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Mongolia to take out loans from Russia to import fuel

By Ch.KHALIUN

Mongolia plans to take out 1.3 billion USD in loans from the Russian Federation in order to meet domestic fuel demands with imported fuel.
During a meeting of the Democratic Party (DP) held on Monday, party members discussed importing fuel through loans. Some people believe that if Mongolia requires loans to purchase fuel, the economy must be facing real difficulty, but government representatives have dismissed these concerns.
Following the first round of negotiations, the loan line will be up to 1.3 billion USD over 36 months. Industry analysts highlight that as the implementation period for the sub-program on stabilizing retail prices for fuel is ending, the deal will be important for Mongolia. They believe that the loan will create sustainable financial resources for fuel importers and grow Mongolia’s foreign currency reserves. It will help decrease the occurrence of price fluctuations for retail fuel, and ensure the sustainability of prices for staple goods, according to the fuel sector’s representatives.
MP S.Tuvdendorj said, “In the past, we have been purchased fuel with cash. Because the nation’s tax income is lower in the first quarter, Mongolia doesn’t have foreign currency to send abroad. We are now ensured with an opportunity to get fuel through loans, without making any payments. That’s the main issue of importance. Herders take out loans and buy necessary things, and then they comb goats and repay their debt, the state does the same thing. In the first quarter of a year, an economy faces difficulties; this loan will help in overcoming this difficult time.”
Minister of Mining R.Jigjid also commented on the issue, saying, “Generally, we take out loans from Russia. We will take out low interest loans from Russia’s bank and buy fuel. Our fuel importers buy 1.2 to 1.3 million tons of fuel annually. They sell fuel in tugrug, and then buy foreign currency with their tugrug. However, sometimes there is a lack of foreign currency. In order to avoid the issue, we are now negotiating to take out loans from Russia and buy necessary fuel from there. It doesn’t mean that the state will be involved in the fuel business.”
Head of the Petroleum Authority of Mongolia (PAM) G.Ulziiburen weighed in with clarification, telling the public, “This issue is connected to foreign currency. In order to ease burdens for fuel importers, Development Bank of Mongolia is organizing the issue of taking out loans from Russia’s VTB Capital. Not all fuel importing companies will take out these loans.  If the negotiations are finalized in the middle of February, three to four domestic importers that meet the requirements of VTB Capital are expected to take out loans.

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Posted by on Feb 5 2016. Filed under Business & Economics. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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