## Macroeconomic Framework TA: Scoping Mission (May 24–June 2, 2023)

## Source details

**Canonical URL:** [Macroeconomic Framework TA: Scoping Mission (May 24–June 2, 2023)](https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024106-print-pdf.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/tar/2024/english/tarea2024106-print-pdf.pdf.md)
- [Structured JSON version](/-/media/files/publications/tar/2024/english/tarea2024106-print-pdf.pdf.json)

---

### Mission overview and purpose
- Scoping mission visited Ulaanbaatar, Mongolia from May 24 to June 2, 2023, to assess macroeconomic forecasting practice at the Financial and Fiscal Research Department (FFRD) of the Ministry of Finance (MOF) of Mongolia.
- Mission team: Mrs. Boriana Yontcheva (mission chief), Simone Maciel Cuiabano, Mehdi El-Herradi (all ICD), and Martin Fukac (CCAMTAC).
- Key counterparts: Mr. Ganbat Jigjid (Secretary of State, MOF); Mrs. Zolboo Ganbold (Director General, FFRD) and FFRD staff; Macroeconomic Policy Division at the Ministry of Economy and Development (MED) — Mr. Enkh-Amgalan Lkhagvabayar, Mr. Munkh-Erdene Batkhishig, and Ms. Uurtsaikh E.
- Purpose: review MOF’s current macroeconomic modeling and forecasting tools and practices; discuss data quality and availability; evaluate staffing and institutional settings. Diagnosis based on information available in May 2023.

### Key findings and needs
- Institutional and analytical gaps:
  - No comprehensive macroeconomic framework in place at FFRD to ensure economic or accounting consistency between four sectors of the economy.
  - FFRD does not actively form the national macroeconomic outlook (task under MED) but incorporates MED and BPPD inputs.
  - MED’s forecasting tool obtains GDP projections mainly from supply-side data with no consistency check to the demand side and has no projections on exchange rate and interest rate.
- Capacity and resources:
  - FFRD has 11 staff, including the Director General and long-term junior and senior experts from the World Bank.
  - Core team of 10 economists committed to the project; core team leader: Mr. Anar Zorigtbaatar; project overseen by Mrs. Zolboo Ganbold.
  - All ten core team members took ICD’s online MDS course; six took the online FPP1 course.
  - Staff skilled in EViews; participated in external data analysis training and coding in R.
  - ADB is financing two part-time university professors and two consultants to develop a VAR model to forecast inflation.
- Data and IT environment:
  - National accounts: quarterly frequency — both production and expenditure bases (expenditure-based measures suffer from large measurement errors).
  - Income-based national accounts: annual frequency.
  - CPI: monthly frequency, released typically three weeks after the reference period.
  - Monetary accounts: monthly frequency, about two months after the reference period.
  - Fiscal sector statistics: follow GFM2005 reporting standards and are available on monthly and quarterly consolidated bases.
  - Balance of payments statistics: follow BPM6 reporting standards, and are available on monthly basis, generally two months after the reference period.
  - FFRD staff have access to laptops with dual monitor, Microsoft Teams, and one Bloomberg terminal. Internet connectivity for off-site support is appropriate.
- Data management risks and recommendations:
  - Current data stored in centralized Excel spreadsheets — risk of unmonitored changes.
  - Appoint a Database Manager to monitor data quality, consistency, and versioning.
  - Establish a central database as a one-stop-shop and single data source for all Budget Departments in MOF.
  - Organize Excel spreadsheets following Data Management and Exchange (DMX) standards per ISO19763; assign unique identifiers to each data series.

### Agreed action plan and capacity building
- Staff-level agreement to develop a CAEM-based Macroeconomic Projection Tool (MPT) adapted to Mongolia’s economic structure.
- Action plan envisages a program of eight missions over a three-year period with a mix of virtual and in-person deliveries and regular remote check-ins.
- Tentative schedule runs from May 2023 to May 2026.
- Principal objectives:
  - (i) build capacity to develop, customize, update, modify and operate a macroeconomic framework;
  - (ii) provide a baseline understanding of existing forecasting and analytical capabilities and opportunities for improvement;
  - (iii) develop an Excel-based MPT respecting accounting relationships.
- Training: MDS course delivered during scoping mission; complementary training and refresher courses and IMF online materials to be used as needed.
- Authorities committed time and resources; project will require approximately three times the duration of mission interactions plus sustained attention.

