TOKYO -- Mongolia will be able to implement the structural reforms it has agreed to with the International Monetary Fund, Foreign Minister Tsend Munkh-Orgil told the Nikkei Asian Review in an interview on Monday in Tokyo.
Last month the IMF approved a three-year, $434 million loan for Mongolia as part of a wider $5.5 billion aid package that is also supported by Japan, South Korea, China, the Asian Development Bank and the World Bank.
The resource-rich country has benefited from a commodities boom over the last 15 years or so. But a subsequent commodity price slump, investment outflows and slowing demand in key export markets have hit the economy hard.
"I am confident that resources and the money that will be lent to the Mongolian government will be used effectively to overcome the temporary economic problems," Munkh-Orgil said on the sidelines of the International Conference on The Future of Asia.
The agreement was reached after IMF determined that Mongolia had met some of the lender's demands, including raising taxes and cutting spending. Some observers, however, question the ability of the government to carry through with the painful structural reforms needed to put the economy back on track.
But Munkh-Orgil said the reform was inevitable. "With or without IMF, we know that we must undertake these reforms. We have expanded fiscally -- a lot. We have stretched ourselves on [the] budget. We have reached unsustainable levels of government debt," he said.
The government is trying to respond through fiscal consolidation, Munkh-Orgil said, and by bringing the budget under control. Mongolia aims to reduce the budget deficit, currently equivalent to 17% of gross domestic product to 10.2% by the end of this year. By 2022, it aims to have a budget deficit equal to around 2% of GDP, he said.
"For the next several decades, the mining sector will continue to be the central linchpin of the Mongolian economy," Munkh-Orgil said. "But at the same time, mining is a very capricious animal. [The] fortunes and misfortunes of the mining sector can go up and down unexpectedly."
Mongolia is ready to diversify its economy, which currently relies on minerals for 90% of its export revenue, he said. "We need to bring in more products, [put] more industries in play. We need to engage the public and businesses in other areas that employ more people and bring more export revenues, like agriculture and tourism."