Press Release No. 25/298

Washington, DC: On September 5, 2025, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Mongolia^[1]

A booming mining sector in 2023-24 significantly bolstered exports and fiscal revenues, underpinning robust economic growth and lower external and fiscal vulnerabilities. However, coal exports declined markedly in the first half of 2025, resulting in a widening current account deficit, reduced budget revenues, and depreciation pressures. After peaking in February 2025, headline inflation moderated to 8.2 percent by June. Credit growth in both the banking and nonbank financial sectors remains high, despite some recent moderation. The new government, formed in June 2025, has signaled policy continuity. In response to revenue shortfalls, it submitted an amended budget to Parliament aimed at reducing expenditures and ensuring compliance with the structural fiscal deficit limit.

Growth in 2025 is projected to rise to 5.5 percent, supported by a strong recovery in the agriculture sector. Mining output is expected to remain robust, driven by increased production of higher-grade copper concentrate at Oyu Tolgoi. However, a sharp decline in coal exports—primarily due to lower prices—is expected to widen both the current account and fiscal deficits. Growth is projected to remain around 5½ percent in 2026. Inflation is anticipated to stay above the BOM target band until 2026. Over the medium term, growth is projected to gradually converge to its potential of about 5 percent. Current account deficits are forecast to persist, reflecting the high import intensity of investment projects and continued strong consumer goods imports.

Downside risks to the outlook have increased, stemming from uncertainties in Chinese coal demand and larger-than-expected declines in coal prices. Policy slippages could undermine reform progress, particularly amid growing pressures to accelerate and broaden the distribution of mining benefits by reducing non-mineral tax collections and exempting large investment projects from the fiscal rules.

 

Executive Board Assessment[2]

Executive Directors noted the strong growth and fiscal surpluses achieved in 2023−2024, which helped reduce Mongolia’s vulnerabilities. Directors underscored, however, that the near-term outlook has become less favorable, with rising downside risks from lower coal prices and greater global uncertainty. Against this backdrop, they called for prudent macroeconomic policies to restore external and internal balances and for structural reforms to achieve diversified and sustainable growth.

Directors welcomed the authorities’ commitment to meeting the structural deficit limit through expenditure restraint, which is reflected in the supplementary 2025 budget. They emphasized the need to create fiscal space by broadening the non-mining tax base and to implement mega capital projects within the fiscal rules and after careful prioritization. Directors encouraged the authorities to ensure that the tax package currently under review reduces reliance on volatile mining revenues and safeguards fiscal sustainability. They also stressed the importance of avoiding frequent changes to fiscal rules to preserve their credibility. Directors encouraged the authorities to expand domestic debt issuance to develop domestic debt markets and enhance monetary policy transmission.

Directors called on the Bank of Mongolia (BOM) to maintain a tight monetary policy stance to contain inflation. They also recommended strengthening the BOM’s legal mandate, operational autonomy, and governance through amendments to the central bank law and by ending the BOM’s quasi-fiscal operations.

Directors concurred that greater exchange rate flexibility would enhance Mongolia’s resilience to external shocks and help deepen the foreign exchange market. They encouraged the BOM to pursue opportunistic reserve accumulation when market conditions allow.

Directors welcomed the recent macroprudential policy tightening. They encouraged aligning the debt service-to-income (DSTI) limit for nonbank financial institutions with that of banks, incorporating pension-backed loans into the DSTI limit, expanding the BOM’s macroprudential toolkit, and separating macroprudential from monetary policy. Directors also recommended strengthening financial oversight and insolvency frameworks.

Directors agreed that structural reforms to improve the business climate, combat corruption, strengthen governance, and address climate change-related challenges remain essential for achieving diversified and sustainable growth. They welcomed the progress made in strengthening the AML/CFT framework and called for its effective implementation.

 

