Mongolia has received the go-ahead on a $5.5bn bailout from the International Monetary Fund (IMF) as the commodity-rich country tries to shore up its crisis-ridden economy.
The central Asian country agreed a wide range of structural reforms to its economy in exchange for the payout, the IMF said.
This includes cuts to government spending, instituting a more progressive tax system, and the strengthening of government institutions and the banking system.
New laws to improve central bank independence will also be brought in, after a doomed attempt by the Bank of Mongolia to prop up the currency against the dollar ended in disaster. The deal was previously held up by a dispute over a law requiring foreign companies to feed earnings through Mongolian banks.
Other bailout partners include the World Bank, the People’s Bank of China, and the Japanese and Korean governments.
Mitsuhiro Furusawa, deputy managing director, said: “The Mongolian authorities are implementing a program to maintain macroeconomic stability, pave the way to economic recovery, and protect the most vulnerable during the adjustment process.”
The reforms are aimed at reducing the country’s debt pile, which jumped to nearly 90 per cent of GDP at the end of 2016, according to IMF calculations.
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Mongolia’s economy was one of the world’s fastest growing economies after the global financial crisis, with GDP more than doubling between 2009 and 2011, according to the World Bank.
While Mongolia only has three million inhabitants and the lowest population density in the world barring Greenland, its vast steppes are home to massive mineral resources, particularly of copper and coal.
However, the tide went out for the country when commodity prices plunged from 2011 onwards in the face of massive oversupply. The government was left massively overstretched as revenues plummeted.
The value of the Mongolian togrog against the US dollar has more than halved since 2011 highs as money has fled the country, with steep falls since the middle of last year.
Mongolia remains heavily dependent on mining for its economy, but the IMF will also push efforts to diversify the economy, including improving agriculture and tourism.