Earlier this week, Mongolia received a long-awaited upgrade from Standard & Poor’s (S&P), with its sovereign rating raised by one notch to BB–. This marks the country’s return to the BB category after 12 years — a development that came as little surprise to market participants, as Mongolia’s international bonds had already been trading broadly in line with BB-rated peers for some time.

S&P cited expectations of “sustained economic growth over the next two to three years, supported by continuous mining activity and strong public investment.” The agency projects Mongolia’s real GDP to expand by around 5.5% annually through 2028. Indeed, fiscal revenues have risen sharply on the back of buoyant mining output — particularly steady copper production and favorable price dynamics — alongside a rebound in agriculture and resilient domestic demand. The solid growth trajectory has been accompanied by three consecutive years of budget surpluses, reinforcing fiscal credibility.

All these factors have enabled Mongolia to significantly deleverage, with the ratio of net general government debt to GDP falling by 35 percentage points since 2020, reaching 32% in 2024. S&P expects this figure to decline further to below 30% by 2026.

Mongolia has also markedly reduced its debt-servicing burden: the ratio of government interest payments to revenue has dropped to below 5%, driven by a series of well-timed liability management operations. These transactions have smoothed Mongolia’s foreign-currency debt profile, optimized maturities, and lowered interest costs. The most recent exercise targeted the near-term 2026 notes and the 8.65% 2028 bonds, funded through the issuance of a new 6.625% five-year benchmark bond. The deal priced 17.5 basis points inside the existing curve, representing Mongolia’s tightest-ever spread to U.S. Treasuries at just 222 basis points.

Following the ratings announcement, Mongolia’s sovereign bonds rallied across the curve, with the benchmark issue rising 0.40% to a mid-market price of 102 9/16, yielding 5.94% — breaking below the 6% threshold for the first time since issuance in February 2025.

Despite the considerable progress achieved in recent years, significant work still lies ahead. Energy independence must remain at the forefront of Mongolia’s national agenda, alongside the diversification of its export base — both in terms of products and destinations. A sustained and coordinated drive into renewable energy sources such as wind, solar, and hydro — sectors in which Mongolia enjoys abundant natural potential — could not only reduce reliance on imported power but also position the country as a regional green-energy hub. The ongoing advancement of the ‘Third Neighbour Initiative,’ exemplified by France’s Orano uranium project, demonstrates that strategic partnerships can translate into long-term industrial capacity and technological know-how.

At the same time, diversifying an economy still heavily dependent on commodities is vital to mitigating the risks of cyclical price volatility and external shocks. In this regard, Mongolia could look to its neighbour Uzbekistan, which has recently announced a US$1.5 billion national program to develop data-center infrastructure and accelerate digital transformation. With its cold climate, abundant renewable energy potential, and highly educated workforce, Mongolia is well placed to pursue a similar strategy — leveraging technology, innovation, and sustainability to build the next pillar of economic growth.

Florian is the Founder and Director of Frontier Strategies Pte. Ltd. — the author of this opinion article. Capital Markets Mongolia (CMM) has recently partnered with Frontier Strategies to strengthen debt advisory and investor relations for Mongolian bond issuers. Read the full press release