Home News MONGOLIA ASKS IMF FOR RESCUE LOAN MONGOLIA ASKS IMF FOR RESCUE LOAN Mongolia has requested a rescue loan from the International Monetary Fund as it battles to plug the gap in its public finances while keeping its giant neighbour, China, at arm’s length. The central Asian nation submitted a formal request for financial assistance from the fund to support its economy and address balance of payments pressures, the IMF said on Friday. A team from the IMF will visit Ulan Bator, Mongolia’s capital, for discussions with the government. Mongolia has struggled to control its budget deficit, make its international payments and curb a severe depreciation in its currency following the global commodity price rout. The request for assistance was widely expected and will probably trigger offers of support from other international donors, including the Asian Development Bank and Japan. It comes after a week of conference calls in which Mongolia’s ministry of finance sought to assure international bond investors that belt-tightening measures already under way would be sufficient to improve the country’s medium-term outlook. By turning to the IMF, Mongolia is staving off a slide into greater dependence on China, which has been supporting its currency through a central bank swap agreement. Mongolia discussed an extension of that swap at a central Asian bankers’ meeting this month in western China, amid an intense public debate over how much the country should be in hock to its much larger neighbour. Western investors had expressed confidence in Mongolia’s bonds in expectation that the IMF would step in. Prime Minister Erdenebat Jargaltulga, who formerly served as finance minister, is hoping that the country will soon issue new international bonds at lower rates, thus paying down high interest-rate bonds issued earlier. But finance ministry officials dismissed speculation this week that Mongolia would renegotiate existing bonds as “false information”. Mongolia’s economy is reliant on mining coal, copper and gold — most of which it sells to China. It has been one of the worst-hit economies in the world by the fall in prices for natural resources, following a spending spree on roads, civil servant salaries and subsidised mortgages for its citizens during the boom years. The country’s budget deficit has climbed to 20 per cent of gross domestic product this year and it faces about $2bn in public and private debt payments due in next year. Total external debt is estimated at about $23.5bn, nearly twice the size of its $12bn economy. Of that, government debt is about $8.4bn. Last month, the central bank raised interest rates by 4.5 percentage points in a desperate bid to stabilise the tanking tugrik. Discussions over the IMF programme will begin next week, during the fund’s World Economic Outlook meetings in Washington DC. Source:http://www.ft.com/cms/s/0/de5ab480-8713-11e6-a75a-0c4dce033ade.html?siteedition=intl#axzz4LzMFXrnc