The DSA has been produced jointly by the staffs of the International Monetary Fund and the World Bank, in consultation with the Asian Development Bank (AsDB) and the Mongolian authorities (Debt Management Department and Aid Coordination Department of the Ministry of Finance). The fiscal year for Mongolia is January-December.
The DSAs presented in this document are based on the common standard low-income countries (LIC) DSA framework. Under the Country Policy and Institutional Assessment (CPIA), Mongolia is rated as a medium performer with an average rating of 3.3 between 2006-08, and the DSA uses the indicative threshold indicators for countries in this category. See “Debt Sustainability in Low-Income Countries: Proposal for an Operational Framework and Policy Implications” (http://www.imf.org/external/np/pdr/sustain/2004/020304.htm and IDA/SECM2004/0035, 2/3/04) and “Debt Sustainability in Low-Income Countries: Further Considerations on an Operational Framework, Policy Implications” (http://www.imf.org/external/np/pdr/sustain/2004/091004.htm and IDA/SECM2004/0629, 9/10/04) and “Applying the Debt Sustainability Framework for Low-Income Countries Post Debt Relief,” (8/11/06).
See “Mongolia: Request for Stand-By Arrangement,” April 2009 (IMF Country Report No. 09/130), and, IDA/R2009-0175/1 (World Bank).
The Tavan Tolgoi deposit, close to the border with China, if developed, would make Mongolia a major world coal producer. However, the Tavan Tolgoi project has not been incorporated in the underlying baseline macroeconomic framework due to the uncertainties about its size and timeframe for development. Once Tavan Tolgoi materializes, it is projected to have an important short-term impact via increased equipment imports, FDI, and loan inflows, and a medium- to long-term beneficial impact on the current account, similar to Oyu Tolgoi.
However, roughly one-third of total domestic debt in 2009 is accounted for by short-term debt issued for budgetary financing.
The Oyu Tolgoi investment share loan will be disbursed and repaid based on cash flow projections, which are subject to changes in commodity price assumptions.
Conducted by the World Bank in June 2008.
In 2009, the Debt Management Division of the Ministry of Finance (MoF) revised its previous debt management strategy, developing it as a medium-term strategy for 2010–12. This medium-term framework creates the opportunity for the government and MoF to improve future risk management.
The fiscal stability law was submitted to parliament on January 12, 2010.
Mongolia’s 2008 GNI per capita is already above the threshold to be potentially eligible for IBRD loans.
The Staff Guidance Note on the Application of the Joint Fund-Bank Debt Sustainability Framework for Low-Income Countries defines a “low risk of debt distress” when: “All debt indicators are well below relevant country-specific debt-burden thresholds. Stress testing and country-specific alternative scenarios do not result in indicators significantly breaching thresholds. In case where only one indicator is above its benchmark, judgment is needed to determine whether there is a debt sustainability problem or some other issues.
The debt burden thresholds for medium policy performer are 150, 40, and 250 for the PV of debt in percent of exports, GDP, and revenue, respectively. Under the same medium policy classification, thresholds for debt service are 20 percent and 30 percent of exports and revenue, respectively.
The public DSA is conservatively undertaken on a gross debt rather than on a net debt basis.