Mongolia’s new government is drafting an “economic crisis’’plan as it seeks to deal with slowing growth, a soaring budget deficit and a declining currency, Bloomberg reported on August 10, citing the country’s Finance Minister Choijilsuren Battogtokh.

The announcement is likely a move by the recently elected government, led by the Mongolian People’s Party (MPP), to place blame of all ongoing bad news on the Democratic Party, which led the country for the past four years.

“We came into a situation where we may not be able to afford to finance salaries and operational costs of government departments, such as the Mongolian military who protect our borders and national security, the social and health employees who are in charge public health, as well as individuals in culture and sport,’’ the minister said. “We are in a deep state of economic crisis.’’

The details of the “economic crisis” plan will be revealed in the upcoming days, according to the minister.

The announcement sent Mongolia’s eurobonds tumbling the most on record on August 10. The government’s $1bn Eurobond due December 2022 fell 6.21 cents to 83.72 cents on the dollar in the afternoon.

Mongolia’s 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 been struggling to adapt to slowing growth in neighbouring China, which buys up nearly all of its copper, gold and coal.

GDP growth eased to 3.1% in the first quarter of 2016 from 4.1% a year earlier. The country sold $1.5bn in sovereign debt since 2012, resulting in a negative outlook from Moody’s rating agency. 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. Additionally, Mongolia's central bank's foreign reserves are net -$429mn.  

The Mongolian tugrik traded at MNT2,141.6 to the dollar on August 10, depreciating by 7.3% since the beginning of 2016.

MPP, credited for luring investors into the country as it led Mongolia for most of its democratic quarter of a century, has pledged to introduce investor-friendly policies in the country’s ailing mining sector and cut debt.