Bad debts in Mongolia

The country is moving forward, but there are pitfalls.

Mongolia's building boom brought to halt by debt pile

Now, Mongolia's banks are choking on bad debts with the official figure for sour loans put at 7 per cent of the banks' combined asset base. This is down from a peak of 17 per cent in late 2009, but the International Monetary Fund, among others, has criticised Mongolia's central bank for under counting.

Whatever the true bad-debt picture, it is easy to see that Mongolian banks are foreclosing on unfinished construction projects. Figures for November 2010 from the Bank of Mongolia, the central bank, show that as of October 31 the nation's banks owned 23.6 billion tugrik (HK$146.49 million) worth of real estate, or triple the amount they held a year earlier.

There is a "complete lack of money in Mongolia," says Jargalsaikhan D, chief executive of Xas Leasing, an arm of Mongolia's Xas bank, and author of a popular Mongolian-language blog on the sorry state of his country's real estate business. "And to put it very simply, it is hard to build tower blocks without money."