Mali
Selected Issues and Statistical Annex

This Selected Issues paper and Statistical Annex presents an overview of economic developments in Mali in 1994–95. Despite the impact of the devaluation on government spending, the overall fiscal deficit was limited to 13.7 percent of GDP in 1994, with government revenue declining by the equivalent of ½ percentage point of GDP and total expenditure rising by about 3½ percentage points. In 1995, the fiscal situation improved significantly as the overall government deficit, on a commitment basis and excluding grants, was reduced by more than 2 percentage points of GDP.

Abstract

This Selected Issues paper and Statistical Annex presents an overview of economic developments in Mali in 1994–95. Despite the impact of the devaluation on government spending, the overall fiscal deficit was limited to 13.7 percent of GDP in 1994, with government revenue declining by the equivalent of ½ percentage point of GDP and total expenditure rising by about 3½ percentage points. In 1995, the fiscal situation improved significantly as the overall government deficit, on a commitment basis and excluding grants, was reduced by more than 2 percentage points of GDP.

MALI - Basic Data 1/

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Data may not add up owing to rounding.

Excluding SDR allocations and medium- and long-term liabilities.

MALI - Basic Data 1/

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Data may not add up owing to rounding.

In percent of exports of goods and nonfactor services; after debt cancellation; before debt relief; excluding debt service due to the People’s Republic of China and Russia.

Table.

Mali: Selected Social and Demographic Indicators 1/

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Sources: World Bank, Social Indicators of Development. 1995; and staff estimates.

Average for 1988–93, unless otherwise indicated.

I. Overview of Economic Developments in 1994 and 1995 1/

1. Introduction

Since the devaluation of the CFA franc in January 1994, Mali has experienced a significant pickup in economic activity. 2/ After nearly a decade of economic stagnation, real GDP grew by 2.3 percent in 1994 and by an estimated 6.4 percent in 1995. 3/ The turnaround in economic activity came about as the result of improvements in Mali’s external competitiveness and was most pronounced in export-oriented sectors, and the cotton sector in particular, as well as in import substitution sectors. After an initial correction, the annual rate of domestic price increase fell to 10.5 percent in the last quarter of 1995 from 32.2 percent in the same period in 1994, owing to the containment of labor costs, as well as abundant supplies and relatively stable prices of staple foods during this time period.

Despite the impact of the devaluation on government spending, the overall fiscal deficit was limited to 13.7 percent of GDP in 1994, with government revenue declining by the equivalent of ½ percentage point of GDP and total expenditure rising by about 3½ percentage points. In 1995, the fiscal situation improved significantly as the overall government deficit, on a commitment basis and excluding grants, was reduced by more than 2 percentage points of GDP; revenues increased by 1 percentage point of GDP and expenditures decreased by the equivalent of more than 2 percentage points of GDP.

2. Production and prices

Over the period 1994–95, real GDP grew by 8.8 percent on a cumulative basis, led primarily by strong performances in the primary sector. Agricultural growth, benefiting from favorable climatic conditions as well as enhanced competitiveness, was broadly based: food crops grew by a cumulative 34 percent; livestock production rose by 9.2 percent; and cash crops (primarily cotton) rose by almost 20 percent in 1995, following a 16 percent drop in 1994. In the secondary sector, output grew by 9 percent, thanks to strong gains in construction and public works. The tertiary sector experienced a cumulative 1 percent decline in output; trade and services both experienced output increases, but they were more than offset by a 25 percent drop in public sector services.

Both the expenditure-reducing and switching effects of the devaluation were quite strong over the period 1994–95, as evidenced by the decline in aggregate consumption: both private and government consumption declined by almost 2 percentage points of GDP each. Investment spending rose significantly over this period, from about 22 percent of GDP in 1993 to 26 percent in 1995. Private investment, largely in the gold mining and cotton sectors, rose by almost a full percentage point of GDP, while government investment increased by more than 3 percentage points. Mali’s rising investment expenditure over the 1994–95 period was financed largely by higher domestic savings as well as the increased use of foreign savings.

In the wake of the devaluation, inflation, as measured by the consumer price index for Bamako, peaked at 32 percent on an end-of-period basis in the last quarter of 1994. 1/ The inflation rate declined rapidly over 1995, ending the year at a quarterly rate of 10.5 percent. Since the devaluation, the Malian authorities have endeavored to implement policies designed to contain labor costs. The rapid fall-off in the rate of inflation suggests that, by end-1995, the inflationary impact of the devaluation had largely worked its way through the economy and that the authorities’ strict anti-inflation policies had been largely successful.

