Yesterday, the IMF announced it had received a communiqué from the Mongolian government making an official request for support for their ailing economy, which has seen foreign direct investment plunge some 70% in the past year and a government reconsidering austerity measures versus development of potentially lucrative international mining projects. Mongolia has already received an IMF bailout loan back in 2009 due to the impact of the global financial crisis, which the country was able to pay off riding the wave of revenue enhancement from the commodity prices boom of the last few years.
The IMF may reconsider loaning to Mongolia again after such a short amount of time, especially given the uncertain fate of the Oyu Tolgoi copper mine and the Tavan Tolgoi coking coal deposit. The Mongolian government, despite having raised a fair amount of money through the sale of some $2 billion in bonds in both dollars and yen, yields skyrocketed follow the news of the last quarter of 2014, but fell again upon news of the IMF’s decision to entertain the idea of a second bailout loan.
However, another related development may help the Mongolian government’s case. The latest referendum, held by text message, rejected austerity in favor of mining investment, which may help loosen the impasse over the Oyu Tolgoi mine and developer Rio Tinto group.
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