Mongolia

Years

Targets and attainment

Classification

1974-90

[Note: Mongolia joined IMF only in 1991, information before that scarce] economy centrally planned, with strong relations with USSR (90% of exports and imports, recurring financial assistance); basic monobank financial system; moves to reform from mid-1980s, but more political than economic; large budget and trade deficits funded by USSR lending

multiple direct controls MDC

1991-3

move to multi-party system 1990 is followed by economic reforms covering private enterprise, pricing, trade and stabilisation; State Bank becomes central bank 1991 in two-tier banking system; limits on credit and currency issue, reserve requirements, limits on central bank lending to commercial banks; interest rates liberalised; interbank payments system; currency base rate fixed to USD with commercial rate linked to basket and heavily devalued 1991, tolerated parallel market has high premium; but, with weak institutions and limited technical expertise, very high fiscal deficits (no longer funded by USSR) and monetary expansion continue, leading to hyperinflation, further depreciation and spike in dollarisation; May 1993 exchange rates unified and floated, some liberalisation; statistical database very poor

unstructured discretion UD

1994-2023

exchange rate initially floating (with some smoothing intervention) and depreciating on balance vs USD; gradual move towards indirect monetary instruments: credit controls phased out 1994; central bank bills issued from 1994, with rising volumes and importance; banking near-crisis 1996 leads to restructuring; 1997-8 heavy forex intervention to limit depreciation from shocks of Asian and Russian financial crises; further banking sector problems; periodic swings in fiscal deficits and private credit growth, forex intervention occasional but less frequent; forex market remains underdeveloped, but growing; GFC, occurring in period of expansionary policies and inflation, causes sharp falls in export values, central bank rations foreign exchange and reluctantly allows large depreciation; 2009 renewed (but limited and temporary) turn to exchange rate flexibility, with plans to move from twice-weekly forex auctions to intervention in growing interbank market, and plans eventually for inflation targeting; but 2011 fiscal expansion (including infrastructural spending by new Development Bank) pushes up inflation despite initial monetary tightening, while monetary transmission mechanism is weak, forex market thin (and exchange rate managed) and dollarisation high; unconventional quasi-fiscal expansionary measures by central bank 2012; interest rate corridor 2013 plus modernisation of Treasury bill auctions, with central bank informal inflation targets met 5 years, overshot 4 and undershot 3, over 2012-23; 2017 return to stabilisation and reform, including partial improvements under 2017 law to governance at central bank; 2018 bank supervision remains weak; rapid containment response to Covid-19 but strong (but untargeted) fiscal, quasi-fiscal and monetary loosening leads to rising debt and weakens central bank’s independence; 2022-23 central bank’s quasi-fiscal operations curtailed, domestic bond issues, banking sector reforms, exchange rates more flexible, but fiscal deficits remain large; major improvements over time in statistics available but gaps remain

loosely structured discretion LSD