Mongolia Will ‘Walk the Walk’ to Revive Economy in Crisis
In the face of the current crisis, Mongolia cut spending and requested support from the IMF. To turn the economy around, the new government aims to lure foreign money to pay for stalled infrastructure and mining projects.
“It’s important to not only talk the talk, but to walk the walk, and that’s what we intend to do,’’ Foreign Minister Munkh-Orgil Tsend, said last week in Ulaanbaatar. “By end of the first half of next year we will have brought in most of the investment projects that have been in the pipeline for many years, including Tavan Tolgoi,’’ he said, referring to Mongolia’s largest coking coal deposit.
The crisis began after prices for Mongolia’s commodity exports fell and the budget deficit expanded. Disputes with foreign investors such as Rio Tinto Group also delayed spending on new mining projects and investment collapsed, hitting tax revenues, growth and the currency.
The tugrik has fallen 19 percent this year, reaching an all-time low of 2479 to the dollar last week. The budget deficit is also widening – with the shortfall at $905 million in the first nine months of this year, compared to $435 million in the same period a year ago.
Development of Tavan Tolgoi includes the construction of a 240-kilometer long railway from the mine site to the Chinese border, as well as coal-handling preparation plant, plus power and water supply facilities. The government is planning talks this month with China Shenhua Energy Co., part of a consortium of companies tapped to develop the mine, according to Ganbat Dangaa, the roads and transport minister.
More on the crisis in Mongolia
The talks have been delayed for more than a year after the previous government failed to win backing from Parliament for a deal with the consortium. If talks fail again, the government will “have to invite another bidder for the project,’’ said Munkh-Orgil.
An IMF program, which could be in place by February, may be followed by bilateral loan agreements from partner countries including China and Japan, the foreign minister said. An IMF program is considered a stopgap measure before big foreign investment projects can move forward, said Munkh-Orgil.
In addition to Tavan Tolgoi, Munkh-Orgil said he supports cooperating with China in its One Belt One Road initiative. Mongolia’s parallel project, the Steppe Initiative, envisions five economic corridors running across Mongolia linking China to Russia with highways, railroads and pipelines.
“We are working with Chinese and Russian partners to develop these projects. We see ourselves as a bridge, as a nation that can bring others together,’’ said Munkh-Orgil. “It’s an important issue and we want to be part of it, we want to benefit from it.’’
“We are looking to create a fiscal political regime that is both stable and attractive to both foreign and domestic investors,’’ Munkh-Orgil said. “If we have some long-term policy agreement with the IMF and then major projects are set in motion, that would be the biggest advertisement’’ for the nation, he said.