Public Disclosure Copy The World Bank Implementation Status & Results Report Second Economic Management Support Operation (P167485) Second Economic Management Support Operation (P167485) EAST ASIA AND PACIFIC | Mongolia | Macroeconomics, Trade and Investment Global Practice | IBRD/IDA | Development Policy Lending | FY 2020 | Seq No: 1 | ARCHIVED on 07-Dec-2022 | ISR53791 | Implementing Agencies: MINISTRY OF FINANCE, Mongolia Key Dates Key Project Dates Bank Approval Date: 30-Jul-2019 Effectiveness Date: 24-Dec-2019 Original Closing Date: 23-Jul-2020 Revised Closing Date: 23-Jul-2020 pdoTable Project Development Objectives Program Development Objective (from Program Document) The Program Development Objective is to support the Government of Mongolia in restoring debt sustainability, strengthening the social protection system, and enhancing competitiveness. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO -- Moderately Satisfactory Overall Implementation Progress (IP) -- Moderately Satisfactory Overall Risk Rating -- High Implementation Status and Key Decisions Due to the COVID-19 pandemic, program efficacy was affected by the lack of progress with proposed structural reforms in three areas: taxes, pensions and banking as the priority of the government shifted to untargeted support to groups of households involving additional spending, tax relief and financial forbearance. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High -- High Macroeconomic High -- High Sector Strategies and Policies Substantial -- Substantial 12/7/2022 Page 1 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Second Economic Management Support Operation (P167485) Technical Design of Project or Program Moderate -- Moderate Institutional Capacity for Implementation and Substantial -- Substantial Sustainability Fiduciary Substantial -- Substantial Environment and Social Moderate -- Moderate Stakeholders Moderate -- Moderate Other -- -- -- Overall High -- High Results Results Indicators Pillar I: Supporting Restoring Debt Sustainability through Fiscal Adjustments IN01221955 ►Capital expenditure financed by the DBM through non-commercial loans (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 101,220,000.00 -- 0.00 0.00 Date 31-Dec-2016 -- 20-Jan-2020 31-Dec-2020 IN01222078 ►Net financing from the BoM to the Housing Mortgage Program (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 162,279,600.00 -- 77,907,830.00 0.00 Date 31-Dec-2016 -- 31-Dec-2019 31-Dec-2020 IN01222079 ►The recapitalization of banks is advanced to meet prudential norm (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The 2017-18 Asset Quality Review (AQR) revealed that six banks did not meet the requirement on capital adequacy ratio (CAR) The banks are Six banks were identified set by the Bank of recapitalized to meet Value to be in short of capital -- Mongolia (BOM). Of the Capital Adequacy needed to meet the CAR. which, one bank was Ratio (CAR). liquidated and the other banks raised some capital to meet the requirement. However, the independent forensic 12/7/2022 Page 2 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Second Economic Management Support Operation (P167485) audit recommended by the IMF completed in November 2019 revealed that most of the capital raised post- AQR was either non- compliant with BOM regulations, illicit, or fictional. Later, two systemically-important banks were judged to be compliant with the required capital adequacy ratios in 2020. In early 2020, the BOM suspended the administrative measures and accepted new capital raises without independently validating the transactions. Efforts to ensure a well- capitalized and well- regulated banking sector have, therefore, taken a major step back. The authorities also introduced a forbearance measure on bank assets amid the COVID-19 pandemic starting early 2020. Date 31-Dec-2017 -- 01-Jul-2020 31-Dec-2020 All banks meet the prudential norm following the 2018 AQR and a forensic audit on the raised capital in Comments: 2019. IN01222221 ►Tax exemptions and incentives (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 14.50 -- 5.30 13.00 Date 31-Dec-2016 -- 31-Dec-2019 31-Dec-2020 Tax exemptions as a percent of total tax revenue Comments: Pillar 2: Strengthening the Social Protection System IN01222182 ►Pension reform options simulation toolkit (PROST) model projections of the state subsidy to the pension fund used as basis for estimating baseline and projection with reforms (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target State subsidy is The Government of State subsidy to Value -- projected to reach 6 Mongolia abandoned pension fund projected 12/7/2022 Page 3 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Second Economic Management Support Operation (P167485) percent of GDP in 2030 some policies agreed to reach sustainable under the growth to under the first level by 2030 under assumptions made in operation relating to current growth 2017. the long-term financial assumptions. sustainability of the pension system. These included reversing the increase in pension insurance contribution rates and the retirement age. Date 31-Dec-2017 -- 20-Jan-2020 31-Dec-2020 Sustainability of the state subsidy to pension fund Comments: Pillar 3: Enhancing Competitiveness IN01222080 ►Number of permits and licenses to do business (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 890.00 -- 454.00 801.00 Date 31-Dec-2016 -- 01-Jul-2020 31-Dec-2020 Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P167485 IBRD-90030 Closed USD 20.00 20.00 0.00 20.00 0.00 100% P167485 IDA-64710 Closed USD 80.00 80.00 0.00 80.25 0.00 100% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P167485 IBRD-90030 Closed 30-Jul-2019 13-Sep-2019 24-Dec-2019 23-Jul-2020 23-Jul-2020 P167485 IDA-64710 Closed 30-Jul-2019 13-Sep-2019 24-Dec-2019 23-Jul-2020 23-Jul-2020 Tranches 12/7/2022 Page 4 of 5 Public Disclosure Copy The World Bank Implementation Status & Results Report Second Economic Management Support Operation (P167485) Restructuring History There has been no restructuring to date. Related Project(s) P162402-Economic Management Support Operation First DPF 12/7/2022 Page 5 of 5