Bloomberg: Mongolia Calls for Economic ‘Crisis’ Plan; Bonds Tumble
“We came into a situation where we may not be able to afford to finance salaries and operational costs of government departments, such as the Mongolian military who protect our borders and national security, the social and health employees who are in charge public health, as well as individuals in culture and sport,’’ Choijilsuren Battogtokh said in a nationally televised address on Tuesday. “We are in a deep state of economic crisis.’’Why Bondholders Are Belittling Mongolia’s Crisis Warning
Mongolia has suffered from falling commodities prices, an economic slowdown in China and waning interest by foreign investors spooked by anti-investment laws and inconsistent policy. Choijilsuren’s comments come six weeks after the Mongolian People’s Party trounced the Democratic Party in June elections, which appears to lay the groundwork for increased austerity measures.
Consider further the Mongolian central bank’s decision to hike interest rates to 15% from 10.5% to halt the currency’s tailspin last week. The lack of such bold monetary policy initiative is what set bondholders against Turkey’s authorities for years.
Of course, Mongolia isn’t Italy or Turkey. With little over 3 million people and an economy similar in size to Albania or Mozambique, it’s certainly not too big to fail. Fiercely independent in the model of the nation’s founding father Genghis Khan, Mongolians are jealous guards against over-zealous influence from Russia to the north or China to the south. Mongolia can’t presume to rely on the support of the International Monetary Fund or bondholders. And this is why the new government is taking its own medicine before it’s prescribed.