Under a Stand-By Arrangement with Mongolia, the IMF Executive Board completes its second review and approves USD24.2 million disbursements.

On September 21, 2009, the International Monetary Fund’s (IMF) Executive Board completed its second review of Mongolia’s economic performance under a program supported by an 18-month Stand-By Arrangement (SBA). Completion of this review enables the immediate disbursement of an amount equivalent to SDR 15.33 million (about USD 24.2 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 91.95 million (about USD 145.7 million).

The SBA was approved on April 1, 2009 (see Press Release No. 09/110) for an amount equivalent to SDR 153.3 million (about USD 242.9 million) or 300 percent of Mongolia’s quota.

Following the Executive Board’s discussion on Mongolia, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chairman, stated:

“The Mongolian authorities’ strong policy implementation, supporting market conditions’ stabilization and reducing inflation, is encouraging. Since Mongolia’s economic recovery is likely to be slower than previously expected due to the stronger-than-projected external shock, policy targets have been recalibrated to provide greater fiscal support for the economy.

“The Government is committed to restoring public health finances and the fiscal restraint to date is commendable. Moderately relaxed fiscal deficit targets for this and next year will provide more economic support, as well as allowing automatic stabilizers to operate. The Government’s fiscal adjustment program remains appropriately ambitious, especially given the limited financing available, and is backed by structural reforms to strengthen the fiscal policy’s effectiveness. Key plans in this regard are to apply a comprehensive social transfer reform better targeting the poor, in addition to adopting a Fiscal Responsibility Law to strengthen fiscal management
and contain pro-cyclicality.

“The authorities’ monetary and exchange rate policy has been instrumental in stabilizing financial markets and lowering inflation. Rebuilding international reserves and allowing the exchange rate to adjust flexibly in line with market conditions are key measures bolstering the economy’s resilience to shocks. The Central Bank should therefore confine the sale of foreign exchange to preventing sharp movements in the exchange rate, while adjusting interest
rates in line with market conditions to keep inflation low and stable.

“Strengthening the country’s banking system remains a top priority and includes pressing ahead with the planned external international audit of all banks and the promptly resolving the Anod Bank dilemma. Steps taken by the Central Bank to improve supervision and bolster confidence are welcome, as is its commitment to carefully monitor the banking system and take further actions if needed.

“In the period ahead, the Mongolian economy stands to benefit considerably from its significant mineral deposits. It is, therefore, important to press ahead with mining sector agreements and to strengthen institutions needed to manage this mineral wealth effectively,” Mr. Kato stated.