Mongolia to Get Economic Crisis Funding Support from ADB, Japan

MANILA, PHILIPPINES – The Asian Development Bank (ADB) and Government of Japan will fund a social sectors support program in Mongolia to help cushion the impacts of the global economic crisis on the country’s poor, who make up a third of the total population.

ADB’s Board of Directors approved a loan equivalent to $43.1 million and a grant of up to $16.9 million from its concessional Asian Development Fund for the Mongolia Social Sectors Support Program. The Japan International Cooperation Agency, funded by the Japanese government, will provide cofinance of up to $50 million.

A technical assistance grant of $700,000 to provide strategic capacity development with the Mongolian government is also being extended by ADB, with the Mongolian government providing a further $100,000 equivalent.

Mongolia’s economy has expanded quickly over the past decade, driven by the rising value of its vast copper deposits. The newfound wealth allowed the government to grant generous wage rises and welfare payments. However, the onset of the global economic crisis and slump in mineral prices has severely dented its fiscal resources, forcing it to pare back planned social sector spending. Mongolia is one of the most exposed countries in the world to poverty fallout from the crisis, due to its reliance on volatile mining revenue.

“Unless the Government is able to bring about an orderly adjustment to this external shock the social consequences will be severe, potentially unwinding the gains of recent years and threatening the attainment of the Millennium Development Goals,” said Wendy Walker, Social Development Specialist in ADB’s East Asia Department.

The program is being harmonized with assistance from the International Monetary Fund, United Nations Development Programme and World Bank, to help the government bridge fiscal shortfalls for social sectors in 2009 to 2011 as part of an economic stabilization plan.

"Support will be given for reforms to improve the targeting of social assistance to the most needy," said Claude Bodart, Senior Health Specialist in ADB's East Asia Department.

These policy measures will pave the way for associated education and health projects, such as a new medicard program for the poor and the expansion of a household micronutrients scheme. The Japan Fund for Poverty Reduction, funded by the Japanese government, and administered by the ADB, will provide a $3 million grant to finance and assist in the implementation of these programs.

The loan for the Mongolia Social Sectors Support Program has a 24 year tenor, with an annual interest charge of 1.0% during the 8-year grace period, followed by 1.5% for the rest of the term. Mongolia’s Ministry of Finance will be the executing agency for the Program, which is due for completion in December 2010.

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