"The Board discussion was postponed," said Neil Saker, the IMF's Mongolia country representative, in emailed comments, adding that they needed to examine the details of a new measure covering foreign exchange transactions by investors. The IMF announced in February a $440 million Extended Fund Facility that Mongolia can draw on for three years, in addition to $3 billion from Japan and South Korea and a three-year extension to a 15 billion yuan ($2.18 billion) swap agreement with the People's Bank of China.
In the 2017 budget approved in the early hours of the morning on April 14, legislators introduced tax changes that would allow it to meet conditions set by the IMF. But it also included a clause seeking to "improve" investment agreements with foreign partners, forcing firms such as miner Oyu Tolgoi LLC, jointly owned by Mongolia and Rio Tinto, to do all their banking with Mongolian institutions in a bid to bolster foreign currency reserves.
"We need a bit more time to understand the nature and the specifics of the measure, and whether the macroeconomic framework of the program remains valid," said Saker. Mongolia's Ministry of Finance and Ministry of Foreign Affairs did not immediately respond for comment. According to a report in local news portal News.mn on Tuesday, the ruling Mongolian People's Party (MPP) will support the removal of the controversial clause. A spokesman for the party declined to comment, but any move would require the consent of parliament. "The parliament must now approve the agreement without that clause and have the programme discussed again by the IMF executive board," said Dale Choi, analyst with the Altan Bumba Financial Group based in Ulaanbaatar.
Copyright Reuters, 2017