B. JAVKHLAN: MONGOLIA  SKILFULLY MANAGES ITS FOREIGN DEBT TO IMPROVE ITS CREDIT RATING

Dec 13.2023

Minister of Finance B. Javkhlan spoke about the Government of Mongolia’s successful  debt management measures by trading foreign securities of in the international capital market and refinancing part of the government’s Khuraldai bonds due 2024 and Nomad bonds due 2026.

In order to balance the long-term  foreign debt burden on the state budget, increase the average maturity of the debt package and maximize the possible payment of foreign securities from the budget, payments on foreign securities totaling $2.2 billion were successfully made under Century I, II and III projects. This was done in line with the public debt management strategy for 2019-2022 and 2023-2025.

This time, however, debt adjustment measures to refinance the remaining $392.5 million of outstanding Khuraldai bonds under the Century III project were successfully implemented on November 20-28, 2023.

For example, $350 million of Century III bonds with an interest rate of 7.875% and a maturity of 5.5 years were sold in the international financial market on November 28, 2023. The government has bought back a certain portion of the remaining $392.5 million of Khuraldai bonds due in March 2024. Mongolia will not repay the bond debt in 2024 and 2025.

Total orders from international investors for Century III’s newly traded bonds reached $4.8 billion, the highest ever recorded and 13.7 times higher than the previous record. In addition, the Mongolian government’s exposure to the Century III bond is also the lowest in history at 2.3%, half the average exposure of 5.5% for foreign bonds issued and traded by the government. If the U.S. Federal Reserve interest rate at this time was between 0 and 1%, this means that the Mongolian government could issue bonds with an interest rate of 2.3-3%.

By refinancing overdue and high external debt as part of debt management measures, the government reduced the debt burden on the budget and balance of payments, which stabilized the exchange rate and had a positive impact on financial and economic stability. In addition, it had an important impact on maintaining and further improving Mongolia’s credit rating, the Finance Minister explained.