3. Fiscal developments

Early in 1994 the authorities introduced a number of measures aimed at increasing government revenue and limiting spending following the devaluation. At the same time, customs duties and certain domestic taxes were reduced to mitigate the impact of the devaluation-induced rise in costs and prices on vulnerable population groups and to lower external protection. The public sector demand management policies contributed to containing the increase in the overall budget deficit resulting from the devaluation. The overall budget deficit (on a commitment basis and excluding grants) rose by 4 percentage points of GDP, to 13.6 percent in 1994. Revenue fell by ½ a percentage point of GDP, to 13.5 percent, largely because of a weakening in customs collections as imports declined and certain customs duties were either reduced or suspended, while expenditures rose by 3½ percentage points, to 27 percent. A pivotal element of Mali’s program was the implementation of a restrained civil service wage policy. On the basis of an agreement between the government and the labor unions representing civil servants, the increase in salaries was limited to 10 percent in April 1994. Subsequently, an additional increase of 5 percent, originally scheduled for January 1995, was granted in October 1994; the resulting budgetary impacts were offset by other budgetary savings, primarily in the area of recruitment. The government’s wage bill was reduced by nearly 13 percent in real terms in 1994. There was no civil service wage increase in 1995, further reducing the real wage bill. Given the wage bargaining system in Mali, where private sector wages closely follow those of the civil service, the government’s wage policy had the effect of minimizing demonstration effects, thus preserving the competitiveness gains stemming from the devaluation.

In 1995 the overall government deficit declined by more than 2 percentage points from 1993, to 10.5 percent of GDP, as revenue rose to 14.4 percent of GDP, while expenditures fell to 24.9 percent of GDP. The strong growth in revenue was partially due to higher nontax receipts, including exceptional receipts from the cotton sector and privatization. Actions taken to improve the tax and customs administrations, reduce tax exemptions, and combat fiscal fraud were also instrumental in strengthening revenue performance. 1/ On the expenditure side, total outlays were kept under strict control, with the government’s restrained wage policy again playing a central role.

4. Monetary and credit developments

Monetary developments in 1994 and 1995 were characterized by a strong recovery in money demand (as money balances were reconstituted in the wake of the devaluation), a strengthening of the net foreign assets position of the banking system, a strong expansion of credit to the private sector, and a substantial reduction of government indebtedness to the banking system.

Credit conditions remained generally tight throughout 1994. Following the devaluation, the Central Bank of West African States (BCEAO) raised the discount rate to 14.5 percent on January 18, 1994, from 10.5 percent. Subsequently, and as inflationary pressures in the region began to abate, credit conditions were progressively eased; the BCEAO’s discount rate was reduced in four steps, reaching 9 percent on January 23, 1995. In 1995, there were two additional cuts in the discount rate: to 8.5 percent on June 5 and further to 7.5 percent on December 26.

Broad money increased by 39 percent in 1994. 2/ After an initially sluggish expansion of bank credit to the economy, private sector credit rose moderately during the last few months of the year, reflecting some recovery in economic activity. In 1995, broad money growth slowed to about 20 percent, net credit to the government contracted significantly, and credit to the economy rose sharply, particularly toward the end of the year.

A source of concern for the monetary authorities in the first half of 1994 was the sharp increase in commercial bank liquidity caused by the reflows of private capital; the improved financial position of, and the resulting demand for credit by, export-oriented enterprises; and the cautious attitude of the banks themselves. However, in the last months of the year, commercial banks utilized part of their excess liquidity to purchase securities, issued by the BCEAO as part of the securitization of the consolidated public debt (CFAF 23.9 billion) assumed by the government in the context of the restructuring of the Malian banking system during the late 1980s. The securitization scheme, developed by the BCEAO, involved the issuance of 12-year securities, redeemable on demand and at par, carrying a tax-exempt interest rate of 5 percent. Similar BCEAO-backed schemes, applicable to government debt issued by other member countries of the West African Economic and Monetary Union (WAEMU), established during the same period enabled Malian banks to purchase an additional CFAF 19.8 billion of securities issued by other WAEMU countries. The expansion of the banks’ credit activities toward the end of the year further contributed to reducing excess liquidity.

