AKIPRESS.COM - Mongolia has requested a rescue loan from the International Monetary Fund (IMF) to address balance of payments woes and support its troubled economy, according to IntelliNews.

Mongolia has been struggling to stabilize its economy and control its budget deficit, as the foreign debt has surged amid a fall in government revenues mainly because of a sharp decline in prices of coal and copper, the country’s main exports. The resource-rich country has also been hit by the slowing growth in neighboring China, which buys up nearly all of its copper, gold and coal. As such, Mongolia’s request for assistance was widely expected, despite previous denials by the government.

It was a boom in FDI that helped Mongolia rack up an astronomical GDP growth of 17.5% in 2011. But the freefall in commodity prices have badly hit the economy, reliant on mining coal, copper and gold. Latest figures by the statistics office showed GDP expanded by 1.4% in the first half of the year, easing from 3% a year ago. Mongolia’s economy will likely expand 0.3% in 2016, easing sharply from 2.3% last year, the Asian Development Bank (ADB) said in a new forecast published on September 27.

At the same time, the country’s budget deficit has plunged to 20% of GDP this year, while it faces approximately $ 2bln in public and private debt repayments due in next year. The country’s total external debt is estimated at $23.5 bln, almost twice the size of its $12 bln economy, where government debt alone stands at $8.4 bln.

An IMF team will visit Mongolia’s capital, Ulaanbaatar, this month to conduct discussions with the government concerning financial assistance

Mongolia’s central bank raised its policy interest rate by 450 basis points (bps) to 15% on August 18 in a bid to stem a sharp fall in the country’s national currency. The decision to hike rates was taken to improve yields on togrog-denominated assets in order to protect the currency and ensure mid-term stability.

The measure was announced shortly after the recently elected Mongolian government said the country is in the middle of an economic crisis. As part of its anti-crisis measures, the government will initiate a spending freeze, salary cuts for civil servants, debt reduction efforts and the set-up of a body tasked with attracting foreign investments.