MALI: Staff Report for the 2000 Article IV Consultation, First Review Under the Poverty Reduction and Growth Facility, and Request for Waiver of Performance Criteria
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Publication Date:
10 Oct 2000
eISBN:
9781451826319
Language:
English
Keywords:
ISCR; CR; program ceiling; wage bill; assistance; program benchmark; bill; government; financial situation; PRGF arrangement; budget deficit; economic reform program; Mali central government; Debt service
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Mali has made progress in reducing macroeconomic imbalances, improving the competitiveness of the economy, and alleviating economic distortions under the Poverty Reduction and Growth Facility (PRGF) Arrangement. Executive Directors commended this step, and stressed the need to maintain fiscal and monetary policies, and accelerate structural reforms. They noted that the Malian economy suffered from trade losses and difficulties in the cotton and electricity sectors, and urged to take necessary actions. They appreciated the authorities' commitment to the PRGF-supported program, and supported the request for waivers.

Abstract

Mali has made progress in reducing macroeconomic imbalances, improving the competitiveness of the economy, and alleviating economic distortions under the Poverty Reduction and Growth Facility (PRGF) Arrangement. Executive Directors commended this step, and stressed the need to maintain fiscal and monetary policies, and accelerate structural reforms. They noted that the Malian economy suffered from trade losses and difficulties in the cotton and electricity sectors, and urged to take necessary actions. They appreciated the authorities' commitment to the PRGF-supported program, and supported the request for waivers.

Mali: Selected Economic and Financial Indicators, 1997-2002

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Sources: Maiian authorities: and Fund staff estimates and projections.

Excluding grants.

I. Introduction

1. The discussions on the first review of Mali’s economic program supported by a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) were initiated in October-November 1999 and concluded in May 2000, after the authorities had taken measures to bring the program back on track. In the attached letter and memorandum on economic and financial policies, dated August 11, 2000 (Appendix I), the Minister of Economy and Finance reviews developments during 1999 and the first quarter of 2000, and sets out the measures to be implemented during the remainder of 2000 to achieve the objectives of the program. If the full amount under the PRGF arrangement is disbursed, and taking into account scheduled loan repayments, Mali’s use of Fund resources would amount to SDR 130 million (139.3 percent of quota) at end-December 2002 (Table 1). A revised schedule of projected reviews and disbursements under the PRGF arrangement is set out in Table 2, and Mali’s relations with the Fund arc summarized in Appendix II.

Table 1.

Mali: Fund Position During the Period of the PRGF Arrangement, January 2000 - December 2002

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Source: IMF, Treasurer’s Department.
Table 2.

Mali: Revised Schedule of Projected Reviews and Disbursements Under the PRGF Arrangement, 2000-02

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2. On September 15, 1998, the Executive Board approved a final decision point document on the Initiative for Heavily Indebted Poor Countries (HIPC Initiative; EBS/98/150; 8/24/98) confirming Mali’s eligibility for assistance under the Initiative. The completion point under the original HIPC Initiative, initially envisaged at and-December 1999, was conditional on completion of the first review under the PRGF arrangement and satisfactory implementation of the planned structural and social reforms. This report is accompanied by the HIPC Initiative document for the completion point under the original framework and the decision point under the enhanced framework (EBS/00/163; 8/11/00). In this context, the authorities have prepared an interim poverty reduction strategy paper (PRSP), which, together with a joint staff assessment, has also been issued separately (EBD/00/67; 8/11/00 and EBD/00/68; 8/11/00). A full PRSP is expected to be completed by mid-2001.

3. The last Article IV consultation was completed on February 10, 1999. On that occasion, Executive Directors noted that, although considerable progress had been made under previous Fund-supported programs, Mali’s economic and financial situation remained fragile. They urged the authorities to consolidate the fiscal situation further through continued reforms of the tax system and expenditure restraint. In the cotton sector, Directors stressed the need to improve efficiency and competition, with the aim of fostering its profitable expansion while increasing producers’ incomes and thus reducing rural poverty. They also underscored the need to deepen and accelerate reforms in the energy, telecommunications, and transportation sectors, and emphasized the need to strengthen the financial system and promote competition among banks.

