sharing in governance of extractive industries
The Mongolian government recently announced a USD 5.5 billion bailout agreement with the International Monetary Fund (IMF) and other development partners, including the World Bank, the Asian Development Bank and the governments of Japan and South Korea. In return, Mongolia approved a limited and revenue-focused set of reforms. Budget amendments passed in April included increases in personal income tax rates, increases in fuel, alcohol and tobacco taxes, and a public service wage freeze.
The reform package was enacted in response to Mongolia’s debt crisis, which was caused by a combination of wildly over-optimistic revenue projections based on unrealistic expectations of mineral sector revenue growth, off-budget spending, and a plethora of small infrastructure projects with questionable economic development benefits.
Using an of Mongolia’s economy, the and executive summary analyzes the impact of the proposed reforms on Mongolia’s public debt levels, GDP growth and employment levels. It concludes that a mere 15 percent drop in mineral prices makes the debt situation worse than today, even with the implementation of the reform program. This high degree of risk calls for additional debt repayment or supplementary measures.
Download the model and read our analysis here:
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