Table 1. Mongolia: Selected Economic and Financial Indicators, 2022-30

2022   2023   2024   2025   2026 2027 2028 2029 2030          Actual                             Projections                  (In percent of GDP, unless otherwise indicated)   National Accounts                             Real GDP growth (percent change) 5.0   7.4   4.9   5.5   5.5 5.5 5.3 5.0 5.0   Nominal GDP (in USD million) 17,146   20,315   23,586   …   … … … … …   Contributions to Real GDP (ppts)                             Domestic Demand 11.4   5.6   21.2   6.6   4.4 7.0 7.0 5.9 6.2   Exports of G&S 13.9   17.9   0.5   3.0   5.0 2.6 2.1 1.7 1.7   Imports of G&S -20.3   -16.2   -16.8   -4.1   -3.9 -4.1 -3.8 -2.6 -2.9   Consumption 65.8   57.5   66.1   71.2   70.6 70.9 71.0 71.2 70.9     Private 51.9   44.5   49.8   54.9   54.7 55.2 55.3 55.5 55.2            Public 13.9   13.0   16.3   16.3   16.0 15.8 15.7 15.7 15.7   Gross Capital Formation 42.3   33.9   34.6   32.2   30.7 30.8 31.1 31.2 31.5   Gross Fixed Capital Formation 29.8   25.3   26.8   24.2   23.7 23.8 24.1 24.2 24.5   Public 7.1   7.4   9.9   8.2   8.0 7.9 7.8 7.9 8.0   FDI 14.2   10.7   11.6   9.5   9.1 8.9 8.8 8.0 7.9   Domestic Private (including SOEs) 8.6   7.3   5.3   6.5   6.6 7.0 7.5 8.3 8.6   Gross national saving 28.9   34.5   24.1   18.4   18.7 18.6 18.8 18.8 19.2                                 Prices                             Consumer Prices (Avg; percent change) 15.1   10.4   6.2   8.7   8.6 7.9 7.2 6.7 6.4   Consumer Prices (EoP; percent change) 13.3   7.7   8.3   9.0   8.2 7.5 6.8 6.5 6.2       Copper prices (US$ per ton) 8,829   8,491   9,142   9,539   9,641 9,674 9,705 9,716 9,716     Bituminous coal prices (US$ per ton) 123   131   107   68   74 76 77 77 77       GDP deflator (percent change) 17.7   21.8   8.2   7.0   8.4 7.7 7.1 6.4 6.4                               General government accounts 1/                             Primary balance (IMF definition) 2.2   4.3   2.8   1.3   1.2 0.0 0.4 0.6 0.8   Total revenue and grants 34.4   34.6   39.2   35.1   33.9 32.1 32.2 32.3 32.4   Primary expenditure and net lending 32.2   30.3   36.5   33.8   32.7 32.1 31.8 31.6 31.7   Interest 1.5   1.6   1.5   1.7   1.9 2.1 2.3 2.4 2.5   Overall balance (IMF definition) 0.7   2.7   1.3   -0.3   -0.7 -2.1 -1.8 -1.8 -1.8   Non-mineral primary balance (in percent of GDP) -6.3   -5.7   -8.9   -7.2   -7.8 -8.8 -8.3 -7.9 -7.6   Gross financing needs 3.8   9.0   4.7   5.0   4.8 6.4 8.2 7.4 9.8      General government debt 2/ 64.5   45.9   44.5   46.0   48.4 51.3 53.0 54.5 55.2   Domestic 4.4   2.6   3.2   2.5   2.6 2.7 2.7 2.8 2.8              External 60.1   43.3   41.3   43.5   45.8 48.6 50.2 51.7 52.5                                 Monetary sector                             Broad money growth (percent change) 6.5   26.8   15.0   14.6   13.1 11.8 11.6 13.9 11.7   Reserve money growth (percent change) 39.9   7.4   51.9   1.7   13.1 11.8 11.6 13.9 12.5   Credit growth (percent change) 8.6   22.0   30.9   25.0   21.2 19.5 17.5 15.5 15.5                                 Balance of payments                             Current account balance -13.4   0.6   -10.5   -13.9   -12.0 -12.2 -12.3 -12.3 -12.3   Exports of goods 57.5   68.5   62.5   54.0   55.4 54.5 53.9 52.9 51.9   Imports of goods 50.3   46.1   49.5   45.9   45.6 45.6 46.0 45.9 45.3   Gross official reserves (in USD million) 3,400   4,922   5,510   4,946   5,128 5,280 5,120 5,126 5,269   (In months of imports) 3.0   3.6   4.1   3.5   3.5 3.4 3.2 3.1 3.1   (net of bank's FX deposits held at the BOM) 1,949   3,491   4,233   …   … … … … …   Net international reserves (NIR) 3/ -788   1,152   1,768   …   … … … … …                                 Exchange rate                             Togrog per U.S. dollar (eop) 3,445   3,411   3,420   …   … … … … …   Sources: Mongolian authorities; and IMF staff projections.                               1/ These projections were prepared ahead of the supplementary budget for 2025 currently under discussion. They include the tax package approved by the previous Cabinet.                                                                                                                       2/ Includes DBM’s total debt, explicit government’s guarantees to SOE as well as government’s liabilities to BOM related to the TDB settlement regarding Erdenet. Excludes BOM liabilities to PBOC. 3/ NIR is defined as GIR excl. commercial banks' and government's US$ deposits held at the BOM, the PBOC swap line, and liabilities to the IMF.

 

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.