{
  "title": "Mongolia: Concluding Statement of 2022 IMF Staff Visit",
  "publication": "IMF News, May 12, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/05/12/mongolia-concluding-statement-2022-imf-staff-visit",
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  "summary": "Mongolia: Concluding Statement of 2022 IMF Staff Visit",
  "publishDate": "2022-05-12",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Mission dates: IMF team visited Ulaanbaatar during April 28–May 4, 2022.\n- Main assessment: Mongolia is facing stagflation driven by global shocks and border disruptions, with significant downside risks despite an export price boom.\n- Immediate policy stance: Monetary policy should stay on hold for now; tight fiscal and quasi‑fiscal policies and greater exchange rate flexibility are also necessary."
    },
    {
      "heading": "Stagflationary outlook and risks",
      "content": "- Growth projection: economy expected to expand at 1 percent in 2022, instead of the 7 percent forecasted in November 2021.\n- Inflation projection: average rate of 14½ percent in 2022.\n- Key downside risks listed:\n  - commodity price volatility;\n  - extended Chinese border closures;\n  - an escalation of sanctions on Russia;\n  - tighter global financing conditions;\n  - risk of a pandemic resurgence;\n  - disruption in correspondent banking relations due to sanctions on Russia could lead to a near-standstill in the worst-case scenario.\n- Medium-term upside scenario: if border disruptions and geopolitical shocks resolve by end-year, growth could accelerate to above 6 percent in 2023-25 with strong commodity prices and Oyu Tolgoi underground mine production starting in 2023."
    },
    {
      "heading": "Monetary policy and exchange rate",
      "content": "- Monetary stance recommendation:\n  - Keep monetary policy on hold and be data dependent, given inflation largely driven by global supply shocks and measures already taken.\n  - Be prepared to tighten if a wage-price spiral emerges.\n  - Monitor inflationary impact of government support measures, the large real minimum pension increase, and forthcoming minimum wage hikes.\n- Quasi-fiscal operations:\n  - Phase out quasi‑fiscal operations immediately (currently being continued till end-2022) because untargeted support adds to inflation and FX pressures and undermines monetary policy.\n  - Phasing out would support BOM operational independence and help meet Mongolia’s commitments under the 2020 emergency financing assistance.\n- Exchange rate policy:\n  - Allow greater exchange rate flexibility so the exchange rate can act as a shock absorber.\n  - Limit BOM FX interventions to disorderly market conditions; use opportunistic interventions to bolster international reserves.\n  - Implement an effective communication strategy to stem speculative pressures."
    },
    {
      "heading": "Fiscal policy and social support",
      "content": "- Fiscal consolidation priority: strong fiscal consolidation essential to support monetary policy, contain inflation, manage external pressures, and address debt maturing in 2023.\n- 2022 supplementary budget: appropriately targets new policy support toward the vulnerable, tightens current spending, and prioritizes investments.\n- Social assistance guidance:\n  - Any additional support should be temporary and targeted to vulnerable households.\n  - Avoid permanent fiscal expansions that undermine consolidation.\n  - Concern: allowing full use of expanded child money support could increase demand and inflation unless saved by recipients.\n  - Large hikes in minimum pensions and minimum wages in real terms are likely inflationary and counterproductive given supply bottlenecks.\n  - Recommend better targeting of social assistance to reduce poverty without raising inflation; improve equity and spending efficiency.\n- Revenue and savings:\n  - 2023 budget should be conservative and balance consolidation with necessary support.\n  - Raising revenues through progressive personal income taxation recommended to fund investments in education, health, and infrastructure.\n  - Any revenue windfalls should be saved after protecting priority spending (e.g., on healthcare) in real terms.\n  - Reverse the 2021 legislative changes that forgo future savings in the Future Heritage Fund to fund permanent expansion of untargeted social assistance.\n- Public investment and supply side:\n  - Accelerate public investment and improve processes to facilitate automated zero-contact exports at the Chinese border.\n  - Continue policy allowing energy prices to reflect market values to preserve fiscal resources and conserve energy."
