IMF Announces Staff Level Agreement with Mongolia on US$224 Million Loan
March 6, 2009Press Release No. 09/64
March 6, 2009
Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), issued the following statement on Mongolia today:
"An IMF staff mission and the Mongolian authorities today reached agreement, subject to approval by the IMF Executive Board, on an economic program supported by Fund resources (of US$224 million) under an 18-month Stand-By Arrangement. The Executive Board is expected to discuss the program shortly after a meeting of international donors, which will take place next week in Ulaanbaatar.
"Mongolia has been hard hit by the global financial crisis through a sudden and precipitous drop in the price of the country’s main export commodities, notably copper. This has had a negative impact on both the fiscal and external accounts. The government’s mineral revenue income has fallen, export proceeds are expected to decline markedly this year, and foreign direct investment flows have been cut back because of the difficult global economic situation. Growth, as elsewhere around the world, looks set to decelerate sharply.
"With more than one-third of the population living below the poverty line, it is imperative that steps are urgently taken to address the economic downturn and protect Mongolia’s most vulnerable citizens. In collaboration with an IMF mission currently in Ulaanbaatar, the government has put together a strong and ambitious macroeconomic program with two key objectives: (i) to restore economic stability through fiscal and monetary policies; and (ii) to protect the poor and preserve social stability through improving the social safety net.
"The government’s program is built on four main planks:
1. The centerpiece is a budget adjustment for this year and next that will put in order Mongolia’s fiscal finances and restore the deficit to a sustainable range. The government also intends to strengthen the institutional framework for fiscal policy to prevent the repeat of the boom and bust cycles of recent years and ensure the long-term sustainability of its policies.
2. This fiscal program will be supported by a proactive monetary policy that will seek to safeguard international reserves.
3. Improving the social safety net is a key element of the government’s program to ensure that the poorest segments of the society are protected adequately. To this end the government will begin a comprehensive overhaul of its social transfer programs, improving targeting and raising the level of social support to the very poor.
4. The government will further strengthen the banking system by improving the current framework for deposit guarantees and enhancing bank supervision.
"The authorities’ strong commitment to macroeconomic stability and a return to robust and equitable growth justifies the proposed exceptional access to IMF resources (of 300 percent of quota) and merits the backing of the broader international community. To this end, I am encouraged that the government will be organizing a donors conference in Ulaanbaatar in the coming days and I appeal to donors to support Mongolia in their impressive efforts.”