In April 1995, the Meridien International Bank Limited (MIBL) was liquidated; its subsidiary, Meridien-BIAO-SA, owned 61.5 percent of the capital of BIAO-Mali, with the remainder being held by the Malian private sector. 1/ As part of the financial shoring up of the bank, renamed Banque Internationale du Mali (BIM) in June 1995, a five-year equity loan of CFAF 3 billion was extended by the government to strengthen its capital base and ensure the observance of prudential ratios established by the regional banking commission. 2/

5. External sector developments

After initially deteriorating over the period immediately following the devaluation, Mali’s external position strengthened significantly in 1995, owing largely to an improvement in external competitiveness. Between the fourth quarter of 1993 and 1995, Mali’s CPI-based real effective exchange rate depreciated by some 27 percent. The current account deficit (excluding official transfers) rose from 12.9 percent of GDP in 1993 to 17.8 percent in 1994, and then declined to 14.6 percent in 1995. The improvement in the current account was due largely to a strong recovery in exports, with export volumes increasing by 1.7 percent and by 24.8 percent in 1994 and 1995, respectively. Mali’s improved competitiveness had a particularly favorable effect on exports of cotton, gold, livestock, and fruits and vegetables. In the cotton sector, which accounts for the largest share of exports, favorable developments in the world price of cotton also contributed to the rebound in the value of cotton exports in both 1994 and 1995. In light of these developments, and given the positive impact of favorable climatic conditions, the volume of cotton fiber exports rose by 36 percent in 1995. The volume of imports declined 4.2 percent in 1994, but rose by almost 10 percent in 1995 along with the recovery in the general level of economic activity and the substantial investments in the gold mining sector during the year.

The services account deteriorated during 1994 and 1995, partly because of the growing demand for services in the gold mining sector. The capital account swung from a small deficit in 1993 into surplus for both 1994 and 1995, reflecting inter alia a significant increase in external financial assistance, as well as significant private capital inflows related to investments in the gold mining sector and a return of flight capital.

Mali’s external public debt amounted to US$2.7 billion (CFAF 1,406 billion, or 142 percent of GDP) in 1994, up from US$2.6 billion (CFAF 760 billion, or 101 percent of GDP) the previous year. In 1995, the stock of debt was estimated at US$2.9 billion (CFAF 1,397 billion, or 113 percent of GDP). The bulk of debt outstanding at end-1995 was owed to multilateral creditors (54 percent), including IDA (29 percent), the African Development Bank (12.8 percent) and the IMF (5.2 percent). Debt owed to official bilateral creditors accounted for 46 percent of the total, with debt owed to Paris Club creditors representing 12 percent and that to the Russian Federation estimated at 18 percent. External payments arrears, owed to both multilateral and bilateral creditors, were eliminated in 1994. Mali’s financial obligations to foreign commercial banks and official export credit agencies accounted for less than 0.1 percent of total debt outstanding between 1992 and 1994, and was entirely eliminated in 1995. 1/

Mali’s scheduled external debt service increased from CFAF 47.5 billion (39.5 percent of exports of goods and nonfactor services) in 1993 to CFAF 94.1 billion in 1994 (42.2 percent), before declining to CFAF 83.8 billion (30.6 percent) in 1995. Over the 1994–95 period, Mali continued to benefit from debt relief under its October 1992 Paris Club rescheduling arrangement, debt moratoria from the Russian Federation and the People’s Republic of China, and debt cancellation equivalent to CFAF 114.7 billion granted by France, Italy, and Switzerland in early 1994.

With regard to Mali’s exchange and trade system, the key development over the 1994–95 period was, of course, the change in parity between the CFA franc and the French franc in January 1994. All other exchange arrangements remained unchanged; in particular, exchange rates for all other currencies officially quoted in the Paris exchange market remained based on the fixed rate for the French franc and the Paris exchange market rate for the currency concerned. There remain no taxes or subsidies on purchases or sales of foreign exchange; however, foreign exchange transfers are subject to a stamp tax.

Prior to June 1, 1996, Mali, as well as its WAEMU partners, availed itself of the transitional arrangements under Article XIV, Section 2, of the Fund’s Articles of Agreement. Nevertheless, Mali maintained an exchange system that was free of restrictions on the making of payments and transfers for current international transactions, similar in most respects to those of other French franc area countries. Effective June 1, 1996, Mali, in concert with its WAEMU partners, accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund’s Articles of Agreement.

