The upgrade "reflects ongoing improvements to fiscal and external metrics and progress in meeting key IMF programme targets," according to Fitch's statement.
Mongolia's general government revenue through May 2018 rose by 26 percent year on year, due to stronger than budgeted tax receipts associated with robust customs activity and the broader economic recovery.
Export volumes of coal and copper rebounded following an official visit of Mongolian Prime Minister Ukhnaa Khurelsukh to China in April 2018, Fitch said.
The agency forecasts that Mongolia's gross general government debt will decline to 75.3 percent of gross domestic product (GDP) in 2018, down from 81.2 percent in 2017, and well below its 2016 peak of 91.4 percent following a commodity-price shock, sharp rise in expenditure, and large currency depreciation.
Official data showed that Mongolia's economic performance has improved with GDP growth increasing from 1.2 percent in 2016 to 5.1 percent in 2017 and 6.1 percent in the first quarter of 2018.
The growth was attributed to the implementation of the International Monetary Fund's Extended Fund Facility program in Mongolia, a surge in mining-related investment and higher commodity prices on international markets.
The three-year IMF program was approved in 2017, aiming to stabilize the economy and establish the basis for a more sustainable and inclusive growth.
Fitch has predicted that Mongolia's real GDP growth will be 5.2 percent this year, rising to 6.3 percent in 2019, in connection with expectations of continued strength in private consumption and investment, with a large drag from net exports owing to a sharp rise in consumer and capital goods imports since early 2018.