4. The Fund and World Bank staffs have maintained their close cooperation on Mali. The World Bank has been supporting Mali’s development efforts through structural and sectoral adjustment lending, including a project to support grassroots initiatives to fight hunger and poverty for SDR 15.9 million (April 1998), an integrated health sector investment project for SDR 28x5 million (December 1998), a financial sector development project for SDR 15.8 million (June 2000), and a rural infrastructure project for SDR 86.7 million (June 2000). For the period ahead, the World Bank staff is focusing on reforms in the agricultural, energy, telecommunications, and education sectors. Mali’s relations with the World Bank Group are summarized in Appendix III.

5. Mali’s economic and financial database is comprehensive but remains weak, notably in the areas of the national accounts, industrial production, and the balance of payments. In addition, there are significant delays in the reporting of reliable monetary data. These weaknesses in the database hamper a timely assessment of economic and financial developments, but do not prevent a meaningful assessment of economic policies. The authorities are continuing their efforts to improve the quality and availability of economic data with technical assistance from the Fund and other partners, and are providing core data to the Fund on a regular basis. Statistical issues are further discussed in Appendix IV.

II. Background and Recent Developments

6. Mali’s medium-term economic reform strategy, described in the policy framework paper (PFP) for 1999-2002 (EBD/99/90; 7/16/99) and reaffirmed in the interim PRSP, builds upon the progress achieved under the programs supported by two previous three-year arrangements under the Enhanced Structural Adjustment Facility (ESAF). The aim is to foster durable economic growth, reduce poverty, and achieve financial viability. The strategy focuses on (i) establishing budgetary equilibrium by further improving the tax system and tightly controlling expenditures; (ii) introducing a reliable and transparent judicial and regulatory framework conducive to private sector activities and investment; (iii) strengthening financial intermediation; (iv) undertaking wide-ranging reforms in the cotton, energy, telecommunications, and transport sectors; (v) completing the last phase of the privatization program; (vi) improving public infrastructure and modernizing the civil service; (vii) executing ambitious programs in the health and education sectors; and (viii) implementing the 1998 National Strategy for the Fight against Poverty (SNLP).

7. Real GDP growth in 1999 is estimated at 5½ percent, only 1 percentage point below program, on account of a strong rebound of cereal production and a further expansion of gold mining activities (Figure 1 and Table 4), Seed cotton production stabilized at some 520,000 metric tons in 1998/99, and nonagricultural real GDP growth slowed from 5¼ percent in 1998 to about 3 percent in 1999. The harmonized consumer price index (CPI) for Bamako fell by 1 ¼ percent during 1999, reflecting lower food prices related to the good grain harvest. In 1999, the Malian economy suffered from serious difficulties in the cotton and electricity sectors and a sizable terms of trade loss. The cotton company (CMDT) reported in the last quarter of 1999 significantly higher production costs, owing to excessive investments and a significant weakening of financial management since 1997. This contributed to a large deficit of the CMDT over the 1999/2000 crop year, which, before corrective measures, was equivalent to some 2 percent of GDP. In the electricity sector, serious deficiencies in management, delays in implementing the rehabilitation plan, and ad hoc investments in generating capacity led to severe power outages and output losses in the manufacturing and services sectors in 1999, as well as the quasi-bankruptcy of the national electricity and water company (EDM).

Figure 1.

Mali: Main Economic Indicators, 1987-2002

Citation: IMF Staff Country Reports 2000, 126; 10.5089/9781451826319.002.A001

Sources: Malian authorities; and staff estimates and projections.1/ Percentage change in GDP deflator.2/ Central government on commitment basis.
Table 3.

Mali: Selected Economic and Financial Indicators, 1997-2002

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Source: Malian authorities; and staff estimates and projections.

Annual average data.

Including capital outlays financed through external project aid and transfers to the local authorities, data on commitment basis.

Change in percent of broad money at the beginning of the period.

End-of-period interest rate on the West African Monetary Union money market.

Goods and nonfactor services.

Table 4.

Mali: Selected National Accounts Indicators, 1997-2002

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Sources: Malian authorities; and Fund staff estimates and projections.

Excluding official transfers.

