Moody's Disclosures on Credit Ratings of Mongolia, Government of
Singapore, March 13, 2012 -- The following release represents Moody's Investors Service's summary credit opinion on Mongolia, Government of and includes certain regulatory disclosures regarding its ratings.
This release does not constitute any change in Moody's ratings or rating rationale for Mongolia, Government of.
Moody's current ratings on Mongolia, Government of are:
Long Term Issuer (domestic and foreign currency) ratings of B1
Short Term Issuer (domestic and foreign currency) ratings of NP
RATINGS RATIONALE
Mongolia's B1 government bond rating is consistent with our methodology scores of low economic and institutional strengths, moderate government financial strength and high event risk. Long-term economic prospects are bright, but the near-term fiscal outlook is clouded by spending pressures.
Mongolia's rating has been constrained by susceptibility to destabilizing boom-bust cycles stemming from (1) an undiversified, dual mining/agricultural economy subject to mineral price vulnerability on one front and occasional extremely severe winters on the other, and (2) pro-cyclical monetary and fiscal policies.
Mongolia pulled through the 2008-2009 boom-bust cycle with the assistance of an 18-month IMF Stand-by-Arrangement, successfully completed in the fall of 2010. Under the program, inflation was reined in and international reserves were rebuilt. The health of government finances over the long term will in large part depend on the implementation of the country's fiscal stability law, key measures of which come into play in 2013-2014.
Predictability with foreign investment agreements would ensure benefits to Mongolia from the country's substantial mineral endowments. After many years of delay, Mongolia's parliament approved the government's agreement with Ivanhoe Mines and Rio Tinto in October 2009 to develop the very rich Oyu Tolgoi copper and gold deposit. The exploitation of this and other large mineral deposits, such as high-grade coking coal in Tavan Tolgoi, will be transformational for the Mongolian economy, but the management of the windfall will pose considerable challenges to the authorities.
The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Moody's current ratings on Mongolia, Government of are:
Long Term Issuer (domestic and foreign currency) ratings of B1
Short Term Issuer (domestic and foreign currency) ratings of NP
RATINGS RATIONALE
Mongolia's B1 government bond rating is consistent with our methodology scores of low economic and institutional strengths, moderate government financial strength and high event risk. Long-term economic prospects are bright, but the near-term fiscal outlook is clouded by spending pressures.
Mongolia's rating has been constrained by susceptibility to destabilizing boom-bust cycles stemming from (1) an undiversified, dual mining/agricultural economy subject to mineral price vulnerability on one front and occasional extremely severe winters on the other, and (2) pro-cyclical monetary and fiscal policies.
Mongolia pulled through the 2008-2009 boom-bust cycle with the assistance of an 18-month IMF Stand-by-Arrangement, successfully completed in the fall of 2010. Under the program, inflation was reined in and international reserves were rebuilt. The health of government finances over the long term will in large part depend on the implementation of the country's fiscal stability law, key measures of which come into play in 2013-2014.
Predictability with foreign investment agreements would ensure benefits to Mongolia from the country's substantial mineral endowments. After many years of delay, Mongolia's parliament approved the government's agreement with Ivanhoe Mines and Rio Tinto in October 2009 to develop the very rich Oyu Tolgoi copper and gold deposit. The exploitation of this and other large mineral deposits, such as high-grade coking coal in Tavan Tolgoi, will be transformational for the Mongolian economy, but the management of the windfall will pose considerable challenges to the authorities.
The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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