When the Mongolian People’s Revolutionary party (MPRP) threatened to quit the country’s ruling coalition last week, the bond market panicked. Mongolian government bonds-which are brand new to the market-sank as much as 8 per cent.

It may have been a rude awakening for investors and the government alike, but a report released on from rating agency Moody’s argues that such local politics is not the real problem facing the country.

Mongolia’s bond issue was a real milestone for the fast-growing resource-rich nation wedged between China and Russia. It successfully raised $1.5bn in its first ever foray into the bond markets, and enjoyed 10 times oversubscription.

It also marked a positive signal for a country whose investment story had slightly gone off track. New laws brought in or proposed by the government have torpedoed investor sentiment over the past year, while the equity market has slumped.

And as Moody’s explains, legal issues remain the real concern:

Even if Mongolia’s governing coalition breaks up, the implications are likely not material to the country’s credit story. The majority Democratic Party in the coalition would gain in relative political strength; it is already close to having a governing majority. We expect the parliament would continue to function.

The real question, says Moody’s, is whether progress can be made on the investment law and the fiscal stability law:

Both laws are essential for Mongolia. The investment law is needed to finance the infrastructure projects required to develop the country’s mineral resources, and to attract foreign capital to compensate for its thin domestic capital markets and inadequate domestic savings. The Financial Stability law is necessary to ensure greater macroeconomic stability and to rein in profligate spending during boom times and to build up a fiscal cushion for lean times in the commodity cycle.

So, investors should be paying attention to what happens in parliament-but it is the legislative agenda, and not the makeup of the cabinet, that will determine whether Mongolia’s economic dream can get going again.