The Bank of Mongolia (BOM) unveils its draft for the government's monetary policy directions for 2025, outlining a framework aimed at fostering sustainable economic growth. Let’s explore the key components and implications of this draft. 🔍

• 🔑 3 Main Directions of Monetary Policy: As the economy continues to recover from the challenges posed by the Covid-19 pandemic, evidenced by a 5.6% growth in the first half of this year, the BOM anticipates a further increase to 7.3% in 2025. To support this trajectory, the central bank is implementing monetary and financial policies that focus on 3 primary areas.

🎯 Inflation Targeting and Exchange Rate Flexibility

The current inflation target is set at 6% (±2), with plans to lower this target to 5% by 2027. Additionally, the BOM emphasizes the importance of a flexible exchange rate for the Mongolian MNT in alignment with core economic conditions. This approach enhances the country’s ability to respond swiftly to external shocks. Notably, the Bank withdraws a total of $238 million from the foreign exchange market in the first half of the year to mitigate the volatility of the MNT exchange rate.

🏦 Support for the Banking Sector

The BOM aims to ease restrictions on the ownership of shares in commercial banks by international financial institutions. Specifically, the draft suggests that systemically important banks will be able to conduct IPOs without the previous limitation that prevents any single shareholder from owning more than 20% of total shares. This change is expected to attract more foreign investment in the banking sector.

💁‍♂️ Enhancing Conditions for Foreign Investment

A crucial aspect of the draft policy is the initiative to create favorable conditions for both foreign and domestic investors to invest in MNT. To facilitate this, proposed changes to the law on bank deposit certificates will allow for trading in traditional, callable, and secondary markets. Currently, Mongolian banks primarily issue traditional deposit certificates that are less liquid and come with fixed interest rates.

The draft of the monetary policy directions for 2025 from the Bank of Mongolia introduces several significant measures aimed at stabilizing the economy and fostering growth. As these proposals are further discussed and refined, the focus will be on implementing strategies that not only support economic recovery but also enhance investor confidence in Mongolia's financial landscape.