    },
    {
      "heading": "Financial sector, IPOs, and Bank of Mongolia (BOM) actions",
      "content": "- Asset quality reviews and IPOs:\n  - BOM should conduct an asset quality review (AQR) of banks and exercise its powers to ensure a sound IPO process.\n  - Concerns raised by BOM’s decision to suspend the initiated AQR; Parliament ideally should delay the June 2022 IPO deadline until AQRs can be completed.\n  - If Parliament does not delay, BOM should complete AQRs before larger amounts of shares are issued by the 2023 deadline to reduce shareholder concentration.\n  - BOM should conduct forward-looking stress tests to assess mining sector developments’ impact on bank balance sheets and engage in contingency planning.\n  - If IPOs fail, BOM should take corrective measures outlined in the Banking Law to stabilize banks.\n- Development Bank of Mongolia (DBM):\n  - DBM’s balance sheet problems should be promptly and judiciously addressed to avoid fiscal and external stability implications in 2023.\n  - Use of public funds for DBM without fixing long-standing governance concerns is inadvisable and poses future fiscal risks.\n  - Recommend appointing an independent external advisor to conduct a diagnostic review of DBM’s balance sheet and develop a credible plan.\n  - Strengthen DBM governance and determine long-term viability in the context of public investment management reforms."
    },
    {
      "heading": "Structural reforms and debt management",
      "content": "- Continue and implement strong structural reform plans to reduce reliance on external borrowing.\n- Implement a new medium-term debt strategy with a nominal debt anchor and domestic debt issuance to support fiscal prudence and debt sustainability.\n- Reforms needed:\n  - pension parameters;\n  - state-owned enterprises;\n  - sound public investment and fiscal risk management.\n- Integrate planned sovereign wealth and development funds into the state budget for proper oversight.\n- Modernize and expand the insolvency framework to help individuals, companies, and banks address impaired balance sheets."
    },
    {
      "heading": "Selected economic and financial indicators (highlights from Table 1)",
      "content": "- Nominal GDP (in USD million):\n  - 2019: 14,206\n  - 2020: 13,313\n  - 2021: 15,098\n  - 2022: 15,790\n  - 2023: 16,629\n  - 2024: 18,366\n  - 2025: 20,134\n  - 2026: 21,833\n  - 2027: 23,494\n- Real GDP growth (percent change):\n  - 2019: 5.6\n  - 2020: -4.6\n  - 2021: 1.4\n  - 2022: 1.0\n  - 2023: 6.0\n  - 2024: 7.0\n  - 2025: 5.5\n  - 2026: 5.0\n- Consumer Prices (Avg; percent change):\n  - 2019: 7.3\n  - 2020: 3.7\n  - 2021: 7.1\n  - 2022: 14.4\n  - 2023: 11.9\n  - 2024: 9.6\n  - 2025: 8.2\n  - 2026: 6.5\n- Consumer Prices (EoP; percent change):\n  - 2019: 5.2\n  - 2020: 2.3\n  - 2021: 13.5\n  - 2022: 14.2\n  - 2023: 10.5\n  - 2024: 8.7\n  - 2025: 7.7\n- Commodity price projections (selected):\n  - Copper prices (US$ per ton): 2019: 6010; 2020: 6175; 2021: 9317; 2022: 10105; 2023: 10048; 2024: 9908; 2025: 9751; 2026: 9629; 2027: 9584\n  - Coal prices (US$ per ton): 2019: 84; 2020: 74; 2021: 129; 2022: 181; 2023: 137; 2024: 107; 2025: 108\n  - Gold prices (US$ per ounce): 2019: 1392; 2020: 1770; 2021: 1800; 2022: 1914; 2023: 1953; 2024: 1994; 2025: 2035; 2026: 2061; 2027: 2081\n  - Oil price (U.S. dollars per barrel): 2019: 61.4; 2020: 41.3; 2021: 69.1; 2022: 106.8; 2023: 92.6; 2024: 84.2; 2025: 78.5; 2026: 74.7; 2027: 72.5\n- General government accounts (selected, percent of GDP):\n  - Primary balance (IMF definition): 2019: 3.2; 2020: -7.5; 2021: -1.2; 2022: 0.6; 2023: 2.0; 2024: 1.1; 2025: 0.0; 2026: -0.5\n  - Total revenue and grants: 2019: 31.7; 2020: 27.1; 2021: 33.1; 2022: 35.8; 2023: 35.7; 2024: 34.7; 2025: 34.3; 2026: 33.8; 2027: 33.6\n  - Primary expenditure and net lending: 2019: 28.5; 2020: 34.6; 2021: 35.2; 2022: 33.5; 2023: 33.3; 2024: 34.2\n  - Interest: 2019: 2.5; 2020: 1.9; 2021: 1.7; 2022: 1.5; 2023: 1.6; 2024: 1.2\n  - Overall balance (IMF definition) 2/3/: 2019: 0.9; 2020: -10.0; 2021: -3.1; 2022: 0.1; 2023: -0.6; 2024: -1.6; 2025: -1.8\n- Monetary sector (percent change):\n  - Broad money