Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Mongolia and endorsed the staff appraisal without a meeting on a lapse-of-time basis.[2] The authorities have consented to the publication of the Staff Report prepared for this consultation.[3]
Despite a sharp decline in coal prices, Mongolia’s macroeconomic outcomes in 2025 were better than expected. A strong recovery in agricultural output and solid mining production supported growth, while higher copper exports and softer import demand helped narrow the current account deficit. Buoyant mining activity underpinned strong GDP growth through April 2026 (7.8 percent y/y), although underlying growth momentum remained subdued. Inflation has risen since March 2026 following several months of moderation, driven by surging meat and energy prices and reaching 12.0 percent y/y in June.
Growth is projected to remain robust in 2026 despite headwinds from higher energy prices and global uncertainty. Strong mining activity is expected to help offset weaker non-mining growth and further improve the current account balance, although growth is projected to moderate from the high level recorded in 2025 as the boost from agricultural base effects fades. Inflation is projected to remain elevated at around 10 percent by year-end amid high food and fuel prices, before easing gradually thereafter. The outlook remains subject to significant downside risks, including domestic policy slippages amid social and populist pressures ahead of the elections, as well as Mongolia close links to developments in global commodity markets and external demand.
Executive Board Assessment
Despite multiple shocks, Mongolia’s economy has remained resilient. In 2025, economic activity benefited from a sharp recovery in agriculture and strong mining activity, notwithstanding declining coal prices. The current account deficit narrowed as surging copper exports and moderating imports more than offset weaker coal exports. Nevertheless, the external position in 2025 is assessed to remain weaker than implied by fundamentals and desirable policy settings. Strong growth continued into early 2026, supported by buoyant mining production, but is projected to moderate owing to base effects. Headline inflation started rising again amid higher food and fuel prices and is expected to remain elevated throughout the year.
Vulnerabilities remain elevated, with the balance of risks to the outlook tilted to the downside. Key downside risks stem from a potential deterioration in external financing conditions due to fiscal slippages and higher debt, given political pressures to further reduce non-mining taxes and increase current spending, especially wages and pensions. External risks include heightened geopolitical tensions, including adverse spillovers from the Middle East conflict and Russia’s war in Ukraine, as well as uncertainty about prospects for coal exports to China and commodity prices.
Fiscal policy should prioritize rebuilding buffers and safeguarding sustainability. The submission of a supplementary budget to Parliament is a priority, to avoid end-year cash shortages as in 2025. The recently approved tax package should be reconsidered given its adverse impact on non‑mining revenues. Efforts should instead focus on tax policy and administrative reforms to strengthen them. Higher non-mining revenue, together with greater efficiency in current spending, would create space for much-needed development spending and rebuilding buffers. Public financial management and fiscal transparency need to be strengthened to enhance the credibility of the budget, including through a well-defined MTFF, more realistic budget formulation, and stronger governance of mining funds. Mongolia has benefited from the fiscal rules, and policy measures that undermine their credibility should be avoided, including the selective exclusion of public investment projects. Fiscal measures in response to higher fuel prices should be temporary and well‑targeted, while preserving price signals. Reducing reliance on external financing would strengthen fiscal resilience.
The BOM should maintain a tight monetary policy stance while standing ready to tighten further if risks of unanchored inflation expectations and significant second-round effects emerge. Strengthening the BOM’s operational and legal autonomy, forbidding quasi‑fiscal activities, and addressing its weak balance sheet are critical to enhancing its effectiveness and credibility.
Higher FX reserves and greater exchange rate flexibility would strengthen Mongolia’s resilience to external shocks. While GIR have increased markedly, they remain below adequacy thresholds. The BOM should continue pursuing opportunistic reserve accumulation when market conditions allow. The BOM should also gradually phase out its role as a structural provider of FX to the market and reduce its dominance in providing FX hedging instruments to banks by fostering the development of the domestic FX derivatives market.
