Mongolia is among the least densely populated countries in the Eastern world, with approximately 3.5 million people separated across close to 604,000 square miles. Of this population, 27% currently suffer from poverty. Like many nations, those most commonly affected are young and codependent people who struggle to afford a mortgage or bring food to the dinner table. Much of the land is uninhabitable and easy to mine. However, the lack of population concentration makes it difficult to spread resources across the country. Mongolia’s Sovereign Wealth Fund is aimed at improving the quality of life for its citizens.

The Sovereign Wealth Fund

In May 2024, Prime Minister Oyun-Erdene Luvsannamsrai and the Central Bank of Mongolia passed a bill to enter Mongolia’s Sovereign Wealth Fund into legislation. The program allows profits from the mining industry, which accounts for around a third of the national annual budget, to contribute to three separate pots of funds: the future heritage fund, the development fund and the savings fund.

The savings fund is the most important for creating a more sustainable outlook for the economy. This initiative was formed in response to the main directions and aims established by the government in 2021 to combat the impact of the COVID-19 pandemic. The pandemic created a precarious job market and an even more precarious living situation for many residents.

Impact of the Fund

The Mongolian government has always been proactive in its efforts to fight poverty, but only now has its work resulted in problems being solved and, perhaps, eventually, resolved Erdenes Mongol LLC, which oversees government investment in mining enterprises, has taken advantage of its position as a country with one of the highest mineral resources per capita in the world and contributed to a promising program.

The money redistributed to the Mongolian central bank will be used to increase investment in health care, education and housing. The priority involves supporting the 10,000 families currently on the waiting list for the Housing Loan program, paving the way for greater financial equality in line with the United Nations (U.N.) 17 development goals.

The wealth fund is only in its early stages and will have more of a considerable impact with time. However, the Mongolian government could still take other routes to enhance its plans since mining resources are far from the only strength of the Mongolian economy. About 40% of employment comes from nomadic roles such as herding livestock, so using the money earned from exports in agriculture could further the benefits reaped by the wealth fund and lessen the burden on struggling civilian families.

Considering the initiative promises to improve prospects for many, Mongolia’s efforts could potentially lead neighboring countries like India and China to use a Robin Hood strategy. This strategy involves taking money from the most profitable areas of the economy and redistributing it to the most disadvantaged.

Final Remark

Mongolia needs to be prepared to adapt its plan to any future circumstances, as other countries may have different economic demands and leadership styles. Additionally, carbon emissions have a potentially detrimental impact on a large scale. Mongolia could solve one problem by contributing to another. However, its efforts so far have relied solely on using what the country already has and would have produced to address the obstacles to its ability to thrive.

There are debates over whether the fund justifies corruption and conglomeration. However, the long-term benefits of such an initiative could outweigh the short-term setbacks and eventually set Mongolia onto a more sustainable playing field.

– Lewis Eyre

Lewis is based in Bournemouth, UK and focuses on Politics for The Borgen Project.

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