Mongolia Benchmark-Size U.S. Dollar-Denominated Notes Assigned #B-# Rating

Stocks and Financial Services Press Releases Monday October 16, 2017 17:39
SINGAPORE--16 Oct--S&P Global Ratings

SINGAPORE (S&P Global Ratings) Oct. 16, 2017--S&P Global Ratings today assigned its 'B-' long-term foreign currency issue rating to Mongolia's issuance of benchmark-size U.S. dollar-denominated notes. The notes will constitute the direct, unconditional, unsubordinated, and unsecured obligations of Mongolia (B-/Stable/B).

Our sovereign credit ratings on Mongolia reflect the ongoing challenges to the country's fiscal performance and growth prospects. While Mongolia's fiscal deficits are stabilizing, they remain considerable, reflecting shortfalls in revenues, elevated spending levels, and our inclusion of commercial spending by the Development Bank of Mongolia in the general government's accounts.

As such, Mongolia's debt will remain high over the 2017-2020 period. In an acknowledgment of Mongolia's fiscal and balance-of-payments stresses, the government secured a US$5.5 billion IMF-led financing package in May 2017, which should mitigate short-term liquidity pressures. Nevertheless, key rating weaknesses remain.

The stable outlook on the rating on Mongolia reflects the country's low-income resource-driven economy, emerging policy environment and fiscal performance, high external risk, and limited monetary flexibility. These factors are balanced against the prospect that large mining projects could quickly reverse Mongolia's sovereign credit profile during the next 12 months.

This outlook also assumes that official creditor support continues to contain balance-of-payment and fiscal pressures. The rating's upside potential could build if the development of the Oyu Tolgoi and Tavan Tolgoi mines accelerates economic growth and improves fiscal and external performances more than we currently expect.

Downward pressure could emerge on the ratings if Mongolia's external liquidity weakens markedly.

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