Ulaanbaatar/MONTSAME/. On August 25, the Asian Development Bank has approved USD100 million in emergency support to the Government of Mongolia to help it weather the impacts of severe economic shocks.

The Russian invasion of Ukraine and continuing border restrictions with the People’s Republic of China (PRC) due to COVID-19 have caused substantial fiscal stress in Mongolia. In response, the government has prepared a countercyclical development expenditure program (CDEP) to help poor and vulnerable groups, ease inflationary pressure, and support macroeconomic stabilization.

“This ADB loan will support government measures to stabilize the economy,” said ADB Financial Sector Specialist for East Asia Peter Rosenkranz. “The budget support provided through this countercyclical support facility (CSF) loan will also provide fiscal space to continue with critical economic structural reforms over the medium term.”

Mongolia is experiencing a widening current account deficit, increased pressure on foreign exchange reserves, and rising external financing needs. Rising food and fuel prices are eroding purchasing power and increasing poverty. Inflation spiked to 16.1% nationwide as of June 2022, and was particularly high for food and fuel.

With one in four people in Ulaanbaatar living below the poverty line, rising costs are particularly challenging for the poor, who spend an average of 43% of their total income on food, compared with 32% spent on food by nonpoor households.

External shocks disproportionally affect poor and vulnerable groups, including women and girls. Women are highly concentrated in lower wage sectors such as services, food production, and wholesale and retail trade, which have been most adversely affected by the pandemic because of mobility restrictions. This program will reach 1.2 million children in 64% of the country’s households through direct cash transfers.

“This ADB financing will help poor and vulnerable groups to weather the difficulties caused by the external shocks,” said ADB East Asia Department Director for Public Management, Financial Sector, and Regional Cooperation Emma Fan. “The emergency support provided under the CSF will expand social protection support to vulnerable households under CDEP until the end of 2022.”

The program will support other key government measures including 50% reimbursements of social security premium contributions for lower-paid employees for the rest of 2022 and 8.5% salary increases for lowest-earning public service employees (three-quarters of whom are women). It will also provide about 16,000 new kindergarten spaces for young children in poor areas. 

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

Source: ADB