Mongolia's parliament passed a $1.1 billion economic stimulus plan on Tuesday that aims to ease an economic crisis battering the resource-rich country as a result of falling commodity prices.
The stimulus is intended to stabilize the country's banking system and currency while creating jobs through road and infrastructure development. It also offers support for agriculture, livestock production, and the energy sector, while seeking to boost exports of coal, iron ore and copper to China.
The stimulus unveiled in parliament will likely take the budget deficit from a current 6 percent of gross domestic product, to 12 percent, Prime Minister Bayar Sanjaa said. That, he said, would require spending cuts while the government seeks outside funding. "We have to raise funds outside of the country as domestic funding resources for the plan are meager," Bayar told parliamentarians.
This vast, sparsely populated North Asian nation of about 3 million people has been walloped by the plunging value of copper, its main export. Recent copper prices have been around $1.50 a pound, down from nearly $4.00 last year. Depositors have also pulled money out of banks for fear they might collapse.
Bayar said the government was discussing obtaining a $3 billion crisis loan from neighbor China, but is also considering selling government bonds on international markets, or taking a loan from the International Monetary Fund or World Bank.
However, borrowing would be more difficult since Mongolia's credit rating has been downgraded, Bayar said.
Another option is to get advance royalty and tax payments from mining giants such as Rio Tinto who want to invest in the country, he said.
The government is currently negotiating with Ivanhoe Mines and Rio Tinto over a huge copper and gold deposit called Oyu Tolgoi, as well as a host of other international mining companies over a large coking coal deposit called Tavan Tolgoi.
Saikhansambuu Shinensambuu, a lawmaker, said the government would also increase domestic gold production by supporting mining companies and opening up nature reserves for exploration as part of the stimulus.
"The price of gold is staying very stable and good, so this is one sure way of increasing government revenue," he said.