Mongolia has been rocked in recent months by a series of corruption scandals that have prompted large-scale demonstrations in the capital, Ulaanbaatar. The government of Prime Minister Ukhnaagiin Khurelsukh has been paralyzed by revelations that senior government officials, including members of his Cabinet, misused funds that were intended to assist small and medium-sized enterprises. Corruption has accelerated dramatically in Mongolia’s “wild ride to capitalism” since 1990.
The country was plagued by minor levels of bribery and graft from its empire stage in the 13th and 14th centuries to its communist period from 1921 to 1990, but corruption was not a pervasive part of Mongolian political culture. The post-communist era, however, has witnessed an increase in corruption in politics, business and the educational and medical systems.This plague of scandal and dysfunction comes at a particularly bad time for Mongolia’s economy.
In 2017, the International Monetary Fund provided a $5.5 billion guarantee for unpaid Mongolian loans, rescuing the country from a sovereign debt default. But the current scandal has no doubt undermined confidence in the Mongolian government on the part of the IMF and other international financial institutions, potentially affecting their future approach toward Ulaanbaatar. More broadly, the government needs new economic policies to diversify away from mining. Mongolia’s reliance on the extraction of metals and minerals to power its economic growth subjects it to the vagaries of world commodity prices.
A drop in these prices over the past four years has dealt a devastating economic blow. Reformers in government, as well as international financial institutions and development banks, had plans to promote other sectors, such as manufacturing and eco-tourism. But corruption scandals have diverted attention from these efforts. As if that wasn’t bad enough, the National Chamber of Commerce and Industry, fed up with pervasive graft, has urged its members not to pay taxes until corruption is rooted out and the government has stabilized. Clearly, a full recovery from these scandals will require considerable time and persistent effort. It may even require drastic reforms to Mongolia’s political and economic systems.