There were minimal changes to Mali’s trade regime over the period 1994–95. Customs and fiscal duties are levied on the c.i.f. values of imports from all countries. Import duties are applied on an ad valorem basis; there are two rates for customs duties (zero percent and 5 percent) and three rates for fiscal duties on imports (zero, 10 percent, and 25 percent). Imported goods from all countries are subject to a customs service fee, equivalent to 5 percent (3 percent for petroleum products) of the c.i.f. value of the imported goods. In 1994 the average effective tariff was 16 percent; it increased to 20 percent in 1995.

6. Savings and investment 1/

In 1994, Mali registered a strong increase in investment; total investment expenditures rose to 26.5 percent of GDP from 21.9 percent in 1993, with government investment accounting for 13 percent of GDP, up from 9.3 percent, and private investment increasing from 12.6 percent to 13.5 percent of GDP. Rising investment expenditure, largely concentrated in the areas of gold mining, the cotton sector, and donor-financed development projects, was financed by an increase in domestic savings, up from 6.4 percent of GDP in 1993 to 6.7 percent in 1994, and an increase in official transfers in an amount equivalent to 13.3 percent of GDP in 1994, up from 8.9 percent in 1993.

The high level of investment spending posted in 1994 was essentially maintained in 1995, with total investment accounting for 26.0 percent of GDP. A decline of official transfers in 1995, equivalent to 4.3 percentage points of GDP, was offset by a significant increase in domestic savings, which rose from 6.7 percent of GDP in 1994 to 10.1 percent in 1995; significant increases were registered in both government and nongovernment sector savings.

CHART 1
CHART 1

MALI: MAIN ECONOMIC INDICATORS, 1987–95

Citation: IMF Staff Country Reports 1996, 141; 10.5089/9781451826203.002.A001

Sources: Data provided by the Malian authorities; and staff estimates.1/ Percentage change in GDP deflator.2/ Central government, on a commitment basis.
CHART 2
CHART 2

MALI: REAL AND NOMINAL EFFECTIVE EXCHANGE RATES JANUARY 1980–JUNE 1996

(Period average; 1990 = 100)

Citation: IMF Staff Country Reports 1996, 141; 10.5089/9781451826203.002.A001

Source: IMF Information Notice System.1/ Based on relative CPIs.

II. The Cotton Sector in Mali 1/

1. Background

Mali has been a significant producer of cotton for about 40 years and now ranks as one of the largest cotton producers and exporters in sub-Saharan Africa. Cotton is grown under rainfed conditions in a region located south of the Niger River and west of Mopti. Total cultivated area currently exceeds 300,000 hectares, and an estimated rural population of 1.5 million people (out of a total population of 9.2 million) directly depends on cotton cultivation for its livelihood. In economic and financial terms, cotton represented in 1995 more than 50 percent of exports (CFAF 127 billion), 10 percent of government revenue (CFAF 16.4 billion), and 7 percent of total GDP. In 1995, farmers’ gross income directly generated by cotton production amounted to CFAF 38 billion, compared with a total government wage bill of CFAF 48 billion.

In Mali, cotton is primarily produced under the supervision of the Compagnie Malienne pour le Developpement des Textiles (CMDT). 2/ The CMDT area covers five geographic regions and accounts for 95 percent of total cotton production in Mali. In addition to its key responsibilities of processing and marketing, CMDT provides a full range of production-related services to producers, including the sale of inputs, extension services, and cotton research. All seed cotton produced is ginned in a network of 13 ginneries operated directly by CMDT. Two textile companies, the Compagnie Malienne des Textiles (COMATEX) and Industry des Textiles du Mali (ITEMA) process cotton fibers domestically. Together, these two companies absorb less than 2 percent of total production, which is almost entirely exported as cotton fiber.

While the institutional structure of the cotton sector is built around the CMDT, as described above, additional support and development activities are carried out directly by farmers’ associations (Associations villageoises). The total number of associations currently exceeds 1,000; their main functions cover the distribution of inputs, the collection of cotton, and the guaranteeing as well as the distributing of credit for equipment. They also undertake health, literacy, and training programs, and participate in the construction of storage facilities.

