Mongolia’s government scaled back its plans for global bond sales this year, after Europe’s debt crisis drove up borrowing costs.
The government plans to raise usd500 million selling bonds this year and the remainder of its usd1.2 billion program according to market conditions, Batbayar Balgan, director general of the financial and economic policy department of Mongolia, said at a forum in Ulan Bator today. Finance Minister Sangajav Bayartsogt said in February that Mongolia planned to sell as much as usd1.2 billion of bonds overseas this year, its first benchmark offering of dollar-denominated debt.
Mongolia, which shares a border with China and Russia, is seeking usd25 billion in foreign investments over five years to develop some of the world’s largest untapped gold and copper resources. Europe’s debt crisis has spurred investors to reduce emerging-market assets, forcing Indonesia to reduce the size of a planned Islamic bond sale in the past month.
“The Greek and European countries’ sovereign debt crisis has some impact on us,” Chuluunbat Ochirbat, parliament member, Government of Mongolia, said at the Frontier Securities Mongolia Capital Raising Conference. “We will have to go for higher rates if we go global.”
As the European debt crisis spread, the yield premium investors demand to own emerging-market debt over U.S. Treasuries widened to 3.15 percentage points yesterday, compared with 2.31 points on April 15, according to JPMorgan Chase & Co.’s EMBI Plus Index.
Indonesia reduced the amount of Islamic bonds it plans to offer to usd650 million from usd750 million, and delayed the timing to October from July, Dahlan Siamat, the ministry’s director of Islamic financing, said earlier this week in Singapore.
Mongolia is rated B1 by Moody’s Investors Service, four levels below investment grade and on par with Fiji and Papua New Guinea. Standard & Poor’s rates the nation BB-, the third- highest non-investment ranking.
The Mongolian government wants to boost living standards in the nation of about 2.7 million people, where average per capita income is about usd2,000 a year.