Iran War Tests Mongolia’s Fiscal and Political Discipline

The Iran war has began to impact Mongolia. The country imports all refined fuel and remains exposed to external shocks despite stabilized price arrangements with Russia.

If oil prices stay elevated, economic growth could slip, the tugrik could weaken further, and inflation would remain stubbornly high.

February data already point to pressure. The currency depreciated against the dollar and yuan, reflecting sustained demand for foreign exchange and rising import costs.

The government is moving quickly. The government has set up an emergency council led by First Deputy Prime Minister and Economy and Development Minister Jadambyn Enkhbayar to draft measures to protect the economy and secure essential supplies. His mandate spans fuel, medicines, food reserves and inputs for the spring sowing season.

At the same time, the cabinet is preparing an emergency law modeled on the Covid-era framework. The draft would allow budget reallocations, tighter fiscal controls, restructuring of state entities and faster debt collection without increasing overall spending. A budget revision remains possible if conditions worsen.

Near-term measures are already visible. Diesel prices will rise by 300 tugriks per litre, a partial adjustment to global pressures. 

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