growth: 2019: 16.3; 2020: 15.0; 2021: 8.5; 2022: 15.7; 2023: 15.5; 2024: 13.8; 2025: 12.6; 2026: 11.8\n  - Reserve money growth: 2019: 5.4; 2020: -12.7; 2021: 6.6; 2022: 14.9; 2023: 14.6\n  - Credit growth: 2019: 4.4; 2020: -3.8; 2021: 18.5; 2022: 8.4; 2023: 10.7; 2024: 11.5; 2025: 12.8\n- Balance of payments:\n  - Current account balance (percent of GDP): 2019: -15.2; 2020: -5.1; 2021: -13.0; 2022: -18.8; 2023: -16.7; 2024: -13.6; 2025: -8.1; 2026: -8.0; 2027: -7.6\n  - Exports of goods (y/y percent change): 2019: 18.0; 2020: 14.1; 2021: 9.9; 2022: 11.2; 2023: 4.9\n  - Imports of goods (y/y percent change): 2019: 2.4; 2020: -13.1; 2021: 32.7; 2022: 24.9; 2023: 2.8; 2024: 4.1\n- Exchange rate:\n  - Togrog per U.S. dollar (eop): 2019: 2734; 2020: 2850; 2021: 2849; 2022: …\n- Memorandum:\n  - Population in million (eop): 2019: 3.3; 2020: 3.4\n\nSource: Mongolia: Concluding Statement of 2022 IMF Staff Visit (May 12, 2022).\n\n---\n\n Content in this bundle\n\n- Moнгол Улс: ОУВС-гийн ажлын хэсгийн 2022 оны айлчлалын дүгнэлт\n  - Moнгол Улс: ОУВС-гийн ажлын хэсгийн 2022 оны айлчлалын дүгнэлт (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Moнгол Улс: ОУВС-гийн ажлын хэсгийн 2022 оны айлчлалын дүгнэлт (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Mongolia and the IMF\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/05/12/mongolia-concluding-statement-2022-imf-staff-visit"
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    "Published: May 12, 2022",
    "Mission dates: IMF team visited Ulaanbaatar during April 28–May 4, 2022.",
    "Main assessment: Mongolia is facing stagflation driven by global shocks and border disruptions, with significant downside risks despite an export price boom.",
    "Immediate policy stance: Monetary policy should stay on hold for now; tight fiscal and quasi‑fiscal policies and greater exchange rate flexibility are also necessary.",
    "Growth projection: economy expected to expand at 1 percent in 2022, instead of the 7 percent forecasted in November 2021.",
    "Inflation projection: average rate of 14½ percent in 2022.",
    "Key downside risks listed:",
    "Medium-term upside scenario: if border disruptions and geopolitical shocks resolve by end-year, growth could accelerate to above 6 percent in 2023-25 with strong commodity prices and Oyu Tolgoi underground mine production starting in 2023.",
    "Monetary stance recommendation:",
    "Quasi-fiscal operations:",
    "Exchange rate policy:",
    "Fiscal consolidation priority: strong fiscal consolidation essential to support monetary policy, contain inflation, manage external pressures, and address debt maturing in 2023.",
    "2022 supplementary budget: appropriately targets new policy support toward the vulnerable, tightens current spending, and prioritizes investments.",
    "Social assistance guidance:",
    "Revenue and savings:",
    "Public investment and supply side:",
    "Asset quality reviews and IPOs:",
    "Development Bank of Mongolia (DBM):",
    "Continue and implement strong structural reform plans to reduce reliance on external borrowing.",
    "Implement a new medium-term debt strategy with a nominal debt anchor and domestic debt issuance to support fiscal prudence and debt sustainability.",
    "Reforms needed:",
    "Integrate planned sovereign wealth and development funds into the state budget for proper oversight.",
    "Modernize and expand the insolvency framework to help individuals, companies, and banks address impaired balance sheets.",
    "Nominal GDP (in USD million):",
    "Real GDP growth (percent change):",
    "Consumer Prices (Avg; percent change):",
    "Consumer Prices (EoP; percent change):",
    "Commodity price projections (selected):",
    "General government accounts (selected, percent of GDP):",
    "Monetary sector (percent change):",
    "Balance of payments:",
    "Exchange rate:",
    "Memorandum:",
    "**Moнгол Улс: ОУВС-гийн ажлын хэсгийн 2022 оны айлчлалын дүгнэлт**",
    "[Mongolia and the IMF](http://www.imf.org/external/country/MNG/index.htm)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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