IMF delays Mongolia bailout after government ousting

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The International Monetary Fund (IMF) will delay disbursing bailout funds to Mongolia after the country's prime minister and cabinet were toppled in a parliamentary no-confidence vote last week, the IMF said on Thursday.

Cash-strapped and debt-ridden Mongolia was granted a 5.5 billion US dollar rescue package from the IMF and other partners in May after clashes with investors, government overspending and declining commodity export revenues tipped the country into an economic crisis last year.

However, the Mongolian People's Party (MPP) government, which negotiated the IMF deal, was ousted by parliament last week amid allegations of corruption and incompetence, as well as a damaging July presidential election defeat.

This picture taken on February 19, 2017 shows an official placing the flags of Mongolia (L) and the International Monetary Fund (R) before a briefing in Ulaanbaatar /AFP Photo

The IMF office in Mongolia confirmed that the scheduled first review of the bailout package would now be delayed until a new administration is formed.

"Once a new government is in place, we will engage with the authorities on further discussions of economic prospects and policies, and how best to move forward with the program," IMF resident representative Neil Saker said in an email.

Neil Saker (R), the International Monetary Fund's resident representative for Mongolia, and Mongolia's Finance Minister Battogtokh Choijilsuren, attend a press conference about a financing package supporting Mongolia's economic reform program, in Ulaanbaatar on May 25, 2017. /AFP Photo

The IMF is providing Mongolia with three years of credit worth about 434.3 million US dollars. The bailout package also includes soft loans from Japan and South Korea and an extended currency swap agreement with the People's Bank of China.

To secure the deal, Mongolia agreed to improve banking and finance regulation and also pledged to cut spending, raise taxes and postpone the statutory retirement age in a bid to balance its books.

Former Prime Minister Jargaltulga Erdenebat and his cabinet were appointed in 2016 on a promise to put Mongolia's struggling economy back on track. Although growth has recovered in 2017 after a resurgence in coal prices, Erdenebat failed in his efforts to revive crucial investment projects like the cross-border railway to China.

A new prime minister is expected to be appointed by the MPP later this month. The deadline is October 6, 30 days after last week's no-confidence vote.

For over a decade, China has been Mongolia's largest trading partner. According to China's Ministry of Commerce (MoC), Sino-Mongolian trade amounted to 3.1 billion US dollars in the first half of this year, up 44.2 percent from a year ago.

This photo taken on June 24, 2017 shows a family resting in a yurt, a traditional Mongolian house, on the outskirt of Ulaanbaatar. /AFP Photo‍

In the same period, China's non-financial direct investment in Mongolia reached 4.1 billion US dollars, accounting for 30 percent of Mongolia's total foreign investment.

China mainly exports gas, diesel, food, machinery and equipment to Mongolia, and imports natural resources, fur and raw materials.

China and Mongolia will soon start conducting a joint feasibility study for the development of a free trade zone, an MoC official said in August, ahead of the Second China-Mongolia Expo, which is slated to take place in Hohhot, capital of China's Inner Mongolia autonomous region on September 26-30.

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Source(s): Reuters ,China Daily