Loan Quality Improves in Mongolia

Last Updated on September 15, 2024 10:32 am

Mongolia’s banking sector grew by 30 percent in the first half of 2024. Amar Lkhagvasuren, Executive Director of the Mongolian Bankers Association, noted during the presentation of the Association’s review on the sector for the first half of 2024 that the increasing credit growth, while GDP is at 5 percent and inflation is at 5.5 percent, could potentially raise inflation.

“Non-performing loans are now below 6 percent, a positive indicator not seen in the past 10 years, though this is partly due to the growth in overall lending. There has been a decline in non-performing loans across all sectors. For example, in the mining sector, non-performing loans have decreased to 17 percent, down from one-third. Due to the decrease in inflation and the appreciation of the national currency, more citizens are choosing to deposit their money in MNT savings, resulting in real returns. However, budget expenditure has increased by 43 percent. Such budget expansion will not allow a macroeconomic environment conducive to lowering loan interest rates,” Executive Director Amar Lkhagvasuren highlighted.

Also, the Mongolian Bankers Association analyzed the Mongolian Government’s Action Program and made several proposals. For example, while the election platform of the three parties stated that they would reduce loan interest rates, the Government’s Action Program for 2024-2028 lacked any specific provisions for it. Therefore, the specific measures for reducing loan interest rates remain unclear. While the winning party’s platform included promises to improve the business environment, such as eliminating taxes on dividends and limiting budget expenditure to 25 percent of GDP, there is little evidence of these commitments being implemented in the budget amendments or proposed budget law. Therefore, the Association emphasized the importance of fulfilling these promises.