The authors of this report analyze Mongolia’s public finance outlook and risks to the country’s economic sustainability using an advanced macro-fiscal model.
Though Mongolia’s fiscal solvency challenges seem resolved for now, the underlying problem of fiscal sustainability remains. The government continues to carry a high level of debt and is very dependent on commodity revenues. Until debt stabilizes, the authors suggest that the Mongolian government should prioritize debt reduction rather than focus on increasing the balances of the Fiscal Stability Fund and Future Heritage Fund.
They also recommend that the government continue with reforms directed at improving fiscal discipline; make budget revenue projections with more caution in order to stabilize expenditure; and continue with the current fiscal consolidation model and comply with fiscal rules in order to prepare for negative mining shocks.