An International Monetary Fund (IMF) staff team led by Mr. Geoff Gottlieb
visited Ulaanbaatar from November 7-17, 2018 to conduct discussions on the
sixth review of the three-year Extended Fund Facility (EFF) arrangement
approved on May 24, 2017, in an amount equivalent to SDR314.5054 million,
or about US$434.3 million (see
Press Release
No. 17/193
).
At the conclusion of the visit, Mr. Gottlieb made the following statement:
“As we reach the mid-way point of the IMF supported program, significant
progress has been made by the authorities in overcoming the economic
crisis. Growth has revived to over 6 percent, the overall fiscal balance
has swung from a large deficit to a small surplus, and government debt has
fallen sharply. While the external environment has been supportive with
buoyant export demand, the recovery has become broader based with
consumption and investment rising sharply. Against this backdrop, the authorities are on track to meet all end-December macroeconomic targets, including the fiscal deficit and net international reserves.
“While welcome, this recovery brings new challenges. Stronger domestic
demand conditions are widening the current account deficit, halting reserve
accumulation. In response, the Bank of Mongolia should rein in high credit
growth through tighter monetary conditions and the introduction of
well-targeted macro-prudential measures.
“In the financial sector, the follow-up to the Asset Quality Review that
was completed in 2017 is entering its final phase. Those banks that were
found to be undercapitalized have until end-December to raise the necessary
new capital. Banks that fail to do so will face Central Bank intervention
or be resolved as per the Banking Law.
“The authorities are also moving ahead with reforms that will allow for
more rapid resolution of non-performing loans, strengthen their Anti Money
Laundering framework, and improve the selection and appraisal of public
investment projects. Given the importance of attracting more foreign
capital, the authorities should also commit to strengthening the business
and investment climate.
“The authorities and the IMF team have reached staff-level agreement on the
economic policies for completion of the sixth review under the EFF
arrangement, which is subject to the approval of the IMF Executive Board.
The authorities have committed to several actions, mainly in the financial
sector, that will be completed before the Executive Board meeting.”
The team thanks the authorities for their cooperation, constructive
dialogue, and hospitality during its stay in Mongolia.
