What drove Mongolia’s political, economic, and social transformations this year? From the ruling party’s extended grip on power to record coal exports, budget drama, and the rise of a new sovereign wealth fund, 2024 was packed with pivotal moments.
What do these developments mean for Mongolia’s future? Dive into our analysis of the top 10 stories shaping the nation’s trajectory—and their implications for 2025 and beyond.
Ruling Party Tightens Its Grip
The ruling Mongolian People’s Party (MPP) extended its dominance with victories in both the July parliamentary and October local elections. Its three consecutive wins since 2016 owe more to a fragmented opposition than to the party’s own appeal.
While the MPP retained power, its reduced majority signaled voter discontent. The opposition Democratic Party (DP) made notable gains, prompting the MPP to form a coalition with the DP and HUN under the banner of stability and continuity. With his reappointment, Prime Minister Luvsannamsrain Oyun-Erdene is poised to become Mongolia’s longest-serving premier in the democratic era.
Oyun-Erdene has championed 14 government-led mega projects in infrastructure, downstream industries, and energy. However, skepticism persists. Past state-driven projects have suffered delays, cost overruns, and corruption scandals, raising doubts about the government’s ability to deliver.
Privatization of state-owned assets remains stalled, despite repeated pledges.
Meanwhile, public frustration over corruption runs high. Scandals involving top officials, often met with impunity, have eroded trust. The success—or failure—of anti-corruption efforts will be crucial in shaping public support and the political landscape heading into 2025.
Record Coal Exports Drive Growth, but Risks Remain
Mongolia’s economy surged in 2024, fueled by a record 78.5 million tons of coal exports to China. This windfall boosted government revenues, foreign reserves, and GDP. However, reliance on a single commodity and trading partner leaves the country exposed to price volatility and external shocks. The government aims to raise coal exports to 100 million tons annually by 2028.
Despite higher volumes, declining coal prices have cut into earnings. The expected boost in copper output from Oyu Tolgoi in 2025 should help offset this revenue drop.
New deals—uranium with France’s Orano and coal with China Energy—are unlikely to deliver significant returns until 2027-2028.
Meanwhile, social disparities persist. Poverty remains widespread, particularly in rural areas, with public frustration mounting over corruption and unequal wealth distribution despite the export boom.
Budget Drama Unfolds
The 2025 budget debate devolved into a political crisis, marked by fierce maneuvering, a presidential veto, and public backlash. The showdown was foreshadowed in August, when the government clashed with newly elected lawmakers over fiscal policy.
Prime Minister Oyun-Erdene’s initial budget proposal in October, criticized for its hefty deficit and wasteful spending, faced strong opposition. Mounting pressure from the president and public in November led to its collapse. In December, Parliament passed a revised budget, shattering long-held assumptions of perpetual deficits.
Whether this rare display of fiscal restraint will last—or if the government will push for amendments in 2025—remains uncertain. What seems clear is that fiscal hawks within the coalition will continue to challenge the prime minister, especially as the 2026 budget process begins.
The spending cuts have raised doubts about the fate of government-backed mega projects. If the budget rift deepens and remains unmanaged, it could threaten the administration’s survival.
New Sovereign Wealth Fund Launched
Parliament approved the new Sovereign Wealth Fund (later dubbed as "Chinggis Fund") to manage mining revenues and invest in long-term development, aiming to distribute wealth more equitably and reduce resource curse risks.
The standout feature is the Future Heritage Fund (FHF), which the prime minister claims has already accumulated MNT 4 trillion (~$1.2 billion) by December 2024. The FHF is supposed to invest internationally for long-term returns until 2030. However, concerns remain that political pressures could redirect funds toward short-term spending before then. Transparency around the FHF’s governance is lacking, leaving uncertainty over the fate of the MNT 4 trillion.
Meanwhile, dividends from state-owned Erdenes Tavan Tolgoi were deposited into citizens' development accounts within the Chinggis Fund, signaling plans for annual payouts going forward.
Dzud Hits Rural Economy Hard
The 2023-2024 dzud wiped out 12.6% of livestock, crippling herder livelihoods and exposing Mongolia’s climate vulnerability. This was less severe than the 2009-2010 dzud, which killed 20% of livestock.
In response, the government offered MNT 550 billion ($162 million) in low-interest loans and postponed loan repayments for over 140,000 herders, covering MNT 1.2 trillion ($353 million) in interest payments.
Frequent dzuds, worsened by climate change, spell ongoing economic instability for rural communities unless adaptive measures are adopted. Yet, despite these disasters, agriculture’s share of GDP continues to shrink. Efforts to diversify exports beyond coal and copper—into cashmere, wool, and meat—remain sluggish and face persistent challenges.