### Proposed model: CAEM (Comprehensive Adaptive Expectations Model)
- Key features:
  - Excel-based simple general-equilibrium model with four sectors (Real, Fiscal, External and Monetary) in a Financial Programming (FP) framework with backward-looking expectations and gap/trend dynamics.
  - Two key objectives: build a baseline forecast of key macroeconomic variables and assess effects of policy/shock scenarios.
  - Interlinkages across four sectors to allow general-equilibrium feedback and ensure accounting and economic consistency.
  - Generic annual FP template, adjustable to various countries and circumstances; option for manual (exogenous) or model-based projections with core behavioral relationships expressed through error correction models.
  - Scenario analysis for a range of policies/shocks with duration of 1-3 years (taxes, spending shocks, interest and exchange rate shocks, foreign demand shocks, supply shocks).

### Project phases, missions, and key outputs
- Phase 1 — Scoping (May/June 2023)
  - Assessment of current systems; agreement Ad-referendum on project action plan; Refresher MDS Training.
  - In-between work (August/2023): collection and compilation of local data.
- Phase 2 — Enhancement of inputs (Mission 1: October 2023)
  - Compile macroeconomic database; database architecture per DMX principles; consistency checks; incorporation of satellite model inputs.
- Phase 3 — Development of Baseline Scenario
  - Mission 2: May 2024 — finalize sector structure and projection methods; develop and test behavioral equations.
  - Mission 3: October 2024 — develop fiscal sector equations; practice producing forecasts; begin external sector.
  - Mission 4: May 2025 — produce full-scale baseline scenario; analyze model properties and differences with MTMF.
- Phase 4 — Development of Policy and Risk Scenarios
  - Mission 5: October 2025 — present tool and baseline to MTMF working group; develop policy and risk scenarios; assess debt-path and shocks; incorporate fiscal rule compliance.
  - Mission 7 (buffer): December 2025.
- Phase 5 — Tool institutionalization
  - Mission 8: Concluding Mission — May 2026 — re-run baseline de-linked from previous MTMF forecasts; expand scenarios; incorporate tool outputs into reporting; presentation to MTMF working group; review forecasting calendar and institutional set-ups.

### Results framework, targets, and milestones
- Objective: Develop capacity in macroeconomic forecasting and policy analysis to support policy decision making and communications - MFR.
- Outcomes and selected indicators:
  - Scoping outcome: Diagnostic/scoping to produce overview and action plan. Outcome Rating Date: 6/2/2023.
    - Milestone: Final action plan to improve capacities in place. Target Completion Date: 6/2/2023.
  - Improved analytical skills outcome: Outcome Rating Date: 4/20/2023.
    - Baseline Value: 5% of staff in the core group has either FPP/MDS online training.
    - Target Value: 100% of staff in the core group has training on MDS.
    - Milestone: MDS training delivered to core group. Target Completion Date: 6/5/2023. Milestone Actual Completion Date: 06/02/2023.
  - Analytical models and forecasting tools developed and operational:
    - Centralized forecasting database linked to forecasting system: Baseline — exists but not linked; Target — linked; Current Assessment: Not achieved as of 06/02/2023.
    - MPT developed as Excel-based framework: Baseline — not available; Target — developed and includes all key features; Current Assessment: Not Achieved as of 06/02/2023.
    - Milestone: Staff completes fiscal block of the MPT and links it consistently to other sectors. Target Completion Date: 2/01/2024.
    - Milestone: Staff demonstrates ability to design and interpret alternative scenarios and sensitivity analysis. Target Completion Date: 2/01/2025.

### Identified risks and mitigation measures
- Inexperienced staff turnover
  - Risk: FFRD is a recently created unit with potential for inexperienced staff turnover.
  - Mitigation: Work with a large core group to create a continuous reserve pool; develop tool user manual and training of future staff.
- Staff resource constraints
  - Risk: Sufficient number of staff albeit limited experience and potential rotation.
  - Mitigation: Strong senior MOF support; schedule aligned with peak work periods; hybrid modality; knowledgeable members to step in when needed.
  - Exact peak work periods: March, April, July, and August.
- Lack of engagement during hybrid deliveries
  - Mitigation: Front-load in-person missions; hybrid modality to maintain engagement.
- Challenges institutionalizing the tool
  - Mitigation: Leverage existing MTMF processes and cross-agency working groups to enhance adoption.

### Sustainability, documentation, and future considerations
- Strengthen sustainability by:
  - Developing regular forecasting practice with defined production processes and institutional arrangements.
  - Producing documentation and user manuals for tools and data management, storing input/output data and log files to replicate forecasts.
  - Establishing regular requests to run tools and produce structured outputs to maintain forecasting practice.
- Considerations:
  - Consolidate existing spreadsheets to allow future automation and dynamic data querying from MS Excel and other analytical software.
  - Reassess development of Nowcasting capacity during implementation; consider adding nowcasting component when CAEM is operationalized.

_Source: PREFACE — IMF Technical Report: Macroeconomic Framework TA: Scoping Mission (May 24–June 2, 2023)._

### PREFACE ................................................................................................................

