09.10.2015 strategically managing mongolia’s sovereign credit and perception ratings nigel finch
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The document discusses Mongolia's sovereign credit rating and strategies for managing its perception. Mongolia currently has a non-investment grade credit rating of B- from Standard & Poor's. This rating influences borrowing costs for the government, banks, and private sector. While Mongolia's corruption perception ranking is improving, it is still below countries like Bosnia and El Salvador. Maintaining or improving the credit rating could save Mongolia $500 million annually in interest payments on future borrowings estimated at $50 billion. The document recommends developing a coordinated strategy to address rating agency criteria by improving transparency, governance indicators, and engagement with agencies through validated documents and addressing feedback.
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09.10.2015 strategically managing mongolia’s sovereign credit and perception ratings nigel finch
- 1. Business Council of Mongolia, EEIBC, GalaxyTower, Ulaanbaatar 9th October 2015 Strategically Managing Mongolia’s Sovereign Credit and Perception Ratings
- 3. TRANSPARENCYINDEXRANKING Mongolia ranks 80/175 on the Corruption Perception Index
- 4. CORRUPTIONPERCEPTIONRANKING Mongolia ranks 80/175 on the Corruption Perception Index While this score is improving it places it below Bosnia and El Salvador
- 5. CORRUPTIONPERCEPTIONRANKING Mongolia ranks 80/175 on the Corruption Perception Index While this score is improving its perception places it on par with Bosnia and El Salvador
- 9. EXTRACTIVEINDUSTRIES TRANSPARENCYINITIATIVE 2010 was the first year that Mongolia was considered compliant Decrease in discrepancies between taxes and royalties companies disclose they have paid and the amount government discloses it has received $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2006 2007 2008 2009 2010 Company payments Government reciepts
- 12. SOVERIGNCREDITRATING Mongolia’s sovereign credit rating has fallen from BB- to B- (non-investment grade).
- 13. SOVERIGNCREDITRATING And the trend continues to be unfavourable….
- 14. SOVERIGNCREDITRATING Mongolia’s sovereign credit rating is now ranked as B- (non-investment grade). Comparative analysis suggests that governance indications are comparatively weak. The sovereign credit rating is influential in informing the investment decision choice and the cost of borrowings for: -The Mongolian Government - Domestic banks - Domestic private sector - Foreign investors
- 15. SOVEREIGNRATINGCRITERIA Source:Criteria For Rating Sovereigns, Standard & Poor’s 1 5432
- 16. SOVEREIGNRATINGCRITERIA Source:Criteria For Rating Sovereigns, Standard & Poor’s
- 17. SOVEREIGNRATINGCRITERIA Source:Criteria For Rating Sovereigns, Standard & Poor’s
- 18. SOVEREIGNRATINGCRITERIA Source:Criteria For Rating Sovereigns, Standard & Poors
- 19. SOVEREIGNRATINGCRITERIA Source:Criteria For Rating Sovereigns, Standard & Poors
- 20. SOVEREIGNRATINGCRITERIA Source:Criteria For Rating Sovereigns, Standard & Poors
- 24. SAVINGSFROMFUTUREBORROWINGS Mongolia’s National Development and InnovationCommittee (NDIC) estimate that Mongolia will require USD$50 Billion in funding in next five years. If borrowing at where to remain at 5.75%, the annual interest bill would be a staggering USD$2.875 Billion
- 25. SAVINGSFROMFUTUREBORROWINGS Mongolia’s National Development and InnovationCommittee (NDIC) estimate that Mongolia will require USD$50 Billion in funding in next five years. If borrowing at where to remain at 5.75%, the annual interest bill would be a staggering USD$2.875 Billion An improvement in sovereign credit rating which leads to a one percent (100 bps) reduction in interest equates to USD$500 million in savings every year for Mongolia. These savings can be used to fund other valuable economic and social priorities for Mongolia.
- 26. SOWHATCANBEDONE? The sovereign credit rating provides a minimum floor for pricing any transaction in the country.
- 27. SOWHATCANBEDONE? The sovereign credit rating provides a minimum floor for pricing any transaction in the country. Any erosion in the credit rating means that the cost of government financing increases and the cost of private sector financing increases.
- 28. SOWHATCANBEDONE? The sovereign credit rating provides a minimum floor for pricing any transaction in the country. Any erosion in the credit rating means that the cost of government financing increases and the cost of private sector financing increases. A co-ordinated strategy to manage the credit rating means there is less chance of a downgrade and an evidence-based approach for achieving an upgrade.
- 29. SOWHATCANBEDONE? The sovereign credit rating provides a minimum floor for pricing any transaction in the country. Any erosion in the credit rating means that the cost of government financing increases and the cost of private sector financing increases. A co-ordinated strategy to manage the credit rating means there is less chance of a downgrade and an evidence-based approach for achieving an upgrade. In the first instance it can be as simple as: - Better preparation and rehearsal of meetings - Compilation and validation of source documents - Taking on the actionable feedback from ratings agencies - Improving the perception ratings by firstly understanding the methodology - Showing how progress is being achieved and that there is a plan - The use of strategic PR in internal forums
- 30. CONTACT Dr Nigel Finch nigel@sakipartners.com.au +61 421 742 878 H1