While China’s slowing economy has singed stock markets around the world, no nation is more affected than neighboring Mongolia.
Things have gotten so bad that the government in this mineral-rich nation is planning job and salary cuts for bureaucrats, and the sale of of shares in state- owned companies including the postal service.
Sandwiched between China and Russia, Mongolia is an early illustration of fallout from slower growth in the world’s second-biggest economy. “When China sneezes, we get a cold. That is how the situation is. It really affects us in a major way,” Dale Choi, founder and director of the research firm Independent Mongolian Metal & Mining Research, said in a phone interview.
That’s because about 88 percent of Mongolia’s exports — mostly commodities including coal — wound up in China in 2014 and falling revenue from these products is pushing Mongolia deeper into economic crisis. Earlier this month the country’s Finance Minister Bolor Bayarbaatar unveiled emergency austerity measures so the government can pay its bills.
The sliding commodity prices are exacerbating existing woes for Mongolia, which has had a sharp downturn in foreign direct investment because of the price decline as well as some disputes with foreign companies like Rio Tinto Plc.
If passed by parliament, the austerity measures would eliminate government jobs, cut salaries and merge agencies in an effort to reduce spending. Revenue-raising plans include selling off shares of power plants and the postal service, which are relics of a Soviet era and continue to bleed red ink — something the government can no longer afford.
While austerity may not be encouraging for a government that faces a contested election in eight months, Prime Minister Saikhanbileg Chimed has few other options. His finance minister reported that the 2015 budget will face a shortfall of more than 4 percent, or $500 million, by the end of the year — a considerable sum for a $12 billion economy.
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