Mongolia on November 30 announced debt regulation measures to refinance its $600mn Khuraldai bond.

Ulaanbaatar extended an offer to investors for a cash buyback of the 8.75% interest rate, with the Khuraldai bond set to mature in 2024. The move allows for the potential deferral of the payment period for a specific portion of the foreign debt. 

Initially, the Mongolian government issued $650mn in bonds with a term of five years, for both the Gerege and Khuraldai bonds, and an interest rate expectation of 11-12%. However, a total of $4bn in orders were received from 138 investors. That led to a decrease in the interest rate to 8.75%.

Mongolia’s Finance Minister, B. Javkhlan, said: “Mongolia’s approach to the Khuraldai Bond is the latest application of our successful medium-term debt management strategy, and builds on the strong relationship our country has with international investors.

“Following our strong recovery from the pandemic and the early successes of our New Recovery Policy, this approach to managing Mongolia’s debt will help free up resources to support our future prosperity and the delivery of sustainable growth.”

The government of Mongolia has issued eight bonds since 2012, raising $5.8bn, with the capital earmarked for debt refinancing, tackling the country’s budget deficit and funding major projects. 

Fitch Ratings has assigned Mongolia’s proposed US dollar bonds a ‘B’ rating. That’s in line with Mongolia’s ‘B’ Long-Term Foreign-Currency Issuer Default Rating (IDR).

The redeeming of the Khuraldai bond comes following Mongolia’s economic bounceback from impacts of the COVID-19 pandemic. The government says the country’s economy is projected to grow by 5.8% in 2023, up from 4.7% in 2022, and 6.2% in 2024, with the country’s deficit falling by 60% and exports rebounding strongly.

In a boost to growth, the Government announced the commencement of underground production at the giant Oyu Tolgoi copper mine in the Gobi Desert with Rio Tinto in March.