2. Institutional framework

The responsibilities of the CMDT are spelled out in five-year performance contracts between the government, the CMDT, and cotton producers. The current performance contract, covering the period October 1994 to September 1998, extends the main provisions of the previous contract for 1989–94. The new contract reaffirms the main responsibilities of CMDT, namely processing and marketing of Mali’s cotton production, and contributing to rural development.

a. Processing and marketing of cotton

As the sole entity responsible for the marketing of Malian cotton, CMDT, in consultation with producers, sets production objectives for each crop year. These objectives must be consistent with the effective ginning capacity of CMDT (Article 5 of the performance contract). They are also set taking into account the expected trends in international cotton prices for any given crop year.

CMDT is committed to purchase all cotton output, at a fixed price up to the production target set for the year; the producer price is also determined annually under the terms of the performance contract. At the operational level, production quotas are set for each of the five cotton-producing regions, for every sector within those regions and for each village in every sector. Although CMDT has no contractual or legal obligation to purchase any amount in excess of the agreed quotas, the need to invoke this clause of the contracts has not arisen yet.

The level of remuneration paid to cotton producers aims at ensuring an equitable distribution of the sector’s profits among all interested parties. The remuneration of producers is effected through a two-tier mechanism, including (a) the setting, annually, of a minimum floor price for the crop year, and (b) the payment of a premium determined by the level of CMDT’s profits from the previous financial year. The minimum guaranteed price was set at CFAF 125 per kilo for the 1994/95 crop year and kept unchanged for 1995/96. This price level is considered consistent with the need to provide a minimum degree of financial incentive to producers and the financial capacity of the CMDT. In calculating the appropriate level of the floor price, attention is paid to the cost of inputs used by producers, in particular for fertilizers and pesticides, which represent a significant share in the cost structure of cotton producers. The capacity of CMDT to pay the minimum price without endangering its financial viability, in turn, is largely determined by the level of international cotton prices. The premium to be paid to producers each crop year is calculated at the end of each financial year, and is based on the estimated level of CMDT net profits. Under the provisions of the performance contract, the amount available for payment of the premium is set at the equivalent of 35 percent of CMDT’s net profits. The premium applies to quantities of seed cotton purchased in the next crop year.

In addition to a floor price, intended to provide a degree of protection to farmers against fluctuations in the world price, the performance contract also provides for a stabilization mechanism into which CMDT pays a share of its retained earnings. The Stabilization Fund can also receive contributions from external donors in the event CMDT is unable to finance the mechanism from its own resources. The minimum amount of resources accruing to the stabilization fund is set according to the level of production of cotton, which, in turn, is based on the volume of the latest crop year. According to the performance contract, this minimum amount must equal 25 percent of the purchases of CMDT in the latest crop year. Any difference between this latter amount and the balance in the stabilization fund must be paid by CMDT (see Table 7 for details of calculation). 1/

b. Rural development

Under the terms of the current performance contract, CMDT has also assumed a significant number of rural development responsibilities. Some of these responsibilities are directly related to the development and maintenance of cotton production systems, the cost of which is met with CMDT’s own resources; other responsibilities 2/ are financed from Mali’s government budget resources. These dual sets of responsibilities are listed as follows.

c. Activities financed by CMDT

These include all activities related to production, including (a) advisory functions in the area of management, and integration of agricultural and livestock breeding activities; (b) training and assistance to women directly involved in cotton production; (c) provision of literacy programs to producers; (d) research; (e) production of seeds; (f) maintenance of a number of secondary roadways; and (g) evaluation of performance of cotton producers.

d. Activities financed by the government

Activities financed by the government correspond to a number of public service missions entrusted to CMDT by the government, which include participation in: (a) the development of access to safe water for rural populations; (b) the development of food production; (c) the promotion of a better livestock health situation; (d) the promotion of women’s role in development; (e) the training of farmers in areas of stock management; and (f) the design and implementation of land management techniques.

The existing institutional framework has clearly helped promote the cotton sector in Mali. While not a major producer of cotton by world standards (its share of world production is less than 1 percent), Mali is now the largest in sub-Saharan Africa, having overtaken, in particular, Benin, C6te d’Ivoire, Tanzania, Zimbabwe, and Sudan. Its growing share of African production, and the quality of its cotton, demonstrate the soundness of the policies implemented by the authorities since the signing of the first performance contract in 1989. These policies are fully supported by Mali’s external partners, notably through the extension of financial support to CMDT and the cotton sector in general during the first phase of implementation of the performance contract and in 1992 and 1993, when competitiveness problems resulting from the overvaluation of the CFA franc were aggravated by weak international cotton prices. The medium- and long-term outlook for the cotton sector appears quite promising, especially in view of the sound financial position of the CMDT, the maintenance of adequate financial incentives to producers and prudent resource management systems.

