Mongolia

The economy is recovering better than anticipated due to buoyant external demand and a return of confidence. The situation facing Mongolia has changed considerably. One year ago, public debt was on track to reach 100 percent of GDP, yields on government debt were nearly 20 percent, reserves were 2 months of imports and the exchange rate had depreciated over 20 percent. Since then, a pick-up in external demand for coal and a rise in commodity prices have triggered a large recovery in activity. Steady implementation of the second phase of the Oyu Tolgoi copper mine has driven a recovery in investment as well as related services and manufacturing. The fiscal deficit fell sharply due to a substantial pick up in revenues and strict expenditure control, helping reduce public debt to roughly 85 percent of GDP. Implementation of the government’s Economic Recovery Program with large support from key donors and the IMF helped restore confidence: external bonds maturing in 2018 have been rolled over at much lower interest rates than before, private and official inflows have boosted reserves by $1.3 billion more than targeted, and the authorities face no external private maturities until 2021.