The International Monetary Fund (IMF) is warning that Mongolia’s economy is in danger of overheating. Steven Barnett, Assistant Director of the IMF Office for Asia and the Pacific, noted that the size of Mongolia’s budget grew by 60 percent in 2011 and another 30 percent this year. He said it was not wise to essentially double state spending in just two years, since it will fuel inflation and increase the country’s trade deficit. He recommended immediate cuts in state spending to “a much more prudent rate of growth.”

Barnett also said a flexible exchange rate should be maintained, and is perhaps most important to a healthy economy. While it is fine for Mongol Bank to intervene to smooth excess volatility, he said, it should not target any specific level for the exchange rate. He explained that this strategy is simply ineffective and will only deplete national reserves.

According to the National Statistics Office, Mongolia’s economy grew by 28.7 percent in 2011.