Fitch Ratings has assigned Mongolia’s (B/Stable) proposed US dollar bonds a ‘B’ rating. Proceeds from the proposed bonds will be used to refinance bonds maturing in 2021 and 2022 through a cash tender offer.

The rating is in line with Mongolia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘B’ with a Stable Outlook. The rating on the proposed bond is sensitive to any changes in Mongolia’s Long-Term Foreign-Currency IDR.

The following were the rating sensitivities for the sovereign rating published in the rating action commentary in May 2020.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

– The accumulation of larger foreign-currency reserve buffers and the implementation of a debt-management strategy that lowers refinancing risks and maintains external debt sustainability.

– A reduction of fiscal deficits that puts gross general government debt (GGGD)/GDP back on a downward trajectory after the increase in 2020 related to the coronavirus shock.

– A resumption of stronger economic growth and export trends without the emergence of imbalances, and the maintenance of a favourable business environment conducive to robust FDI inflows.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– Evidence of heightened external financing stress, for example if official multilateral and/or bilateral inflows are not forthcoming or in the event of a marked decline in foreign reserves.

– Failure to reduce the budget deficit and stabilise the GGGD/GDP ratio after the increase in 2020 related to the coronavirus shock.

– Political instability sufficient to significantly disrupt strategic mining projects or FDI inflows.

(Fitch)