The International Monetary Fund (IMF) has concluded its 2025 Article IV consultation with Mongolia. An IMF team, led by Mr. Tahsin Saadi Sedik, held discussions in Ulaanbaatar from June 4 to June 18, 2025. The preliminary findings indicate an improvement in Mongolia's macroeconomic conditions since the last consultation in 2023.
Mongolia experienced a resource-driven economic boom during 2023-24, which bolstered budget revenues and fiscal surpluses despite increased public spending. This period saw the debt-to-GDP ratio decrease significantly. However, a sharp increase in public expenditure led to an expansionary fiscal policy stance that contributed to rapid credit growth and inflation pressures.
In early 2025, Mongolia's economic outlook weakened as the commodity boom lost momentum. Declining coal export receipts have widened the current account deficit and reduced foreign exchange reserves. Inflation remains high despite recent moderation.
To navigate these challenges, greater fiscal prudence is advised to restore balances and preserve fiscal buffers. The government plans to meet structural fiscal balance targets through expenditure restraint while safeguarding social spending for vulnerable groups.
Reconsideration of a tax package under discussion is suggested due to potential impacts on non-mining tax revenues and overall deficit increases. The focus should shift toward strengthening non-mining revenue mobilization through streamlined tax incentives and administration reforms.
Monetary policy adjustments are recommended to contain credit growth and inflation. Greater exchange rate flexibility could enhance resilience against external shocks. Reforms are needed to strengthen the Bank of Mongolia’s effectiveness by withdrawing from subsidized mortgage programs and finalizing amendments aimed at strengthening its mandate.
The IMF also suggests enhancing macroprudential frameworks to mitigate financial stability risks from rapid credit growth and improving the business climate through governance reforms that address corruption vulnerabilities.
Significant investments are necessary for climate adaptation and mitigation efforts as part of a green transition strategy given Mongolia's exposure to natural hazards and high carbon intensity.
The IMF staff expressed gratitude for constructive discussions with Mongolian authorities during their visit.