Mongolia May Consider IMF Standby Program, Prime Minister Says

February 12 01:46 2015 Print This Article

(Bloomberg) — Mongolia sees a standby program as only one of several options for International Monetary Fund support to help its faltering economy and looks to a new trade deal with Japan as essential to boost its economic and security role in Asia, Prime Minister Saikhanbileg Chimed said.

“There are four or five options that Mongolia has to cooperate with the IMF,” Saikhanbileg said in an interview with Bloomberg TV Mongolia in Tokyo. “Wanting cooperation from the IMF does not necessarily have to mean standby. That is an open option among many,” he said after signing the new trade deal.

The IMF offers standby programs to quickly aid countries with loans of no longer than 36 months.

“No official talk has been made on entering an official bailout program, but there is a need to consult the policy changes with the IMF and other international organizations such as World Bank,” Saikhanbileg said.

The IMF sent a mission to Mongolia this week after the government requested support to combat a slump that more than halved a world-leading economic growth rate of 17.5 percent in 2011 to about 7 percent. Inbound investment has fallen more than 85 percent in the past two years and the currency has slid by almost a third.

In a move to attract more investment into the country Saikhanbileg signed the trade deal with Japan. Mineral-rich Mongolia has resources needed by Japan to help power its economy, including rare-earth metals, copper and coking coal.

Commodity Slump

Mongolia is seeking new markets for its goods after three years of slowing economic growth triggered by the slump in commodity prices and disputes with investors, including Rio Tinto Group, which controls Mongolia’s biggest mining venture, the Oyu Tolgoi copper mine.

The Economic Partnership Agreement “will help increase trade, investment, service flow and human collaboration between the two countries and is essential for Mongolia to keep track with regional and global economic integration,” Saikhanbileg said at a meeting with counterpart Shinzo Abe in Tokyo Feb. 10.

Part of the agreement includes approval of a loan of 36.8 billion yen ($308 million) to finance the construction of a new international airport in Ulaanbaatar, Abe said in his statement.

The agreement with Japan will also aid Mongolia’s efforts to assume a greater role in regional security issues. Mongolia styles itself as a linchpin nation that has good relations with regional neighbors including North Korea and Japan. Mongolia has hosted talks between the two countries, whose relations have been strained over North Korea’s kidnapping of Japanese in the 1970s and 1980s.

Regional Stage

“We have ingeniously talked about developing our cooperation in the regional stage and have agreed on broadening strategic partnerships in areas of foreign relations and security,” Abe said.

The Mongolian premier also commented on the verdict of a high-profile trial in the country that landed three foreign businessmen in prison on January 30.

American Justin Kapla and Philippine nationals Hilarion Cajucom Jr and Cristobal David were found guilty of tax evasion and their former employer SouthGobi Resources Ltd. was fined 35 billion tugrik ($18 million).

“The government cannot change the decision that has been made by the court,” Saikhanbileg said in the interview. “But it can change what has caused the problem. The government will come up with a plan to amend tax laws in a way that cannot be interpreted in many different ways.”

Saikhanbileg said the plan would be introduced to the spring session of Parliament, which is due to commence in April.

To contact the reporter on this story: Michael Kohn in Ulaanbaatar

To contact the editors responsible for this story: Andrew Davis Greg Ahlstrand

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