Mongolia Vice Minister: Bonds Can Wait
JAKARTA—With a budget surplus and no need of funds at the moment, Mongolia isn't in a hurry to issue its first sovereign bonds, Vice Finance Minister Ganhuyag Chuluun Hutagt said Saturday.
The debate over whether to make the move is "pretty strong," Mr. Hutagt told Dow Jones Newswires in an interview, adding that issuance will take some time.
"The budget is in surplus, we have record high level of cash in our coffers, we have created the stabilization fund," said Mr. Hutagt, who's in Indonesia to attend the World Economic Forum East Asia Summit. "There is no immediate, urgent needs for additional funds."
In its first year of operation, Mongolia's stabilization fund stands at US$50 million, and is expected to grow to US$200 million by year-end.
Indonesia and the Philippines are among the Asian nations whose recent global sovereign bonds have been heavily subscribed. Indonesia raised US$2.5 billon through global dollar bonds in April; the Philippines sold US$1.5 billion in bonds in March. People familiar with the situation said earlier this week that Malaysia was also considering a U.S. denominated sukuk bond with meetings to gauge investor interest planned for mid-June.
In March, Mr. Hutagt had said that his country was planning to tap the international market by raising US$500 million, a typical size for a dollar-denomiated bond, through the sale of its first sovereign bond this year.
"The debate is around whether our economy can handle that much inflow of foreign currency without negative consequences on the exchange rate, inflation and the local industry," Mr. Hutagt explained, indicating that any issuance by Mongolia could be lower.
Mr. Hutagt, who termed the global bonds "Wolf Bonds," said that his ministry was looking to create a benchmark in the international market to encourage the private sector to issue bonds and so get access to global capital.
"Because of a lack of benchmark sovereign issues, the economy is not performing at its optimum," he said, and the companies can raise funds only through international equity markets.
But his ministry is issuing local bonds whose proceeds would be used to fund housing needs and support small and medium enterprises and the textile industry.
Mongolia is exposed to any potential downturn in China, where 70% of its exports go, but Mr. Hutagt said that doesn't greatly weigh on him.
"There is a risk that we will be completely hit by whatever happens in China," he said.
But with the country moving over time to ramp a diverse range of exports—brown coal, coking coal, copper, silver, uranium and gold among them—Mongolia is likely to be resilient in the face of a Chinese slowdown, he added.
"It is enough for us not to worry too much," he said.
Write to James Glynn at james.glynn@dowjones.com and P.R. Venkat at venkat.pr@dowjones.com
The debate over whether to make the move is "pretty strong," Mr. Hutagt told Dow Jones Newswires in an interview, adding that issuance will take some time.
"The budget is in surplus, we have record high level of cash in our coffers, we have created the stabilization fund," said Mr. Hutagt, who's in Indonesia to attend the World Economic Forum East Asia Summit. "There is no immediate, urgent needs for additional funds."
In its first year of operation, Mongolia's stabilization fund stands at US$50 million, and is expected to grow to US$200 million by year-end.
Indonesia and the Philippines are among the Asian nations whose recent global sovereign bonds have been heavily subscribed. Indonesia raised US$2.5 billon through global dollar bonds in April; the Philippines sold US$1.5 billion in bonds in March. People familiar with the situation said earlier this week that Malaysia was also considering a U.S. denominated sukuk bond with meetings to gauge investor interest planned for mid-June.
In March, Mr. Hutagt had said that his country was planning to tap the international market by raising US$500 million, a typical size for a dollar-denomiated bond, through the sale of its first sovereign bond this year.
"The debate is around whether our economy can handle that much inflow of foreign currency without negative consequences on the exchange rate, inflation and the local industry," Mr. Hutagt explained, indicating that any issuance by Mongolia could be lower.
Mr. Hutagt, who termed the global bonds "Wolf Bonds," said that his ministry was looking to create a benchmark in the international market to encourage the private sector to issue bonds and so get access to global capital.
"Because of a lack of benchmark sovereign issues, the economy is not performing at its optimum," he said, and the companies can raise funds only through international equity markets.
But his ministry is issuing local bonds whose proceeds would be used to fund housing needs and support small and medium enterprises and the textile industry.
Mongolia is exposed to any potential downturn in China, where 70% of its exports go, but Mr. Hutagt said that doesn't greatly weigh on him.
"There is a risk that we will be completely hit by whatever happens in China," he said.
But with the country moving over time to ramp a diverse range of exports—brown coal, coking coal, copper, silver, uranium and gold among them—Mongolia is likely to be resilient in the face of a Chinese slowdown, he added.
"It is enough for us not to worry too much," he said.
Write to James Glynn at james.glynn@dowjones.com and P.R. Venkat at venkat.pr@dowjones.com
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