Mongolia’s budget produces massive deficit in January-July as spending surges

By bne IntelliNews August 23, 2016

A surge in government spending and falling revenue pushed Mongolia's budget into a MNT1.97tn (€774.6mn) deficit in the first seven months of 2016, state-run Montsame news agency reported on August 22. The deficit is well above its year-ago level of just MNT637.9bn.

While Mongolia’s government relies heavily on external borrowing for domestic financing needs, it comes at the cost of high interest payments and exchange rate risk exposure, the World Bank said in a recent report.

Budget expenditure jumped 32.6% y/y to MNT5.01tn in January-July, while revenues fell by 3.3% y/y to MNT3.04tn.

Earlier this month, the newly-elected government roiled markets announcing the country is in a state of deep “economic crisis” and moved quickly to announce a number of austerity measures seeking to support the slowing economy and fight the soaring budget deficit. Yet, upcoming debt repayments will continue to put pressure on the government which might need to borrow more to pay back the debt.

The government debt burden is expected to reach 78% of GDP in 2016, above the target of 55%. The projected budget deficit is seen at $2.6bn, or 21% of the GDP. 

Mongolia sold $1.5bn in sovereign debt in 2012, know as Chinggis Bonds, mainly to finance road projects. The government is due to repay $500mn in 2018 and the remaining in 2022. The Development Bank of Mongolia faces a $580mn repayment in 2017. 

The country’s central bank raised its policy interest rate by 450 basis points (bps) to 15% on August 18 in order to stem the fall in the country’s national currency. The currency depreciated by over 8% against the greenback since the start of August and is now worth half of what it was in the fall of 2008.

Related Articles

Speculation over a second downgrade grows as S&P drops outlook on Polish economy

Speculation that Poland could suffer a second downgrade of its sovereign rating at the end of the week intensified on January 10, as Standard & Poor’s lowered its estimates on economic growth. ... ... more

Head of Belarus' largest bank dismissed amidst corruption scandal

Sergei Pisarik has been dismissed from his post of chairman of the board at the largest bank in Belarus, state-owned Belarusbank, the lender's media office reported on December 21. ... more

Privat investigations: PrivatBank lending practices threaten Ukraine’s financial stability

The problems at PrivatBank, co-owned by oligarchs Igor Kolomoisky and Hennady Boholyubov, have forced the Ukrainian government to nationalise the country’s largest commercial bank, putting an ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss