Journal Issue
Share
Article

Mali: Joint IMF/IDA Debt Sustainability Analysis For Low Income Countries

Author(s):
International Monetary Fund
Published Date:
March 2010
Share
  • ShareShare
Show Summary Details

I. Background and Macroeconomic Assumptions

1. As a result of the Highly Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), Mali’s stock of external debt has declined significantly since 2002.2 Mali’s stock of public and publicly guaranteed external debt declined from 90 percent of GDP in 2002 to 19 percent at end-2008. Total public external debt at end-2008 is estimated at US$1.55 billion, with a net present value (NPV) estimated at the equivalent of 12 percent of GDP, 42 percent of exports, and 77 percent of budgetary revenue. These estimates are lower than the projections made for 2008 in the last DSA, mostly on the basis of a lower debt accumulation than projected and downward revisions to data on the stock of debt, reflecting more systematic recording of the cancellation of loans through debt relief.

2. The baseline scenario reflects prudent macroeconomic projections and sound fiscal performance (Box 1).3 The medium-term outlook envisages continued macroeconomic stability and sustained economic growth, supported by continued structural reforms and borrowing on concessional terms. Growth is expected to remain around the recent trend rate of 5 percent, despite a 20 percent decline in gold production by 2020 (it remains relatively stable thereafter).4 This decline results in slower growth of exports, larger current account deficits, and marginally lower GDP growth than in previous DSA exercises. The fiscal deficit (including grants), upon which net public borrowing depends, is projected to hover around 3½ percent of GDP throughout the DSA period.

Box 1.Mali: Debt Sustainability Analysis, Macroeconomic Assumptions, 2009-2029

  • Real GDP growth is projected to average 5 percent per year during 2009-19, in line with historical trends over the previous decade, before increasing to 5½ percent per year over 2019-29. The primary sector is projected to grow at 5-5½ percent a year as a result of supportive agricultural development policies. Agrobusiness, energy and construction activities will pull the secondary sector, despite the stability of the gold mining sector over time. Transportation and trade will remain the pillars of the tertiary sector. With population growth currently over 3½ percent, the baseline thus assumes limited per capita income growth (and therefore no decline in the grant element of lending).

  • Consumer price inflation is projected to remain at about 2 percent per year, in line with the WAEMU convergence criterion.

  • The basic fiscal deficit (total revenue minus total expenditure, excluding foreign financed capital projects and HIPC spending) hovers around 1 percent of GDP, in line with projected budgetary assistance. Including foreign-financed capital expenditure, the overall fiscal deficit remains stable around 7 percent of GDP. It is financed in equal parts by grants and loans. A temporary fiscal stimulus over the period 2009-12 is financed by the exceptional privatization receipts of the telecommunication parastatal SOTELMA. New public sector external borrowing is projected to carry a nominal interest rate of about 1 percent, with an average grant element of 45 percent. No new domestic medium or long-term borrowing is assumed other than the rollover of credit from the central bank.

  • The current account balance is projected to deteriorate on average by nearly one percentage point of GDP to 10 percent of GDP over 2009-19, reflecting at first the fiscal stimulus and then the decline in gold exports. The current account improves slightly thereafter, as the stability of gold exports is more than compensated by growth in other exports, including food, cotton, and other minerals. The baseline assumes a successful transition of the economy from a dependence on gold exports—equivalent to 17 percent of GDP in 2009 and projected to decline to below 5 percent of GDP in 2029—to a more diversified economic base, with other exports rising from 6 to 12 percent of GDP over the same period.

II. Results of the External Debt Sustainability Analysis

3. Mali’s external debt ratios are projected to increase gradually over time, but remain well below the applicable indicative debt thresholds over the period 2009–29 (Figure 1 and Table 1a).5 The debt ratios under the baseline scenario are broadly of the same magnitude as the ones of the previous DSA, but higher than under the historical scenario, which reflects the relative deterioration of projected economic performance compared with the past. Although the initial debt burden in 2008 is lower than had been projected in the previous DSA, the slower growth in exports (averaging 2 percent per year lower over the 20-year projection horizon) results in debt indicators that are similar. The NPV of debt is expected to climb from 13 percent of GDP in 2009 to 26 percent in 2029. As production from existing gold mines declines, the NPV of debt-to-exports ratio is projected to increase from 42 percent in 2008 to 122 percent in 2029. Debt service is not expected to exceed 5 percent of exports over the projection period.