### PREFACE

### Mission overview
- A Technical Assistance (TA) scoping mission visited Ulaanbaatar, Mongolia from May 24 to June 2, 2023, to assess macroeconomic forecasting practice at the Financial and Fiscal Research Department (FFRD) of the Ministry of Finance (MOF) of Mongolia.
- Mission team: Mrs. Boriana Yontcheva (mission chief), Simone Maciel Cuiabano, Mehdi El-Herradi (all ICD), and Martin Fukac (CCAMTAC).
- Key counterparts: Mr. Ganbat Jigjid (Secretary of State, MOF); Mrs. Zolboo Ganbold (Director General, FFRD) and FFRD staff (Annex C); Macroeconomic Policy Division at the Ministry of Economy and Development (MED) — Mr. Enkh-Amgalan Lkhagvabayar (Director General, MPD), Mr. Munkh-Erdene Batkhishig (Director of Balance of Payments, MPD), and Ms. Uurtsaikh E. (Senior Analyst, MPD).

### Purpose and scope of assessment
- Reviewed MOF’s current macroeconomic modeling and forecasting tools and practices; discussed data quality and availability; evaluated staffing and institutional settings.
- Diagnosis is based on information available in May 2023.
- Findings and recommendations represent the views and assessment of the IMF mission team and do not necessarily reflect those of the authorities.
- The mission presented its assessment to senior officials from the FFRD and reached agreement “ad referendum” on an action plan to deliver a technical assistance project and a results-based logical framework to assess progress towards agreed outcomes.
- The report incorporated input and comments from the authorities.

### Administrative and funding notes
- The mission received administrative support from Ms. Salgado (ICDMF) and support from the IMF resident representative, Mr. SeokHyun Yoon and his office staff.
- The project is funded by the JSA, through the Fiscal and Debt Sustainability Fund.

---

### EXECUTIVE SUMMARY

### Project objective and approach
- The mission reviewed needs, capacity and constraints for developing institutional macroeconomic forecasting capacity at FFRD and reached agreement “ad referendum” with the authorities on a TA action plan and logical framework to develop a macroeconomic projection tool (MPT) based on ICD’s Comprehensive Adaptive Expectations Model (CAEM).
- The mission evaluated FFRD’s current macroeconomic forecasting capacity and identified capacity development needs.

### Key findings
- Despite FFRD’s ambitions in fiscal policymaking, a comprehensive macroeconomic framework for analysis, forecasting, and assessing fiscal policy's macroeconomic impact is not yet in place.
- FFRD requires a macroeconomic framework based on solid economic principles, adaptable to diverse policy analysis, and improved data management practices.

### Agreed plan and capacity building
- Staff-level agreement to develop a CAEM-based MPT (one of ICD's Macroeconomic Project Tools).
- Training on macroeconomic and forecasting techniques to equip a core team to develop the CAEM adapted to Mongolia’s economic structure.
- Action plan envisages a program of eight missions, with a mix of virtual and in-person deliveries, over a three-year period, with regular remote check-ins between missions.

### Commitment and team
- Authorities committed time and resources for the core team to develop the CAEM-based MPT.
- A core team of 10 economists, led by Ms. Zolboo Ganbold (Director General, FFRD), will work on the task.
- The authorities acknowledge the work will require approximately three times the duration of mission interactions, plus sustained attention.
- To ensure a homogeneous knowledge base, specific, intensive training was prioritized at the onset; all core team members participated in the in-person MDS course during the scoping mission.

---

### SECTION I. BACKGROUND

### A. The macroeconomic context of Mongolia
- Mongolia is a resource-rich country with significant economic growth and human capital development over the past three decades, but remains susceptible to commodity price fluctuations and external shocks.
- Recent shocks, including the Russian invasion of Ukraine and COVID-19 border closures in China, negatively affected the economy in 2022.
- Post-pandemic recovery is gaining momentum; export-led GDP growth surged since the first half of 2021, driven by mining exports, resumption in FDI and private investment.
- External imbalances widened and inflation continued to surge; the current account deficit was likely to remain wide in 2022–23.
- Authorities prioritize reforms to build on rural development, diversify the economy, and enhance resilience against external shocks.
- Enhanced macro framework tools and processes are crucial for incorporating sector-specific inputs, realistic and consistent sectoral forecasts, and for training and integrating new staff.

