Mongolia: Weathering Exogenous Shocks Program

approved

The Program is proposed to be supported under the COVID-19 Crisis Recovery Facility (the Facility) of the Bank and co-financed with the Asian Development Bank (ADB). The proposed Program will support the government measures and financing needs, and mitigate the adverse social and economic impacts on the Mongolian people by providing targeted assistance to poor and vulnerable groups, including women and girls. Due to its high dependence on trade with its two large neighbors, China and Russia, Mongolia is one of the most severely affected economies by the twin shocks created by COVID-19 containment policies and the multiple macroeconomic pressures. The exposure to these twin shocks has adversely impacted Mongolia's economy and its population. The current international environment is characterized by disrupted global economic conditions, increasing challenges in financial and commodity markets, and inflationary pressures on energy and food prices. Economic growth forecast for Mongolia in 2022 was considerably downgraded from 6% p.a. made in September 2021 to only 1% p.a. real GDP growth in July 2022, according to the IMF. The situation is having severe economic impacts in Mongolia, particularly for the 27.8% of households already below the poverty line, with a further 14.9% of people at risk of falling into poverty. Against this backdrop, the government has prepared a countercyclical development expenditure program (CDEP) to help vulnerable groups, tame inflationary pressure, and support macroeconomic stabilization. The approved budget for 2022 was amended in two occasions to strengthen the critical measures to address the impacts of the twin shocks. The Program will support the CDEP and will provide the following three outputs: (i) measures to provide temporary increase in cash transfers directly made to households; (ii) measures to cushion adverse socioeconomic impacts on vulnerable groups, including women, and (iii) measures to counteract inflationary pressures of imported essential goods and commodities.