Today (November 30), Mongolia announced debt regulation measures to refinance its USD 600 million Khuraldai bond.
Ulaanbaatar extended an offer to investors for a cash buyback of the 8.75 percent interest rate, with the Khuraldai bond set to mature in 2024. The move allows for the potential deferral of the payment period for a specific portion of the foreign debt.
Initially, the Mongolian government issued USD 650million in bonds with a term of five years, for both the Gerege and Khuraldai bonds, and an interest rate expectation of 11-12 percent. However, a total of USD 4 billion in orders were received from 138 investors. That led to a decrease in the interest rate to 8.75 percent.
The government of Mongolia has issued eight bonds since 2012, raising USD 5.8 billion, with the capital earmarked for debt refinancing, tackling the country’s budget deficit and funding major projects.
Fitch Ratings has assigned Mongolia’s proposed US dollar bonds a ‘B’ rating. That’s in line with Mongolia’s ‘B’ Long-Term Foreign-Currency Issuer Default Rating (IDR).
The redeeming of the Khuraldai bond comes following Mongolia’s economic bounceback from impacts of the COVID-19 pandemic. The government says the country’s economy is projected to grow by 5.8 percent in 2023, up from 4.7 percent in 2022, and 6.2 percent in 2024, with the country’s deficit falling by 60 percent and exports rebounding strongly.
In a boost to growth, the Government announced the commencement of underground production at the giant Oyu Tolgoi copper mine in the Gobi Desert with Rio Tinto in March.