ULAANBAATAR, November 13, 2009 – With temperatures outside dropping to a bitter -18 degrees Celsius, debate ran hot at a recent series of high-profile events in Mongolia’s capital Ulaanbaatar discussing the global financial crisis and the ongoing reform efforts of this small, land-locked country.
The financial crisis laid bare the cracks in Mongolia’s mineral dependent economy, as the sharp drop in copper prices, the country’s main export, resulted in a decline in fiscal revenues, a widening current account deficit, a rapid rise in non-performing loans and pressure on Mongolia’s currency the Tugrik.
The crisis also highlighted the need to improve government policies, as a rapid expansion in budget expenditures and credit when copper prices were high (‘05 to mid ’08) set the stage for a difficult ‘bust’.
The second annual public Economic Policy Conference, a Technical Meeting and a high-level workshop focused on two key challenges that emerged as a result of the crisis: restoring a sound financial system and promoting fiscal responsibility in a mineral-rich economy.
These events brought together government policymakers, parliamentarians, business representatives, civil society, global experts and external development partners.
- The President of Mongolia, Tsakhia Elbegdorj, opened the Economic Policy Conference by announcing that Mongolia is about to enter a new era of development following the long-awaited signing of the agreement with Rio Tinto and Ivanhoe Mines to develop the Oyu Tolgoi project in the Gobi desert, one of the world’s largest copper and gold deposits.
- Senior officials from Chile, the Netherlands, the International Monetary Fund (IMF) and the World Bank were keynote speakers and a visiting delegation of MPs from Bangladesh, Finland, Cambodia, France, India, Indonesia, and Uganda, supported by the World Bank’s Parliamentary Network, also participated.
- On his first full day in office, Mongolia’s new Prime Minister Su. Batbold opened proceedings at a Technical Meeting by stressing the importance of learning from other countries experienced in managing mining revenue, namely Chile.
- The following day, both major political parties (representing almost half of the parliament) and experts from Chile, the World Bank and the IMF met in an all-day workshop concerning fiscal reforms, copper prices, structural balance rules, the public investment program, social transfers, public promises and realities.
World Bank support to Mongolia through the crisis
These three events are part of a bigger World Bank program supporting Mongolia through the crisis. Over the last year the World Bank has supported the ambitious reform program introduced by the Government of Mongolia, restructured the country strategy to respond to government requests, assisted the government to put in place an IMF stand-by arrangement and mobilized additional donor financing to fill an estimated $205 million budget gap.
Sustained policy outreach has also been offered to senior policymakers on economic crisis management and reforms in a mineral dependent economy.
A grant from the global Governance Partnership Facility (GPF) has been an important source of financing to extend the World Bank’s efforts on knowledge exchange and policy outreach. The GPF has also provided support for the second Economic Policy Conference and for the visits to and from Chile.
Mongolia and Chile – what’s the connection?
Chile, like Mongolia, is a resource-rich nation. Mongolia views Chile as an important source of natural resource-related information as the distant South American country has successfully converted natural resources into broadly shared wealth for some time.
This information exchange has been facilitated in many ways:
- Mongolia’s Vice Minister of Finance, Mr. Ochirkhuu, together with the leaders of the two major party caucuses in parliament, visited Chile to better understand and come to a consensus on proposed Mongolian fiscal reforms