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Belgrade
22/05/2024
Mining News

Mongolia’s bid for economic growth amid mining reliance

Mongolia is actively pursuing international bonds to fuel its economic agenda. However, investor apprehensions linger due to the nation’s heavy reliance on mining. While mining contributes significantly to Mongolia’s GDP and export earnings, it also poses inherent risks due to overreliance. Moreover, frequent shifts in government policies amplify uncertainties.

A recent amendment to Mongolia’s Minerals Law by the parliament adds to these concerns. It limits project owners to a maximum of 34% ownership and grants the government the right to claim up to 50% of a project for free, compelling owners to sell their remaining stakes within a year. Such stringent measures could deter potential investors and tarnish Mongolia’s attractiveness as an investment hub.

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Doubts persist regarding the government’s capacity to repay these bonds, as evidenced by past challenges. During previous commodity price downturns, the Ministry of Finance had to restructure previously issued bonds multiple times, raising red flags for investors.

To bolster investor confidence and facilitate successful bond issuances, Mongolia must shore up its legal and economic foundations. While diversification away from mining is a strategic objective, sustainable economic diversification hinges on responsible mining practices. Hence, supporting the mining sector is paramount.

Establishing transparent and consistent regulatory frameworks is essential to instill trust among investors. This move will enable Mongolia to harness the full potential of its mining industry while ensuring long-term financial stability. Such efforts will lay the groundwork for future development and foster diversified growth across various economic sectors.

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