The Executive Board of the
International Monetary Fund (IMF) has completed the fifth and the sixth reviews
of Mongolia”s economic performance under a program supported by an 18-month
Stand-By Arrangement (SBA). The Board also approved the Mongolian authorities’
request for rephasing the final disbursement. While the completion of the final
two reviews under Mongolia’s SBA enables the disbursement of an amount
equivalent to about USD46.4 million, the Mongolian authorities do not
intend to draw this amount. Total disbursements under the arrangement remain an
equivalent to about USD185.4 million.

The SBA was approved on April 1,
2009 for an amount equivalent to about USD231.8 million or 300 percent of
Mongolia”s quota.

Following the Executive Board”s
discussion on Mongolia, Naoyuki Shinohara, Deputy Managing Director and Acting
Chair, stated:“The Mongolian economy is undergoing a brisk recovery.
International reserves are at historic highs, the fiscal position has
strengthened, and pro-poor spending has been protected. These developments are
a testament to the authorities’ unwavering commitment and policy performance
under the Fund-supported program. Close engagement with the Fund, together with
technical support and outreach efforts, has contributed to the program’s
success in stabilizing the economy and the financial market.

“The government has built a strong
institutional foundation for fiscal policy. The recently adopted fiscal
responsibility law—a landmark in public financial management—will help secure
fiscal discipline. The nominal spending limit for 2011 enshrined in the
medium-term fiscal framework will promote macroeconomic stability and bolster
fiscal policy credibility. Strict adherence to the targets in the medium-term
fiscal framework and fiscal responsibility law will be essential.

“Spending on social transfers has
steadily increased. The social transfer reform legislation, expected to be
adopted by parliament in the coming months, will introduce a targeted poverty
benefit, which will both strengthen the social safety net and enhance budget
flexibility.

“Monetary policy continues to focus
on maintaining low inflation, contributing to strong, sustainable, and equitable
growth. The recent tightening of monetary policy, alongside a nominal
appreciation of the currency, has helped contain the upswing in inflation. The
flexible exchange rate regime continues to work well and foreign currency
intervention is being used appropriately to build reserves and smooth out
short-term fluctuations in currency markets.

“Significant progress has been made
in reforming the banking system. The Empowering the Banking Sector and Capital
Support Program, a comprehensive bank restructuring and recapitalizing
framework, has been submitted to parliament. Its implementation will help
ensure prudent, transparent use of public resources. The recently issued
banking regulations are an important step toward strengthening banking
supervision, critical to preventing a re-emergence of vulnerabilities,”  Shinohara stated.