Mongolian shares rose 4% in March according to Bloomberg’s top company index, after the IMF extended another multi-year bailout for $440 million which can unlock an immediate additional $3 billion from bilateral and multilateral partners. CChina, which receives 90% of its neighbor’s mineral exports, will bolster a $2 billion currency swap as part of the package, coming just five years after expiration of 2009’s post-crisis program. With its 85% of GDP public debt, the country faced imminent default on an almost $600 million Development Bank Mongolia (DBM) external bond repayment due this month, as headline mining ventures unraveled over investor commercial disputes and alleged corruption and political favoritism. The new government in power, led by the Mongolian People’s Party, has promised to restore economic stability and creditworthiness and more business-friendly policies through the Fund plan, but protracted banking system and fiscal cleanups may exhaust multinational company and average citizen patience. The Fund announcement described long-term agriculture and tourism diversification scope alongside natural resource wealth but criticized “ineffective” spending by the government to offset commodity price and foreign direct investment collapse. GDP growth “stagnated” at 1% in 2016, with high debt and low international reserves, which dipped to $1 billion or four months imports. The currency lost one-quarter its value against the dollar, and a diplomatic spat with Beijing over hosting the Dalai Lama resulted in administrative and tariff penalties at year-end. The population went into a harsh winter with livestock decimated by frigid temperatures. Then there were claims that officials had requested donations to help pay off overseas obligations. Nature was unusually unkind as disease ravaged rare antelope, which drew appeals from global conservation groups. In the mining sector, which accounts for one-quarter of output, the long impasse was ended in principle over royalties and management control at copper venture Oyu Tolgoi, operated by cross-border giant Rio Tinto. However the timetable for the project’s second phase has slipped, and private funding initially secured may have to be renegotiated with rising world interest rates. The fate of a $400 million sale of a Russian stake in state company Erdenet to a politically-connected Mongolian investor by the previous government is even more precarious. The parliament annulled the deal in February and called for renationalization amid charges the specialist Trade Development Bank may have been an illegal hidden backer. President Elbegdorj complained the action would scare away foreign capital, but acknowledged the need to pursue investigations. The financial system has been a shambles since independence starting with the central bank, which has been euphemistically engaged in “quasi-fiscal” activities including recent support for $800 million in cheap mortgage loans which had sustained household consumption. The DBM, which provides one-quarter of total credit, carries an unconditional sovereign guarantee for its 2012 external bond as ratings agencies assign the issuers near-default status. The bank’s former chief executive was arrested last year for abuse of the proceeds, and the latest Fund arrangement mandates a split between the government and lender, which is to be run commercially according to a new law. A separate statute will overhaul the central bank’s governance and enforcement powers, and it is responsible for overseeing recapitalization and restructuring and shoring up the deposit insurance scheme after a comprehensive industry assessment. Ordinary citizens have organized in anger against DBM, which they accuse of covering up losses and management failure at state coal producer Erdenes TT, whose non-voting shares were distributed to the public in 2010. The Mongolian Stock Exchange was considered a candidate to join MSCI’s frontier market roster early in the 2012-14 boom period when cooperation pacts were forged with Hong Kong and London counterparts, but actual trading has stayed quiet in a handful of shares alongside hundreds of nominal listings and an absent local fixed income market. With fiscal consolidation a “key priority” to reduce the 15% of GDP deficit, privatization offerings could inject momentum, but the record to date has been disappointing. The IMF believes such overdue policy and reform steps can usher in 8% growth and $4 billion in reserves, comparable to the 2012 peak, by end-decade.