Mongolia’s new government has revealed a budget deficit equivalent to nearly one-fifth of economic output, underlining the dire financial conditions that have sent the currency tumbling.

Even after stringent cost-cutting measures outlined by the Mongolian People’s party, which won a landslide victory in last month’s elections, the country faces a gap between its revenues of MNT5.34tn ($2.67bn) and MNT9.7tn ($4.87bn) expenditure — a shortfall equivalent to 18 per cent of gross domestic product, well above the 4 per cent statutory limit.

Mongolia, with a population of 3m and GDP of some $12bn, is heavily dependent on mining and commodities exports, mostly to China. A surge of mining investment helped it repay previous IMF loans early, but the more recent downturn in copper and coal prices has dealt a heavy blow to the economy.