(Bloomberg) -- Mongolia will work to get its bailout approved soon, according to a senior finance ministry official, after the International Monetary Fund postponed a vote on it over concerns about a new law that affected foreign exchange and investment.
"We are working towards resolving this issue as soon as possible and we hope that once it’s resolved the IMF board meeting will take place," Manduul Nyamdeleg, head of the financial markets and insurance division, said by phone in Ulaanbaatar.
The fund delayed its decision on the bailout in order to seek clarity on the new measure, according to Neil Saker, the IMF’s representative. The fund had been expected to finalize the bailout on Friday at a board meeting in Washington.
The measure was included in a package of laws passed last month that was seen as a prerequisite of the bailout. It stated that revenues from large-scale projects had to pass through a Mongolian bank account.
“We need a bit more time to understand the nature of the specifics of the measure and whether the macroeconomic framework of the program remains valid," Saker said on Saturday by e-mail. He added that there was no fixed date for the fund to consider the issue.
Manduul declined to comment on how long Mongolia’s government could effectively function without the assistance. That money would have been part of a larger package aimed at supporting the balance of payments and the budget deficit, which last year reached 17 percent of gross domestic product.
An early version of the measure explicitly referred to the Oyu Tolgoi copper mine, which is controlled by London-based Rio Tinto Group, according to a note issued Friday by the American Chamber of Commerce in Mongolia. In the final document the language was changed to remove any reference to specific projects.
Rio Tinto spokesman Ben Mitchell declined to comment on any implications for funding on Oyu Tolgoi’s expansion.
“A number of MPs see this as enhancing visibility or transparency of foreign investment and particularly of OT," Canada’s ambassador to Mongolia Ed Jager said by phone, referring to the Oyu Tolgoi mine. “From our perspective it’s not just about OT, its about any sizable foreign investment and it creates a distressingly difficult situation for companies to be required to funnel funds through Mongolian banks."
Last week Mongolian authorities “expressed some willingness’’ to resolve the matter, Jager said. “What their form of resolution will look like and how they see this moving forward this week, I don’t know."
“Since the U.S., Canada and Australia governments are all investors in Oyu Tolgoi’s project finance, we would expect this issue be resolved fairly quickly,’’ Nick Cousyn, Chief Operating Officer of BDSec, said in an email.