Crossroads Asia | Politics | East Asia

Mongolia’s New Government Set Ambitious Goals. But Are They Realistic? 

Data centers, the Sovereign Wealth Fund, and a hydropower plant – will any of it better the lives of Mongolian people?

On September 15, Mongolia’s parliament, the State Great Khural, began its autumn session – and it started full throttle. The incumbent government headed by Prime Minister Uchral Nyam-Osor has an ambitious agenda that saw it propose one of the largest state budgets. Among its goals: establishing a sovereign wealth fund, securing energy from China, and building data centers. Parliament will likely scrutinize many of these big initiatives. 

The State Great Khural has much to decide, but it is operating within a highly politically divided environment. Mongolia is still wrangling with government instability that began with the ousting of Oyun-Erdene Luvsannamsrai’s administration in June 2025. Uchral’s government only took office on March 31 of this year – less than six months ago.

When parliament convened on September 15, the new government revealed one of the largest state budget proposals in Mongolia’s history, asking for 41.3 trillion tugrik, with a deficit of 2.3 trillion tugrik. Economists and skeptics worry that, with inflation standing at 12.5 percent, such a large deficit will only increase Mongolia’s debt, forcing the government to increase taxes on businesses and individuals. The state budget proposal has already faced massive scrutiny within the parliamentary committees. In a warning sign for Uchral’s government, parliament failed to reach the required quorum last week. 

One of the major issues with the 2027 state budget proposal is the 2.3 trillion tugrik deficit. One of the solutions the Uchral government proposed is to utilize the increased Oyu Tolgoi dividend.  

On September 11, Mongolia and Rio Tinto agreed to amend the Oyu Tolgoi contract, the Shareholder’s Agreement that was first established 17 years ago. The amendment will allow Mongolia to receive 13 trillion tugrik, approximately $3.6 billion. Uchral also announced that Rio Tinto agreed to reduce operational costs by approximately 30 trillion tugrik, an equivalent of $8.4 billion. 

While the Mongolian parliament has to review another state budget amid the constant changes of government, a second issue that will face major scrutiny is the establishment of Mongolia’s Sovereign Wealth Fund. Under the Oyun-Erdene administration, in 2024, the Parliament of Mongolia passed new laws on a Sovereign Wealth Fund. In February 2026, just before it was forced from office, the Zandanshatar Gombojav government signed a preliminary agreement with companies to allocate 60 percent of the benefits from Mongolia’s strategic deposits to the Sovereign Wealth Fund as a new profit-sharing mechanism meant to benefit the public. 

The current trajectory and the goal of the Sovereign Wealth Fund, however, may have pivoted from Mongolia’s welfare system, which would have directly benefited the public. The fund is now leaning more toward a corporate governance structure. 

The initiative is now part of a larger reform in Mongolia’s state-owned companies. To support this reform, on September 10, Mongolia signed a Memorandum of Understanding (MoU) with the U.S.-based BlackRock Financial Markets Advisory. BlackRock and the Mongolian government outlined a general framework that looks to explore selling shares in state-owned enterprises in both domestic and international capital markets. 

After the MoU was signed, critics asked whether BlackRock’s corporate model – the restructuring of Mongolia’s state-owned enterprises – aligns with the country’s semi-welfare system. The government will need to have access to those funds to provide public assistance to the elderly, the disabled, children, the poor, and for public education and health. These welfare systems are indeed at the heart of Mongolian society today. 

In 2025, Mongolia experienced intermittent protests and strikes from educators and medical workers, demanding a pay raise. If the Uchral government fails to deliver these promises, this wealth fund policy and priority changes will have a great impact on the Mongolian people who depend on these funds.  

Beyond the financial wrangling, the issue of energy security looms........

© The Diplomat