Moody's Ratings has assigned a B1 rating to proposed senior unsecured, U.S. dollar-denominated bonds to be issued by the Government of Mongolia. According to the rating agency, these notes will rank pari passu with all of Mongolia's existing and future senior unsecured obligations. The government plans to use the proceeds to fund a tender offer that will repurchase a portion of its outstanding bonds and to refinance upcoming maturities.
The rating on the proposed notes mirrors Mongolia's long-term issuer rating of B1, which Moody's currently maintains with a stable outlook. In Moody's assessment, Mongolia's sovereign credit profile benefits from robust economic growth prospects anchored by strong demand for its key mineral exports, with copper singled out as particularly important. The agency highlights an emerging track record of effective debt and fiscal management as a supporting factor for the rating.
Moody's notes that structural demand for copper - driven by electrification and expanding digital infrastructure - underpins medium-term growth potential for Mongolia. The firm also points to ongoing increases in mining output as a factor that will further bolster export performance, supporting foreign exchange inflows and external receipts.
On the fiscal side, the government debt burden improved markedly in recent years, falling to around 43% of GDP at year-end 2025 from roughly 74% of GDP in 2020. Moody's attributes this decline to strong nominal GDP growth and prudent debt management practices. Looking ahead, the agency expects fiscal deficits to widen modestly over the next few years, projecting a deficit of about 4.3% of GDP in 2026 as revenue growth moderates and spending pressures persist. Despite slightly wider deficits, Moody's forecasts a broadly stable government debt ratio of about 44% of GDP in 2026.
Credit strengths identified by Moody's are counterbalanced by Mongolia's continued reliance on commodity exports, which leaves fiscal and external metrics vulnerable to price swings. The rating agency specifically flags coal as a source of revenue sensitivity, noting that coal prices are influenced by developments in China's property and steel sectors and that this sensitivity constrains revenue visibility for the sovereign.
Moody's also highlights external liquidity risks as elevated, pointing to sizeable market debt maturities in the second half of the decade. These liquidity risks are, however, tempered by Mongolia's ongoing access to international capital markets and the government's track record of refinancing upcoming obligations.
In Moody's environmental, social and governance framework, Mongolia carries an ESG credit impact score of CIS-4. The firm attributes this score to high exposure to environmental and governance risks. Environmental exposure stems from an economy that remains highly dependent on the production and export of hydrocarbons, particularly coal, which raises susceptibility to carbon transition risk. Governance exposure reflects still-weak executive institutions and limitations in policy effectiveness, even though Moody's acknowledges recent progress on structural reforms.
Overall, Moody's assigns the B1 rating on the proposed notes on the same basis as the sovereign issuer rating, emphasizing both the supportive role of mineral export dynamics and the mitigating steps in debt management, while also underscoring the material risks arising from commodity dependence and institutional constraints.