### B. The TA request of the authorities
- In November 2022, Finance Minister Mr. Javkhlan Bold requested TA to develop macroeconomic forecasting and policy analysis to feed into economic policy-making, focusing on developing a financial programming (FP) macroeconomic framework to strengthen FFRD capacity.
- On March 15, 2023, ICD staff held a virtual pre-scoping meeting with FFRD to set the preliminary schedule for the scoping mission; FFRD requested a robust tool for macroeconomic forecasts, sectoral analysis, and evaluation of alternative fiscal policy scenarios.
- An in-person scoping and training mission was conducted May 24–June 2, 2023, to assess analytical and forecasting tools, data availability and management, human resources and skills, and current policy analysis systems.
- Based on the assessment, the mission prepared a three-year action plan to improve MOF’s macroeconomic analysis and forecasting capacity (Annex D provides the detailed work program).

---

### SECTION II. SCOPING MISSION FINDINGS AND ASSESSMENT

### A. Introduction
- The project design and action plan were informed by findings from the scoping mission concluded on June 2nd, 2023.
- The assessment summarized key findings from questionnaires, discussions, and feedback with the authorities (Annex D: scoping mission meeting agenda).

### B. Remit and outputs of the TA beneficiary
- The Ministry of Finance split in 2022 into Ministry of Economy and Development (MED) and Ministry of Finance (MOF); the National Development Agency was dissolved and competencies transferred to MED in January 2022.
- MED integrated the Macroeconomic Policy Department, responsible for medium and long-term projections.
- FFRD, established in 2022, has responsibilities: i) ensuring implementation of legislation, ii) researching, predicting and analyzing current and future financial and budget conditions of Mongolia, iii) surveillance of relevant countries’ economies, iv) evaluating results of previously implemented policy measures for financial and budget planning, v) planning future policy measures.
- FFRD reports to State Secretary of MOF, Vice Minister of Finance and Finance Minister.
- FFRD collaborates with MED, MOF’s Fiscal Policy and Planning department, Bank of Mongolia (BOM), and Financial Regulatory Commission via the Financial Stability Council.
- Currently FFRD develops scenario analysis based on baseline projections from MED and Fiscal Policy Planning Department but intends to expand macro-forecasting capacities.

### C. Existing human and material resources

- Staff sizes, availability and turnover:
  - FFRD created in 2022.
  - After Ministry split in 2022, experienced forecasting staff stayed with MED; FFRD recruited internally and hired recent university graduates.
  - FFRD has 11 staff, including the Director General and a long-term junior and senior experts from the World Bank.
  - Department used an ADB grant to hire (on part-time-basis) two professors from local universities to cooperate with the core team on selected policy-relevant projects.
  - Authorities are committed to make their team fully available for the duration of the CD project.
  - Risk: Given team's relative youth, increased staff turnover in the next two to three years is possible; FFRD management will implement rotation of responsibilities and divide sectoral responsibilities between two experts to ensure continuity.

- Skills capacity of staff:
  - All core team members have university degrees (in economics, statistics or finance).
  - Over the past eight months, all ten core team members took ICD’s online MDS course, and six of them took the online FPP1 course.
  - Core team is skilled in using EViews; participated in external data analysis training and coding in R.
  - FFRD staff adapted generic MDS templates to Mongolian data and internal briefing needs.
  - Team composition: three seasoned MOF policy veterans and eight emerging professionals.
  - ADB is financing two consultants to develop a VAR model to forecast inflation.
  - FFRD shows promise in developing practical policy analysis and advisory skills; MOF management seeks Capacity Development (CD) to enhance competencies and anticipates FFRD will become the key analytical body for fiscal policy advice.

- Material resources and software:
  - (Content truncated in provided source at this point; no additional material resources or software details available in supplied text.)

---

*Source: PREFACE — IMF Technical Report: Macroeconomic Framework TA: Scoping Mission (May 24–June 2, 2023).*

### 19. FFRD is well resourced for the CD project’s needs. The authorities stressed that establishing a

### 19. FFRD is well resourced for the CD project’s needs. The authorities stressed that establishing a

### Resources and IT environment
- FFRD staff have access to laptops with dual monitor, Microsoft Teams to share files and facilitate communication and data sharing and one Bloomberg terminal used to collect market data on commodity prices.
- The Internet connectivity for off-site support is appropriate.
- Footnote: FFRD equipment was provided by international cooperation agencies such as Koica and Jica.

### Existing macroeconomic frameworks and institutional roles
- There is no macroeconomic framework currently in use at the FFRD. No framework is in place to ensure economic or accounting consistency between the four sectors of the economy.
- FFRD does not actively form the national macroeconomic outlook – a task under the purview of the Ministry of Economy – but incorporates the macroeconomic targets and BPPD's budget strategy into its overall framework.
- The Macroeconomic Policy Department (MPD) from the Ministry of Economy and Development (MED):
  - Prepares medium and long-term macroeconomic projections used by the MOF during the annual budget and medium-term fiscal framework preparation.
  - Developed a forecasting tool to obtain the GDP projections mainly using data from the supply side (mining and agricultural sectors) with no consistency check to the demand side.
  - Has no projections or forecasts on the exchange rate and interest rate.
  - Expressed interest in learning about their CAEM to enhance current forecasting tools.
- Communication channels with the Bank of Mongolia (BOM) are described as open and healthy at both management and technical levels. BOM maintains a rich portfolio of analytical tools including a basic static accounting FFP framework and raised concerns about occasional inconsistencies in the MOF/MED’s macro-fiscal framework.

