Mongolia proposes 41.3 trillion tugrik budget with 2.3 trillion deficit

Mongolia’s State Great Khural convened its autumn session on September 15, addressing an ambitious state budget proposal of 41.3 trillion tugrik with a 2.3 trillion tugrik deficit amidst political division and energy vulnerability. Prime Minister Uchral Nyam-Osor’s government, which took office on March 31, faces intense parliamentary scrutiny over the spending plan, inflation sitting at 12.5 percent, and plans to restructure state-owned enterprises through a partnership with BlackRock Financial Markets Advisory.

Budget Pressures and Sovereign Wealth Fund Reforms

The government’s proposed 41.3 trillion tugrik budget carries a deficit of 2.3 trillion tugrik, sparking concern among economists and skeptics that the spending will swell national debt and force tax hikes on individuals and businesses. Parliamentary committees have already subjected the proposal to heavy scrutiny, leading to a missed quorum during votes in mid-September. To help offset the budget deficit, the administration points to an increased dividend from the Oyu Tolgoi copper and gold mine. On September 11, Mongolia and Rio Tinto finalized amendments to the 17-year-old Shareholder’s Agreement, securing 13 trillion tugrik—approximately $3.6 billion—for Mongolia alongside an operational cost reduction of roughly 30 trillion tugrik, equivalent to $8.4 billion.

At the same time, the administration is steering Mongolia’s Sovereign Wealth Fund away from a direct public welfare model toward a corporate governance structure. The fund was initially established via laws passed in 2024 under the Oyun-Erdene administration, and the Zandanshatar Gombojav government subsequently signed preliminary agreements in February 2026 to route 60 percent of strategic deposit benefits into the mechanism. To facilitate state-owned enterprise reforms, Mongolia signed a Memorandum of Understanding (MoU) with U.S.-based BlackRock Financial Markets Advisory to explore selling shares in domestic and international capital markets. Critics question whether this corporate restructuring aligns with the country’s semi-welfare system, which funds public education, healthcare, and assistance for the elderly, disabled, and children—all priorities that fueled educator and medical worker strikes throughout 2025.

Energy Security and Bilateral Petroleum Talks

Energy vulnerability remains a critical challenge for Ulaanbaatar, as Mongolia imports over 95 percent of its refined petroleum products from Russia. Global market disruptions driven by the Iran-U.S. war and Ukrainian strikes on Russian energy infrastructure severely squeezed Russian fuel supplies, triggering nationwide fuel shortages across Mongolia in the summer and fall of 2026. These shortages pushed policymakers to diversify import channels toward China. During September, delegates from the Ministry of Industry and Mineral Resources met with the China National Petroleum Corporation to negotiate imports of 10,000 tonnes of refined petroleum, 4,000 tonnes of jet fuel, and 3,000 tonnes of diesel, while Beijing also continues financing the Erdeneburen hydropower plant project in Khovd province.