONGOLIA

Request for Stand-By Arrangement

Prepared by the Asia and Pacific Department in Consultation with Other Departments

Approved by Nigel Chalk and Anthony R. Boote

March 18, 2009

Motivation: The global financial crisis has had a serious impact on the price of Mongolia’s key mineral exports, feeding through to the fiscal accounts, the real economy, the balance of payments and the exchange rate. With one-third of the population in poverty, a disorderly adjustment to this external shock would have devastating social consequences, unwinding the gains that have been made in recent years. The program’s main goal is to avoid such an outturn by stabilizing the macroeconomic situation and building confidence.

Program content: The proposed Stand-By Arrangement (of 300 percent of quota or SDR153.3 million) would aim to smooth adjustment to the catastrophic terms of trade shock, restore health to the country’s fiscal finances, allow for exchange rate flexibility in line with market conditions, address weaknesses in the banking system, and protect the most vulnerable from the burden of the needed adjustment. In addition, the Fund program would outline a clear macroeconomic framework to provide the basis for the authorities to approach the broader international community for financial support. The centerpiece of the program will be a substantial fiscal adjustment. Monetary policy will be calibrated to lower inflation while maintaining a flexible exchange rate and safeguarding international reserves. Financial sector policies have been designed to rebuild confidence in the banking system and improve the framework for supervision and regulation. Finally, the government’s program has a concrete timetable to better target the system of social transfers in order to provide greater support to Mongolia’s poorest citizens.

Discussions: A staff team visited Ulaanbaatar, January 21–February 5 and March 1–7, 2009 consisting of M. Karasulu (Head), T. Feridhanusetyawan, K. Guo (APD), J. J. Hallaert (FAD), J. Hartley (SPR), and B. Jang (Resident Representative). In March, the team overlapped with a mission from MCM on foreign currency operations. Mr. Lee (OED) and I. Song (MCM) joined the January mission, and N. Chalk (APD) participated in discussions in March. The team held discussions with the Prime Minister, Speaker of Parliament, heads of various parliamentary committees, the Finance Minister, the Governor of the Bank of Mongolia, commercial banks, mining companies, and other officials.

Contents

  • I. Context

  • II. Policies

  • III. Program Discussions

  • IV. Program Modalities

  • V. Risks

  • VI. Staff Appraisal

  • Figures

  • 1. Macroeconomic Trends

  • 2. Policy Developments

  • 3. Financial Developments

  • Tables

  • 1. Selected Economic and Financial Indicators, 2006–10

  • 2. Summary Operations of the General Government, 2006–10

  • 3. Monetary Aggregates, 2006–10

  • 4. Balance of Payments, 2006–10

  • 5. Medium-Term Macroeconomic Framework, 2006–14

  • 6. External Financing Requirements and Sources, 2009–11

  • 7. Indicators of Capacity to Repay to the Fund, 2008–15

  • 8. Review and Disbursements Under the Proposed 18-Month Stand-By Arrangement

  • 9. Indicators for Vulnerability and Financial Soundness, 2005–08

  • Attachment

  • 1. Letter of Intent, Memorandum of Economic Policies, and Technical Memorandum of Understanding

Front Matter Page

INTERNATIONAL MONETARY FUND

INTERNATIONAL DEVELOPMENT ASSOCIATION

MONGOLIA

Joint IMF/World Bank Debt Sustainability Analysis Under the Debt Sustainability Framework for Low-Income Countries1

Approved by Nigel Chalk and Anthony Boote (IMF) and Carlos Braga and Vikram Nehru (IDA)

March 18, 2009

Front Matter Page

INTERNATIONAL MONETARY FUND

Mongolia—Assessment of the Risks to the Fund and the Fund’s Liquidity Position

Prepared by the Finance and Strategy, Policy, and Review Departments

(In consultation with other Departments)

Approved by Andrew Tweedie and Anthony Boote

March 19, 2009

Front Matter Page

INTERNATIONAL MONETARY FUND

MONGOLIA

Request for Stand-By Arrangement—Supplementary Information

Prepared by the Asia and Pacific Department in Consultation with Other Departments

Approved by Nigel Chalk and Anthony R. Boote

March 30, 2009

Front Matter Page

Press Release No. 09/110

FOR IMMEDIATE RELEASE

April 1, 2009

International Monetary Fund

Washington, D.C. 20431 USA

Telephone 202-623-7100

Fax 202-623-6772

www.imf.org