(Repeats story from Thursday, no change to text)
* Govt in talks with China and IMF for assistance
* Development Bank of Mongolia's $580 mln of bonds due in
* Donation pledges flood in this week after a campaign
* Financing difficult due to Mongolia's FX reserves at
ULAANBAATAR/HONG KONG, Feb 2 Private citizens in
Mongolia are donating cash, jewellery, gold and even horses to
help the government make a near $600 million payment to
bondholders next month.
The cash-strapped nation has been embroiled in an economic
crisis brought about by a collapse in foreign investment,
slowing growth in China and weak commodity prices.
Its currency, the tugrik, lost nearly a quarter of
its value last year.
The government has been in talks with China and the
International Monetary Fund for assistance, but investors are
worried that any bailouts might not be negotiated in time, with
the Development Bank of Mongolia's $580 million of bonds due in
"If they don't get the IMF bailout, where do they get the
resources for this payment, without which they can't do a new
bond to refinance? It's a chicken and egg situation," said a
Hong Kong-based trader.
The bonds were showing a bid of 98 cents on the dollar on
Thursday, with a yield as high as 21.5 percent because of their
closeness to maturity.
Though the Mongolian public has been hit by welfare cuts,
rising food and fuel costs and a tough winter that is
threatening to kill large numbers of livestock, donation pledges
began to flood in this week after a campaign was launched by a
prominent economist and members of parliament.
Corporate groups and legislators were also chipping in with
cash contributions of as much as 100 million tugrik ($40,650).
Mongolia's foreign currency reserves are at a seven-year
low, according to credit rating agency Fitch, and redeeming
DBM's bonds could halve its total stockpile, which stood at $1.1
billion in September last year.
"The biggest issue for Mongolia is the very low level of FX
reserves for financing this year, which is essentially why
investors are closely watching out for an agreement with the
IMF," said Simon Quijano, emerging markets strategist with Legal
& General Investment Management.
"Of course, Mongolia could go for other financing options
but it is always the uncertainty on each of those options that
causes unnecessary volatility," he said.
Prime Minister Jargaltulga Erdenebat said that while the
government would accept the donations, it had already "found a
solution" for the March bond payment and would spend the cash
"The government cannot prohibit the start of any citizen-run
campaign," he said in a statement released on Wednesday.
"The cabinet has decided to spend voluntary donations on
health, education and reducing smog as well as public
infrastructure," he added.
A senior Mongolian finance official said late last year that
the country was looking to refinance its debt through
lower-interest loans, and insisted the payments would be met in
($1 = 2,460 tugrik)
(Reporting by Terrence Edwards in ULAANBAATAR and Umesh Desai
in HONG KONG; Editing by Kim Coghill and Jacqueline Wong)