Investor Presentation March 2017
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> Mongolia Macroeconomic Developments Banking Industry TDB Overview Investment Summary
Laying the Foundations for Long-Term Growth Mongolia is expected to receive IMF bailout package IMF’s three– year Extended Fund Facility (EFF) GDP growth is highly correlated to FDI • IMF and Mongolian Government jointly announced that the 5,000 20% Government of Mongolia reached staff-level agreement with the International Monetary Fund for a three-year program 4,500 that includes a $440 million loan package as part of a $5.5 billion plan. 4,000 15% • Floating interest rate will be no more than 2% p.a. Repayment period is 10 years. IMF will monitor progress on a 3,500 quarterly basis before the next loan tranche is given. • International partners’ programs such as Asian Development 3,000 10% USD Millions Bank, World Bank, and bilateral partners including Japan and Korea together expected to provide up to $3 billion in 2,500 budget and project support. People’s Bank of China is expected to extend its ¥15 billion swap line with the Bank of 2,000 5% Mongolia for at least three years. • Package is expected to be approved by Executive Board in 1,500 April. Forecast under EFF 2017 2018 2019 1,000 0% GDP growth (%) -0.1 1.8 8.1 Inflation (%) 6.1 6.1 6.9 500 Trade balance (billion USD) 1.26 0.96 0.7 Export (billion USD) 4.89 4.94 5.44 0 -5% Import (billion USD) 3.62 3.97 4.73 Foreign exchange reserve 1.67 2.77 3.54 (billion USD) External debt as of GDP FDI (LHS) GDP growth (RHS) 86.9 85.7 79.4 (%) Source: National Statistical Office of Mongolia, IMF, Bank of Mongolia 3
IMF: Staff-Level Agreement on EFF (1) Approach on budget Approach on budget Approach on Approach on expenditure reduction expenditure reduction budget revenue increase budget revenue increase • Petroleum excise tax Tobacco excise tax Child Money Program Tender offer need when increase of 10% in 2018, increase in July and targeted to 40% of total purchasing medicine and increased 5% in 2019 and October 2017 children instead of 60% medical equipment 2020. Personal income tax Reduced portion will be Social welfare programs audit • 10% tax on interest income used to spend on the food increase of 10%, 15% and to remove overlapping for savings is effective stamp program for the 20% based on income level programs April 1, 2017 most vulnerable Social insurance tax Concession agreement without • Tobacco import tax Suspend the program of increase of 2%, 1%, 2% for estimation of burden on budget increase of 30% • providing residence or employer and employee in Improvement on tax will be audited and collection management in residential allowance to 2017, 2018 and 2019 reimbursement will be made in order to increase budget veterans respectively. following year revenues Pension age increase by Automobile excise tax When increasing budget 1.5 years in every 2 year. increase to 3%-15% based expenditure, other By 2026, pension age for on manufactured year. expenditures must be reduced male will be 65 years and Automobiles with engine to offset for female it will be 65 over 4,501cm3 is subject to No salary increase for years by 2036 40%-250% increase government officials until 2018 IMF financing is necessary to restore economic stability and debt sustainability in order to create strong, sustainable and inclusive growth in Mongolia. Source: IMF 4
IMF: Staff-Level Agreement on EFF (2) Banking sector Banking sector Monetary policy Monetary policy evaluation evaluation • • • Tight monetary policy given Flexible exchange rate Independent evaluation Government commitment to policy with intervention on financial sector to the deposit insurance the objective of price assess institutions’ • limited to smoothing Commitment to strengthen the stability excessive volatility and financial soundness and regime for Anti-Money Subsidized mortgage loan preventing disorderly resilience Laundering and Combating program as a revolving fund • BOM’s engagement on market conditions the Financing of Terrorism. Bank of Mongolia (BOM)’s • Adoption of new BOM law banks to ensure solely pursuit to monetary to clarify its mandate, appropriate restructuring interventions from now, strengthen governance, and recapitalization • forbidding no more and improve independence Strengthening the regulatory and engagement in quasi-fiscal supervisory framework of activity BOM Strengthening the banking system is a crucial part of the program, to ensure that the banks can support sustainable and inclusive economic growth Source: IMF 5
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