Droughts caused by exceptionally hot weather have forced Mongolia to suspend its grain exports, a setback for the country’s plans to diversity its economy away from over-reliance on commodity exports such as copper and coal.
June saw Mongolia hit by the highest temperatures it has experienced in 56 years, leaving one-third of its farmland suffering from severe drought. Agriculture officials said on July 29 that the impact on crops meant that they had been forced to ban grain exports so that adequate preparations could be made to deal with a shortfall in the autumn harvest. Mongolia needs grain to support livestock through its notoriously long and cold winter, which brings freezing temperatures and heavy snowfall. One-third of the Mongolian population are herders, usually semi-nomadic.
Temperatures in Mongolia have risen by two degrees Celsius in the last 70 years, three times faster than the global average, the United Nations Environment Programme says. That has brought about rising desertification rates, the melting of glaciers and drying rivers and lakes, threatening livelihoods.
Mongolia’s Information and Research Institute of Meteorology, Hydrology and the Environment said central and eastern Mongolia were most affected by the scorching weather.
Another difficulty brought about by the punishing climate are wildfires. In early July, such fires that broke out amid Mongolia's fragile steppe and desert environment in the north caused wind-blown thick acrid clouds to blanket the capital Ulaanbaatar, according to Reuters.
Grain exports do not yet make up a significant portion of Mongolia’s overall exports, but the government needs to push them up to shield the economy from further volatility caused by swings in global commodity prices.
A boom in FDI in commodities helped Mongolia rack up astronomical GDP growth of 17.5% in 2011. But stalled talks over the underground development of the Oyu Tolgoi open pit and underground copper and gold mine during 2013-2015 and the subsequent freefall in commodity prices badly impacted the economy, shrinking growth to just 1% in 2016.
The IMF has agreed a bailout package with Mongolia worth $5.5bn, equivalent to half the mining-dependent nation’s GDP. The decline in copper and coal prices and falling demand from China had sparked concerns that Mongolia would not be able to honour debt payment deadlines. To be accepted into the IMF’s three-year Extended Fund Facility program, Mongolia’s government had to backtrack on many election promises, and instead sanction tax rises, a meaner social safety net, frozen public-sector wages and a raised retirement age.