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Mongolian Prime Minister Luvsannamsrain Oyun-Erdene resigned on Tuesday, a parliamentary statement said, after losing a confidence vote among lawmakers.
The secret ballot followed days of protests in the capital Ulaanbaatar against alleged corruption.
Speaking after the result of the vote was announced to parliament, Oyun-Erdene said: "It was an honour to serve my country and people in times of difficulties, including pandemics, wars, and tariffs."
He will remain as caretaker prime minister until his successor is appointed within 30 days.
Mongolia, a landlocked democracy in northern Asia, has battled deep-seated corruption for decades.
Many in the country believe that wealthy elites are hoarding the profits of a years-long coal mining boom at the expense of the general population.
Since Oyun-Erdene took power in 2021, Mongolia has plummeted in Transparency International's Corruption Perceptions Index.
The country has seen frequent protests and unrest, and hundreds of young people turned out in Ulaanbaatar last week calling for his resignation.
Fuelling public outrage are accusations that members of the prime minister's family are enjoying lavish lifestyles far beyond what a civil servant on the public dime could afford.
In a statement to AFP last month, the prime minister's office said it "vehemently" denied the allegations, describing them as a "smear".
Concerns over the economy and rising living costs have also stoked the unrest.
Some counter-protesters -- overwhelmingly older than their pro-opposition counterparts -- also turned out to support the prime minister.
- Secret ballot -
Mongolia has been ruled by a three-way coalition government since elections last year resulted in a significantly reduced majority for Oyun-Erdene's Mongolian People's Party (MPP).
But the MPP evicted the second-largest member, the Democratic Party (DP), from the coalition last month after some younger DP lawmakers backed calls for Oyun-Erdene's resignation.
The move pushed the country's political scene into further uncertainty.
Some 82 lawmakers participated in the secret ballot, with 44 voting for retaining confidence in Oyun-Erdene, and 38 against.
The ballot did not reach the 64-vote threshold required from the 126-seat parliament, prompting Oyun-Erdene to stand down.
On Monday, hundreds of young protesters crowded onto the square outside the parliament building, marching with white placards and chanting: "It is easy to resign."
Organiser Ulamsaikhan Otgon, 24, said the weeks of demonstrations "have showcased throughout that young people are very sensitive to unfairness" in society.
Yroolt, a 30-year-old content creator, said it was the second demonstration he had attended.
"The reason I came is because I want a different life, a different society," he told an AFP reporter, declining to share his last name out of privacy concerns.
"We all know injustice is deeply embedded in our society but it's time for change."
A.Stransky--TPP