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Business Consulting, Logistics, Technology Service & Project Development in Mongolia

Mongolia in Brief

ECONOMY AND FINANCE

Mongolian national currency is Tugrug and the notes currently using in circulation are 20000, 10000, 5000, 1000, 500, 100, 50, 20, 10. Approximate exchange rate is 1 USD = 1235 Tugrug Mongolia began its transition from a centrally-planned to a market-oriented economy in 1990. The break up of the Soviet Union and of the socialist trading system created difficulties for the Mongolian economy. Like other transitional economies, Mongolia experienced a period of depression and increased poverty in the first part of the 1990s. The GDP per capita reached over 2200 USD which is about 500 USD greater than the economic recession period in 2009. The growth of 9.7% in the first quarter of 2011 has never been recorded in the history of Mongolian Economy.

The Mongolian economy depends mainly on the performance of agriculture and mining and their price fluctuation in international markets. In 1999, agriculture, the main livestock production was the source of approximately 35% of GDP; commerce 29%; services, 18%; mining, 10%; and industry, 7.5%. Mining generated more than 80% of the economy's export earnings. The industrial field includes wool and cashmere processing, leather goods production, food processing, and construction. In 1999, 70% of GDP was generated by the private sector.

Mongolia is currently enjoying a vigorous economic recovery. The 2009 Stand-by Arrangement has been successful in restoring economic and financial stability. Economic growth is expected to surpass 10 percent this year and the extreme pressures that the financial system faced during 2008–09 have eased. Two state-owned banks were placed under conservatorship and will eventually be sold to strategic investors.

Banking sector soundness indicators have improved since the 2008 crisis, but capital ratios are likely overstated. Banks returned to profitability in 2010 and the average nonperforming loan (NPL) ratio declined from a peak of 20 percent in 2009 to 8 percent in 2010. The system-wide Capital Adequacy Ratio (CAR) also showed improvement, increasing to 15.1 percent in 2010. However, the reported CARs do not take into account expected losses from higher loan provisioning and inadequate risk weighting of interbank exposures. Concerns surround the weakest medium-sized banks which have not yet conformed to minimum capital requirements. These banks have poor underwriting practices and have been expanding their loan book.

The authorities have submitted to parliament the Empowering the Banking Sector and Capital Support Program. This program provides a comprehensive restructuring framework aimed at restoring solvency and ensuring banks’ medium-term viability. Bank-by-bank restructuring plans are supposed to be implemented as soon as parliament approves the Program, but prospects for its passing now seem slim.