Mongolia Renews Debt Ceiling Debate to Boost Infrastructure
Mongolia’s Ministry of Finance presented a plan to parliament that would raise the nation’s debt ceiling, paving the way for the government to sell more foreign debt to pay for infrastructure development.
The government plans to increase the debt ceiling to 70 percent of gross domestic product from 40 percent, Gantsogt Khurelbaatar, the State Secretary for the Ministry of Finance, said yesterday at a meeting with diplomats and foreign press. The change is part of a new debt management plan he said was introduced to Parliament yesterday.
Mongolia is studying financing options for infrastructure projects that can help it process and export its resources as foreign direct investment fell 28 percent in the first two months of 2014. In November, parliament blocked a bill to raise the debt ceiling to 60 percent, prompting Moody’s Investors Service to describe the rejection as a credit positive.
Raising the debt ceiling is one of several changes proposed by the Ministry of Finance, said Gantsogt. The plan also includes a 20 percent limit on state guarantees and changes to the way the government calculates debt, he said.
Mongolia has raised about $2.3 billion in sovereign debt since March 2012.
Underscoring the challenges for the economy, Standard & Poor’s this week lowered Mongolia’s long-term sovereign rating to B+ from BB-, or four levels below investment grade.
The 40 percent limit went into effect this year as part of the country’s Fiscal Stability Law, adopted in 2010 as a way to smooth spending habits and generate savings from mineral revenue. Government debt in 2013 was 49.5 percent of GDP, just shy of the 50 percent mark allowed for that year.
Mongolia’s currency, the tugrik, fell to a record low on April 30, reaching 1,796 to the dollar, a 25 percent year-on-year decline.
To contact the reporter on this story: Michael Kohn in Ulaanbaatar at firstname.lastname@example.org
To contact the editors responsible for this story: Andrew Hobbs at email@example.com Keith Gosman