## Press Release: IMF Executive Board Approves US$229.2 Million Stand-By Arrangement for Mongolia

_IMF News, April 1, 2009_

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**Canonical URL:** [Press Release: IMF Executive Board Approves US$229.2 Million Stand-By Arrangement for Mongolia](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr09110)

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## Bibliographic details
- Published: April 1, 2009

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### Program approval and financing
- Executive Board approved an 18-month Stand-By Arrangement for Mongolia in an amount equivalent to SDR 153.3 million (about US$229.2 million).
- Upon approval, an amount equivalent to SDR 51.1 million (about US$76.4 million) becomes immediately available.
- Remaining amount to be phased in, subject to quarterly reviews.
- Total IMF resources made available under the arrangement equals 300 percent of the country’s quota.

### Key objectives of the IMF-supported program
- Restore macroeconomic stability through fiscal, monetary and financial sector policies.
- Protect the poor from the burden of the needed adjustment.
- Outline a solid macroeconomic framework to provide the basis for the authorities to approach the broader international community for financial support.

### Executive Board statement highlights (Takatoshi Kato, Deputy Managing Director and Acting Chairman)
- Mongolia severely affected by the global financial crisis through a sharp reduction in prices of main mineral exports, notably copper.
- Program aims to:
  - Smooth Mongolia’s adjustment to the large terms-of-trade shock.
  - Put the fiscal finances on a sustainable footing.
  - Allow for a more flexible exchange rate.
  - Address weaknesses in the banking system.
  - Mitigate the impact of adjustment on the most vulnerable.
- Fiscal policy centerpiece: significant adjustment in the fiscal stance to strengthen Mongolia’s finances and restore fiscal sustainability; seek a legislated framework for fiscal responsibility to limit procyclicality.
- Monetary stance: safeguard international reserves, prevent an overshooting of the nominal exchange rate, and put inflation on a steady downward path; central bank has raised interest rates and contained liquidity.
- Financial sector actions: taken one bank into conservatorship, clarified the blanket deposit guarantee scheme, and required other banks to raise their level of capital over time.
- Social protection: aim to improve system of social transfers through better targeting to ensure the very poorest households are more fully protected while conserving fiscal resources.

### Recent economic developments (Annex)
- Mongolia hit hard by global economic and financial crisis via a sudden drop in prices of main export commodities, most notably copper.
- Mineral revenues:
  - Accounted for more than one-third of budget revenues at the peak of the commodity boom in 2007.
  - Expected to account for only 12½ percent of total revenues in 2009.
- Growth and external position:
  - Economic growth set to fall to around 3 percent in 2009 from 9 percent in 2008.
  - Current account deficit expected to remain substantial, at around 6½ percent of GDP in 2009.
- Financial conditions:
  - Retranchement of credit; broad money has fallen by 14 percent since mid-2008.
  - Banking system came under stress.

### Program summary — key elements
- Fiscal policy:
  - Seek to constrain the general government deficit to 6 percent of GDP in 2009.
  - Fiscal adjustment centered primarily around expenditure restraint.
  - Biggest savings from postponement of domestically financed capital expenditure plans.
  - Additional savings from a wage and hiring freeze, cuts in some untargeted social allowances, and reductions in other purchases and goods and services.
  - Stronger institutional framework to ensure a greater proportion of windfall copper revenues is saved to prevent future boom-bust cycles.
- Monetary and foreign exchange policy:
  - Strengthen international reserve position and calibrate monetary policy to prevent undue overshooting of the exchange rate and keep inflation on a downward path.
  - New system of foreign currency auction introduced to provide a nondiscriminatory and transparent mechanism to sell foreign exchange allowing for market determination of the exchange rate.
- Financial sector:
  - Measures to strengthen the banking system by improving the framework for deposit guarantees and enhancing bank supervision.
- Social protection:
  - Improve the social safety net to protect the poorest (noting one-third of the population living below the poverty line).
  - In collaboration with the Asian Development Bank and the World Bank, design a comprehensive overhaul of the existing untargeted system of social transfer programs to better target the very poor and increase support to poor households.

### Key statistics and country-specific facts
- Arrangement amount: SDR 153.3 million (about US$229.2 million).
- Immediate disbursement: SDR 51.1 million (about US$76.4 million).
- IMF resources under arrangement: 300 percent of the country’s quota.
- Mineral revenues projected share of total revenues in 2009: 12½ percent.
- Growth: around 3 percent in 2009 (from 9 percent in 2008).
- Current account deficit: around 6½ percent of GDP in 2009.
- Broad money change: fallen by 14 percent since mid-2008.
- General government deficit target for 2009: 6 percent of GDP.
- Mongolia joined the Fund on February 14, 1991; quota of SDR 51.1 million (about US$76.4 million).

*Press Release No. 09/110 — April 1, 2009*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr09110_