Ulaanbaatar /MONTSAME/ MONTSAME interviewed Chief Executive Officer of the Development Bank of Mongolia (DBM) H.Amartuvshin.

Some media outlets have published articles about those who have not paid back their loans to the Development Bank of Mongolia. Are those articles credible?

-           I saw the newspaper article. I do not know if you have noticed, but it was an audit report made on DBM’s operation by the Government in 2016. There was also data on the bank’s loan portfolio of that time.  Three years have passed since then. So, there are companies that have completely settled their debts during that period of time. A lot of changes have been made to DBM’s balance sheet and loan portfolio and relating laws and regulations since 2016. For instance, the bank’s loan portfolio amounted to MNT 6 trillion in 2016, of which MNT 3.3 trillion was invested in over 350 projects and programs with a stipulation to be repaid from the state budget, MNT 1.2 trillion was loaned to more than 1,600 companies through commercial banks, and MNT 1.6 trillion was loaned for 17 projects and programs directly from the Development Bank. DBM transferred all of the projects and programs associated with the state budget to the Ministry of Finance at the end of 2016. Some of the loans directly taken out from DBM have been fully paid off by the companies and some are being repaid as scheduled. In particular, Erdenes Tavantolgoi JSC settled its loan of USD 200 million one year ahead of schedule in October, 2018. Also, the Central Geological Laboratory of Mongolia, PIMM LLC, and Baganuur JSC fully settled their loans. However, the newspaper article mistakenly reported that the companies have not paid off their loans yet.

Moreover, with a decision of the Mongolian Parliament and Government to amend loan agreements in order to make them loans to be repaid from its revenues, Mongolian Railway state-owned shareholding company’s loan of MNT 506.2 billion and Amgalan Thermal Power Plant LLC’s loan of MNT 191.9 billion were transferred to the Government.

There are enterprises that have been repaying their loans as per or ahead of schedule. Specifically, Moncement plant have paid back USD 33.4 million out of USD 65 million it received from DBM and now owes USD 31.6 million. Foreign currency loans expose companies to exchange rate risks. In other words, for some major enterprises, the amount of their remaining debt in MNT does not decrease even when they make their repayments as scheduled due to the increase in exchange rates. For instance, State Housing Corporation state owned company faces this issue as a part of its loan has been granted in a foreign currency.

Could you elaborate on the loan repayment progress?

-           As of today, debts of over MNT 380 billion are due to be settled from the loans of MNT 1.2 trillion provided to over 1,600 companies through commercial banks. The loan agreements’ term comes to an end in late 2020.

Has the portfolio of non-performing and overdue loans decreased? How is the progress so far?

-           In 2016, the size of the bank’s active assets reached MNT 6.8 trillion with loan portfolio of MNT 6 trillion and the volume of overdue and non-performing loans was quite high. Thanks to a series of actions, the Development Bank that had a loss of over MNT 190 billion have seen profits over the past two years. As might be expected, some actions such as the increase of the risk funds adversely affected the bank’s profitability.

As of today, DBM’s active assets amount to MNT 4.2 trillion with loan portfolio of MNT 2.7 trillion.And non-performing loans make up 11.9 percent of the loans as of the first half of the year. We are striving to diminish this percentage in short and mid-terms.

What would you say about the financial misconduct valued at MNT 13 trillion mentioned in the newspaper article?

-           It is not MNT 13 trillion. At the time, misconduct costing MNT 1.3 trillion was found during the investigation in 2016. With regard to this, the Government of Mongolia gave DBM authorities directives on eradication of the malpractice and referral of the case to legal authorities. Thus, the relevant documents have been handed over.

How are the repayments of the problem loans detected during this year’s government investigation going?

-           The Cabinet Secretariat transferred the projects that are not making repayments on the due date to the prosecutor’s office. Some are failing to make repayments on time due to exchange rate risks, failures in their activities, and misuse of their loans and this harms the bank’s operation. As it could be required to increase the risk funds at the end of the year, we are working hard with support of the government and in collaboration with legal authorities to see concrete results.