Mongolia is facing an increasingly serious foreign currency crunch, with foreign exchange reserves down 40 percent in August from a year earlier to USD 2.7 billion and the current account deficit ballooning. In addition, the tugrik has taken a beating due to interest rate hikes overseas, losing 16% of its value against the dollar this year. The central bank has repeatedly hiked interest rates this year in an attempt to rein in high inflation and curb the currency outflows.

Khan Bank, the country’s largest bank measured by total assets, limited the daily amount of cash that can be converted into foreign currencies to 1 million tugrik (USD 300) from this month, Vice President of Wholesale Banking T.Uuganbayar said in an interview on Thursday. That’s down from as much as MNT 300 million under normal banking conditions and 100 million tugrik in June, he said.

Multiple bank customers who’ve tried to transfer funds at four different commercial banks in recent weeks confirmed they were limited to a daily foreign exchange amount of 1 million tugrik.

Golomt Bank, Xacbank and Trade and Development Bank of Mongolia didn’t respond to requests for comment.

The Asian Development Bank approved a USD 100 million emergency loan for the country in August to “help it weather the impacts of severe economic shocks.

Dollar bonds issued by Mongolia and due in 2023 and 2024 fell about 4 cents Friday, according to prices compiled by Bloomberg, on pace for their biggest declines since March 2020. The tugrik also weakened and was trading at 3,337.7 to the dollar at 4:30 local time.

Rising costs combined with stagnant wages drove young people to protest outside the parliament house in April, although inflation has since moderated after hitting a high of 16.1% in June.

Further risk could come toward the end of the year when almost USD 140 million in sovereign debt will mature in early December and need to be repaid, according to data compiled by Bloomberg. That’s followed by more than USD 1.2 billion in debt which is due next year. (source: Bloomberg)