Figure 1.Mali: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2009-2029 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio in 2019. In figure b. it corresponds to a One-time depreciation shock; in c. to a Exports shock; in d. to a One-time depreciation shock; in e. to a Terms shock and in figure f. to a One-time depreciation shock

Table 1a.External Debt Sustainability Framework, Baeline Scenario, 2006-2029 1/(In percent of GDP, unless otherwise indicated)
ActualHistorical Average 7/Standard DeviationProjections
200620072008200920102011201220132014Average 2009-201420192029Average 2015-2029
External debt (nominal) 1/18.919.419.120.222.224.226.128.030.036.839.8
o/w public and publicly guaranteed (PPG)18.919.419.120.222.224.226.128.030.036.839.8
Change in external debt−31.90.5−0.31.12.02.01.91.91.91.00.0
Identified net debt-creating flows−6.3−1.3−2.6−0.73.13.43.32.72.72.40.8
Non-interest current account deficit0.43.42.73.42.84.85.15.75.65.15.24.93.74.5
Deficit in balance of goods and services5.19.010.97.79.810.19.89.49.310.911.3
Exports30.026.628.427.526.826.326.526.726.522.321.0
Imports35.135.639.335.236.636.336.336.235.833.232.3
Net current transfers (negative = inflow)−5.3−5.5−5.9−4.70.7−5.2−5.3−5.1−4.8−4.9−4.5−4.7−5.1−4.8
o/w official−2.7−1.8−1.7−2.1−2.2−2.0−2.0−2.0−2.0−2.0−2.2
Other current account flows (negative = net inflow)−0.2−0.1−2.32.40.70.80.60.60.4−1.3−2.5
Net FDI (negative = inflow)1.2−2.3−2.1−2.21.0−4.9−1.3−1.4−1.4−1.4−1.3−1.1−0.9−1.0
Endogenous debt dynamics 2/−4.7−2.3−3.2−0.7−0.7−0.9−1.0−1.1−1.1−1.5−1.9
Contribution from nominal interest rate0.50.40.30.20.20.20.20.20.20.30.3
Contribution from real GDP growth−2.4−0.7−0.8−0.8−0.9−1.1−1.2−1.3−1.3−1.7−2.2
Contribution from price and exchange rate changes−2.8−2.0−2.80.5−1.0−0.3−0.3−0.3−0.3−0.7−0.8
Residual (3-4) 3/−25.51.82.31.8−1.1−1.4−1.3−0.8−0.8−1.4−0.9
o/w exceptional financing−34.6−0.3−0.3−0.3−0.30.00.00.00.00.00.0
PV of external debt 4/12.112.713.714.916.017.118.323.025.7
In percent of exports42.746.151.456.660.263.868.8103.2122.4
PV of PPG external debt12.112.713.714.916.017.118.323.025.7
In percent of exports42.746.151.456.660.263.868.8103.2122.4
In percent of government revenues77.976.381.287.492.898.5104.8128.6130.8
Debt service-to-exports ratio (in percent) 5/5.46.73.71.82.52.62.62.62.52.95.0
PPG debt service-to-exports ratio (in percent)5.46.73.71.82.52.62.62.62.52.95.0
PPG debt service-to-revenue ratio (in percent)9.310.66.73.04.04.04.03.93.83.65.4
Total gross financing need (Billions of U.S. dollars)0.00.20.00.40.50.60.50.60.81.4
Non-interest current account deficit that stabilizes debt ratio31.52.93.03.73.13.73.73.23.33.93.7
Key macroeconomic assumptions
Real GDP growth (in percent)5.34.35.04.93.84.34.85.35.25.25.05.05.25.95.5
GDP deflator in US dollar terms (change in percent)5.912.016.76.89.6−2.75.21.41.21.10.91.22.02.02.0
Effective interest rate (percent) 6/1.12.22.11.40.60.81.01.00.90.90.90.90.80.80.8
Growth of exports of G S (US dollar terms, in percent)36.43.530.915.215.0−1.67.14.77.67.35.15.04.78.26.0
Growth of imports of G S (US dollar terms, in percent)17.218.335.415.114.7−9.014.46.06.65.94.94.85.98.26.9
Grant element of new public sector borrowing (in percent)44.944.944.944.944.944.944.944.944.944.9
Government revenues (excluding grants, in percent of GDP)17.316.715.516.616.917.017.217.317.417.919.618.4
Aid flows (in Billions of US dollars) 8/0.60.60.50.80.70.80.80.91.01.33.0
o/w Grants0.30.30.30.40.40.40.40.40.50.71.6
o/w Concessional loans0.30.20.20.30.40.40.40.50.50.71.4
Grant-equivalent financing (in percent of GDP) 9/6.65.55.45.45.55.55.55.85.6
Grant-equivalent financing (in percent of external financing) 9/76.372.671.871.871.871.772.574.172.9
Memorandum items:
Nominal GDP (Billions of US dollars)6.17.28.88.99.810.511.111.912.617.737.7
Nominal dollar GDP growth11.516.822.51.510.26.76.56.46.06.27.38.17.6
PV of PPG external debt (in Billions of US dollars)1.01.21.31.51.82.02.34.09.6
(PVt-PVt-1)/GDPt-1 (in percent)2.02.12.12.12.22.32.12.42.12.3
Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt.