The macroprudential framework needs further improvement. The BOM should strengthen the institutional separation between macroprudential and monetary policy, expand its macroprudential toolkit, and enhance coordination with the FRC. Incorporating pension-backed loans into the DSTI framework would help prevent excessive indebtedness among pensioners. Continued progress in risk-based supervision, alongside reforms to credit information, insolvency, and resolution frameworks, would further enhance financial sector resilience. The proposed increase in bank shareholder limits, together with allowing international financial institutions to invest in multiple banks, is welcome and could facilitate bank shareholder diversification.
Structural reforms remain essential to achieving sustainable and inclusive growth. Priorities include improving the business environment to support investment and attract FDI, strengthening governance and the rule of law, and moving toward a more diversified and private sector-led growth model. The revised Foreign Investment Law, amendments to the SOE Law and the Mineral Law, and the draft Whistleblower Law should be finalized and enacted promptly.
Table 1. Mongolia: Selected Economic and Financial Indicators, 2023–31
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2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
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Actual |
Projections |
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(In percent of GDP, unless otherwise indicated) |
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National Accounts |
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|
|
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Real GDP growth (percent change) |
7.4 |
5.1 |
6.8 |
5.8 |
5.6 |
5.6 |
5.1 |
5.0 |
5.0 |
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|
Nominal GDP (in USD million) |
20,315 |
23,795 |
25,370 |
… |
… |
… |
… |
… |
… |
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Contributions to Real GDP (ppts) |
|
|
|
|
|
|
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Domestic Demand |
5.6 |
21.2 |
1.8 |
10.4 |
8.5 |
8.2 |
7.2 |
7.4 |
7.3 |
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|
Exports of G&S |
17.9 |
0.5 |
4.0 |
2.1 |
4.2 |
2.1 |
1.6 |
2.5 |
2.7 |
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|
Imports of G&S |
-16.2 |
-16.6 |
1.1 |
-6.7 |
-7.1 |
-4.7 |
-3.8 |
-4.9 |
-5.0 |
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Consumption |
57.5 |
64.9 |
66.1 |
59.7 |
61.1 |
60.8 |
62.6 |
63.0 |
64.6 |
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Private |
44.5 |
49.4 |
51.5 |
45.7 |
45.9 |
45.7 |
47.5 |
47.8 |
49.3 |
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Public |
13.0 |
15.5 |
14.6 |
14.0 |
15.2 |
15.1 |
15.2 |
15.2 |
15.3 |
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Gross Capital Formation |
33.9 |
35.5 |
31.4 |
29.5 |
28.7 |
30.5 |
29.9 |
30.3 |
29.3 |
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|
Gross Fixed Capital Formation |
25.3 |
27.2 |
28.0 |
29.1 |
27.0 |
26.7 |
24.9 |
24.3 |
23.3 |
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Public |
7.4 |
9.8 |
7.9 |
8.4 |
7.7 |
8.1 |
7.0 |
7.0 |
6.8 |
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Private (including SOEs) |
18.0 |
17.3 |
20.1 |
20.6 |
19.2 |
18.6 |
17.8 |
17.3 |
16.6 |
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Gross national saving |
34.5 |
25.1 |
23.1 |
25.0 |
24.2 |
25.2 |
24.0 |
23.7 |
22.4 |
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Prices |
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|
Consumer Prices (Avg; percent change) |
10.4 |
6.2 |
8.6 |
8.8 |
9.5 |
8.3 |
7.2 |
6.8 |
6.7 |
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|
Consumer Prices (EoP; percent change) |
7.7 |
8.3 |
7.5 |
10.0 |
9.0 |
7.5 |
6.9 |
6.7 |
6.6 |
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|
Copper prices (US$ per ton) |
8,491 |
9,142 |
9,947 |
13,527 |
13,889 |
13,837 |
13,805 |
13,801 |
13,814 |
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Bituminous coal prices (US$ per ton) |
131.4 |
107.3 |
66.5 |
73.4 |
79.2 |
76.3 |
76.3 |
76.4 |
76.4 |
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|
GDP deflator (percent change) |
