Mongolia's Political Crisis Deepens as Ruling Party Infighting Stalls Economic Reforms

Ruling party infighting stalls vital reforms, raising risks for Mongolia’s stability and investment

Mongolia’s economic reform drive has hit a wall of its own making. The ruling Mongolian People’s Party, once a machine of consensus, is now a cockpit of personal rivalries.

Prime Minister Gombojavyn Zandanshatar and Parliament Speaker Dashzegviin Amarbayasgalan

Prime Minister Gombojavyn Zandanshatar has gone on the offensive, accusing parliamentary speaker Dashzegviin Amarbayasgalan of ties to a coal theft scandal. No evidence has been made public. Zandanshatar then nominated Battumuryn Enkhbayar, a former justice minister, to return to the post.

Enkhbayar has long alleged that Amarbayasgalan was involved in the Tavan Tolgoi coal mine affair, even hinting at a cover-up of a death he claims was linked to the bribery. 

Amarbayasgalan flatly denies this, pointing to police documents clearing him of involvement. He says his rivals are misusing prosecutors and the anti-corruption agency to intimidate his backers and stall his bid to lead the party.

What began as a power contest has metastasized into institutional gridlock. Agencies meant to police corruption are now instruments of it, their conflicting rulings allowing politicians to shop for verdicts.

To hurt Amarbayasgalan’s standing, MP Enkhbayar also claims that the 2024 China-Mongolia government-to-government coal deal was manipulated to Mongolia’s detriment. Enkhbayar alleged that ETT’s CEO (Amarbayagalan’s university friend) turned a modest 5 percent discount into 50 percent, cutting the export price from around $100 to $53 a ton and locking in losses worth $10 billion in the long-term. Amarbayasgalan argued he neither negotiated nor approved the contract and called for an investigation.

The fallout was immediate, paralyzing parliament as factions turned procedural rules into weapons. Amarbayasgalan’s allies blocked Enkhbayar’s nomination from reaching the agenda. Parliamentary secretary Baasandorj said the matter was not on this week’s agenda and deferred consideration.  

The delay undermines the prime minister’s authority and pushes back the 2026 budget, which is now mired in partisan maneuvering. The opposition Democratic Party is exploiting the stalemate, demanding the budget be scrapped altogether.

The dispute also exposes how blurred the line has become between party politics and state institutions. Since constitutional changes in 2019, the prime minister controls the anti-corruption agency. Different bodies like the police, prosecutors, intelligence, and anti-graft commission often give conflicting rulings, allowing politicians to cherry-pick whichever outcome suits them. This corrodes judicial integrity and deepens public cynicism.

The MPP’s parliamentary majority is wafer-thin, with 68 of 126 seats. Several MPP MPs are threatening to quit unless disciplinary ruling against Enkhbayar is overturned. A handful of defections could strip the MPP party of its majority and trigger a parliamentary crisis, even government collapse. There are now rumors Speaker Amarbayasgalan and his allies are considering dismissing PM Zandanshatar. That uncertainty alone is enough to scare off long-term capital.

Some see a more calculated picture unfolding in Mongolia's political crisis. Zandanshatar, while promoting stability and private-sector growth, has shown a soft spot for domestic conglomerates such as MCS. Pro-Zandanshatar MPs and cabinet members, including Foreign Minister Battsetseg, reportedly received campaign funding from the MCS Group during the 2024 elections.

Moves to nationalize part of MCS’s Ukhaa Khudag mine were quietly dropped after Zandanshatar’s premiership. Some argue his agenda is less about reform than about aligning state policy with big business. In that light, the gridlock may serve as an unintended check against abrupt shifts that favor insiders at the expense of broader competition. 

But for Zandanomics to really work the parliament needs to review the national wealth fund law which limits private ownership in strategic mining deposits. That would remove expropriation risk and state control. Steering reforms like the Economic Freedom Bill is also at stake.

The next milestone is the MPP congress in November that could be decisive. If Amarbayasgalan’s election as chairman is formally upheld, the Supreme Court and President Khurelsukh would be forced to recognize him, cementing his authority.