Mongolia banks prepare for overhaul after IMF bailout www.reuters.com
ULAANBAATAR, Aug 3 (Reuters) - The International Monetary Fund said Mongolia's banks are preparing for a regulatory overhaul as the government introduces policies aimed at restoring economic growth following a $5.5 billion bailout the IMF granted in May.
Resource-dependent Mongolia was forced to seek IMF assistance when a collapse in foreign investment and a slump in commodity prices left it struggling to pay debts and sent its currency, the tugrik, into a tailspin.
The IMF deal required Mongolia to make a "comprehensive effort to rehabilitate the banking system" and to strengthen the central bank's independence.
Reforms are already at the drafting stage and are designed to improve supervision and regulation in the banking system, the IMF said in a statement issued on Wednesday.
Mongolia will also conduct an "asset quality review" to evaluate credit risks at commercial banks, it said.
The precise impact of the reforms will depend on how quickly banks will be forced to respond, and how the central bank enforces the asset quality review, said Tomas Bravenec, deputy chief executive officer at Mongolia's Golomt Bank, one of the country's biggest private banks.
"A banking sector with a health certificate would definitely help improve Mongolia's image as an investment destination," Bravenec said.
The IMF recently held its first quarterly review meeting with Mongolian officials since agreeing the $5.5 billion extended funding facility in May.
It said changes to Mongolia's tax administration were also being planned, and would include the creation of a fiscal council to strengthen tax policy and budgetary controls.
The IMF is providing Mongolia with three years of credit worth about $434.3 million. The bailout package also includes soft loans from Japan and South Korea and an extended currency swap agreement with the People's Bank of China.
The IMF said Mongolia is using the funds to bring a "return to confidence", noting the country's economy was now rebounding, helped by strong coal exports. Coal export revenues grew more than fourfold in the first half of 2017.
The IMF predicted Mongolia would see growth of 2 percent in 2017 versus 1 percent last year. The figure pales in comparison with 2011, when growth reached an all-time high of 17.3 percent, driven by a surge in foreign mining investment and rising Chinese commodity demand.
The IMF agreement also imposed austerity measures on Mongolia, including a commitment to introduce means tests to reduce welfare spending, which became a bone of contention during the presidential election in July.
The election was eventually won by populist former martial arts star Khaltmaa Battulga of the opposition Democratic Party, who was critical of the IMF deal. (Reporting by Terrence Edwards; Editing by David Stanway and Eric Meijer)
Published Date:2017-08-03