Source: The Wall Street Journal                          Date: 15 June, 2011

With a budget surplus and no need of funds at the moment, Mongolia is in no hurry to issue its first sovereign bonds, says Deputy Finance Minister Ch.Gankhuyag. The debate over whether to make the move is "pretty strong", Mr.  Gankhuyag has said in an interview, adding that issuance will take some time. "The budget is in surplus, we have a record high level of cash in our coffers, and we have set up a stabilization fund," said Mr. Gankhuyag, who was in Indonesia to attend the World Economic Forum East Asia Summit. "There is no immediate, urgent need for additional funds." In its first year of operation, Mongolia's stabilization fund stands at USD50 million, and is expected to grow to USD200 million by year-end.

"The debate is around whether our economy can handle another large inflow of foreign currency without negative consequences on the exchange rate, inflation and the local industry," Mr. Gankhuyag explained. Calling the global bonds "Wolf Bonds," he said his ministry was looking to create a benchmark in the international market to encourage the private sector to issue bonds and so get access to global capital. "Because of a lack of benchmark sovereign issues, the economy is not performing at its optimum," he said, and the companies can raise funds only through international equity markets. But his ministry is issuing local bonds whose proceeds would be used to fund housing needs and support small and medium enterprises and the cashmere industry.

Mongolia is exposed to any potential downturn in China, where 70% of its exports go, but Mr. Gankhuyag said that doesn't greatly weigh on him. "There is a risk that we will be completely hit by whatever happens in China," he said. But with the country moving over time to ramp a diverse range of exports—brown coal, coking coal, copper, silver, uranium and gold among them—Mongolia is likely to be resilient in the face of a Chinese slowdown, he added. "It is enough for us not to worry too much," he said.