The International Monetary Fund said Sunday that it and other partners have agreed on terms for a more than $5 billion loan package to the Mongolian government to help get the north Asian country’s economy back on track.
The deal is subject to approval by the IMF’s executive board, which is expected to consider Mongolia’s request in March.
According to the terms agreed by the Mongolian government and IMF envoys, the IMF would provide $440 million over three years. The Asian Development Bank, World Bank, Japan and South Korea are together expected to provide up to $3 billion, and the People’s Bank of China is expected to extend its 15 billion RMB ($2 billion) swap line with the Bank of Mongolia for at least another three years, the IMF statement said.
The economy of mineral-rich Mongolia has been hit hard in recent years by a sharp decline in commodity prices and a collapse in foreign direct investment.
Adding to Mongolia’s woes is an exceptionally cold winter for the second successive year, which the Red Cross warned last week was putting the livelihoods of more than 150,000 nomadic herders and family members at risk.
Mongolia’s national debt now stands around $23 billion, or twice the annual economic output, and a $580 million payment to foreign bondholders is due March 21.
The IMF statement said the loan agreement would mean Mongolia has to strengthen its banking system and adopt fiscal reforms to ensure that budget discipline is maintained.
Generally, terms required by the IMF as a condition for such lending often prompt complaints in borrower countries that the conditions hurt the poor or undercut economic growth by reducing social spending or investment in public facilities.