News Brief No. 99/32

News Brief: IMF Executive Board Approves Mongolia's Second Annual Program under ESAF

June 16, 1999

IMF Executive Board Approves Mongolia's Second Annual Program under ESAF

Shigemitsu Sugisaki, Deputy Managing Director of the International Monetary Fund (IMF), said: "The Executive Board of the IMF today welcomed the resumption of Mongolia's ESAF-supported program under the second annual arrangement and approved the request for increased access to support the ambitious adjustment and structural reform effort being undertaken to counter the effects of the difficult external environment.

"They noted that the return to a calmer political environment had created the conditions for a fuller adjustment to the terms of trade shock, for private sector-led growth, and for locking in the recent disinflation gains. In this regard, they welcomed the full commitment of the new government to the economic policies and objectives that constitute the basis of the second ESAF arrangement, which they considered to be well balanced and appropriately ambitious. Directors observed that the prudent fiscal and monetary policies envisaged under the program are appropriately targeted to putting the budget on a sustainable path, maintaining inflation at single digit levels, and laying the foundations for rapid, sustainable growth. They noted that further improvements in tax administration and public expenditure management would be essential for continued fiscal consolidation.

"Directors welcomed the strong commitment of the Mongolian authorities to structural reforms to build on the impressive progress that has been made in the past. They pointed out that the comprehensive banking sector reform strategy, the acceleration of the privatization program to include some large enterprises, and public administration reforms would lay the foundations for high quality growth by creating a healthy banking system, further room for private sector activity, and greater efficiency and transparency in government operations.

"Directors observed that the economic challenges now facing Mongolia made it incumbent on the authorities to maintain a broad base of political support for the reform process. Integral to this effort would be a strengthening of the safety net to alleviate the social costs of the transition adjustment. At the same time, it would be essential to ensure that policies remain conducive to macroeconomic stability. At the same time, Directors expressed the hope that Mongolia's development partners would maintain strong financial and technical assistance to the country in order to support its comprehensive adjustment program."