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Mongolia Delays Dollar Bond Sale as Economy Set for 20% Growth

Mongolia Delays Dollar Bond Sale
The Finance Ministry has sold $150 million of tugrik-denominated securities over the past three months. Photographer: Nelson Ching/Bloomberg News

Mongolia delayed plans to sell its first U.S. dollar-denominated bonds until 2012 as surging coal exports puts the economy on target to grow 20 percent this year.

Global banks had offered to manage a sale of as much as $2 billion, four times the $500 million the Asian nation sandwiched between China and Russia sought in June, said Chuluunbat Ochirbat, a Mongolian lawmaker who served as governor of the country’s central bank from 2000 to 2006.

“Mongolia will definitely take a look at the global bonds, maybe next year,” Chuluunbat said yesterday in an interview in Hong Kong. “Almost all the global banks have already made a proposal to the government” to manage sales of dollar- or yen-denominated debt, he said, without elaborating.

Mongolia, the world’s most sparsely populated nation, has set its sights on becoming Asia’s biggest commodity supplier, offering coal, copper, iron and uranium to fuel the industrial growth of China, as well as manufacturers in Japan and South Korea. Rising exports of coal and other products means the economy may grow 20 percent this year, according to Otgonbat Sedbazar, an adviser to the nation’s Resource Ministry.

The country has the equivalent of $172 million of bonds due by the end of 2016, according to data compiled by Bloomberg.

The government talked with investment banks in June about a possible sale of dollar bonds and an additional $700 million of local currency debt to help fund spending on rail, roads and power infrastructure.

Nineteen new mines began operating in the country in 2011, the most starts for at least three years, Otgonbat told a Mongolia investment forum in Hong Kong yesterday. India, Japan and Germany have expressed interest this year in helping Mongolia start mining rare-earth metals, he said.

Tugrik Bonds

Mongolia overtook Australia as the leading supplier of coking coal to China in the first half of the year and export volumes across the whole economy are on course to jump 65 percent this year, Trade and Development Bank of Mongolia president Randolph Koppa told the forum in Hong Kong.

The Finance Ministry has sold $150 million of tugrik-denominated securities over the past three months, Koppa said. The nation’s foreign debt to gross domestic product ratio is at 50 percent, he said.

Tenfold Jump

The commodity-driven boom has fueled a tenfold jump in Mongolia’s benchmark stock index in the past five years, while hurting traditional industries such as cashmere. Mongolia produces a quarter of the world’s cashmere.

Gross domestic product per capita may climb to $5,000 by the end of next year, from about $3,000 now, Yadmaa Ariunbold, the country’s consul-general in Hong Kong, said at the conference yesterday. Unemployment has dropped to 8.7 percent, he said without giving a comparative figure.

With new laws in the works to allow Mongolian companies listed abroad also to trade shares in Ulan Bator and the state’s plans to privatize more of its assets, the country’s stock market value could jump to $45 billion within five years from $2 billion today, Mongolia Stock Exchange Chairman Bold Baatar said at the forum.

Still, the boom has driven inflation to 15 percent this year, said Steven Barnett, mission chief for Mongolia at the International Monetary Fund.

“The government is spending too fast,” Barnett said at the conference. “Growth with that level of inflation is a worry.”

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