Joint Statement by Mongolia’s Minister of Finance, Governor of Mongolbank, and IMF staff Mission to MongoliaPress Release No. 10/387
October 15, 2010
On the occasion of the successful completion of Mongolia's Stand-by Arrangement (SBA) with the International Monetary Fund (IMF), H.E Bayartsogt Sangajav, Minister of Finance, H.E Purevdorj Lkhanaajav, Governor of Mongolbank and Mr. Steven Barnett, the IMF’s mission chief for Mongolia, made the following joint statement:
"In the wake of the global financial crisis, the Government of Mongolia requested an SBA with the IMF in support of its efforts to overcome the economic and financial crisis in Mongolia. The Executive Board of the IMF approved an 18-month SBA on April 1, 2009 (see Press Release No. 09/110).
"The goal of the IMF-supported program was to put the Mongolian economy on a path of strong, sustainable, and equitable growth with low inflation. The program had four main components: (i) allowing the exchange rate to adjust flexibly to market conditions while rebuilding international reserves; (ii) restoring health to public finances; (iii) bolstering confidence in the banking system; and (iv) protecting the poor during the period of economic adjustment.
"The SBA was approved for an amount equivalent to SDR 153.3 million (about US$242 million). In 2009, 107.3 million SDR (about US$170) were disbursed and 15.5 million SDR (about US$24) were disbursed in 2010. On September 8, 2010, the Executive Board of the IMF approved the final two disbursements of SDR 30.66 million (about US$48 million).
"In addition, the World Bank, Asian Development Bank, Japan International Cooperation Agency, and other bilateral partners committed significant financial and policy support to Mongolia.
"The Government of Mongolia’s determined policy implementation within the framework of the IMF-supported SBA has led to a remarkable economic turnaround with growth expected to exceed 7 percent this year. Under the program, macroeconomic performance improved significantly:
- International reserves reached an all time high;
- Confidence in the local currency was restored and the foreign exchange market stabilized;
- Inflation was significantly reduced;
- Budget deficit was lowered at the same time as social spending was increased;
- Official external arrears were all resolved.
"The Government of Mongolia has also made significant structural reforms under the SBA, including adoption of a Fiscal Stability Law, revised Central Bank Law, and revised Banking Law. These reforms set a solid foundation for securing sustained growth in the years ahead.
"In addition, during the implementation of the IMF-supported program spending on the poor was protected and a revised social welfare reform law was submitted to Parliament. This law would introduce a targeted poverty benefit, which would significantly strengthen the social safety net.
"The Government of Mongolia and the IMF have a history of fruitful cooperation. Since joining the IMF in 1991, Mongolia has had several IMF-supported programs to facilitate structural reforms that helped the transition to a market economy, to promote economic stability, and to reduce poverty. These included an SBA (1991-1992), Enhanced Structural Adjustment Facility I (ESAF) (1993-1996), ESAF II (1997-2001), and Poverty Reduction and Growth Facility (2001-2005). These programs, however, all eventually went off-track; the recently concluded SBA marks the first time that Mongolia has successfully completed an IMF-supported program.
"The Mongolian economy is poised to enter a period of rapid economic growth with the development of its vast mineral resources. Managing the pending boom, however, will require continued prudent economic management. This includes consolidating the recent gains in fiscal policy by strictly adhering to the Fiscal Stability Law recently adopted, continuing to gear monetary policy towards fighting inflation supported by the flexible exchange rate regime, pressing ahead with reforms to strengthen the banking system, and proceeding with social welfare reform. These policies will help ensure that Mongolia’s mineral wealth leads to strong and sustainable growth that spreads prosperity to all of Mongolia’s citizens."