The Institute of Meteorology and Hydrology warns that over 40% of Mongolia’s territory faces a high dzud risk in 2025.
Energy Crisis Deepens Amid Tariff Hikes and Power Cuts
Electricity tariffs rose by 25-30% in an effort to recover energy sector costs, with heating tariff increases expected in late 2025. Initially seen as necessary for stabilizing the struggling sector, the hikes sparked public outrage as many questioned the government’s plans to export electricity while domestic supply falters. Annual electricity consumption grows by 6-7%, and Ulaanbaatar residents faced peak-hour power outages.
The government argues that economic diversification and mega-project development require energy sector liberalization, starting with gradual tariff increases. However, these measures risk fueling inflation and disproportionately burdening lower-income families. Critics point out that price hikes alone fail to resolve inefficiencies and mismanagement within state-run energy enterprises.
Energy reform is essential for Mongolia’s stability, but its success hinges on the government’s approach. Further liberalization of the electricity market could benefit the sector, aligning with the nation’s goal to generate 30% of its power from renewable sources by 2030.
Putin Visits as Mongolian Skepticism Grows
Despite international pressure, Mongolia hosted President Putin in Ulaanbaatar, underscoring Russia’s role as a key supplier of fuel and a counterbalance to China.
However, Mongolians grew wary of Russian influence this year. The government shelved a free trade deal with the Russia-led Eurasian Economic Union (EAEU) after backlash from domestic businesses and considered scrapping a Russian-funded modernization of a Soviet-era power plant due to high costs.
Dropping tariffs on Russian wheat flour failed to curb prices while hurting local flour production.
Meanwhile, the "Power of Siberia 2" gas pipeline, planned to pass through Mongolia, now faces uncertainty, with reports suggesting a possible route shift through Kazakhstan instead.
Mongolia Navigates Third Neighbor Diplomacy
Mongolia actively engaged with "third neighbor" countries to balance the influence of Russia and China. The deepening China-Russia partnership complicates Mongolia’s efforts to align with Western partners without antagonizing its powerful neighbors.
Still, Mongolia is pushing to attract Western investment in critical minerals to meet global demand. The long-delayed $1.6 billion uranium deal with France’s Orano has progressed, with a shift from state equity to higher royalties, pending parliamentary approval. However, rare earth development hit a setback after local protests in western Mongolia. Mongolia is partnering with South Korea and the U.S. to build rare earth mining and processing capacity, aiming to diversify supply chains and reduce reliance on China.
A key feature of Mongolia’s third neighbor policy this year was its outreach to Central Asia. Both Mongolia and Central Asian countries face similar challenges in reducing dependence on Russia and China. Whether this pivot will create new transport corridors linking Mongolia to Central and East Asian markets remains uncertain.
Foreign Investment and Foreign Labor Under Fire
Mongolia needs billions in foreign investment to diversify its economy and advance its "14 mega projects" in infrastructure, energy, and downstream industries. Yet nationalist sentiment is rising, with concerns over land rights, job security, and ensuring greater benefits for Mongolians. Economic anxieties — fueled by perceptions of unfair deals and threats to sovereignty — are driving this trend, with politicians exploiting it to stoke xenophobia and scapegoat foreigners.
In early 2024, a foreign investment bill aimed at easing ownership and investment restrictions sparked fears of foreign influence. The bill was scrapped ahead of elections after attacks on then-Deputy PM Khurelbaatar, with critics questioning his Mongolian ancestry.
Later, a proposal to suspend foreign worker quotas and cut job placement fees triggered backlash. Critics warned it would hurt local employment and worsen rural joblessness, again raising ethnic purity claims against proponents.
Mongolia faces a looming shortage of up to 240,000 workers by 2035, driven by demographic shifts and labor migration abroad. The shortage is acute in construction and mining, where businesses already struggle to fill vacancies — a major obstacle to economic goals.
This rising nationalism threatens Mongolia’s economic strategy. Balancing foreign investment with safeguarding national interests will be critical to avoid derailing key projects and alienating essential partners.
Ulaanbaatar’s Traffic and Air Pollution Worsen
Ulaanbaatar faces mounting challenges with worsening traffic congestion and toxic air pollution. Authorities have implemented vehicle restrictions, taxes, and limits, but public frustration remains high. In response, the president reprimanded cabinet ministers and scheduled a parliamentary hearing for February 2025.
Despite government efforts to revitalize rural areas, over half of Mongolia’s population now resides in the capital, exacerbating its problems.
Tackling these issues demands bold, coordinated action and rebuilding public trust in the mayor’s leadership. Until then, the vision of a “20-minute city,” where essential services are accessible within 20 minutes, remains a distant dream.
Comments