With dzud hitting Mongolia, questions are being asked as to whether the country should end its reliance on nomadic herders and dig deeper into its mineral reserves instead. The Government”s hand might now be forced by massive fiscal debt, coupled with a crippling humanitarian problem as nomadic herders, fleeing a freezing winter that is killing their herds, overwhelm the capital.

The Government needs cash quickly to relieve the strain on Ulaanbaatar and provide jobs and an education for a million struggling nomads. The cash can only come from opening up its mining sector to foreign firms. “You have to have revenues coming from somewhere and that is going to come from mining. If you do dodgy deals, then yes you will have a problem, but I don”t think Mongolia should be holding back,” said Mr. Arshad Sayed, Country Representative of the World Bank, to a Reuters reporter.

Most of Mongolia“s resources remain unexplored, particularly in the South Gobi region, but copper reserves from the Oyu Tolgoi deposit alone are second only to Chile. Its inferred uranium reserves are also estimated to be the world”s second largest, behind Australia. Yet this underground wealth provides little solace for the millions of refugees who huddle from the cold in Ulaanbaatar“s makeshift shanty towns.

The Government is currently in the middle of a long debate about how Mongolia should take advantage of its largely unexplored reserves. The Mongolian economy was badly hit by the financial crisis, and the World Bank expected 2009 growth to have slowed to 2.7 percent, down from 8.9 percent in 2008. The impact of the harsh winter on meat prices is also expected to push inflation up to 8 percent this year, according to IMF forecasts.

Analysts predict Mongolia will take over from Angola and Azerbaijan as the fastest growing economy in the world, albeit from a very low base, over the next decade. The IMF is a little more conservative and says it will be the fourth fastest growing economy.