ULAANBAATAR May 2 The International Monetary
Fund (IMF) has postponed a $5.5 billion bailout for Mongolia
because of a measure included in the 2017 budget that forces
foreign firms to bank with domestic institutions, the IMF's
country representative said.
Mongolia's economy has slid into a crisis caused by heavy
foreign debt, a collapse in its currency and a slowdown in
growth in its biggest trading partner, China. The IMF board had
been expected to approve a rescue package at a meeting on April
"The Board discussion was postponed," said Neil Saker, the
IMF's Mongolia country representative, in emailed comments,
adding that they needed to examine the details of a new measure
covering foreign exchange transactions by investors.
The IMF announced in February a $440 million Extended Fund
Facility that Mongolia can draw on for three years, in addition
to $3 billion from Japan and South Korea and a three-year
extension to a 15 billion yuan ($2.18 billion) swap agreement
with the People's Bank of China.
In the 2017 budget approved in the early hours of the
morning on April 14, legislators introduced tax changes that
would allow it to meet conditions set by the IMF.
But it also included a clause seeking to "improve"
investment agreements with foreign partners, forcing firms such
as miner Oyu Tolgoi LLC, jointly owned by Mongolia and Rio Tinto
, to do all their banking with Mongolian
"We need a bit more time to understand the nature and the
specifics of the measure, and whether the macroeconomic
framework of the program remains valid," said Saker.
Mongolia's Ministry of Finance and Ministry of Foreign
Affairs did not immediately respond for comment.
($1 = 6.8937 Chinese yuan renminbi)
(Reporting by Terrence Edwards; Editing by Simon Cameron-Moore)