### Monitoring, nowcasting, and forecasting practices
- FFRD monitors the real sector (production GDP), consumer prices, monetary and financial sector, fiscal sector, external sector (BOP and China) and briefs the Minister and senior management weekly.
- Existing system is based on MDS templates and needs extensions for monitoring the expenditure-based GDP and subcomponents, and development of commodity sector block.
- Nowcasting and near-term forecasting (NNTF) system is nascent:
  - FFRD forecasts consumer prices (measured by CPI) on monthly basis using the automated SARIMA techniques in EViews.
  - Quarterly trade balance and other components of the balance of payments are forecasted.
  - FFRD forecasts are near-term, end-of-the year forecast or up to 12 months.
  - FFRD currently works on real economic activity NNTF which would benefit from being extended to all sectors and linked to a single database.
  - Recommendation: add forecast tracking and performance monitoring system; extend NNTF across sectors; timely update budget strategy tracking.

### Need for a central analytical tool and model-based analysis
- FFRD’s role would benefit from a central analytical tool to support internally consistent policy analysis and advice to the Minister and the Cabinet.
- The FFRD needs a more systematic framework for development of macroeconomic projection tools to:
  - estimate the macroeconomic impact of changes in tax revenue policies;
  - provide model-based analysis of policy scenarios and shocks;
  - fine-tune the macro-fiscal plan, ensure accounting consistency, understand fundamental plan drivers, and provide a foundation for alternative scenario exploration and risk assessments.
- Mission recommendation: MOF and MED to participate jointly in this TA to enhance coordination and assure good practices for the macro-fiscal projections during the MTFF.

### Data availability and quality
- Sectoral data quality and availability are adequate for the CD project’s needs and in line with CCAM peers.
- Specific frequencies and delays:
  - National accounts: quarterly frequency – both production and expenditure bases (expenditure-based measures suffer from large measurement errors).
  - Income-based national accounts: annual frequency.
  - Consumer Price Index (CPI): monthly frequency, released typically three weeks after the reference period.
  - Monetary accounts: monthly frequency, about two months after the reference period.
  - Fiscal sector statistics: follow GFM2005 reporting standards and are available on monthly and quarterly consolidated bases.
  - Balance of payments statistics: follow BPM6 reporting standards, and are available on monthly basis, generally two months after the reference period.
- FFRD has access to a whole range of high-frequency indicators on economic activity, imports and exports that can be exploited for nowcasting and near-term forecasting of GDP.

### Data management practices and recommended improvements
- Current practice:
  - Each sectoral expert is responsible for collecting and updating data for her/his specific sector.
  - Data releases are regularly monitored and tracked per the FFRD’s Data Release Calendar.
  - Data stored in centralized Excel spreadsheets, accessible to the entire core team.
- Risks and recommendations:
  - Centralized Excel structure presents risks associated with unmonitored changes.
  - Appoint a Database Manager to monitor data quality, consistency, and versioning.
  - Establish a central database as a one-stop-shop and single data source for all Budget Departments in MOF.
  - Organize Excel spreadsheets following the Data Management and Exchange (DMX) standards per ISO19763 on the metamodel framework.
  - Each data series should have a unique identifier to allow calling the database from analytical software to simplify updates to sector monitors, NNTF, or medium-term macroeconomic framework.

### Needs assessment summary
- Key needs identified:
  - Adopt a flexible tool that incorporates Ministry of Economy's macroeconomic projections, assimilates comprehensive sectoral information, and validates forecast consistency.
  - Tool should allow evaluation of alternative scenarios to sustain and elevate macroeconomic analysis capacity.
- FFRD staff have an overall good level of economic training but require strengthened consistency of forecasts and integrated policy guidance.

### Action plan overview and timelines
- Agreement “ad referendum” reached on June 2, 2023, on a draft action plan for delivery of a macroeconomic framework TA project.
- Principal objectives:
  - (i) build capacity to develop, customize, update, modify and operate a macroeconomic framework;
  - (ii) provide a baseline understanding of existing forecasting and analytical capabilities and opportunities for improvement;
  - (iii) develop a MPT in the form of an Excel-based macroeconomic framework for forecasting and policy analysis, respecting accounting relationship.
- Delivery schedule:
  - Designed over five phases across three years.
  - Continued engagement for about three years is necessary.
  - At this time, eight missions have been agreed.
  - Tentative schedule runs from May 2023 to May 2026.
- Training and capacity-building:
  - A MDS course was delivered during the scoping mission to transfer specialized knowledge to the core staff team.
  - Complementary training and refresher courses will be provided as needed; IMF online courses and reference material may be used.

