Bayadran Lagvasorin, Governor of the Bank of Mongolia, cautious and optimistic, deals with fluctuations in commodities and strengthens relations with regional trading partners.
Global Finance: What is the growth outlook for Mongolia in 2025?
Bayadran Lakhagvasurin: Mongolia’s economy is expected to grow by about 5% to 6% in 2025, supported primarily by copper production from the underground expansion of Oyu Tolgoi, a recovery in agriculture after losses last winter, and steady growth in the services and construction sectors.
However, we remain cautious. Global economic uncertainty and geopolitical tensions could impact export markets and investor sentiment. Commodity markets are mixed: copper has performed strongly, but coal has been more volatile, which already weighed on reserves earlier this year. Inflationary pressures and climate-related risks – such as dzud (extreme winter conditions that lead to large livestock deaths) – also remain local challenges.
As a central bank, we take a conservative stance. We are prepared to use all available policy tools – monetary, macroprudential, and regulatory – to protect prices and financial stability. At the same time, we stress the importance of financial prudence and economic diversification to reduce dependence on volatile commodities. The overall outlook is positive, and it is worth noting that the country’s credit outlook remains stable, reflecting international confidence in Mongolia’s medium-term potential.
GF: How stable is the country’s foreign exchange reserve position?
Lakhagvasurin: As of August 2025, Mongolia’s foreign exchange reserves had reached a record high of US$5.68 billion, covering about six months of imports and providing a strong buffer against external shocks.
In the first half of 2025, reserves were pressured by weak commodity prices – particularly coal – coupled with global trade tensions and weak market conditions. But since July, the picture has improved. Reserves rebounded due to higher copper prices, higher income from reserve management activities such as gold monetization, and more resilient demand from key partners, including ASEAN economies, which helped offset weak demand from the United States. Our financial sector has also secured additional external financing from international markets, supported by investor confidence in Mongolia’s medium-term prospects.
Looking to the future, long-term stability will require reducing reliance on a narrow range of commodities. The government’s efforts to diversify mining exports, improve infrastructure, and enhance the investment climate are crucial.
GF: What is the rationale for this year’s interest rate increase?
Lakhagvasurin: The inflation rate accelerated in the second half of 2024 and remains above 8%, exceeding the target range. Although global supply-side shocks – such as commodity price volatility and supply chain disruptions – have played a role, core inflation remains persistently high, reflecting strong domestic demand. Wage growth, which has been significant in recent years, has also added to these pressures. Against this background, the Bank of Mongolia began to tighten its stance at the beginning of 2025 to prevent inflation from taking hold. Our priority is to bring inflation back to target, stabilize expectations, and protect financial stability.
GF: Is there a fair balance in the country between fiscal policy and monetary policy?
Lakhagvasurin: Our task as a central bank is not to evaluate fiscal policy options, but rather to manage monetary policy within the financial environment in which we operate. Our responsibility is to protect prices and financial stability, regardless of financial situation.
Of course, when fiscal and monetary policies are aligned, the effect becomes stronger. But as a neutral institution, our role is to use the tools at our disposal to manage inflation, stabilize expectations, and support sustainable growth.
GF: Why is Mongolia seeking more active engagement with ASEAN countries?
Lakhagvasurin: ASEAN economies are among the world’s fastest growing economies, with dynamic markets and deeper regional integration. Strengthening Mongolia’s engagement with this group offers clear benefits: expanding export markets, increasing the diversification of investment flows, technology transfer, and strengthening financial cooperation to build resilience.
On the central banking side, Mongolia is an active member of the SEACEN central banking community. We were honored to host the SEACEN Human Capital Conference and a training course for central bankers in Ulaanbaatar this summer, highlighting our commitment to regional dialogue and capacity building.
