Mongolia refinances its USD 1 billion Chinggis and Gerege debts with low interest bonds

2021-06-30 15:08:11

Ulaanbaatar /MONTSAME/. On June 29, Tuesday, Minister of Finance B.Javkhlan delivered a presentation on the liability management taken by the government of Mongolia to refinance its bonds – Chinggis and Gerege maturing in 2022 and 2023 respectively – at all-time low interest rates. 

In September 2020, the government of Mongolia issued a ‘Nomad’ sovereign bond and raised USD 600 million on international stock markets, by taking advantage of the favorable indicators of the international markets at that time. Now, the government has taken the debt management measure as part of its project named ‘Century’ to refinance a total of USD 1 billion debts from the Chinggis and Gerege sovereign bonds, which were growing closer to their maturity dates, at historic low interest rates, according to the Ministry of Finance.

Mongolia issued 5.125%, USD 1 billion and 10-year Chinggis bond during the peak of its economic growth in 2012 when Mongolia’s economic growth rose to up to 17.3 percent and the country’s credit rating was already two levels’ higher than the current rating and the bond was set to mature in 2022. 

“This time with the country’s economy has shown 5.3 percent contraction and credit rating was at B level by 2020 amid the pandemic, we have successfully implemented liability management to pay off USD 1 billion that were reaching maturity in the next 2 years through debt refinancing for a USD 500 million bond with 6-year term and 3.5 percent interest, and another USD 500 million with 10-year term and 4.45 interest as part of the ‘Century’ project,” stated in the Finance Ministry’s press release. 

“Successfully refinancing Mongolia’s sovereign bonds with the lowest rates of 3.5 and 4.45 percent compared to those of other countries with the same B credit rating is a result of the Mongolian government’s effective policy response and measures to protect the population’s health and recover the economy during the pandemic and shows international investors’ high confidence in the political and economic stability of Mongolia”. 

The Finance Ministry reports that the liability management – the debt refinancing to replace high-interest bonds with low-interest bonds - will help reducing the burden to be imposed on the government’s budget and balance of payment in coming years and maintain currency stability while improving Mongolia’s credit rating.