August 13, 2025
In Recent Experiences
1. Domestic bond through the Stock Exchange (June 2024): The Municipality of Ulaanbaatar (MUB) sold a domestic bond[1] of MNT 500 billion with coupon 12-14%, tenor 24-36 months on Mongolian Stock Exchange in June 2024. The bond would be invested in the following projects:
· Up to MNT 300 billion to Power Plant Buuruljuut,
· Up to MNT 150 billion for the UB city road enhancement and renewal,
· Up to MNT 50 billion to Tuul 1 wastewater treatment collector and antiflood structure.
For issuing domestic bond, sovereign guarantee is not required by the Law on the Debt Management.
2. Foreign bond (December 2024): The Municipality of Ulaanbaatar (MUB) issued a bond of USD 500 million at an interest rate of 7.75 percent, a term of 2.75 years in the international market in December, 2024 with a sovereign guarantee required by the Law on Debt Management. In accordance with Resolution No. 17 of the State Great Hural dated January 17, 2024, and Government Resolution No. 265 dated June 6, 2024, the Government provided a guarantee for financing the “Selbe Sub-Center Housing Development Project” through the issuance of a foreign bond by MUB.
It should be noted that the MUB cannot issue securities directly in the foreign market and is subject to mandatory conditions for obtaining a guarantee from the Government.
3. Bond issued in domestic OTC market[2]: In January 2025, the MUB sold a bond (most likely MNT denominated bond but not confirmed) in domestic OTC market to IFC. IFC is engaging in a privately placed unsecured bond of up to US$90 million. The investment entails (i) an own account IFC investment of up to US$65 million and (ii) an investment by IFC-Canada Blended Climate Finance Program (BCFP) of up to US$25 million. The proceeds of the financing will be used for the procurement by the MUB of the supply and construction for the 50MW/200MWh Battery Energy Storage System (BESS) project.
4. Municipal Loans: There is no specific regulation for municipal loans in the Law on Debt Management, meaning the MUB cannot directly obtain loans from Multilateral Development Banks (MDBs). Instead, the Ministry of Finance (MoF) acts as the borrower on behalf of the state, and the funds are then allocated to municipal projects.
It is important to note that any foreign loan agreement must be approved by the Parliament of Mongolia. A specific example of this is the Ulaanbaatar Green Affordable Housing and Resilient Urban Renewal Sector Project, where the MoF acted as the borrower for the Ordinary Operations Loan Agreement. A specific example of this is the Ulaanbaatar Green Affordable Housing and Resilient Urban Renewal Sector Project[3], where the MoF acted as the borrower for the Ordinary Operations Loan Agreement. In this case, the MUB served as the executing agency, responsible for carrying out the project in accordance with the Project Agreement.
This particular loan agreement was approved by the Parliament in September 2019[4]. The process for securing foreign loan arrangements requires a considerable amount of time, involving extensive due diligence and negotiations. As outlined in Article 7.1.5 of the Law on Debt Management, such foreign loan agreements must be approved by the Parliament of Mongolia.
Key Takeaways
· Municipal loans for Ulaanbaatar are possible, but only through the Ministry of Finance.
· Ulaanbaatar cannot independently contract foreign loans under current law.
· On-lending and national budget allocations are the main funding channels.
· Legal reforms would be needed for direct municipal borrowing.
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