IMF delays Mongolia bailout payment after govt ousting

* IMF says will begin discussions once new govt is appointed

* PM, cabinet dismissed amid corruption, incompetence claims

* New government expected later this month

ULAANBAATAR, Sept 14 (Reuters) - The International Monetary Fund (IMF) will delay disbursing bailout funds to Mongolia after the country’s prime minister and Cabinet were toppled in a parliamentary no-confidence vote last week, the fund said on Thursday.

Cash-strapped and debt-ridden Mongolia was granted a $5.5 billion rescue package from the IMF and other partners in May after clashes with investors, government overspending and declining commodity export revenues tipped the country into an economic crisis last year.

However, the Mongolian People’s Party (MPP) government, which negotiated the IMF deal, was ousted by parliament last week amid allegations of corruption and incompetence, as well as a damaging July presidential election defeat.

The IMF office in Mongolia confirmed that what would have been the first review of the bailout package would now be delayed until a new administration is formed.

That review had been expected to result in the disbursement of about $37.82 million of the funds.

“Once a new government is in place, we will engage with the authorities on further discussions of economic prospects and policies, and how best to move forward with the programme,” IMF resident representative Neil Saker said in an email.

The IMF is providing Mongolia with three years of credit worth about $434.3 million. The bailout package also includes soft loans from Japan and South Korea and an extended currency swap agreement with the People’s Bank of China.

To secure the deal, Mongolia agreed to improve banking and finance regulation and also pledged to cut spending, raise taxes and postpone the statutory retirement age in a bid to balance its books.

Former prime minister Jargaltulga Erdenebat and his Cabinet were appointed in 2016 on a promise to put Mongolia’s struggling economy back on track.

Although growth has recovered in 2017 after a resurgence in coal prices, Erdenebat failed in his efforts to revive crucial investment projects like the cross-border railway to China. His term of office was also marred by a spat with China over a visit to Ulaanbaatar by the Dalai Lama last year.

A new prime minister is expected to be appointed by the MPP later this month. The deadline is Oct. 6, 30 days after last week’s no-confidence vote.

No Mongolian prime minister has completed a four-year term since 2004, but analysts said Erdenebat’s ousting was ill-timed and could hurt the economy.

“We’ve been assured by multiple sources that policy will continue as expected but it certainly raises concerns with foreign investors,” said Henry Nguyen, an analyst with Development Finance Asia in Ulaanbaatar. (Reporting by Terrence Edwards; Editing by David Stanway and Paul Tait)