Derived as [r − g − ρ(1 + g)]/(1 + g + ρ + gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Debt service after 2008 fully reflects HIPC and MDRI debt relief.

Current-year interest payments divided by previous period debt stock.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt.

Derived as [r − g − ρ(1 + g)]/(1 + g + ρ + gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Debt service after 2008 fully reflects HIPC and MDRI debt relief.

Current-year interest payments divided by previous period debt stock.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

4. Sensitivity tests show that Mali’s debt service capacity is relatively robust to the standard shocks (Table 1b). Under an alternative scenario that assumes higher interest rates on public sector loans—in effect, recourse to less concessional external borrowing—the NPV of debt to exports ratio reaches 145 percent in 2029, uncomfortably near the threshold. The same ratio reaches 140 percent under an export-shock scenario that lowers permanently the ratio of exports to GDP by about 2 percentage points. The ratios of NPV of debt to GDP and debt service to exports remain comfortably below the thresholds under alternative scenarios with the full range of shocks.

Table 1b.Mali: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2009-2029(In percent)
Projections
2009201020112012201320192029
PV of debt-to GDP ratio
Baseline13141516172326
A. Alternative Scenarios
A1. Key variables at their historical averages in 2009-2029 1/13131212111112
A2. New public sector loans on less favorable terms in 2009-2029 213141617182630
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2010-201113141617182528
B2. Export value growth at historical average minus one standard deviation in 2010-2011 3/13151718192526
B3. US dollar GDP deflator at historical average minus one standard deviation in 2010-201113151718192629
B4. Net non-debt creating flows at historical average minus one standard deviation in 2010-2011 4/13151617182426
B5. Combination of B1-B4 using one-half standard deviation shocks13151617182527
B6. One-time 30 percent nominal depreciation relative to the baseline in 2010 5/13192122243236
PV of debt-to-exports ratio
Baseline4651576064103122
A. Alternative Scenarios
A1. Key variables at their historical averages in 2009-2029 1/46474644434859
A2. New public sector loans on less favorable terms in 2009-2029 24653596469117145
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2010-20114651566064103122
B2. Export value growth at historical average minus one standard deviation in 2010-2011 3/4659747781124140
B3. US dollar GDP deflator at historical average minus one standard deviation in 2010-20114651566064103122
B4. Net non-debt creating flows at historical average minus one standard deviation in 2010-2011 4/4654626669108124
B5. Combination of B1-B4 using one-half standard deviation shocks4653565963100118
B6. One-time 30 percent nominal depreciation relative to the baseline in 2010 5/4651566064103122
PV of debt-to-revenue ratio
Baseline7681879399129131
A. Alternative Scenarios
A1. Key variables at their historical averages in 2009-2029 1/76757167665963
A2. New public sector loans on less favorable terms in 2009-2029 276839299107146155
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2010-2011768494100106138140
B2. Export value growth at historical average minus one standard deviation in 2010-2011 3/7687102107112139133
B3. US dollar GDP deflator at historical average minus one standard deviation in 2010-2011768898104111144147
