When Mongolia began its Political and economic reform program in 1990, it was one of the most isolated of the former socialist countries and highly dependent on financial assistance from the former USSR. The collapse of economic relations with the USSR led to a loss of financial assistance equivalent to approximately 60% of Mongolian GDP, This paper documents the reform process in Mongolia. After 70 years of central planning, there was little consensus as to the direction, speed, or pace of reforms. The domestic debate largely centered on political factors rather than on economic arguments concerning sequencing or speed. Reforms were further hampered by unclear powers and diffuse decision-making processes at the local government level and within the police. Even so, reforms have proceeded remarkably quickly. The main force behind macroeconomic reform has been rapid growth in the newly legalized private sector, which has arbitraged price controls and developed mechanisms to circumvent central and local government regulations. (C) 1994 Academic Press, Inc.
