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IMF suggests tighter monetary conditions www.zgm.mn
An International Monetary fund (IMf) staff team led by Geoff Gottlieb has visited Ulaanbaatar to conduct discussions on the sixth review of the three-year extended fund facility (eff) arrangement. The team highlighted the widening current account deficit and suggested the central bank to rein in high credit growth.“As we reach the mid-way point of the IMfsupported program, significant progress has been made by the authorities in overcoming the economic crisis. Growth has revived to over 6 percent, the overall fiscal balance has swung from a large deficit to a small surplus, and government debt has fallen sharply. While the external environment has been supportive with buoyant export demand, the recovery has become broader based with consumption and investment rising sharply.
Inappropriate levels of international reserves and bank capital remain key vulnerabilities
Against this backdrop, the authorities are on track to meet all end-December macroeconomic targets, including the fiscal deficit and net international reserves,” Mr.Gottlieb mentioned at the end of the mission. However, he explained that this recovery brings new challenges as stronger domestic demand conditions are widening the current account deficit, halting reserve accumulation. “In response, the Bank of Mongolia should rein in high credit growth through tighter monetary conditions and the introduction of well-targeted macro-prudential measures,” suggested Mr. Gottlieb In the financial sector, the follow-up to the asset Quality Review that was completed in 2017 is entering its final phase. The team warned that the undercapitalized
banks have until end-December to raise the necessary new capital and failure to do so will face central Bank intervention or be resolved as per the Banking law. Additionally, Mr. Gottlieb recommended the authorities to commit to strengthening the business and investment climate.
Published Date:2018-11-23
