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Annual Report 2002 : East and Central Asia

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Mongolia

Economic performance

The Mongolian economy improved in 2002. Owing to the performance of industry and services, and recovery in the livestock subsector, the GDP growth rate reached 3.9% in 2002. Macroeconomic stability was restored, inflation fell from 8.0% in 2001 to 1.6% in 2002, and the fiscal deficit was contained at 5.6% of GDP despite the pressures triggered by a 20.0% rise in public sector wages and pensions.

External trade improved as exports and imports grew strongly. The volume of exported copper concentrate, a key source of revenue, rose, but the value fell as international copper prices declined. Cashmere followed the same pattern. An increase in gold production and a higher international price contributed to the nonagriculture economic growth.

According to official sources, registered unemployment rate dropped to 3.6%, although there was double-digit nation- al unemployment, as measured by international standards.

ADB operations

Operational strategy: ADB’s strategy for Mongolia, in line with the poverty partnership agreement (PPA) (see page 35), focused on poverty reduction through pro-poor interventions that foster private sector-led economic growth and good governance. ADB’s operations covered initiatives to further develop the financial, agricultural, road, public, social, and urban development sectors. The Government’s privatization program was furthered by technical assistance for banking sector privatization and policy development in the civil aviation sector.

Policy dialogue: The second annual review of the PPA, in March 2002, confirmed that Mongolia was making progress toward achieving the Millennium Development Goals, with the notable exception of reducing poverty incidence. On accelerating economic growth to address persistent income poverty, ADB emphasized the need to maintain macroeconomic stability in providing an environment conducive to private sector-led growth. Dialogue on public sector reform continued, particularly in implementing the Public Sector Management and Finance Law.

Loans, technical assistance, and grants: Two loans totaling $34.1 million were approved in 2002, to provide basic urban services in provincial towns and to improve the education sector. Nine technical assistance totaling $3.5 million and two grants totaling $3.2 million were approved (see tables 1, 6, 24, 25, and 35 in the Statistical Annex).

Project implementation: Since joining ADB in 1991, Mongolia has received 31 loans totaling $539.2 million, of which 16 were active at the end of 2002. Contract awards totaled $24.7 million, bringing the cumulative figure to about $395.0 million. The contract award ratio was 18.4%—lower than the ADB-wide average of 22.6%. Disbursements in 2002 totaled $26.6 million, bringing cumulative disbursements to $378.9 million. The disbursement ratio was 16.0%—lower than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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