IMF Executive Board Approves $ 99 Million in Rapid Financing Instrument Disbursement for Mongolia to Respond to COVID-19 Pandemic
June 3, 2020
- The COVID-19 pandemic has taken a heavy toll on economic activity in Mongolia, resulting in urgent budget and balance of payments needs.
- To support Mongolia, the IMF approved the request for emergency financial assistance under the Rapid Financing Instrument (IFR) of approximately $ 99 million.
- This emergency financial assistance will help support foreign exchange reserves, create fiscal space for essential pandemic-related spending, and catalyze donor support.
– The Executive Board of the International Monetary Fund (IMF) approved Mongolia’s request for emergency financial assistance under the
Rapid Financing Instrument (IFR)
equivalent to SDR 72.3 million (approximately US $ 99 million, or 100 percent of quota) for
urgent budgetary and balance of payments needs
stemming from the COVID-19 epidemic and to support the most affected sectors and vulnerable groups.
Following the Board’s debate on Mongolia, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chairman, made the following statement:
“Mongolia has successfully avoided a nationwide COVID-19 outbreak so far, aided by the early introduction of social distancing and strict health protocols for cross-border flows. Nevertheless, the pandemic has sharply reduced economic activity due to both the economic cost of containment measures and the decline in external demand. There is now an urgent need for balance of payments and a budget financing gap.
“The authorities have already taken a number of measures to limit the economic contraction and help the most vulnerable. Recent budget revisions allow for increased health and social spending as well as tax relief for affected households and businesses. In addition, the Bank of Mongolia has relaxed its monetary and financial policies to help prevent a disorderly contraction of bank lending to the private sector.
“Emergency financing under the IMF’s RFI will provide much needed support to meet urgent balance of payments and budget needs. Further assistance from development partners will be needed to support the authorities’ efforts and close the funding gap. The authorities’ commitment to upholding high standards of transparency and governance in the management of financial assistance is welcome.
“As the immediate threat to the economy eases, it will be essential to resume the key reforms initiated in the recent extended financial mechanism agreement. These include a return to fiscal consolidation to reduce the still high public debt, a more flexible exchange rate to build up foreign exchange reserves, address the shortcomings of AML-CFT and stricter enforcement of supervision to ensure that all banks have sufficient capital.