Thursday, December 22, 2016

Mongolia Bottoming?

Nikkei Asian Review:

The international financial community's confidence in the Mongolian government's ability to deliver reforms and service its debt may be improving after a long slump. That was the impression left by an investment conference in Tokyo on Dec. 7, attended by foreign lenders and investors, and officials from the country's central bank and legislature.


In recent years, a sharp decline in resource prices led to a drop in government revenues from the mining sector and to a deterioration in the balance of payments. On June 29, the Democratic Party lost in a landslide general election to the Mongolian People's Party, with former Finance Minister Erdenebat Jargaltulga becoming prime minister.

The new government immediately started drafting policy involving fiscal restructuring and structural reforms, and started talks with the IMF. In late September, it officially requested a bailout.

Almost all the speakers pointed to a swift rebound in coal and copper prices, both crucial exports. "The economic gods are starting to smile for Mongolia," said veteran American investor Nicholas Edwards. He pointed out that, thanks to the recent price increase, Mongolian coal mines are starting to make money and that copper has been the best performing metal for the past six weeks in international markets.

The commodity markets are cyclical. We are emerging from a five year bear market in commodities. I expect Mongolia will benefit from an improvement in commodity prices. 

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