Mongolia’s debts incurred in the socialist days are
settled but the country continues to borrow. The loans it took from The Asian
Development Bank, The International Monetary Fund (IMF) and Japan between 1991
and 2009 now total USD2.6 billion. According to The Debt Department of the
Finance Ministry, foreign debt consists 94% of the Government’s total debt,
with domestic debt accounting for the remaining 6%.

Foreign loans can come from bilateral agreements with
another country or from international financial institutions. Of Mongolia’s
loans from individual countries, 56% is from Japan, 8% from South Korea, 4%
from China and 6% from Kuwait. Of institutional loans, 58% is from The Asian
Development Bank, 37% from The World Bank and 1% from The IMF. Besides this, USD118.7
billion received as grants and soft loans has been invested in infrastructure
in the last two decades, USD883 million in the economic field, and USD141.8 million
in social sectors.

The situation is taken to be of threat to the economy when
Government debts equal 40% of the GDP. It was 29.5% of the GDP in 2009. The IMF
and The World Bank have classified Mongolia as a country of “minor risks” in
terms of debt repayment. All outstanding debts at present have to be repaid by
2050 but in most cases an annual interest has to be paid. The repayment will
reach its peak in 2020.

The share of domestic debt has gone up as more bonds carrying higher interests
were sold to meet the successive budget deficits. MNT300 billion worth of bonds
were sold in 2009 and this equals 2.8% of the GDP. Earlier sales amounted to
altogether MNT80 billion in 2005 and 2006, and to MNT150 billion in 2007.