Fitch Ratings has assigned Mongolia’s (B/Stable) proposed US dollar bonds a ‘B’ rating. The transaction is related to a voluntary tender offer for outstanding bonds maturing in 2024.

The rating is in line with Mongolia’s ‘B’ Long-Term Foreign-Currency Issuer Default Rating (IDR), which has a Stable Outlook and was last affirmed on 15 May 2023.

The following ESG issues represent key rating drivers for the proposed bond; other key rating drivers can be found in the issuer rating action commentary dated 15 May 2023.

Mongolia has an ESG Relevance Score of ‘5[+]’ for Political Stability and Rights and ‘5’ for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight World Bank Governance Indicators (WBGIs) have in our proprietary Sovereign Rating Model. Mongolia has a medium WBGI ranking at the 46th percentile.

The rating on the bonds is sensitive to any changes in the Long-Term Foreign-Currency IDR, which has the following rating sensitivities (as per the aforementioned issuer rating action commentary).

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

– External Finances: Heightened external stress, which may be evident from restricted access to external-financing sources or a marked decline in foreign reserves.

– Public Finances: Significant increase in the budget deficit or the government debt/GDP ratio.

– Structural Features: Political instability and/or major policy shifts sufficient to significantly disrupt strategic mining projects or FDI inflows.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

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

– Macroeconomic: Strong and sustained economic growth and export without the emergence of imbalances, and the maintenance of a favourable business environment conducive to robust FDI inflows.

– Public Finances: Sustained reductions in the government debt/GDP ratio.