### Core team, responsibilities, and modalities
- FFRD staff will lead tool development with ICD technical assistance; each sectoral expert leads development of its sector in the CAEM with ICD support.
- Authorities committed staff resources and agreed to devote time and effort to work on the CAEM-based MPT in between missions, including periodical remote check-ups.
- Core team leader: Mr. Anar Zorigtbaatar.
- Project overseen by Mrs. Zolboo Ganbold (Director General, FFRD).
- Communication methods: [WhatsApp group], a mailing list, Zoom, Microsoft Teams; online data sharing platforms are being explored.
- ICD assistance modality:
  - Hybrid model of in-person and virtual missions; about two thirds of missions planned in-person.
  - ICD will provide clear guidance for in-between-mission tasks and virtual follow-ups.

### Proposed macroeconomic framework tool (CAEM)
- The mission and authorities agreed to utilize ICD’s CAEM template, tailored to the country’s circumstances.
- Box 1 — Key features of the CAEM:
  - The Comprehensive Adaptive Expectations Model (CAEM) is an Excel-based simple general-equilibrium model, with four sectors (Real, Fiscal, External and Monetary), in a financial programming (FP) framework with backward-looking expectations and gap/trend dynamics.
  - Two key objectives: build a baseline forecast of key macroeconomic variables and assess the effects of various policy or shocks scenarios.
  - Interlinkages across the four sectors allow general-equilibrium feedback and ensure accounting and economic consistency.
  - Other characteristics:
    - Generic template: relatively generic annual Financial Programming (FP) framework, adjustable to a large set of countries and circumstances (e.g. flexible or fixed exchange rate (most suitable for fixed exchange rate regime)). It can be easily adapted to include more granularity or country specific characteristics.
    - Option of manual- or model-based projections: users can make key projections manually (exogenous) or use a model that incorporates key economic relationships; core behavioral relationships are expressed through error correction models.
    - Scenario analysis: provides consistent scenario analysis for a range of policies/shocks, with a duration of 1-3 years, including adjustments to taxes, spending shocks, interest and exchange rate shocks, foreign demand shocks, supply shocks.

### Sustainability, documentation, and future steps
- To strengthen sustainability:
  - Develop regular forecasting practice with clearly defined production processes and institutional arrangements.
  - Produce documentation on how to operate tools and data management guidelines to store input/output data and log files to replicate forecasts and simulations.
  - Regular requests to run tools and produce structured outputs are key to maintaining a forecasting practice.
- Implementation considerations:
  - Project will help strengthen macroeconomic data management to feed into the macroeconomic projection tool, possibly consolidating existing spreadsheets to allow future automation and dynamic data querying from MS Excel and other analytical software.
  - Developing FFRD’s Nowcasting capacity could be reassessed during implementation; when CAEM is fully operationalized and customized, consider adding a nowcasting component to enhance GDP forecast from a production function perspective.

*IMF | Technical Report – Mongolia. Macroeconomic Framework TA: Scoping Mission.*

### 47. This project is subject to several risks—but these can be mitigated:

### 47. This project is subject to several risks—but these can be mitigated:

### Identified risks and mitigating factors
- Inexperienced staff turnover
  - Risk: The FFRD is a recently created unit with potential for inexperienced staff turnover.
  - Mitigation:
    - The TA project will work with a large core group to create a continuous reserve pool.
    - Authorities will focus on development of a tool user manual, associated material, and training of future new staff by current members of the team.
- Staff resource constraints
  - Risk: FFRD has a sufficient number of staff albeit with limited experience and potential for rotation to other MOF units.
  - Mitigation:
    - Strong support from senior MOF management for the project and keen interest in enhancing FFRD's capacity; senior management will be kept informed of progress and resource needs throughout the project.
    - Project schedule designed around peak work periods (budget preparation months) allowing efficient self-management of tasks.
    - Hybrid work model provides further flexibility.
    - Knowledgeable team members will be able to step in in case of absence or rotation, ensuring consistent sector analysis.
  - Exact peak work periods: March, April, July, and August.
- Lack of engagement during hybrid deliveries
  - Risk: Reduced engagement during hybrid modality deliveries.
  - Mitigation:
    - Hybrid modality will allow the mission team to engage the core group throughout multiple missions each year.
    - In-person missions will be chosen strategically and front-loaded to develop necessary momentum and engagement for the project.
- Challenges in institutionalizing the tool
  - Risk: Successful tool development with a small core group may not translate into institutionalized usage across wider policy processes.
  - Mitigation:
    - A process for developing and utilizing an MTMF is already in place, including functioning cross-agency working groups at both technical and policy decision-making levels.
    - The project will enhance the process and strengthen tool usage and can piggy-back on developed processes already in place.

