IMF Staff Completes Discussions for Emergency Access to the Rapid Financing Instrument on Mongolia
IMF News, May 19, 2020
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- Published: May 19, 2020
Mission and request
- Press Release No. 20/218; May 18, 2020.
- IMF staff completed discussions at the Mongolian authorities’ request for emergency financing of SDR 72.3 million (about US$ 99 million).
- An IMF staff team led by Mr. Geoff Gottlieb conducted discussions with the Mongolian authorities from May 11-13.
- The Board’s consideration of the request is expected by early June.
Findings on economic impact and recent policy context
- The COVID-19 pandemic has weakened the macroeconomic outlook for Mongolia.
- The government has taken prompt measures to contain the spread of the virus and is implementing a broad stimulus package to mitigate the economic and social impact of the pandemic.
- Mongolia has managed to contain the spread of the virus thus far, but the economy faces significant challenges stemming from weak exports and domestic containment measures.
- In recent years, Mongolia made major progress in strengthening the resilience of its economy, including by public debt reduction and reserve accumulation, under the IMF-supported program which expires on May 23, 2020.
- The policy buffers built in the last three years have strengthened the authorities’ ability to take emergency actions to combat the pandemic.
Policy recommendations and priorities
- Immediate priority:
- Put in place efficient government programs to support those most affected by the pandemic.
- To limit pressure on macroeconomic stability:
- Aim to maintain fiscal discipline by reprioritizing expenditures.
- Preserve hard-earned reserves by allowing a more flexible exchange rate.
- Post-pandemic priorities:
- Enhance resilience by reducing public debt.
- Build up foreign exchange reserves.
- Strengthen bank capital.
- Continue banking sector reforms in the period ahead, possibly in the context of a follow-on program to the expiring Extended Fund Facility.
Role of IMF financing and next steps
- The IMF Executive Board’s approval of the request for RFI financing, together with support from other donors, will help Mongolia meet urgent budgetary and balance of payments needs.
- The Board’s consideration of the request is expected by early June.
Representative statement (Mr. Geoff Gottlieb)
- “The IMF team held productive discussions with the authorities on the impact of the COVID-19 pandemic on the Mongolian economy as well as the policies needed to prevent a severe economic downturn and protect the most vulnerable. Thus far Mongolia has managed to contain the spread of virus. Nonetheless, the economy faces significant challenges stemming from weak exports and domestic containment measures.
- “In recent years, Mongolia made major progress in strengthening the resilience of its economy, including by public debt reduction and reserve accumulation, under the IMF-supported program which expires on May 23, 2020. The policy buffers built in the last three years have strengthened the authorities’ ability to take emergency actions to combat the pandemic.
- “The immediate priority is to put in place efficient government programs to support those most affected by the pandemic. In addition, to limit the pressure on macroeconomic stability, the authorities should aim both to maintain fiscal discipline by reprioritizing expenditures and preserve hard-earned reserves by allowing a more flexible exchange rate.
- “After the pandemic abates, the priority should shift to enhancing resilience by reducing public debt, building up foreign exchange reserves, and strengthening bank capital. In particular, the authorities agreed to continue banking sector reforms in the period ahead, possibly in the context of a follow-on program to the expiring Extended Fund Facility.
- “The team thanks the authorities for their cooperation and the constructive dialogue.”
IMF Communications Department — Press Release No. 20/218, May 18, 2020