Mongolia expects to sign a loan agreement with the International Monetary Fund (IMF) by February, Foreign Minister Munkh-Orgil Tsend said on November 7.

Mongolia, which recently requested a rescue loan from the IMF, has been struggling to stabilise its economy and control its widening budget deficit, as the foreign debt has surged amid a fall in government revenues mainly because of a sharp decline in prices of coal and copper, the country’s main exports. The resource-rich country has also been hit by the slowing growth in neighbouring China, which buys up nearly all of its copper, gold and coal. 

“Mongolia should enter the IMF program. In fact, we are losing time on this process,” Khayankhyarvaa Damdin, chairman of the ruling party’s parliamentary caucus, said, according to Bloomberg.

A deal with the IMF would ease the country’s financial concerns ahead of the Development Bank of Mongolia’s $580mn bond which matures in March. The country has to repay over $1bn in debt by January 2018, while foreign exchange reserves were at their lowest level in seven years at the end of September and the tugrik fell to a record low of 2,411 to the dollar on November 8. The currency has lost 17% of its value since the start of the year, Bloomberg estimates.

The fund discussed policies that could become part of an IMF-supported financial and economic programme during a visit to Mongolia in late October.

It was a boom in FDI that helped Mongolia rack up an astronomical GDP growth of 17.5% in 2011. But stalled talks over the underground development of the giant Oyu Tolgoi gold and copper mine in 2013-2015 and the subsequent freefall in commodity prices have badly hit the economy, reliant on mining coal, copper and gold. Latest figures by the statistics office showed GDP expanded by 1.4% in the first half of the year, easing from 3% a year ago. In addition, Mongolia registered a net foreign direct investment (FDI) outflow of $4.28bn in the first nine months of 2016. Mongolia has to repay more than $1bn in debt by January 2018. 

Since coming to power by a landslide victory in June parliamentary elections, Mongolian People’s Party (MMP) has embarked on an anti-crisis plan that will seek to return the budget to surplus, boost foreign reserves and increase investment.The parliament is currently reviewing the plan with a vote expected by the end of November.

Munkh-Orgil does not expect to see a balanced budget until 2020. “Until then we are aiming to cut the budget deficit slowly but steadily,’’ he said. “Priority number one was getting the fiscal house in order,’’ Munkh-Orgil said. “Now we know exactly whom we owe to and how much.’’

The IMF has urged Mongolian authorities to focus on fiscal consolidation in the October edition of its Regional Economic Outlook. Mongolia’s current account deficit is seen widening to 11.1% of GDP in 2016 and further to 19.2% in 2017, according to the IMF.