### Model/Framework components (Figure B.1 — Main Blocks of the FP2.0 Comprehensive Adaptive Expectations Model and Framework)
- Core macro model blocks and linkages identified (verbatim elements shown in source):
  - Taylor Rule / Policy Rate
  - Phillips Curve / CPI Inflation / Imported inflation / External
  - Fiscal: Revenues / Expenditures / Fiscal Balance
  - External environment
  - UIP-PPP / Monetary/Financial / Exchange Rate / CB Balance Sheet
  - Public Debt: Domestic / External
  - EXPENDITURE: NOMINAL DEMAND, C, S − I, INVESTMENT, X, etc.
  - Fiscal Impulse
  - Real GDP / Nominal GDP / FPP EXERCISE / DEFLATORS / GDP Deflator
  - PRODUCTION / Potential GDP / Output Gap / CORE MACRO MODEL / Reconciliation

### Project delivery schedule — key outputs and timing (annex A)
- Phase 1 – Scoping
  - Scoping mission: May/June 2023
    - Assessment of current forecasting and policy analysis systems.
    - Agreement Ad-referendum on project action plan.
    - Refresher MDS Training.
  - In-between mission work: August/2023
    - Collection and compilation of local data for main accounts and other essential data.
    - Further online training by core team depending on identified gaps.
- Phase 2 – Enhancement of inputs
  - Mission 1: October 2023
    - Compilation of macroeconomic database and customization of input sheets for tool.
    - Database architecture per DMX principles.
    - Consistency checks, identification of data issues and agreement on short-term and long-term solutions.
    - Incorporation of satellite model inputs and estimation of trends.
    - Meeting with MTMF working group to discuss coordination and roles in relation to tool.
  - In-between mission work: TBD
- Phase 3 – Development of Baseline Scenario
  - Mission 2: May 2024
    - Finalize structure of specific sectors and projection methods for key real variables.
    - Refresher on forecasting methods (part 2).
    - Develop and test behavioral equations and forecasting options for supply and demand real sector variables.
  - In-between mission work: TBD (begin work on behavioral equations for remaining sectors; begin development of user-manual and associated material; Refresher on forecasting methods (part 3)).
  - Mission 3: October 2024
    - Develop equations for fiscal sector variables in tool.
    - Practice producing forecasts of real and fiscal sector variables given external assumptions.
    - Begin work on external sector.
  - In-between mission work: TBD (develop linkages and equations for remaining external and monetary sector variables).
  - Mission 4: May 2025
    - Produce a full-scale baseline scenario; analyze model properties and interpret results.
    - Analyze differences between central projections and former MTMF forecasts and identify drivers of differences.
    - Initial model properties testing for glitches, errors, etc.
  - In-between mission work: TBD (continue model testing; cleaning of tool; update user manual and associated material).
- Phase 4 – Development of Policy and Risk Scenarios
  - Mission 5: October 2025
    - Present tool and baseline results to MTMF working group; develop policy and risk scenarios and implement using tool.
    - Comparison of scenarios against baseline.
    - Interfacing of DDT with tool.
    - Assessment of debt-path and impact of shocks.
    - Incorporation of assessment of compliance with fiscal rules into tool.
  - In-between mission work: TBD (DDTx course taken by core team; updates to user manual).
  - Mission 7 (buffer): December 2025
- Phase 5 – Tool institutionalization
  - In-between mission work: TBD (update user manual; develop reporting and working group processes).
  - Mission 8: Concluding Mission — May 2026
    - Re-run baseline, de-linked from previous MTMF forecasts.
    - Expand policy and risk scenarios off new baseline.
    - Incorporate tool outputs into reporting process; customize output tables and graphs.
    - Presentation to MTMF working group and incorporation of comments and feedback.
    - Review forecasting calendar with MTMF working group and updated discussion on inputs, linkages with satellite models and other agency forecasts.
    - Review inter-and-intra-institutional set-ups affecting tool implementation and integration into policy making.
    - Incorporation of possible additional customized elements and routines.
  - In-between mission work: TBD (update user manual and associated material; develop reporting and working group processes).

