IMF Executive Board Completes First and Second Reviews under the Extended Arrangement for Mongolia and Approves US$ 79.1 Million Disbursement

IMF News, December 15, 2017

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Canonical URL: IMF Executive Board Completes First and Second Reviews under the Extended Arrangement for Mongolia and Approves US$ 79.1 Million Disbursement

On December 15, 2017, the Executive Board of the International Monetary Fund (IMF) completed the first and second reviews of Mongolia’s performance under the program supported by a three-year extended arrangement under the Extended Fund Facility (EFF).
Completion of the review enables Mongolia to draw the equivalent of SDR 55.912 million (about US$ 79.1 million), bringing total disbursements under the arrangement to SDR 83.868 million (about US$ 118.6 million).
Mongolia’s three-year extended arrangement was approved on May 24, 2017, in an amount equivalent to SDR 314.5054 million, or about US$425 million at the time of approval of the arrangement.

Growth in 2017 is projected to reach 3.3 percent, considerably better than forecasted at the time of program approval.
The combination of strong policy implementation and a supportive external environment has helped the authorities over-perform on all of the quantitative targets under the program.
Net international reserves have improved, reflecting:
- strong coal export performance,
- capital inflows into the bond and money markets, and
- donor disbursements.

All quantitative targets under the program have been met.
Fiscal results have been better than expected, supported by stronger revenues and tight expenditure control.
The fiscal deficit in 2017, at 7.6 percent of GDP, is less than half of what it was in 2016.
The recently approved 2017 Supplementary Budget and the 2018 Budget are in line with the program.
About half of the revenue overperformance will be saved, thus helping to reduce borrowing and control debt.
The remainder of the revenue overperformance will be used to fund productive spending in line with the government action plan and for a one-off bonus to civil servants.

The authorities are moving ahead with an ambitious structural reform agenda to:
- sustain growth over the medium term,
- promote diversification and competitiveness, and
- mitigate the boom-bust cycle.
Banking system rehabilitation and strengthening is underway:
- Results of the comprehensive Asset Quality Review are expected imminently.
- The Bank of Mongolia is taking steps to improve the regulatory and supervisory framework.
- Important legal reforms regarding the governance and operations of the Bank of Mongolia, the Deposit Insurance Corporation, and the banks are expected to be passed soon.
Fiscal-side reforms:
- Progress is being made in strengthening tax administration, tax policy, and budgetary controls, including through the establishment of a high-level working group on tax policy.
Social protection reforms:
- To strengthen the social safety net and target pro-poor expenditures toward the most vulnerable, the government is focusing the Child Money Program on less affluent families and using the savings to increase food stamps for the poor.

With debt still high and the economy still exposed to global commodity developments, it is critical to maintain strong commitment to the program.
Sustained implementation of the reform agenda is necessary to:
- cement solid growth,
- improve confidence,
- strengthen fiscal revenues and foreign reserves, and
- mobilize donor support.

IMF Press Release No. 17/502 (December 15, 2017).