Mongolia Parliament Rejects Bill to Raise Country’s Debt Ceiling

November 18 02:47 2013 Print This Article

Mongolia’s parliament blocked a bill to raise the debt ceiling, a move that could limit the government’s ability to raise money for infrastructure needed to develop the mining sector.

The bill to amend the Fiscal Stability law and raise the debt limit to 60 percent of gross domestic product from 40 percent failed to muster the necessary two-thirds approval yesterday, said Purevbaatar Gantsogt, the State Secretary for the Ministry of Finance.

Mongolia is increasing its spending on road, rail and power projects as mining companies including Rio Tinto Group invest billions in mineral deposits. Much of the country’s spending on infrastructure this year has been facilitated by proceeds from the sale of dollar bonds in 2012.

Government debt this year will be 49.5 percent of GDP, just shy of the 50 percent mark allowed for 2013, Gantsogt said. The 40 percent limit goes into effect starting from 2014.

“The plan was to issue more bonds to finance infrastructure development so yesterday’s decision restricts this,” Gantsogt said. “Next year we will probably not do what we had planned.”

Mongolia’s Fiscal Stability Law, adopted in 2010 as a way to smooth spending habits and generate savings from mineral revenues, imposes limits on expenditure growth and caps the structural budget deficit to two percent of GDP, separate from the 40 percent cap on outstanding debt.

Mongolia’s currency, the tugrik, fell to the lowest since at least 1993 today, reaching 1742.50 to the dollar and foreign direct investment has been cut in half this year.

International Debt

Instead of selling international debt, Gantsogt said parliament is planning to approve the sale of 1.4 trillion tugrik in local bonds, to be issued in 2014. The bonds, issued in tugrik, will be used to plug revenue shortfalls, Gantsogt said.

Mongolia posted 17.4 percent growth in 2011 and 12.4 percent growth in 2012. Growth over the first three quarters of this year stood at 11.9 percent. By stopping the sale of international bonds Mongolia’s GDP to debt ratio is forecast to fall to 40 percent by the end of next year from from 49.5 percent because of increases to GDP, Gantsogt said.

“We still believe we will achieve double digit growth next year but it will be less because of parliament’s decision,” he said.

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

To contact the editor responsible for this story: John Liu at

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