B4. Net non-debt creating flows at historical average minus one standard deviation in 2010-2011 4/768696101107134132
B5. Combination of B1-B4 using one-half standard deviation shocks768895101107138139
B6. One-time 30 percent nominal depreciation relative to the baseline in 2010 5/76113122129137179182
Debt service-to-exports ratio
Baseline1.842.532.592.592.562.895.02
A. Alternative Scenarios
A1. Key variables at their historical averages in 2009-2029 1/2222222
A2. New public sector loans on less favorable terms in 2009-2029 22333346
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2010-20112333335
B2. Export value growth at historical average minus one standard deviation in 2010-2011 3/2333346
B3. US dollar GDP deflator at historical average minus one standard deviation in 2010-20112333335
B4. Net non-debt creating flows at historical average minus one standard deviation in 2010-2011 4/2333335
B5. Combination of B1-B4 using one-half standard deviation shocks2333235
B6. One-time 30 percent nominal depreciation relative to the baseline in 2010 5/2333335
Debt service-to-revenue ratio
Baseline3444445
A. Alternative Scenarios
A1. Key variables at their historical averages in 2009-2029 1/3443322
A2. New public sector loans on less favorable terms in 2009-2029 23444457
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2010-20113444446
B2. Export value growth at historical average minus one standard deviation in 2010-2011 3/3444446
B3. US dollar GDP deflator at historical average minus one standard deviation in 2010-20113455446
B4. Net non-debt creating flows at historical average minus one standard deviation in 2010-2011 4/3444446
B5. Combination of B1-B4 using one-half standard deviation shocks3444446
B6. One-time 30 percent nominal depreciation relative to the baseline in 2010 5/3666658
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/42424242424242
Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

5. With no indicative threshold breached under a variety of scenarios, Mali remains at low risk of external debt distress. One indicative threshold is approached after 20 years under the assumption of less concessional borrowing, but all other indicators are favorably placed. This outcome, however, relies on the implementation of prudent macroeconomic policies and structural reforms aiming at addressing the projected decline of the gold mining sector. Taking into account that Mali’s economy remains highly vulnerable to external shocks, the risk of debt distress will have to be monitored regularly.

III. Results of the Public Debt Sustainability Analysis

6. In the baseline scenario, Mali’s public debt increases moderately over the projection period (Figure 2 and Table 2a). Domestic debt is projected to decline to negligible levels, as there is no domestic financing of the budget. The NPV of debt to revenue (and grants) ratio is projected to increase from 76 percent in 2008 to 108 percent in 2029 (and to 131 percent excluding grants). The debt service to revenue ratio excluding grants is projected to remain below 6 percent from 2012 onward, following repayment of a medium-term loan taken from a consortium of sub-regional banks to clear domestic arrears. Thus, Mali’s public debt is considered manageable from a fiscal perspective, as long as the authorities implement a cautious debt strategy and avoid recourse to domestic term financing.

Figure 2.Mali: Indicators of Public Debt Under Alternative Scenarios, 2009-2029 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio in 2019.

2/ Revenues are defined inclusive of grants.

