Mongolia: COVID-19 Rapid Response Program

OBJECTIVE

The Program objective is to mitigate the severe adverse economic and health impacts of the COVID-19 pandemic and support poverty alleviation through budgetary support to the government’s countercyclical development expenditure program.

DESCRIPTION

This program is proposed to be supported under AIIB’s COVID-19 Crisis Recovery Facility and co-financed with the Asian Development Bank (ADB) as a policy-based loan under its Countercyclical Support Facility COVID-19 Pandemic Response Option (CPRO). The program will provide critically needed support to assist the Government of Mongolia in mitigating the severe adverse health, social, and economic impacts caused by the COVID-19 pandemic.

Mongolia has taken proactive and decisive actions in response to the COVID pandemic and kept the number of COVID-19 cases low. However, its vulnerability to the pandemic remains, as the Government has identified that about 20% of its population, especially the poor and other vulnerable groups, are at high risk due to the strained healthcare system. Meanwhile, the pandemic triggered severe economic slowdown in the country. Mongolia’s economy has limited diversification and is highly dependent on the mining sector, which accounts for 24% of its gross domestic product (GDP) and almost 90% of its exports. Its high dependency on trade makes the country particularly vulnerable to exogenous shocks, such as the COVID-19 pandemic.

The government of Mongolia has put together a comprehensive set of response measures to mitigate the COVID-19 impact. The measures include the Countercyclical Development Expenditure Program (CDEP), which consists of three packages: (1) support to public health protection; (2) social protection to support citizens and businesses; and (3) support to vulnerable businesses and fiscal stimulus measures.

The proposed Mongolia COVID-19 Rapid Response Program (the Program) will assist the government’s response to COVID-19 pandemic, support the implementation of its CDEP to mitigate the adverse impacts of the pandemic on the economy, and support poverty alleviation. The Program will support the three packages of the CDEP: public health protection, social protection, and fiscal stimulus measures.

ENVIRONMENTAL AND SOCIAL INFORMATION

This Loan will be co-financed with the ADB as lead co-financier, and the Program’s environmental and social (ES) risks and impacts have been assessed in accordance with the provisions of ADB’s Safeguard Policy Statement 2009 (SPS) applicable to policy-based lending. AIIB’s Environmental and Social Policy (ESP) was designed to apply to investment projects and has no provisions for its application to policy-based operations. Therefore, as permitted by the decision of the AIIB’s Board of Directors set forth in the Decisions to Support the COVID-19 Crisis Recovery Facility, the provisions of the SPS applicable to policy based lending will apply to this operation in lieu of AIIB’s ESP. This will ensure a harmonized approach to addressing the ES risks and impacts of the Program.

Under its SPS, ADB has categorized the Program as Category C for Environment, Involuntary Resettlement, and Indigenous Peoples, respectively, on the basis of an assessment of the countercyclical expenditures to be supported by the Program. These focus on expanding and strengthening social safety nets for the most vulnerable groups and are not expected to have adverse ES impacts. The Program is also categorized by ADB as “effective gender mainstreaming”, as it has set targets to ensure vulnerable female employees benefit from tailored social protection and job retention programs, suspension of personal income tax, and compulsory and voluntary social insurance premiums. The Program will also support Micro, Small, and Medium Enterprises (MSMEs) owned by women and businesses where women make up a significant number of employees. ES monitoring will be conducted based on guidelines, checklists and monitoring matrix determined by ADB.