PDF《MONGOLIA》

s large monetary stimulus, through its so-called price stabilization program, mortgage program, and liquidity injection, distorts markets and is bound to ratchet up inflation. The programs should be phased out and the BOM should focus on further strengthening the monetary policy framework while maintaining the increased exchange rate flexibility observed in recent months. ? Banking sector vulnerabilities need to be addressed. They stem from weaknesses in banking supervision, inadequate provisioning, high levels of loan concentration and dollarization, and a high and rising credit-to-deposit ratio. ? The government should build on the recent passage of the new investment law to further improve the business climate and encourage FDI inflows. November 1,

2013 MONGOLIA

2 INTERNATIONAL MONETARY FUND Approved By Markus Rodlauer and Masato Miyazaki Discussions were held in Ulaanbaatar during September 10C24, 2013. The staff team comprised Messrs. Almekinders (head) and Yu (both APD), Ms. Kinoshita (OAP, who is in charge of the local office), and Messrs. Min (FAD), Quill (MCM), and Shin (OAP). Messrs. Rodlauer (APD), Yoon, and Moon (both OED) joined the last days of the mission. The team was assisted by Mses. Ardak, Khulan, and Selenge in the local office. Ms. Tolentino, Mr. George, and Ms. Choi (APD) assisted in the preparation of this report. CONTENTS RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK 4? A. Introduction 4? B. Expansionary Policies and External Shocks Are Pressuring the BOP 5? C. Outlook and Risks 7? POLICY DISCUSSIONS 10? A. Fiscal Policy_10? B. Monetary and Exchange Rate Policy_11? C. Financial Sector Issues_13? D. Structural Reforms and Statistics 14? STAFF APPRAISAL 15? BOXES 1. The Recent Failure of Savings Bank_17? 2. Price Stabilization Program, Mortgage Program and Liquidity Injection_18? 3. The Monetary Policy Stance 19? 4. Exchange Rate Assessment 20? 5. Financial Soundness Indicators and Bank Stress Tests 21? FIGURES 1. Real Sector Developments_22? 2. Fiscal and Monetary Sector Developments 23? 3. External Sector Developments 24? 4. Inclusive Growth Indicators 25? TABLES 1. Strong Policy and Weak Policy Scenarios, 2010C18_8? 2. Selected Economic and Financial Indicators, 2009-14 26? MONGOLIA INTERNATIONAL MONETARY FUND

3 3. Summary Operations of the General Government, 2009C14_27? 4. Statement of Operations and Stock Positions of the General Government, 2009C14_28? 5. Monetary Aggregates, 2009C14 29? 6. Balance of Payments, 2011C18_30? 7. Selected Economic and Financial Indicators, 2009-18 31? 8. Financial Soundness Indicators of the Banking Sector_32? APPENDIXES I. Risk Assessment Matrix_33? II. Mongolia'

s New Fiscal Framework Anchored by the Fiscal Stability Law 34? MONGOLIA

4 INTERNATIONAL MONETARY FUND RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK A. Introduction 1. Mongolia has made impressive progress in developing its economy (Figure 1). Spearheaded by foreign direct investment (FDI)-financed development of the mining sector, per capita income has increased five-fold, to more than US$3,000, over the past decade. Medium-term prospects are promising as mining output is projected to expand further over the next five years. Foreign investors'

optimism about Mongolia'

s prospects was illustrated by successful international bond issuances in 2012. A private mining company, a private bank, the state-owned Development Bank (DBM), and the sovereign (the US$1.5 billion Chinggis bond) raised a total of US$3 billion (30 percent of GDP). 2. The strong growth of the economy has helped reduce poverty. Over the past two years, poverty has declined by more than