The Executive Board of the International Monetary Fund (IMF) today completed the third review of Mali’s performance under an economic program supported by a three-year Extended Credit Facility (ECF) arrangement. The Board’s decision, which was taken without a formal meeting,1 enables the disbursement of SDR 4 million (about US$5.6 million), bringing total disbursements under the arrangement to SDR 18 million (about US$25.3 million).
In a still fragile security environment, the economic recovery is gathering strength. Activity in 2014 was driven by a return to more normal levels of cereal production and strong growth in the manufacturing sector. The favorable medium-term outlook is based on growing business confidence following the donor reengagement and improved governance. Nevertheless, the vagaries of climatic conditions, setbacks in national reconciliation, or a quick reversal of recent declines in oil prices could undermine the recovery.
Program performance was mixed at end-December 2014 but improved during the first quarter of 2015. In spite of the implementation of measures to strengthen public financial management during the last quarter of 2014, the performance criteria for end-2014 relating to gross tax revenue and bank and market financing of the government were not met owing to administrative weaknesses at the customs administration and a conflict with importers. Steps taken by the authorities to increase oil product taxation and implement better management at the tax and customs administration have put tax revenue back on track at end-March 2015.
The 2015 draft supplementary budget is a temporary solution to pressing spending challenges, including ramped up military spending and deferred payments from earlier years. On the revenue side, it targets an increase of tax revenue by 1.8 percent of GDP to be achieved through an increase in taxes on some products (oil, telecommunication, financial transactions, alcohol and tobacco) and reforms in tax and customs administration to broaden the tax base. On the expenditure side, the composition reflects the priorities of the growth enhancing and poverty-reducing strategies, including restoring peace and security and paying arrears.
Steadfast implementation of reforms is needed to further strengthen public financial management. Tax policy and administration reforms need to be accelerated to successfully raise the tax yield. Simplifying the tax and customs administrative procedures will help improve the overall business environment. The promising results obtained by closer cooperation and information sharing between tax, customs and procurement administrations should now be used to improve tax auditing. Tighter expenditure control, supported by improvements in Treasury management, will help prevent accumulation of arrears. Paying the outstanding domestic arrears will support the recovery.
Reforms aimed at improving the business environment are essential to boost Mali’s prospects for stronger medium-term growth. The authorities’ agenda is ambitious and targets areas with documented weaknesses. Progress in strengthening the financial system, lightening the administrative burden for taxpayers, placing the electricity company’s finances on a sustainable footing, and strengthening governance are critical to durably raising growth and employment prospects.
The Executive Board approved the ECF arrangement for Mali on December 18, 2013 for an amount of SDR 30 million (about US$42.2 million or 32 percent of quota (see Press Release No. 13/524).
The Executive Board takes decisions without a formal meeting when it is agreed by the Board that a proposal can be considered without convening formal discussions.