e. Financial position of CMDT

After experiencing financial difficulties in the years prior to 1994, the CMDT is now considered financially sound, in large part as a result of the devaluation of the CFA franc and increases in international prices. The average export price of CMDT thus rose from CFAF 295 per kilo in 1993 to CFAF 746 per kilo in 1994 and further to CFAF 857 per kilo in 1995. An additional factor in CMDT’s financial results has been improvements in the quality of its management, following restructuring efforts in 1993 and 1994. Reflecting these developments, the financial results of CMDT improved markedly, from a deficit of CFAF 7.9 billion in 1993 to a surplus of CFAF 29.2 billion in 1994 and an estimated comparable amount for 1995. The strengthening of CMDT is already being reflected in the lowering of its borrowing costs, as Malian commercial banks now generally consider this company as one of the most creditworthy borrowers in the country.

f. Incentive mechanisms

While the guaranteed producer price of cotton in Mali is one of the lowest in Africa, it does not appear to have hampered the development of production. This is in large part due to the satisfactory operation of the profit-sharing scheme which, at least at current world prices, allows for the payment of a significant premium. An important factor in the profit sharing scheme is that the amount of the premium (for the previous crop year) is known at the beginning of the crop year, when farmers decide, in collaboration with CMDT, on the amount of land and financial resources they will commit to cotton production. An additional, and important, feature of the mechanism is its reliability; based on the experience of the last several years, payments to cotton farmers are made promptly, at the time of delivery of seed cotton to CMDT.

g. Land management

There is ample evidence that Malian farmers are managing their land resources in a prudent way and that the attractiveness of cotton production is not creating any immediate danger to the ecosystem. On average, cultivated area devoted to cotton in the CMDT zones does not exceed 30 percent of total cultivated area, a level consistent with the three-year rotation system thought indispensable in the African context to prevent land deterioration. While important environmental issues need to be addressed more forcefully (a problem more generally related to agriculture in Mali), the current level of production is sustainable according to the World Bank and could even be increased by up to 20 percent, under current production methods, without exerting undue pressure on land resources.

3. Characteristics of cotton cultivation

Over the past 10 years, total Mali an cotton production has averaged about 300,000 tons a year, although fluctuations between crop years have been substantial. These variations are for the most part explained by shifting climatic conditions, as all Malian cotton is grown under rainfed conditions. An additional factor is the ability of the CMDT to influence the level of production through the guaranteed price mechanism. As described above, CMDT is obligated to purchase cotton at the guaranteed price, but only within the production limits agreed with representatives of cotton producers. By restricting production, CMDT has thus been able to effectively contain losses in years when international cotton prices were not sufficient to generate profits at the going exchange rate.

As noted above, cotton production in Mali is, for the most part, centered in five regions, where it coexists with subsistence farming. On average, areas under cotton cultivation represent less than 30 percent of total cultivated area, as farmers continue to give priority to food production, and particularly cereals. Production techniques are still very labor intensive, requiring a high ratio of active personnel to total output (see Table 5). Only 20 percent of the nearly 110,000 Malian farms involved in cotton production are considered to be fully equipped (i.e., owning at least one ox-drawn plough and two pairs of oxen), while about 30 percent have no equipment other than hand-tools. The average size of cotton farms is about 10 hectares and average yields are about 1.2 tons per hectare. Size and yields vary, however, with the degree of equipment of farms. Fully equipped farms (Type A) average yields of 1.5 tons/ha, while those of moderately equipped farms (Type B) and of manual farms (Type C) do not exceed 1.3 tons and 1.1 tons per hectare, respectively. Similarly, the size of Type A farms, on average, is close to 20 hectares, while Type B and Type C farms generally do not exceed 12 and 5 hectares, respectively. These disparities in size and yields are reflected in significant differences in income levels.

