“Unsustainable external debt”: will there be a default in Mongolia?
The British analytical company Economist Intelligence Unit, in its July 21 report, said that Mongolia has a high probability of default on external debts in the next four years due to high inflation and borrowing costs.
“Laos has the highest chance of non-payment in the next four years, followed by Mongolia,” the EIU report says.
The Economist Intelligence Unit also noted that Laos and Mongolia are the most at risk of default after Sri Lanka in 2022-2026. It is reported by Bloomberg.
Global bond investors are increasingly wary of the threat of a historic cascade of defaults after Sri Lanka and Russia suspended debt repayments in 2022.
According to the report, economic experts expect Mongolia to be dependent on an inflow of new debt in 2022 and 2023 to pay interest, while its access to financing may be limited by high inflation and the risk of depreciation of the national currency.
At the same time, the Mongolian government constantly refutes information about an allegedly upcoming default on debts in the country. Finance Minister B. Javkhlan on June 24 in an interview with News.mn called such reports in foreign media “purposeful and organized misinformation.”
The head of the Mongolian financial department announced the strategy of debt repayment approved by the government of the country for the next three years.
“We used to pay 150-200 million dollars a year. But if we have the opportunity, we will increase this amount and reduce the debt by $200-300 million annually,” B. Javkhlan said.
According to the minister, one billion dollars of public debt falls on China, which has financed 23 Mongolian government projects in sectors ranging from road transport and agriculture to energy and construction. Thirteen of them have already been completed and ten are under implementation.
B. Javkhlan also noted that exports from Mongolia to China have been constantly growing over the past two months, which should have a positive impact on the economy in the country.
In the first quarter of 2022, Mongolia’s external debt decreased from $33.9 billion to $32 billion. According to the National Department of Statistics of Mongolia, the public debt increased by 4.6% compared to the same period in 2021.
