- Mongolia experienced issues after its first bond issue in 2012 due to poor fiscal discipline. Global markets are wary of emerging markets and commodity prices affect investor sentiment. - The document discusses Mongolia's macroeconomic policies and reforms, including tightening monetary policy, reducing debt, and increasing foreign investment. It highlights the Comprehensive Macroeconomic Adjustment Plan's framework for policy reform focusing on fiscal stability, external balance, and structural adjustments. - If Mongolia follows through on its macroeconomic plan with consistent fiscal and monetary policies, it will help the country regain access to international debt markets. Continuity of reforms is key to credibility with investors.

1. MACROECONOMIC ISSUES
Amid Global Trends
BCM SUMMIT
April 21, 2016
Randolph S. Koppa, Executive Vice Chairman, TDB

2. Some Key Lessons Learned
• Poor discipline after first bond issue in 2012 costly
• Global environment has investors averse to emerging markets
• Commodities prices dominate investor sentiment
• Access to markets is not automatic

3. Investor concerns
• Fiscal and Monetary discipline is key
• Policy consistency is critical
• Stability and enforcement of laws
• Proactive approach; i.e. make decisions on key projects

4. Trade Balance Continues to Show Surplus
Positive trade balance trend has been maintained since 2014 Production increases have helped offset price decreases
4
Strong copper production, coupled with import compression
0
500
1,000
1,500
2,000
2,500
3,000
Copper Coal Crude Oil Iron Ore Gold
USDinMillions
Export of main commodities
(2010 through 2015)
Source: National Statistical Office
-4,000
-2,000
0
2,000
4,000
6,000
8,000
2008 2009 2010 2011 2012 2013 2014 2015
USDinmillions
External trade
Export Import Trade Balance

5. External Accounts Have Stabilized
Trade surplus helped current account deficit to narrow … which continues to help FX reserve level to stabilize
5
Positive trade balance helped to narrow the current account deficit
-4,000
-3,500
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
2008 2009 2010 2011 2012 2013 2014 2015
USDMillions
Current Account Balance
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2008 2009 2010 2011 2012 2013 2014 2015 2016
USDMillions
Gross International Reserve
Source: Bank of Mongolia

6. Foreign Investment
The Missing Ingredient
-5%
0%
5%
10%
15%
20%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2009 2010 2011 2012 2013 2014 2015
USDMillions
FDI (LHS) OT capex (LHS) GDP growth (RHS)

7. Forward-Looking Policy Measures
7
Tightened policies, trade agreements and domestic business support pave the way for future growth
Macroeconomic policy
amendments and
trade agreements
● The Law on Economic Transparency passed
● Comprehensive Macro Adjustment Plan (“CMAP”) approval by the parliament
● Japan: Signed economic partnership agreement
● China: Signed extensive bilateral economic partnership agreements
● China, Russia: Signed a memorandum on compiling a guideline for building the trilateral
economic corridor
Fiscal policy changes
and debt
management
● Fiscal Stability Law amended by the parliament
● Debt Management Law (“DML”) approved by the parliament
● Integrate DBM financed projects into the budget
● 2016 – 2018 Government Debt Management Strategic document was passed
Monetary policy
● Policy rate reduced to 12% in January 24, 2016
● Phased out Price Stabilization Programme
● Minimum paid-in capital requirement for banks raised to MNT 50 billion by YE 2017
● Received IMF Technical assistance to enhance systemic oversight
Support for industries
and diversification
● Initiatives to create value-added downstream natural resources exports
● Stronger support for local SMEs, e.g. processing of F&B, wool and cashmere, leather, textiles
Making FDI easier
● Streamlining application process and improving legislative environment
● Supportive PPP structures and concession agreements for developing infrastructure
Source: Government of Mongolia, Ministry of Finance of Mongolia, Bank of Mongolia, Ministry of Industries

8. Comprehensive macro Adjustment Plan (CMAP) provides
a legal framework for a policy reform
8
 Gradual tightening of
monetary policy stance since
July 2014
 Phasing out of programs
under unconventional
monetary policy measures as
planned
Prudential macro and micro
measures to prevent
systematic and idiosyncratic
risks in financial sector
Continued commitment to
the exchange rate flexibility
in alignment with macro
economic fundamentals
 Inclusion of quasi-fiscal
expenditures into the
consolidated budget,
including DBM spending and
Price Stabilization Program
(PSP)
Gradual reduction of
government debt and
structural fiscal deficit under
the Fiscal Stability Law
Reduction of DBM social
project spending in line with
prudent monetary and fiscal
policies
Implementation of longer
term fiscal budget planning
Prudent fiscal policy to
promote external balance
Stability oriented
monetary policy
 Macro-economic adjustment
policy with close dialogue with
IMF, World Bank and ADB,
which was reflected in the
Parliament ratified
Comprehensive Macro
Adjustment Plan (CMAP)
• Measures to support
economic diversification
(productions, competitiveness
and absorption capacity)
• Initiation of the long-term
sustainable savings policy
(sustainable mortgage
financing program)
• Enhancing DBM’s governance
and independence
Structural
reforms
 Debt Management Law
introduced contingent
liability management,
liability management
operations, and institutional
arrangement for prudent
debt management policy
2016-2018 Government
Debt Management Strategy
ratified by Parliament
 Government External Debt
Servicing Plan
 Proactive liability
management
 Active presence in the
international markets
Enhanced debt
management strategy
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Addressing short-term balance of payments pressures, consolidating off-budget fiscal spending,
and implementing longer-term structural adjustment measures
Source: Government of Mongolia, Ministry of Finance of Mongolia, Bank of Mongolia, Ministry of Industries
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9. Conclusions and Recommendations
• The macroeconomic plan is credible with investors
• Keys to accessing debt markets as a sovereign are
fiscal and monetary policy performance
• Plan needs to be followed
• Continuity of policies is essential

10. Thank you for
your attention.