Mongolia is asking China for a $3 billion loan to help shore up troubled banks and develop trade as global economic turmoil drives down prices for its exports of coal, copper and cashmere, the government said Friday.
The request includes $1 billion to stabilize Mongolian banks and $2 billion to finance road building, and industrial and agriculture projects to expand trade with China, according to a government statement.
The appeal reflects China’s evolution from the Cold War adversary of this former Soviet satellite into its most important export market.
Parliament is forecasting a 2009 budget deficit of 395 billion tugrik ($296 million), or 6 percent of gross domestic product. Finance Minister Bayartsogt Sangajav said spending will be cut if already weak copper prices continue to fall.
Deputy Prime Minister Enkhbold Mieygombo has been assigned to lead negotiations with Beijing.
This vast, sparsely populated North Asian nation of 3 million people has struggled since the Soviet collapse cut off subsidies from Moscow.
In its latest shock, the central bank was forced to inject government money into Mongolian financial institutions in December after jittery investors staged a series of small bank runs and one troubled lender was seized by regulators.
The government is negotiating with the International Monetary Fund for a possible loan, the finance minister said. He did not state how much money Mongolia wants but revealed that IMF officials were in Ulan Bantor for talks.
In addition, Mongolia is in communication with Western mining companies about speeding up development of mineral deposits in the South Gobi region in an effort to revive economic growth.