News Brief: IMF Completes Mongolia Review and Approves US$8.1 Million Credit
January 24, 2000
The Executive Board of the International Monetary Fund (IMF) today completed the first review of the second annual arrangement under the Poverty Reduction and Growth Facility1 for Mongolia. As a result, Mongolia will be able to draw up to the equivalent of SDR 5.9 million (about US$8.1 million) from the IMF.
In commenting on the Executive Board's discussion of the review, Stanley Fischer, First Deputy Managing Director of the IMF, made the following statement:
"The Executive Board has concluded the first review of Mongolia's second annual PRGF arrangement that was approved in mid-1999. Mongolia has taken significant steps under its Fund-supported program to complete the adjustment to the large external terms of trade shock of 1998, to restore macroeconomic stability, and to reinvigorate the structural reform process. As a result of these efforts, inflation has been contained to near single digits and real GDP growth has remained robust. In particular, measures have been taken to strengthen the banking system, including through decisive action to deal with insolvent banks, and public sector administrative reforms have been initiated.
"Further fiscal consolidation and a prudent monetary policy are envisaged under the program for 2000. These policies should help to lock in the recent inflation gains and move the government budget closer to a sustainable path.
"The Mongolian authorities are encouraged to persevere with the implementation of their ambitious structural reform agenda, especially in the areas of banking sector reform, the extension of the privatization program to large state-owned enterprises, and further measures to improve the efficiency and transparency of government operations. These reforms would set the stage for continued high quality, private sector-led growth.
"The challenge now facing Mongolia is to ensure that the momentum of the reform program is maintained in the run-up to parliamentary elections scheduled for mid-2000. The authorities are strongly encouraged to continue their efforts to maintain broad-based support for the reform process to facilitate the implementation of structural reforms on a timely basis," Fischer said.
1On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. At this time for Mongolia, pending the completion of a PRSP, a preliminary framework has been set out in a policy framework paper (PFP), and preparations for a participatory process are underway. It is understood that all policy undertakings in the PFP during the current arrangement are subject to reexamination and modification in line with the strategy that is to be elaborated in an interim PRSP. Once completed and broadly endorsed by the Executive Boards of the IMF and World Bank, the interim PRSP will provide the policy framework for Mongolia's next PRGF arrangement.
PRGF loans carry an interest rate of 0.5% a year, and are repayable over 10 years with a 5½ year grace period on principal payments.