Joint Statement of the International Partners at the Government of Mongolia—External Partners’ Meeting

The international partners of Mongolia would like to congratulate the Government of Mongolia for hosting this meeting during an important but difficult phase in Mongolia’s development.

We understand that the financial crisis started far away from Mongolia, but its impact, via the decline in global commodity prices, has made Mongolia one of the most heavily affected countries in the East Asian region. A strong macroeconomic stabilization program is needed, backed by firm government commitment. And with one third of the population living in poverty, the Government will need to use its limited resources to protect the poor from the negative effects of the downturn.

In addition, Mongolia needs to look beyond the crisis, not lose sight of maintaining its current high level of human capital, infrastructure and environmental wealth, and selectively invest in the future to bring Mongolia back on the road to prosperity. Mongolia is blessed with mineral wealth but it should not let it become a mineral curse by letting other sectors and associated employment decline, by allowing corruption to thrive or by letting government spending follow the commodity boom-and-bust cycle. To prevent this from happening, a strong institutional framework is needed that is robust to the global ups and downs of the commodity cycle. This crisis presents the opportunity to put such a framework in place.

The international partners are impressed by the actions already undertaken in this regard by the Government. We understand that these reforms may be painful in the short run, but will pay off in a more stable macroeconomic and financial environment in the medium term.

We congratulate the Government of Mongolia on having reached an agreement with the International Monetary Fund on a Stand-By Arrangement of $224 million, and we express our wish that the cooperation with the IMF will continue to be fruitful. The SBA will assist in attaining macroeconomic stability and provide breathing space for Mongolia to institute the necessary medium-term reforms on the fiscal side and in the banking sector while safeguarding protection of those who need it.

The IMF has estimated that $205 million is needed to bridge the budget gap for 2009 and 2010. Given the downside risks, this is a conservative estimate. The Government has received firm pledges amounting to $160 million from the World Bank, the Asian Development Bank and Japan. Other partners have indicated that they will add to this and with some additional support we are optimistic that the combined effort will be sufficient to plug the estimated budget gap.

As a result of this Donors Conference, the community of development partners is now keenly aware of the economic crisis in Mongolia, the strong remedial actions that have been taken so far, and the short and medium-term strategy being put in place by the Government. This Conference therefore resolves to explore further possibilities of providing additional budget support and reprioritizing existing and planned development assistance to Mongolia to better respond to the crisis. In this regard, we urge the Government to continue to engage in discussions with the multilateral and bilateral partners. We promise our continued support to the Government of Mongolia and the Mongolian people so that Mongolia will emerge from this crisis with a stronger framework to sustain development.