Cash-strapped Mongolia is now selling jewellery and horses to pay debt

Mongolia is out of cash, but it has big bills to pay. Bills worth US$580 million, in fact. So citizens are scrounging up cash, and donating money, jewellery, and even horses to the government to help it cling on long enough for an international bailout.

The country has a US$580 million bond payment due in March. So the government is negotiating a bailout with China and the International Monetary Fund amid a historic economic crisis, but it may not come in time. Prime Minister Jargaltulga Erdenebat said he didn’t ask citizens to donate their cash and valuables (including horses, as Reuters reports), but his government certainly wouldn’t say no to the extra help. “The government cannot prohibit the start of any citizen-run campaign,” he said. But he added “the Cabinet has decided to spend voluntary donations on health, education and reducing smog as well as public infrastructure”.

The donations are sorely needed as Mongolia’s economy has gone from double-digit growth a few years ago into a nosedive. One reason is Mongolia’s dependence on mining; a great strategy during the commodities boom, but less brilliant as prices softened and key customers like Russia and China bought less ore.

“A mining boom is not a sustainable development strategy,” Katie Putz, Central Asia expert at the Diplomat, told Foreign Policy.

By 2016, foreign investment dried up and commodity prices sank, while recessions in neighbouring Russia and China infected Mongolia’s economy, Putz said, flatlining growth last year. Adding fuel to the fire is the dzud – a fierce weather combination of severe wind and drought that has disastrous effects on the Central Asian steppe. Mongolia is still recovering from a dzud in 2016 that killed over a million animals and livestock. At best, Mongolia could see just 1.4 per cent growth in 2017, according to the Asian Development Bank.

To cope, Mongolia slashed welfare and public services spending, even with steep unemployment. One Mongolia store owner told Nikkei Asian Review that eight out of 10 adults she knew lost their jobs amid the economic slump, and are struggling to get by. “They are cutting [back] on even basic foods to buy fuel for their stoves. Look how few shoppers we have,” she said.

Prime Minister Erdenebat said he had found a solution to pay off the March bond payment, but financial analysts are sceptical. Barring a magic bullet, getting an IMF bail-out could be a make-or-break moment for Mongolia.

“If they don’t get the IMF bailout, where do they get the resources for this payment, without which they can’t do a new bond to refinance? It’s a chicken and egg situation,” a Hong Kong-based trader told Reuters.