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Falling commodity prices have dampened the impact of the discovery of vast reserves of high-grade coal and other commodities in Mongolia.

A provisional agreement on the deal was announced in February, but only confirmed by the fund’s executive board yesterday.

It will help support an economy where minerals had accounted for 90% of total exports and the loss of related revenues amidst depressed prices saw the budget deficit spiral to 20% of GDP.

Meanwhile, the country’s total international debt has grown to almost twice the size ($23.5bn) of its $12bn economy, with government debt accounting for $8.4bn of that.

Mitsuhiro Furusawa, IMF deputy managing director and acting chair of the board, said balancing the budget formed a “critical element” of the reforms required under the bailout.

This will include cuts to “non-essential” spending, a shift to a more progressive tax system and pension and public financial management reforms.

“A number of structural fiscal reforms, including an independent fiscal council, will help bolster budget discipline,” Furusawa explained. “Sizeable fiscal adjustment, coordinated concessional external financing and continued engagement with private creditors will help restore debt sustainability and rebuild international reserves.”

As well as cash from the IMF, the $5.5bn programme includes money from the Asian Development Bank, World Bank and other nations, including Japan and Korea, altogether accounting for around $3bn. Further support will also come from the People’s Bank of China.

As well as fiscal policy, the programme will target an end to the “boom-bust cycles of the past” through greater central bank independence and governance, a strengthening of the financial sector, economic diversification and inclusive growth, the fund said.