Mongolia was initially (and for many years before) a centrally planned economy with no effective monetary policy. After a difficult transition from 1990 to a market economy its financial system developed slowly, while the focus of policy moved gradually and erratically towards inflation control and exchange rate flexibility.


Targets and attainment



[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


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


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 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 dollarisation high; unconventional quasi-fiscal expansionary measures by central bank 2012; interest rate corridor 2013 plus modernisation of Treasury bill auctions; 2017 return to stabilisation and reform, including plans to improve currently poor governance at central bank; major improvements over time in statistics available

loosely structured discretion LSD

Selected IMF references: SR 1991 pp3-11, 21-2, 23-6 65-6; SR 1993 pp2-7, 11-12, 18-20; BP 1994 pp12-15, 21, 26-7; SR 1994 pp10-11; SR 1996 pp8-10 26-7; RED 1997 pp18-21, 30-1; SI 1998 pp7, 9, 23-4, 26-7; SR 1998 pp7, 9, 16, 19-21; SR 2002 pp8, 12, 19-21; SISA 2005 pp13, 15, 16-20, 27; SR 2005 pp11, 13, 20-1; SI 2006 pp41-5; SR March 2009 pp8-11; SR December 2009 pp6, 15-16; SR 2011 pp8, 14-15; SR 2012 pp13-14; SR 2013 pp5, 11-13, 18-19; SR 2015 pp4-5; SR 2017 pp17-18; SI 2019 pp12-13.

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