Mongolia's parliament moved towards meeting the conditions of an International Monetary Fund (IMF) bailout of $3-5 billion on Friday, as lawmakers voted to grant greater independence to the Development Bank of Mongolia. The country is scrambling to avoid missing a $580 million sovereign-guaranteed debt repayment, issued by the Development Bank, due in March. The economy has been badly hit by weak prices for its coal and dwindling foreign investment.
The Mongolian government is in talks with both the IMF and China to refinance billions of dollars of debt issued since 2012 by the March deadline.
The law's passage fulfils most of the requirements for a bailout, according to Dale Choi, an analyst for Mongolian Metals & Mining.
"This removes a major obstacle for reaching IMF staff level agreement. I expect the agreement to be announced next week," Choi told Reuters.
Seventy-seven percent of Mongolia's lawmakers voted in favour of the new law on the bank's governance, Choi said, adding that the legislation should meet most of the IMF's demands.
Chimed Khurelbaatar, who heads the parliament's budget committee, urged lawmakers to pass the bill allowing the Development Bank to act independently of the government.
"Recommendations from the IMF suggested there should be separated control," said Khurelbaatar.
In 2009, the IMF pulled Mongolia out of economic crisis with a $230 million stand-by agreement.
Khurelbaatar told legislators that another bailout this time round was preferable to defaulting and said "the IMF is not a scary organisation," according to a research note by Choi.
"The IMF is an important organisation for economic stabilisation, to get the country out of debt," he said.
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