Historical Sketch

In the wake of the 1911 Chinese Revolution, Mongolia declared independence in December of the same year. A monarchy was established with the highest Buddhist authority in Mongolia as head of state, who took the title Bogd Khaan (or Holy Ruler). The move was not recognized by China, and in early 1920, Mongolia got re-annexed. A year later already, the Chinese were expelled again with the help White Army troops from neighboring Russia. The monarchy was restored under Russian protectorate until the death of the Bogd Khaan in 1924, which triggered the establishment of a People’s Republic in the Soviet style. Mongolia remained under Soviet influence until the end of the USSR in 1991. The adoption of the 1992 constitution transformed Mongolia into a republic.

Monetary History Overview

The Mongolian economy was traditionally based on subsistence and barter, payments were done in silver bullion, complemented with silver coins entering from neighbouring China. In April 1921, the Bogd Khaan government issued a series of state bonds denominated in Chinese currency, which subsequently circulated in small quantities as paper money. In the same year, the shortlived rival "People's Government of Mongolia" contracted a loan from Soviet Russia for the creation of a distinct Mongolian currency. The Bogd Khaan government also pursued the creation of a Mongolian Dollar at par with the Chinese Dollar. This could not be implemented as the basic banking infrastructure was missing, just some trial paper money was produced until 1924 but not put into circulation. After the establishment of the People's Republic, a Russian-Mongolian commercial bank, the Mongolian Bank for Trade and Industry, was established in June 1924 and took over the central banking role. In December of following year, the Mongolian Tugrik (Tögrög) was created as the national currency. It was at par with the Soviet Ruble and remained pegged with unchanged rate through the various Soviet currency reforms until the end of communist rule. Since the 1960s, non-commercial effective rates had existed for exchange with non-communist countries. In July 1990, also a floating commercial exchange rate was created for foreign trade. One year later, it replaced the official rate, leading to a nominal 92% devaluation. In 1993, the Tugrik was devalued again by 90%, and the exchange rate got floated. During the remainder of the 1990s, the Tugrik lost another 65% in value, then followed a decade of relative currency stability. Since the late 2000s, a slow depreciation has set in again.

Mongolia joined the International Monetary Fund (IMF) on 14.02.1991.

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