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  • Signing of Japanese ODA Loan Agreement with Mongolia: Supporting reforms in Mongolia under an international aid framework with the aim of economic and fiscal reconstruction

Press Releases

December 6, 2017

Signing of Japanese ODA Loan Agreement with Mongolia: Supporting reforms in Mongolia under an international aid framework with the aim of economic and fiscal reconstruction

photosigning ceremony

On December 5, the Japan International Cooperation Agency (JICA) signed a loan agreement with the Government of Mongolia in Ulaanbaatar, the capital city, to provide a Japanese ODA loan of up to 32 billion yen for the Fiscal, Social and Economic Reform Development Policy Loan.

The economy of Mongolia depends heavily on the mineral resource sector, which accounts for 20 percent of the country’s gross domestic product (GDP) and 90 percent of exports, which are primarily coal and copper. Due to a drop in the prices of minerals, which are major exports, a slowdown in the economy of China which purchases 80 percent of the exports from Mongolia, a drop in foreign direct investment caused by restrictive investment policies and other such factors, the GDP growth rate dropped from 17 percent in 2011 to one percent in 2016. Fiscally, the country faces such challenges as increasing domestic infrastructure expenses, and rising social welfare expenditures due to inadequate controls on payees. Such factors pushed the fiscal deficit-to-GDP ratio to 17 percent in 2016 while the public debt-to-GDP ratio grew from 33 percent in 2011 to 88 percent in 2016, making reforms toward economic and fiscal reconstruction priorities.

Given these circumstances, an international aid framework totaling approximately 5.65 billion dollars was created in 2017 by the International Monetary Fund, the World Bank, the Asian Development Bank and others. With the aim of economic and fiscal reconstruction in Mongolia as a part of the international aid framework, the project will support reforms by the Government of Mongolia in three areas: stable macroeconomic management, the promotion of helping the socially vulnerable and enhancing economic growth.

Specifically, the project will support reforms such as those aimed at strengthening fiscal discipline in the area of stable macroeconomic management. In the area of the promotion of helping the socially vulnerable, the project will support reforms directed at targeting subsidies to the socially vulnerable and improving their living environment, and in the area of enhancing economic growth, the project will support the stimulation of foreign direct investment through improvements to the investment environment and reforms aimed at economic diversification.

The project will support mid- to long-term reforms from such a macro perspective, contribute to the short-term reduction in the fiscal burden of Mongolia, and contribute to fiscal, social and economic stability.

Two years have passed since the launch of the Sustainable Development Goals (SDGs) adopted by all UN member countries, including Japan and Mongolia. This project aims to accomplish the core SDG principle of “leaving no one behind,” through providing support to the socially vulnerable such as the improvement of living conditions in ger (yurt) districts where many poor people live. In addition to strengthening economic growth, the project will, through collaboration with various other projects being carried out in Mongolia, lead to improvements in social welfare and health care systems and address urban environment issues, especially air pollution in Ulaanbaatar. All these comprehensive areas of support cover the three dimensions of sustainable development (economic, environmental and social) that will be put into practice in the project.

1. Terms and Amount of Loan

Project title Amount (million yen) Annual interest rate (%) Repayment
period
(years)
Grace
period
(years)
Procurement
Project Consulting services
Fiscal, Social and Economic Reform Development Policy Loan 32,000 0.8 20 6 General untied

2. Executing Agency
Ministry of Finance
Address: Government Building 2, S. Danzangiin gudamj 5/1, Ulaanbaatar 15160, Mongolia
Phone: +976-51-26-02-47

3. Planned Implementation Schedule
(1) Completion of project: December 2017 – with completion of the loan disbursement
(2) Issuing of letters of invitation for consulting services: No hiring of consultants is planned for this project.
(3) Tender announcement of initial procurement package for international competitive bidding on project construction: No work in conjunction with international competitive bidding is planned for this project.

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