SUCCESSFULLY IMPLEMENTED LIABILITY MANAGEMENT REDUCED DEBT PRESSURE AND SAVED COST OF INTEREST RATE

7/6/2021

The Ministry of Finance of Mongolia is working with the World Bank to strengthen debt management and external development financing, implementing the SFFS project. 

In September 2020, the Government of Mongolia issued a sovereign bond, raised USD 600 million on international bond markets by taking advantage of the favorable indicators of the international markets. At this time, the government has taken the debt management measure as part of its project named "Century" to refinance a total of USD 1 billion debts from the Chinggis and Gerege sovereign bonds, which were growing closer to their maturity dates historic low-interest rates. 

Mongolia issued 5.125%, USD 1 billion, and 10-year Chinggis bonds during the peak of its economic growth in 2011-2012 when Mongolia's economic growth rose to up to 17.3 percent. As a result, the country's credit rating was already two levels' higher than the current rating. The bond was set to mature in 2022. 

This time with the country's economy has shown 5.3 percent contraction and credit rating was at B level by 2020 amid the pandemic, the MOF successfully implemented liability management to pay off USD 1 billion that was reaching maturity in the next 2 years through debt refinancing for a USD 500 million bonds with 6-year term and 3.5 percent interest, and another USD 500 million with a 10-year term and 4.45 interest as part of the "Century" project. 

 

2.5-3 times more orders from investors in the international markets are considered successful. "Century" bond has received a total of 6.4 billion orders from Asia, the USA, and European investors. In addition, "Successfully refinancing Mongolia's sovereign bonds with the lowest rates of 3.5 and 4.45 percent compared to those of other countries with the same B credit rating is a result of the Mongolian government's effective policy response and measures to protect the population's health and recover the economy during the pandemic and shows international investors' high confidence in the political and economic stability of Mongolia". 


The Finance Ministry reports that the liability management of the debt refinancing to replace high-interest bonds with low-interest bonds will reduce the burden to be imposed on the government's budget and balance of payment in coming years, maintain currency stability, and improve Mongolia's credit rating. 

JPMorgan, Morgan Stanley, HSBC, and Nomura are the arrangers for this issuance.  In addition, we would like to thank the Bank of Mongolia, the Development Bank of Mongolia, and the National Statistical Office for their cooperation in this liability management measurement. 


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