8. The external terms of trade deteriorated by 11 percent in 1999, as cotton export prices fell by almost 19 percent below their 1998 levels and import prices for petroleum products rose by 27 percent (Table 3). After appreciating in 1998, the real effective exchange rate depreciated again by about 4 percent in 1999, reflecting price differentials and the appreciation of the U.S. dollar (Figure 2). In the external sector, cotton fiber export receipts nearly stabilized, despite a strong rebound in shipments from the 1998 delays in the wake of the Asian financial crisis, and gold exports continued to expand. The volume of imports grew moderately, but the petroleum import bill rose steeply. As a result, the external current account deficit (excluding official transfers) widened from 9½ percent of GDP in 1998 to 10½ percent in 1999, some 2 percentage points of GDP above program; including official transfers, the deficit increased from 3 percent of GDP to 4¾ percent. Taking account of a slightly lower level of foreign assistance than in 1998 and a decline in the net outflows of private capital, the overall balance of payments deficit in 1999 remained at a level equivalent to 2 percent of GDP.

Figure 2.
Figure 2.

Mali: Real and Nominal Effective Exchange Rates, January 1990 - March 2000

(Period average; 1990=100)

Citation: IMF Staff Country Reports 2000, 126; 10.5089/9781451826319.002.A001

Source: IMF, Information Notice System.1/ Based on relative consumer price indices.

9. The implementation of the 1999/2000 PRGF-supported program was marked by policy slippages, notably in the structural area (Appendix I, Tables 1 and 2). None of the four structural performance criteria for end-November 1999 and end-March 2000 were observed. These related to the undertaking of planned reforms in the cotton sector; the privatization of the EDM; the liberalization of the telecommunications sector; and the auditing of the national pension fund (CRM) and the social security agency (INPS). In addition, only two of the seven structural benchmarks were met, as there were delays in the reforms of the financial sector; the privatization of the management of the airport authority (ADM); the appointment of new adjudicators at the commercial courts, including representatives of the banking and insurance sectors; and the preparation of a financing plan for education. Finally, although most quantitative performance criteria and benchmarks through end-March 2000 were met, the performance criterion and benchmark on net bank credit to the government for end-September and end-December 1999, respectively, were not observed.

10. Fiscal performance in 1999 was affected by the negative revenue impact of the more difficult economic environment. With budgetary expenditure close to program, the basic budgetary surplus of 1¼ percent of GDP in 1998 virtually disappeared in 1999 (Table 5).1 The overall budget deficit (commitment basis and excluding grants) increased by ¾ of 1 percentage point to 9 percent of GDP, as compared to slightly above 7½ percent under the program.2 Including grants, the fiscal deficit widened from 2½ percent of GDP in 1998 to 3¾ percent in 1999.

Table 5.

Mali Central Government Consolidated Financial Operations, 1997-2002

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Sources: Malian authorities; and staff estimates and projections.

Scheduled After debt cancellation obtained through 1997. From 2000 onwards reflects Russian debt service on the basis of the 1996 Paris Club stoct-of-debt operation.

Includes estimates for interest due on disbursements after December 1999.

PESAP, Public Enterprise Sector Adjustment Program.

Spending by the Ministry of Defense.

Defined as total revenue minus total expenditure and net lending, excluding interest payments and foreign-financed capital expenditure.

Defined as total revenue minus total expenditure and net lending, excluding foreign-financed capital expenditure.

11. Budgetary revenue in 1999 was ¾ of 1 percent of GDP below target, owing to lower tax receipts from the cotton company, somewhat higher-than-foreseen revenue losses related to the introduction of the common external tariff (CET) by member countries of the West African Economic and Monetary Union (WAEMU), and the lower economic growth. In terms of nominal GDP, total government revenue rose, nevertheless, from 16½ percent in 1998 to 17 percent in 1999 (Table 6). Total government expenditure and net lending in 1999 was kept close to program but increased in relation to GDP from 24¾ percent in 1998 to 26 percent in 1999. Current expenditure was slightly below program, with continued restraint in wage policy and lower-than-anticipated interest payments. The government granted a 7 percent rise in civil service base salaries, effective as of September 1, 1999, which was consistent with the wage bill ceilings programmed for 1999 and 2000. The share of the health and education sectors in current government spending remained at about 28 percent in 1999. Public investment outlays were slightly above program, owing to higher domestically financed capital expenditures. Verified domestic payments arrears were eliminated as planned, and all domestic and foreign debt-service obligations were met on time, but there was a temporary increase in the budgetary float (payments orders issued during the last months of the year that were not executed by year’s end). Finally, despite higher-man-programmed external budgetary assistance and privatization receipts from the sale of a hotel, net bank credit to the government exceeded the program ceiling at end-December by CFAF 5.2 billion (⅓ of 1 percent of GDP).