### Results framework (Annex B) — objectives, outcomes, indicators, and timelines
- Objective:
  - Develop capacity in macroeconomic forecasting and policy analysis to support policy decision making and communications - MFR
- Outcome (scoping)
  - Authorities have a baseline understanding of existing forecasting and analytical capabilities and opportunities for improvement.
  - Annual Assessment Narrative: Scoping mission taking place form 24 May – 02 June 2023. The mission will diagnose the needs of the Authorities and develop an Action Plan that will meet their needs and objectives.
  - Outcome Rating Date: 6/2/2023
  - Outcome Indicator / Baseline / Target / Current Assessment:
    - Diagnostic/scoping produced an overview of existing (baseline) capacities and opportunities for improvement supported by an action plan and agreed upon key outcomes and deliverables.
    - Baseline: Capacities and opportunities for improvement are not identified/documented.
    - Target: Opportunities for improvement identified and authorities and the IMF team agree on the workplan and key outcomes.
    - Current Assessment Value: Project plan to meet objectives to be agreed during the scoping mission.
  - Milestone: Final action plan to improve capacities in place. Target Completion Date: 6/2/2023. Milestone Actual Completion Date: NA.
- Outcome (improved analytical skills)
  - Annual Assessment Narrative: Project not yet started - Scoping Mission in progress.
  - Outcome Rating Date: 4/20/2023
  - Outcome Indicator example:
    - Relevant staff have successfully completed agreed training delivered via various modalities (online, classroom courses, workshops).
    - Baseline Value: 5% of staff in the core group has either FPP/MDS online training.
    - Target Value: 100% of staff in the core group has training on MDS.
    - Current Assessment Value: 5% of staff in the core group has either FPP/MDS online training as of 4/20/2023.
  - Milestone: MDS training delivered to core group. Target Completion Date: 6/5/2023. Milestone Actual Completion Date: 06/02/2023.
- Outcome (analytical models and forecasting tools developed and operational)
  - Annual Assessment Rating: 1 Not Achieve
  - Annual Assessment Narrative: Project not yet started - Scoping Mission in progress.
  - Outcome Rating Date: 2/24/2023
  - Outcome Indicators and status:
    - Centralized forecasting database is established and is linked to the forecasting system.
      - Baseline: Forecasting database exists but is no linked to the forecasting system.
      - Target: The database is linked to the forecasting system.
      - Current Assessment: Not achieved as of 06/02/2023.
    - Macroeconomic Projection Tool (MPT) is developed in the form of an Excel-based macroeconomic framework for forecasting and policy analysis, respecting accounting relationships.
      - Baseline: Project tool is not available.
      - Target: The project tool is developed and includes all key features.
      - Current Assessment: Not Achieved as of 06/02/2023.
  - Milestones:
    - Staff completes fiscal block of the MPT and links it consistently to other sectors. Target Completion Date: 2/01/2024.
    - Staff demonstrates ability to design and interpret alternative scenarios and sensitivity analysis to test for different policy changes. Target Completion Date: 2/01/2025.

### Core group and capacity
- Core group: 10 members listed in Annex C (names and positions provided in source).
  - Example entries (verbatim as in source): 1 Amuudari Ryenchindorj — FFRD, MOF — Officer — amuudari_r@mof.gov.mn — 95481368; 2 Lkhamkhuu Batbold — FFRD, MOF — Consultant — lkhamkhuu_b@mof.gov.mn — 99665184; through 10 Anar Zorigtbaatar — FFRD, MOF — Senior analyst — anar_z@mof.gov.mn — 94041109.

### Training and agenda (Annex D)
- Scoping mission and MDS Training Refresher dates: May 24th to June 2nd, 2023.
- Weekly agenda highlights (verbatim themes and sessions as in source):
  - Review meeting with office of the Resident Rep; overview of mission tasks.
  - Courtesy meeting with senior MOF officials and overview of mission.
  - Courtesy meeting with the Secretary of State.
  - Strategic considerations with HR/Training Departments.
  - Presentations on current tools, frameworks, and data management.
  - Detailed training modules and workshops for the core team including:
    - L-1 Macroeconomic Framework & interrelations.
    - L-2 General presentation of Macro Tool (Introduction to Macroeconomic Projection Tool (MPT)).
    - L-3 Supply and Productivity + Economic Growth and Potential Output.
    - Workshops on Supply and Productivity diagnostics; Assessing Fiscal Policy and Fiscal Sustainability.
    - L-6 Analyzing Inflation; L-7 Analyzing Monetary Policy.
    - L-8 Assessing the External Position; L-9 Assessing External Debt Sustainability and Foreign Reserve Adequacy.
  - Debriefing with MOF Senior Officials and meeting with the Ministry of Economy and Development.

*IMF | Technical Report – Mongolia — Macroeconomic Framework TA: Scoping Mission*

---


_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024106-print-pdf.pdf_