China's fiscal position will likely be more constrained

The offshore Chinese yuan (CNH) issuance can be accommodated under the revised debt ceiling (on an NPV basis) of 58.3% of GDP for 2015. That said, the issuance, along with domestic debt issues and World Bank credit, largely exhausts the Mongolian sovereign's ability to issue further external debt in 2015, as public debt was already high at 54.7% of GDP as of end-2014, according to official estimates. 

However, Mongolia may have headroom to issue a further c.USD 750mn-1bn of external debt from 2016 onwards, even though the debt ceiling will likely be lowered to 55% in 2016 and 50% in 2017, estimates Standard Chartered. This comes on the back of an expected pick-up in GDP growth due to the commencement of development of Oyu Tolgoi (OT) mine Phase II. 

The weaker rating was due to rising debt, and the CNH issuance will likely add to these concerns. The government debt/GDP ratio rises to over 80% if use of the China swap line and the Trade and Development Bank of Mongolia's (TDBM's) government-guaranteed bond issuance are included; these are excluded from official calculations, says Standard Chartered.