On Wednesday, the World Bank decided to finance 100 million USD to Mongolia to boost the country’s sustainable development and stabilize its economy.
The financing will fund thesecond Economic Management Support Operation (EMSO 2), aimed to support policy reforms for debt sustainability, strengthen the social protection system, and enhance competitiveness.
Despite Mongolia’s strong economic revival since 2016, the World Bank sees underlying vulnerabilities in the economy. The economic growth reached 6.9 percent in 2018, compared to 1.2 percent in 2016. The country’s fiscal position has improved substantially, as the deficit declined from 16.4 percent of GDP in 2016 to a surplus of 2.7 percent in 2018, resulting in a reduction of Mongolia’s government debt to GDP ratio by nearly 13 percentage points over this period, as reported by World Bank.
Poverty increased during the economic slowdown between 2014 and 2016 and declined slightly during the subsequent recovery, pointing to continued challenges in the labor market and the need for stronger social support policies.
“The reforms supported by this operation are critical for sustaining economic growth, improving public finances, and enhancing competitiveness. Their adoption shows the government’s commitment to continue structural reforms in Mongolia. The World Bank will continue to work with the government and with other international development partners in support of Mongolia and the Economic Recovery Program,” said World Bank’s Country Director for China, Mongolia and Korea Martin Raiser.
The program seeks to restore the country’s debt sustainability by consolidating the adjustment already achieved and addressing structural weaknesses in the management of public sector finances. This includes improving the tax system and public investment management, helping to reduce the costs of ongoing investment projects, and tightening the management of special funds financed from the state budget. It will also publicly disclose the recent external reviews of the operations of the Development Bank of Mongolia and Mongol Bank in addition to the restructuring of the Housing Mortgage Program to expand the availability of affordable housing and improve its targeting.
Another focus area is to strengthen the social protection system for poor and vulnerable groups by promoting employment creation outside the mining sector and better targeting of social policies.
To enhance the competitiveness of the economy, the program will support measures to improve the business and trade environment such as strengthening investor protection, streamlining permit requirements, and promoting trade facilitation reforms. Moreover, it supports economic diversification by promoting animal health management.
The EMSO series is part of a broader, coordinated effort of development partners to support the government’s medium-term economic recovery program. A third operation under the EMSO series is planned, focusing among other things on completing the ongoing recapitalization of the banking sector in close coordination with IMF. The EMSO series complements existing World Bank investment and technical assistance projects in areas such as the development of non-mineral exports, employment support, fiscal stability, energy, education, ICT development, and central and local governance.
