Mongolia
- Total external debt: $1 327 million (external debt book 2005)
- Total external debt payments: $45 million (EDB 2005).
- Population: 2.6 million (EDB 2005)
- Percentage of adults who can read and write: 97.8% (HDR 2005)
- Average life expectancy: 65.9 years (HDR 2005)
- HIV prevalence: 0.1% (HDR 05)
- Total health spending: 4.0% of GDP (HDR 04)
- Total spending on debt service payments: 2.37% of GDP
- Annual GDP: $1.9 billion (HDR 2005)
DROP THE DEBT FAST
Mongolia is the focus of the Drop the Debt Fast on Monday 5 May.
Background information
The Republic of Mongolia is dominated by the vast Gobi Desert in the centre of the country, is bounded on the north and south by steppe regions where ranching is practised and nomadic groups tending sheep, horses and camels. To the west lies the mountainous region of the Altai Mountains, rich in mineral resources: copper, tin, phosphate, coal and petroleum.
Political history
The Mongols have been conquerors – most infamously under thirteenth century Emperor Genghis Khan – and subjects, under their Chinese neighbours for some 200 years, and more recently under the Soviet Union.
Despite declaring itself an independent republic in 1921, the country was Soviet-dominated in every sphere. In the 1930s, Stalinist purges slaughtered thousands; herding was collectivized and nomads compelled to live in co-operatives. But communism was not successful economically, and in the 1980s sweeping economic reforms sought to prop up the economy.
In 1990 Mongolia abandoned its 70-year-old one-party state and embraced political and economic reforms. Democracy and privatisation were enshrined in a new constitution, but the collapse of the economy after the withdrawal of Soviet support triggered widespread poverty and unemployment.
Where has the debt come from?
Before 1990, Mongolia had been dependent on financial support and technical assistance provided by the Soviet Union. With the collapse of Soviet support, the country found itself unable to meet its needs, due to a shortage of foreign currency to buy consumer goods, equipment, and other necessities.
The main sources of Official Development Assistance (ODA) to Mongolia in the past two decades have been Japan, the Asian Development Bank, the World Bank, Germany, and the United States. Since the initial transition till the end of 2003 Mongolia has received more than US$2.6 billion in aid (half as loans), heavily concentrated in the economic sectors (transport, industry and construction, and electricity and heating). Mongolia has also drawn loans from the IMF since 1993 in return for implementing reforms, under its Poverty Reduction and Growth Facility (PRGF).
But the reforms carried out under the guidance of the International Financial Institutions (IFIs) have not succeeded in tackling poverty and inequality. Mongolia remains among the least developed nations, with Gross Domestic Product (GDP) per capita of around US$480. Market forces have increased the disparity between the living standards of rural and urban populations. Liberalising the financial sector in the 1990s also made the economy vulnerable to rocketing interest rates and instability. More than one-third of Mongolia's population lives below the poverty line. The severity and depth of poverty has increased in past years, compounded by economic shocks.
Debt cancellation status
Mongolia is officially classed as a low-income country by the World Bank. It is considered by the IFIs to have a 'sustainable' debt: this is measured by the size of external debt in comparison to the value of exports, without taking into account domestic debt or what Mongolia needs to spend on tackling poverty. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. It has qualified for additional debt assistance from the UK, which cancels the UK’s share of Mongolia’s debts to the World Bank and African Development Bank.
The New Economics Foundation calculates that Mongolia requires 100% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Sources:
New Internationalist, BBC country profile, World Bank, IMF.
Last updated: April 2008
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