4. Impact of the devaluation

The devaluation of the CFA franc in January 1994 had a significant, positive impact on the profitability of Mali’s cotton sector. With respect to producers, the increases in producer prices and the premiums distributed under the profit-sharing system more than offset the increase in the costs of imported inputs, resulting in increases in net income. Pre-devaluation net income per person, which averaged CFAF 10,943 for Type A farms against CFAF 7,100 for Type B farms and CFAF 5,335 for Type C farms, has been estimated to have increased by almost 25 percent for Type A farms, and 20 percent and 14 percent for Type B and Type C farms, respectively (see Tables 6A6C). The larger increase in the income of better equipped farms has widened the income disparities between small and large farmers. Specifically, the post-devaluation income level of small farmers is estimated to be equivalent to 44 percent of that of Type A farms, compared with 49 percent before the devaluation, mainly reflecting the higher share of imported inputs in unmechanized farms and the correspondingly higher increase in production costs experienced by this type of farms. For all categories of farms, however, increases in net income were insufficient to fully compensate for increases in prices levels as measured by the Consumer Price Index (CPI) for Bamako, which increased by 32 percent in 1995 on an end-of-period basis.

CMDT’s financial situation was significantly improved as a direct result of the devaluation and is reflected in the evolution of its profits for the three crop years to 1996 (Table 3). However, these results, which contrast sharply with the series of deficits experienced prior to the devaluation, also reflect the impact of exceptionally favorable international prices and weather conditions. While markedly strengthened, the financial situation of CMDT remains vulnerable to sharp variations in international prices for cotton and the vagaries of weather conditions typical to the Sahel region.

5. Conclusion

Mali’s potential as a cotton producer is significant. As a result of the 1994 devaluation, the profitability of cotton farming increased substantially. The improvement in the level of cotton farmers’ income should strongly contribute further to the development of Mali’s cotton potential. Key medium-term objectives should aim at: (a) the development of new arable lands in new areas, as well as traditional cotton-growing areas; (b) an increase in the share of cotton in total cultivated areas; and (c) an increase in yields per hectare, which have tended to lag behind those experienced in the rest of the world. As indicated by the financial results of better equipped farms, the use of modern farming techniques translates into significant improvements in income levels, compared with those of traditional farming. However, even Mali’s more modern techniques of production remain rudimentary by international standards, and the scope for improvement in yields would appear substantial. Rapid progress in this direction will require the maintenance of reliable payment and remuneration mechanisms as provided for under the current arrangements. But it will also require more forceful efforts to raise educational levels of farmers and to improve access to appropriate sources of financing for medium- and long-term investment. Finally, greater attention will also need to be given to environmental issues, as fewer than 10 percent of farms are implementing a consistent program of land preservation.

Table 1.

Mali: Economic Indicators of the Cotton Sector, 1991–96

(In billions of CFA francs, unless indicated otherwise)

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Sources: Malian authorities; and staff estimates.
Table 2.

Mali: CMDT’s Cost Structure, 1990–96 1/

(In CFA francs per kilogram, unless otherwise indicated)

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Source: Compagnie Malienne pour le Développement des Textiles (CMDT).

Data reported on CMDT’s financial year, October to September.

Excluding premium to producers.

Office de la Haute Vallee du Niger.

Table 3.

Mali: CMDT Financial Results, 1992–94

(In billions of CFA francs)

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Source: Compagnie Malienne pour le Développement des Textiles.
Table 4.

Mali: Cotton Farmers’ Income, 1990–96 1/

(In thousands of CFA francs)

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Source: Compagnie Malienne pour le Développement des Textiles (CMDT).

Data reported on CMDT’s financial year, October to September.

Table 5.

Mali: Cotton Farm Indicators 1/

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Source: Compagnie Malienne pour le Développement des Textiles (CMDT).

Type A: fully equipped farms; Type B: partly equipped farms; Type C: unmechanized farms.

Table 6A.

Mali: Devaluation Effects on Farmers’ Income 1/

Cotton producers’ financial results Fully equipped farm (Type A)

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Source: Compagnie Malienne pour le Développement des Textiles (CMDT).

In CFA francs.

Table 6B.

Mali: Devaluation Effects on Farmers’ Income 1/

Cotton producers’ financial results Partly equlpped farm (Type B)

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Source: Compagnie Malienne pour le Développement des Textiles (CMDT).

In CFA francs.

Table 6C.

Mali: Devaluation Effects on Farmers’ Income 1/

Cotton producers’ financial results Unmechanized farm (Type C)

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Source: Compagnie Malienne pour le Développement des Textiles (CMDT).

In CFA francs.

Table 6D.

Mali: Devaluation Effects on Farmers’ Income 1/

Net effects of the devaluation by type of exploitation

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Source: Compagnie Malienne pour le Dévdoppement des Textiles (CMDT)

In CFA francs.