New IMF Mongolia deal: extracting sovereignty

7 April 2017

In February, the IMF announced it had reached an agreement with Mongolia for a three-year Extended Fund Facility loan for approximately $440 million, in response to the decline in commodity prices and a collapse of foreign direct investment (see Observer Spring 2017). It is the IMF’s sixth loan programme to Mongolia since 1990. The programme is expected to unlock an additional $3 billion in financing from other sources, including the World Bank and China. A March article in the Iranian Financial Tribune indicated that the impacts of the loan programme will likely include raising taxes, reducing public expenditures and maintaining the public wage bill freeze. Conditions of the loan also include that the Mongolian government distances itself from the management of the Development Bank of Mongolia, a state lender that provides over a fifth of credit in the country. Sukhgerel Dugersuren of Mongolian NGO Oyu Tolgoi Watch commented: “each IMF loan programme has chipped further away at Mongolia’s sovereignty, a trend which the latest programme will only continue. It is clear the priority of the Fund and the Mongolian government is to protect big business, investors and the extractive industry, at the cost of and without the input from the Mongolian people.”