Press Release: IMF Executive Board Completes Fourth Review Under Stand-By Arrangement with Mongolia and Approves US$23.4 Million Disbursement
March 19, 2010Press Release No. 10/99
March 19, 2010
The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Mongolia's economic performance under a program supported by an 18-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 15.33 million (about US$23.4 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 122.64 million (about US$187.4 million). The Board also approved the request for the modification of performance criteria to reflect the revised macroeconomic data and framework.
The SBA was approved on April 1, 2009 (see Press Release No. 09/110) for an amount equivalent to SDR 153.3 million (about US$234.3 million) or 300 percent of Mongolia's quota.
Following the Executive Board's discussion on Mongolia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:
“Mongolia’s macroeconomic outlook has improved markedly. Growth is expected to rebound sharply boosted by investment in a large mining project and the authorities’ strong policy implementation. At the same time, inflation has recently picked up in part because of higher food prices due to the severe winter.
“The authorities have made substantial progress in strengthening public finances. Expenditure restraint and an increase in revenues emanating from higher world copper prices have resulted in an improvement in the structural balance by 3½ percentage points, about 1 percentage point more than anticipated. This large fiscal adjustment was achieved while fully protecting social welfare expenditures.
“Passage of a comprehensive social transfer reform law with a targeted poverty benefit will be an important step in fighting poverty and increasing fiscal flexibility. The planned passage of a fiscal responsibility law will be critical for institutionalizing fiscal discipline and avoiding the boom-bust policies of the past.
“The flexible exchange rate regime is working well, helping to contain inflationary pressures and safeguarding international reserves. The current neutral stance of monetary policy is appropriate but will need to be reviewed if inflationary pressures persist. Maintaining low and stable inflation will be a prerequisite to continued improvement in poverty indicators and high and sustained growth.
“A comprehensive bank restructuring plan is needed to ensure that banks have strong balance sheets that can support sustained growth in lending to the private sector. Moreover, a further strengthening of bank supervision will help support the bank restructuring effort and prevent the re-emergence of problems in the banking system,” Mr. Shinohara stated.