Statement by IMF Staff Mission to MongoliaPress Release No. 09/282
August 13, 2009
An International Monetary Fund (IMF) mission, led by Steven Barnett, held discussions with the Mongolian authorities during August 3-13, 2009 as part of the second review of the country’s Stand-By Arrangement (SBA). The SDR 153.3 million (about US$229.2 million) SBA was approved by the Executive Board of the IMF on April 1, 2009 (see Press Release No. 09/110) and the first review was completed on June 23, 2009 (see Press Release No. 09/233). At the conclusion of the visit, Mr. Barnett made the following statement:
“Since the SBA was put in place in April, the government’s policy strategy has put Mongolia on a path toward achieving sustainable and equitable growth accompanied by low inflation. However, the near term recovery now appears somewhat weaker than previously foreseen. As a result, the authorities have recalibrated their economic program to modestly increase the budget deficit targets for this year and next to provide support for the economy, allow automatic stabilizers to operate, and to smooth the path of fiscal adjustment. At the same time, the government’s plan to adopt a Fiscal Responsibility Law will help secure a lasting improvement in public finances. In addition, the planned reform of social transfers will yield fiscal saving through efficiency gains while safeguarding the poor through improved targeting.
“The Bank of Mongolia continues to be fully committed to a flexible, market-determined exchange rate and will focus their monetary and foreign exchange policies toward lowering inflation and achieving their targets for a continued build-up in international reserves. The Bank of Mongolia’s plans to switch to a neutral bias for monetary policy is, therefore, appropriate in the current circumstances given the significant reductions in interest rates that are already feeding through to economic growth.
“As a result of the authorities’ strong policy implementation, the end-June targets underlying the authorities’ program have been fully met. The IMF mission today reached a staff-level agreement with the Mongolian authorities on the conclusion of the second review under the SBA. The Executive Board of the IMF is expected to consider the second review of the arrangement in September. The completion of this review would enable Mongolia to draw SDR 15.33 million (about US$24 million).
“The authorities’ commitment to steadfast implementation of a strong policy package has been critical to their success so far. We are encouraged that this same commitment will help meet the ongoing challenges and risks, especially in improving public finances and strengthening the financial system. With continued prudent macroeconomic management, the Mongolian economy will be able to successfully navigate the current global downturn toward a path of sustainable growth, falling poverty, and low inflation.”