Table 2a.Mali: Public Sector Debt Sustainability Framework, Baseline Scenario, 2006-2029(In percent of GDP, unless otherwise indicated)
ActualEstimateProjections
200620072008Average 5/Standard Deviation2009201020112012201320142009-14 Average20192029Average 2015-29
Public sector debt 1/18.919.421.622.323.725.226.828.530.236.839.8
o/w foreign-currency denominated18.919.419.120.222.224.226.128.030.036.839.8
Change in public sector debt−31.90.52.30.71.41.51.61.71.71.00.0
Identified debt-creating flows−41.6−0.2−0.2−4.01.92.62.51.81.60.7−0.1
Primary deficit2.12.81.92.20.72.73.43.83.73.12.93.22.92.62.8
Revenue and grants22.321.319.021.620.820.720.921.021.121.723.822.3
of which: grants5.04.63.44.93.83.73.73.73.73.84.23.9
Primary (noninterest) expenditure24.424.120.824.324.224.524.624.124.024.626.425.2
Automatic debt dynamics−9.1−2.5−0.8−2.1−1.2−1.2−1.2−1.3−1.3−2.2−2.7
Contribution from interest rate/growth differential−3.5−0.9−0.9−1.1−1.1−1.2−1.4−1.5−1.6−2.1−2.7
of which: contribution from average real interest rate−1.0−0.10.0−0.20.00.0−0.1−0.2−0.2−0.4−0.4
of which: contribution from real GDP growth−2.5−0.8−0.9−0.9−1.0−1.2−1.2−1.3−1.4−1.8−2.2
Contribution from real exchange rate depreciation−5.6−1.60.1−1.1−0.10.00.10.20.3
Other identified debt-creating flows−34.6−0.4−1.3−4.5−0.30.00.00.00.00.00.0
Privatization receipts (negative)0.00.0−1.0−4.2−0.10.00.00.00.00.00.0
Recognition of implicit or contingent liabilities0.00.00.00.00.00.00.00.00.00.00.0
Debt relief (HIPC and other)−34.6−0.4−0.3−0.3−0.30.00.00.00.00.00.0
Other (specify, e.g. bank recapitalization)0.00.00.00.00.00.00.00.00.00.00.0
Residual, including asset changes9.80.72.54.7−0.5−1.1−0.8−0.10.20.20.10.2
Other Sustainability Indicators
PV of public sector debt0.00.014.714.815.215.816.617.518.523.025.7
o/w foreign-currency denominated0.00.012.112.713.714.916.017.118.323.025.7
o/w external12.112.713.714.916.017.118.323.025.7
PV of contingent liabilities (not included in public sector debt)
Gross financing need 2/3.74.62.93.64.85.04.74.03.83.63.7
PV of public sector debt-to-revenue and grants ratio (in percent)0.00.077.268.673.476.679.783.487.6105.9107.9
PV of public sector debt-to-revenue ratio (in percent)0.00.094.289.090.093.296.8101.2106.3128.6130.8
o/w external 3/77.976.381.287.492.898.5104.8128.6130.8
Debt service-to-revenue and grants ratio (in percent) 4/7.28.55.54.46.85.84.94.64.33.34.7
Debt service-to-revenue ratio (in percent) 4/9.310.86.75.78.37.15.95.55.34.05.7
Primary deficit that stabilizes the debt-to-GDP ratio34.02.3−0.42.02.02.32.01.41.11.92.6
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)5.34.35.04.93.84.34.85.35.25.25.05.05.25.95.5
Average nominal interest rate on forex debt (in percent)1.12.22.11.40.60.81.01.00.90.90.90.90.80.80.8
Average real interest rate on domestic debt (in percent)
Real exchange rate depreciation (in percent, + indicates depreciation)−11.8−9.10.6−5.69.3−6.0
Inflation rate (GDP deflator, in percent)5.12.68.63.63.74.32.61.82.02.02.12.52.02.02.0
Growth of real primary spending (deflated by GDP deflator, in percent)0.10.0−0.10.10.10.20.00.10.10.00.00.10.10.10.1
Grant element of new external borrowing (in percent)44.944.944.944.944.944.944.944.944.9
Sources: Country authorities; and staff estimates and projections.

[Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.]

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Sources: Country authorities; and staff estimates and projections.

[Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.]

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

7. Sensitivity analyses shows that Mali’s public debt servicing capacity could become impaired in the face of shocks (Table 2b). Specifically, reducing economic growth by an average of 1 percent per year would, with less buoyant fiscal revenues, raise public debt service ratios to levels that could potentially prove burdensome. However, with a relatively even profile of debt service after the amortization in 2010-12 of the regional borrowing to reduce payment arrears, debt service ratios would remain comfortable under this scenario. Nevertheless, the sensitivity analysis underscores the importance of continuing to pursue prudent macroeconomic policies to achieve high GDP growth rates and low public sector deficits.