21.8 |
8.9 |
4.4 |
14.3 |
9.5 |
8.0 |
7.3 |
6.8 |
6.5 |
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|
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|
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General government accounts |
|
|
|
|
|
|
|
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Primary balance (IMF definition) |
4.3 |
2.7 |
3.2 |
-0.3 |
-3.0 |
-4.2 |
-3.2 |
-3.0 |
-2.8 |
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|
Total revenue and grants |
34.6 |
38.9 |
36.3 |
31.8 |
30.3 |
29.1 |
28.8 |
28.8 |
28.7 |
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|
Primary expenditure and net lending |
30.3 |
36.2 |
33.1 |
32.2 |
33.3 |
33.3 |
32.0 |
31.8 |
31.5 |
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Interest |
1.6 |
1.5 |
1.7 |
1.9 |
2.2 |
2.4 |
2.7 |
3.0 |
3.3 |
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|
Overall balance (IMF definition) |
2.7 |
1.3 |
1.5 |
-2.2 |
-5.2 |
-6.6 |
-5.9 |
-5.9 |
-6.1 |
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|
Non-mining primary balance (in percent of GDP) |
-5.7 |
-8.8 |
-5.6 |
-8.2 |
-10.6 |
-11.4 |
-10.1 |
-9.6 |
-9.2 |
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|
Gross financing needs |
9.0 |
4.7 |
3.0 |
5.1 |
9.5 |
13.3 |
13.1 |
14.1 |
16.5 |
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|
General government debt 1/ |
46.7 |
44.1 |
45.1 |
47.0 |
50.5 |
55.9 |
59.1 |
61.3 |
63.7 |
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|
Domestic |
3.3 |
3.1 |
3.2 |
4.9 |
6.3 |
7.8 |
8.8 |
9.3 |
10.8 |
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|
External |
43.4 |
41.0 |
41.9 |
42.1 |
44.3 |
48.1 |
50.2 |
52.0 |
52.8 |
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|
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|
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|
Monetary sector |
|
|
|
|
|
|
|
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|
Broad money growth (percent change) |
24.2 |
15.5 |
10.6 |
20.3 |
17.5 |
14.1 |
12.7 |
12.4 |
12.1 |
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|
Reserve money growth (percent change) |
7.4 |
51.9 |
39.5 |
20.3 |
17.5 |
14.1 |
12.7 |
12.4 |
12.1 |
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|
Credit growth (percent change) |
22.0 |
30.3 |
19.8 |
17.0 |
16.5 |
15.1 |
13.7 |
13.1 |
12.8 |
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|
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Balance of payments |
|
|
|
|
|
|
|
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|
Current account balance |
0.6 |
-10.4 |
-8.4 |
-4.5 |
-4.5 |
-5.3 |
-5.9 |
-6.6 |
-7.0 |
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|
Exports of goods |
68.5 |
62.0 |
60.5 |
67.3 |
65.3 |
61.7 |
58.9 |
56.7 |
54.8 |
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|
Imports of goods |
46.1 |
49.0 |
44.7 |
46.6 |
44.5 |
44.0 |
42.3 |
41.8 |
40.9 |
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|
Gross official reserves (in USD million) |
4,922 |
5,510 |
7,005 |
7,234 |
7,230 |
7,234 |
7,254 |
7,264 |
7,285 |
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|
(In months of imports) |
3.6 |
4.1 |
4.4 |
4.3 |
4.2 |
4.0 |
3.9 |
3.7 |
3.6 |
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|
(net of bank's FX deposits held at the BOM) |
3,491 |
4,233 |
5,094 |
… |
… |
… |
… |
… |
… |
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|
Net international reserves (NIR) 2/ |
1,152 |
1,768 |
2,517 |
… |
… |
… |
… |
… |
… |
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|
Exchange rate |
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|
|
Togrog per U.S. dollar (eop) |
3,411 |
3,420 |
3,557 |
… |
… |
… |
… |
… |
… |
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Sources: Mongolian authorities; and IMF staff projections. |
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1/ 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. |
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2/ 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. |
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[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] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
[3] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/Mongolia page.
