A new report from the World Bank recommends that Mongolia use its current mining-driven economic growth to implement fiscal reforms that could support long-term stability and development. The findings, published in the Mongolia Public Finance Review titled “Making this time different: Fiscal reforms for stable, sustainable, and inclusive development,” come after three years of external shocks that challenged the country’s economy.
The review notes that strong coal exports have helped Mongolia reduce public debt and build up financial reserves. Improved debt management has also eased concerns about refinancing, resulting in lower bond spreads and better sovereign credit ratings. However, the report points out that increased government spending—fueled by higher mining revenues—now exceeds levels seen before the pandemic and is higher than in comparable countries.
The World Bank also highlights quasi-fiscal operations, such as subsidized housing mortgage programs and off-budget transfers via state-owned enterprises, as contributors to expansionary fiscal policy. These practices may threaten recent gains if not addressed.
According to the report, Mongolia’s social assistance system has played a role in reducing poverty and inequality but remains costly and could be more effectively targeted. The World Bank suggests improving access to health and education services across regions and income groups to strengthen human capital outcomes for future growth. The review further advises that public investment decisions should focus on better prioritization, planning, and oversight—especially as the government seeks to increase infrastructure investment under its New Recovery Policy.
While current revenues are strong, the World Bank encourages tax reforms aimed at broadening the tax base beyond mining income. Such changes could make taxation more progressive and supportive of economic growth.
Implementing these reforms would help stabilize Mongolia’s economy against inflationary pressures and external risks while allowing for greater investment in both physical infrastructure and human capital. Taehyun Lee, World Bank Country Manager for Mongolia, said: “Mongolia stands at a pivotal moment. The current economic boom creates a unique opportunity to strengthen the country’s fiscal position, butalso risks repeating past boom-bust cycles if reforms are delayed. Now is the time to strenghten fiscal foundations, improve spending efficiency, and create space for sustainable and inclusive growth.The recently approved amended budget reflects the government’s efforts to maintain fiscal prudence in the face of revenue volatility and global uncertainty.”