Mongolian Bond Prices Jump Following $440 Million IMF Bailout www.bloomberg.com
The price of Mongolia’s benchmark 10-year bond rose after the announcement on Sunday that the International Monetary Fund will lead a bailout the nation.
The yield declined and the price of the bonds due in 2022 rose more than 4 cents by 1:50 p.m in Hong Kong, after the news of a $440 IMF million loan package as part of a $5.5 billion bailout. The tugrik was little changed at 2,482 per dollar compared to 2,483 on Friday.
Mongolia’s sixth IMF bailout since 1990 follows a downturn in prices for copper and coal, the two main export commodities. The budget deficit soared and disputes with investors including Rio Tinto Plc led to a collapse in foreign investment and depleted foreign exchange reserves.
The IMF’s Extended Fund Facility will support the Economic Stabilization Program, a long-term plan to tighten fiscal policy, diversify the economy, depoliticize the Development Bank of Mongolia and strengthen governance at the central bank. The facility will also help Mongolia repay looming debts, including a $580 million DBM bond due next month.
After that bond, the nation has $641 million due next year, for a total of $2.2 billion to be repaid, according to Keiko Utsunomiya, a spokeswoman for the IMF.
Mongolia is keen to avoid the boom-bust-bailout cycle it’s experienced in recent years, the IMF Mission Chief for Mongolia, Koshy Mathai, said in an interview on Sunday with Bloomberg Mongolia TV.
Gross domestic product is expected to expand eight percent by 2019, and then grown at around five to six percent after that due to new mining projects and output from the Oyu Tolgoi copper mine.
“Asking that Mongolia’s economic growth be stable forever is a very big challenge because there are so many mining exports and so many concentrated to one particular market," said Mathai. "That is why the government has emphasized many of these institutional reforms in order to make sure that fiscal policy remains strong."
Published Date:2017-02-21