Mongolian PM Unveils 2026 Budget With Tax Cuts, Heavy Bet on Copper

Mongolian Prime Minister Gombojavyn Zandanshatar’s first full budget blends headline promises with cautious arithmetic. Branded as people-centered, it promises sweeping tax cuts, higher social spending and visible infrastructure investment. The detail, however, is more cautious than the rhetoric suggests.

The MNT 3–4 trillion (USD 835 million–1.11 billion) in tax reductions is the headline, but just MNT 800 billion (USD 223 million) may land in 2026.

The delay hints at fiscal limits and political timing. Near-term stimulus is restrained, and families and firms face uncertainty over when benefits actually arrive as the parliamentary fiscal debate kicks off from late September.

The fiscal arithmetic is tighter than in recent years. The draft projects revenues of 31.6 trillion tugriks (USD 8.79 billion) and spending of 32.98 trillion tugriks (USD 9.18 billion), leaving a deficit of 1.3 percent of GDP.

This marks a retreat from the 2025 scare, when the shortfall looked set to breach 3 percent of GDP. The consolidation owes as much to deferred promises as to structural reform.

Zandanshatar cast the budget as a first step toward fiscal reform, warning that Mongolia relies on a single buyer for more than 90% of exports, imports a quarter of its power and all its fuel, and carries foreign debt equal to 160% of GDP. His answer: trim spending, lighten taxes, and clear space for the private sector.

Cuts to the state payroll and a planned reduction in the number of state-owned enterprises, from 109 to 87, provide some breathing space. Yet such measures depend on political will and administrative execution, both in short supply during past reform waves. Even if successful, savings are unlikely to offset the volatility of mining revenues, which continue to anchor fiscal planning.

Here the assumptions are revealing. The budget prices coal at USD 70 per tonne, reflecting a dim view of China’s import appetite, while copper is set at USD 9,700 per tonne, buoyed by global energy transition demand.

These forecasts feed directly into transfers to Mongolia’s stabilization mechanisms. Nearly MNT 2.96 trillion (USD 807 million) is earmarked for the National Wealth Fund, with MNT 292.1 billion (USD 81.3 million) in mineral royalties for stabilization. Should prices undershoot, the government’s fiscal cushions shrink quickly.

External perceptions remain guarded. Fitch affirmed Mongolia’s B+ rating with a stable outlook, citing improved deficit control but warning of vulnerability to commodity shocks and elevated external debt. Its forecasts diverge from the government’s.

Fitch sees growth slowing to 5.3% in 2026–27, while Ulaanbaatar projects 5.7% and accelerating thereafter. Fitch also expects inflation to remain near 8.5%, well above official assumptions, highlighting the risks behind the government’s optimistic path.

The phased approach to the budget discussion reveals the prime minister’s clear political priorities. The government’s digital consultation in August 2025 exercise drew 186,000 responses, a record for the E-Mongolia platform. Yet the impact of this input is cosmetic.

What matters is the sequencing: social spending and infrastructure now, phased tax relief later, and the heaviest giveaways arriving in time for the 2027-2028 campaign cycle.

The Fiscal Stability Council called growth projections more realistic than past optimism but warned of risks: spending cuts remain insufficient, structural deficits persist, and current-expenditure growth far outpaces GDP, threatening to breach fiscal rules by 2028. New tax reforms could also create a 3–4% GDP shortfall from 2027, worsening deficits.

This budget is less a break with past practice than a careful repackaging. It trims excesses, nods to reform and courts voters while deferring hard choices. Its credibility rests not on the ambition of the promises but on the stability of copper and coal markets and continued access to external lending.