“Although the uncertainty remains in the external environment, the balance of trade (BoP) came out in surplus in November, which is indicating potentials to stabilize foreign exchange (FX) rates,” highlighted the Monetary Policy Committee in its report.

The BoP deficit fell by USD 51 million in October as the USD 500 million bond financing of Development Bank of Mongolia was completed in the same month. However, the Asian Development Bank and International Monetary Fund have warned of potential surge in current account.

Discussion on revision to the Law on Minerals, which stated to extend 2.5 percent gold royalties by five years, has been postponed with the Parliament’s delay of four consecutive plenary sessions. The BoM informed that if the bill is not ratified before 2019, gold royalties will jump to 7-9 percent, which could obstruct gold purchase of BoM and FX reserves.

BoM had an initial plan to increase FX reserves by USD 750 million by purchasing 21 tons of gold this year.

Regarding the inflation, which exceeded the BoM target level of 8 percent, reaching 8.1 percent nationwide and 9.3 percent in Ulaanbaatar last month, the bank explained that the jump in prices of solid fuel (coal and wood), petroleum and meat were the key drivers in inflation growth. These three accounted for 5 percentage point of inflation in Ulaanbaatar. The BoM further addressed that the price of petroleum imported from Rosneft has declined this month and expects inflation to ease down in the following quarter.