Strong economic foundation laid for executing New Revival Policy

Last year, our country was unable to export its main mining products due to the restrictions of the “Zero-COVID” policy of China, causing the economy to shrink by 3.9 percent in the first quarter of 2021. Along with export disruptions, sharp increases in prices of key imports due to geopolitical tension have heightened the balance of payments deficit of Mongolia and led the national foreign currency reserves to decline to 2.4 billion USD. 

At that time, our country faced two possible options: to declare default or to accept an IMF bailout program. I am happy to say that without choosing either of these options, we managed to achieve economic growth that exceeds pre-pandemic levels through the timely implementation of major policies aimed at increasing budget revenue and foreign trade, optimizing the balance of payments, and increasing foreign exchange reserves. Also, the Government of Mongolia focused on increasing the export of coal, conducted multiple negotiations with China regarding coal trades, and carried out prompt actions to continue coal transportation by strictly observing the quarantine regime during the COVID-19 pandemic. 

As a result, coal exports, which had been at a standstill, were able to return to normal in a relatively short period of time. In addition, the Cabinet approved a resolution on certain actions to increase official foreign exchange reserves in order to support currency inflow, resolved issues related to coal offtake agreements, and built an auction-based stock exchange system for coal trade. Consequently, by the end of 2022, coal exports had surpassed the expected 18 million tons to stand at a whopping 31.7 million tons, which resulted in record-high exports of 12.5 billion USD and a 60 percent increase in foreign trade turnover. Ultimately, our country’s foreign reserves reached 3.4 billion USD and the economy grew by 4.8 percent. Budget revenue exceeded the estimate by 1.8 trillion MNT and the balance of payments grew by 65.3 percent. Such improvement in the main economic indicators is the result of our diligent work and timely implementation of major structural and budgetary policies and medium-term external debt strategy to maintain the living standards of citizens and macroeconomic stability amid the global crisis. For example, over the last 3 years, the Government has managed to write off a 1.6 billion USD debt, without burdening the state budget.

 For instance, the outstanding 136.8 million USD repayment of the Chinggis bond, issued by the Government of Mongolia back in 2012, was fully paid off in December 2022 and the 2016 Mazaalai bond’s remaining payment of 132.6 million USD was paid off on time in April 2021. In January 2023, the Century-2 project was successfully implemented and as a result the Gerege bond’s remaining payment of 368.4 million USD was also fully settled. This bond was released by the government in 2017.

As part of the Century-2 project, we were able to receive nine times more orders from investors while reducing the interest rate, which proves the success of this debt adjustment measure and the good maintenance of investors’ trust. 

The Government of Mongolia has proven its capability to fully comply with its obligations on the international financial market and managed to completely get rid of the default risk triggered by foreign debt, while at the same time retaining its current credit rating. With the improved and stabilized economic situation, trust in our country is getting stronger on the international market. In the future, the Government promises investors to maintain strict discipline in managing external debt. To sustain the economic activity in the long term, we continue to improve the border crossing process of passengers and cargo by intensifying the operations of border ports, and increasing throughput, within the framework of the Port Revitalization of the “New Revival Policy”. Some major reforms were achieved within a short period of time. 

Namely, the previous trading mechanism, in which Mongolia’s coal was sold cheaply under the terms of mine mouth, was discontinued and replaced by a new mechanism to sell coal at higher prices and ensure a transparent and open process of coal export through the Mongolian Stock Exchange. As a result, coal exports reached more than 28 million tons in the first half of this year, which is equivalent to the accumulated amount of the first 11 months of last year. Mongolia’s economy expanded by 7.9 percent in the first quarter of this year due to the recovery of mining and other economic sectors and the country’s foreign currency reserves surged by 12 percent, reaching 3.8 billion USD. Although the economy is showing signs of recovery, the persistently high inflation rate continues to adversely affect the real income of citizens.

In response to this challenge, the Government of Mongolia has introduced amendments to the state budget aimed at increasing the real income of citizens and ensuring the equitable distribution of excess budget income from natural resources to citizens. These budget amendments encompass several measures, including providing child allowances to all eligible children, with reimbursements starting from January 2023, addressing and eliminating the longstanding issue of pension gaps, increasing pensions for all senior citizens by 10% to keep pace with inflation, and improving the salary system for civil servants. Furthermore, efforts have been made to alleviate traffic congestion in the capital city through the implementation of the Connection Road Project. We have also successfully resolved significant infrastructure challenges along rivers and improved public transport accessibility.

In 2020, the Government of Mongolia developed and gained approval for a long-term development policy document known as “Vision-2050”. The “New Revival Policy” is being developed and implemented in order to promptly solve the issues that might hinder the achievement of long-term development goals. By promptly resolving obstacles and challenges faced in the past by means of a proper policy without losing fiscal discipline, we managed to build a strong economic and fiscal foundation for the fulfillment of tasks reflected in the “New Revival Policy”. We will strive to strengthen such an achievement and implement the policy by ensuring wellcoordinated joint efforts that involve the government, the private sector and foreign investors. The approval of the “Law on Public-Private Partnership” by the Parliament last year marks a significant milestone in implementing the programs and goals of the “New Revival Policy” through private sector participation and investment. 

This law creates opportunities for addressing the growing social and economic needs with private sector involvement and establishes a legal framework that meets international standards, indicating substantial progress for Mongolia.

Furthermore, we will focus our actions on directing the budgetary policy to the country’s medium-term development goals for the next decade, supporting entrepreneurs with a favorable tax policy, reducing the external debt burden through the implementation of a prudent debt management policy, and expanding the comprehensive cooperation with international organizations. We are very confident that we will be able to increase exports – the mainstay of the country’s economy, improve its economy, become an uppermiddle-income country, and create long-term sustainable and inclusive growth. Mongolia has plenty of potential to further improve the investment and business environment, while not being impacted by any external economic pressures, and strengthen its economic immunity. Therefore, we invite all of you to become a part of our country’s prosperity and cooperate with us by investing in our country.