Source: Bloomberg                        Date: 22 June, 2011

Mongolia plans to sell its debut dollar-denominated bond “in the near future”, to finance expansion of the mining industry and build roads and bridges, President Ts. Elbegdorj said during his visit to the USA. “Mongolia is in good shape in terms of issuing bonds and paying back those things. Our economic growth is good,” he said. Mr. N. Zoljargal, Central Bank Deputy Governor who was with the president, added that the Government was talking to investment banks in New York about underwriting the planned USD500-million debt sale.

The Government is also negotiating with Russia to secure currency swaps, according to Mr. Elbegdorj. He said he expects trade in local currency with Mongolia’s two neighbors, Russia and China, to increase. A currency swap agreement signed with China last month paved the way for the planned five-year bond because the “safety belt” will boost investors’ confidence in its debt market, Mr. Zoljargal said.

The planned bond sale would open the international capital markets for the Government and local companies to raise funds to finance USD50 billion of investment projects in the next decade, said Mr. Zoljargal. Mongolia’s B1 rating at Moody’s is four levels below investment grade, while S&P ranks it a step higher at BB-. “We are watching the market carefully,” said Mr. Zoljargal. “The Government really wants to have this. The benchmark itself is a very important thing for private companies to go to the market.”

Mr. Jeremy Brewin, a fund manager, said he is interested in Mongolian dollar debt because of the nation’s debt levels and commodities-driven economy. “We’re quite keen as it has very little debt outstanding and the resources, the declared resources, suggest that Mongolia is asset rich,” he said. “Until proven otherwise, we like idea of investigating the credit with prospects for participating in the deal.”

Mr. Elbegdorj said he is concerned about how to “manage” the surge of foreign investment and ensure the windfall spreads among the nation’s citizens. “One of the biggest challenges is how to manage the money flowing from the mining to the benefit of our people. Our best interest is to balance investments and trade between our two neighbors, Russia and China, and other parts of the world,” Mr. Elbegdorj said. “I’m trying to encourage investment from the United States.”