Table 2b.Mali: Sensitivity Analysis of Key indicators of Public Debt 2009-2029
Projections
20092010201120122013201420192029
PV of Debt-to-GDP Ratio
Baseline1515161718192326
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages1515141414151821
A2. Primary balance is unchanged from 20091515151516172125
A3. Permanently lower GDP growth 1/1516161819213048
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2010-20111516182022243240
B2. Primary balance is at historical average minus one standard deviations in 2010-20111515151617182226
B3. Combination of B1-B2 using one half standard deviation shocks1515151618192632
B4. One-time 30 percent real depreciation in 20101520202020202223
B5. 10 percent of GDP increase in other debt-creating flows in 20101522222324242829
PV of Debt-to-Revenue Ratio 2/
Baseline697377808388106108
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages6970686769718389
A2. Primary balance is unchanged from 200969727172747896103
A3. Permanently lower GDP growth 1/697579849097135195
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2010-201169788895103111147168
B2. Primary balance is at historical average minus one standard deviations in 2010-2011697272767984103108
B3. Combination of B1-B2 using one half standard deviation shocks697272788490119135
B4. One-time 30 percent real depreciation in 201069969594949510295
B5. 10 percent of GDP increase in other debt-creating flows in 201069105108109112115128120
Debt Service-to-Revenue Ratio 2/
Baseline47655435
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages46654423
A2. Primary balance is unchanged from 200946654434
A3. Permanently lower GDP growth 1/46655547
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2010-201146655547
B2. Primary balance is at historical average minus one standard deviations in 2010-201146654434
B3. Combination of B1-B2 using one half standard deviation shocks46655435
B4. One-time 30 percent real depreciation in 201047766657
B5. 10 percent of GDP increase in other debt-creating flows in 201046665555
Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

IV. Conclusion

8. Mali’s risk of external debt distress remains low, with debt indicators comparable to the 2008 DSA. None of the debt burden thresholds are breached over the 20-year projection period, under either the baseline scenario or with the standard sensitivity analysis. Nevertheless, to ensure continued debt sustainability, it would be important for Mali to work to broaden the export base in the coming years, as well as to deepen fiscal consolidation, enhance competitiveness, and follow a prudent borrowing strategy.

A preliminary version of this DSA was discussed with the Malian authorities, who share staff views regarding the risk of debt distress.

HIPC debt relief was granted by all multilaterals, Paris Club bilateral creditors, and three non-Paris Club creditors (Saudi Arabia, Kuwait and China). Negotiations with four countries are still ongoing.

The Poverty Reduction Strategy Paper (PRSP) is based on an annual economic growth of 7 percent. The teams assumed a more conservative approach, taking into account the historical trends, the projected decline of the gold mining sector, and the related difficult economic transition that requires a higher momentum of structural reforms.

Gold output accounted for about 7 percent of GDP and 75 percent of exports in 2009. Staff has analyzed an alternative baseline scenario with economic growth slightly above 4½ percent per year to illustrate a slower growth response of sectors, such as agriculture, to ongoing structural reforms and development policies; under this scenario, prudent macroeconomic policies help to keep the risk of debt distress at a low level; in the sensitivity analysis, only the ratio of the present value of debt to exports breaches slightly the threshold of 150 percent after 2025 under a most extreme shock hypothesis. This alternative baseline points to the need to monitor new indebtedness and to implement effective growth strategies in the future.

Based on the World Bank three-year average CPIA ratings, Mali is classified as a ‘medium performer’. Consequently, the external debt burden thresholds relevant for Mali are (i) NPV of debt-to-exports ratio of 150 percent; (ii) NPV of debt-to-revenue of 250 percent; (iii) NPV of debt-to-GDP of 40 percent; and (iv) debt service-to-exports and revenue ratios of 20 and 30 percent, respectively.

Other Resources Citing This Publication