Table 6.

Mali: Central Government Revenue, 1997-2002

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Sources: Malian authorities; and staff estimates and projections.

12. Important reforms in the fiscal area were implemented in 1999. In the context of implementing the CET, Mali introduced the WAEMU system of imports classification in four categories as of January 1, 1999.3 The customs service fee (CPS) of 5 percent on nonpetroleum imports was eliminated on April 1, 1999. On mtracommunity trade, the tariff reduction for approved industrial products of WAEMU origin was raised on January 1, 1999 to 80 percent of the rates applicable to third countries, and these customs duties were eliminated as of January 2000. As a result of these reforms, the weighted-average import tariff rate, including the CPS and statistical tax, was reduced from 13½ percent at the beginning of 1998 to 12 percent as of 2000.4 The customs revenue loss related to the introduction of the CET is estimated at close to 1 percent of GDP in 1999 and almost ½ of 1 percent of GDP in 2000.

13. To modernize the direct and indirect tax system, and compensate for the revenue losses resulting from the introduction of the GET, the government put in place a comprehensive domestic tax reform, beginning on April 1, 1999 (EBS/99/129; 7/16/99; Box 3). This reform was centered on the introduction of a single-rate value-added tax (VAT) of 18 percent and a limitation of VAT-exempted commodities to medical supplies, educational materials, and agricultural inputs. In addition, efforts continued to improve revenue collection. At the tax department, the VAT administration was strengthened; the large enterprise division (DGE) was fully computerized; and, as of January 2000, tax collection of 412 large enterprises was taken over from the treasury. To assist the authorities in their efforts, a Fund tax expert was stationed at the tax department from July 1999. At customs, the new customs code, which simplifies procedures and establishes better controls and safeguards against fraud, was adopted in February 2000. Taxpayer compliance has been further enhanced by extending the registration system based on a single tax identification number from 46 thousand taxpayers in 1998 to 73 thousand taxpayers in 1999.

14. Mali’s monetary policy is conducted at the regional level by the Central Bank of West African States (BCEAO). Money demand further weakened in 1999, with broad money growing by only 1⅓ percent (Tables 7 and 8).5 Reflecting fiscal performance, the net creditor position of the government was reduced somewhat in 1999, while credit to the economy rose by 14½ percent. This latter development was partly related to the financial difficulties in the cotton sector, which resulted in delays in the repayment of 1999/2000 crop credits. Excluding these exceptional loans, credit to the private sector rose by some 8½ percent. As a result of these developments and the weakening of the external position, the net foreign assets of the banking system fell by more than 10 percent in terms of beginning-of-period money stock, and Mali’s contribution to the foreign reserves account of the BCEAO declined.

15. The soundness of the commercial banking system has improved in recent years, and most banks showed a profit in 1999. However, their situation remains fragile, and a number of them failed to comply with some of the Regional Banking Commission’s prudential regulations. Nonperforming loans amounted on average to 25 percent of bank credit to the economy at end-1999; net of provisions, this ratio was 9¾ percent, a relatively low level by regional standards. The call for bids for the Banque Malienne de Crédits et Dépôts (BMCD) was issued in September, as planned, and the Banque Internationale pour le Mali (BIM-SA) was placed under receivership upon failure of its prospective private partner to fulfill key financial conditions.

16. Regarding other structural reforms, little progress was made in implementing key measures under the program until early 2000. In the cotton sector, a new performance contract was signed by the government, the CMDT, and producers in October 1999. This contract was only in partial conformity with the performance criterion for end-November, as it did not include all the elements of the action plan for the sector, nor take account of the higher production costs of the CMDT. The 1999/2000 deficit of the CMDT is estimated at CFAF 32½ billion (2 percent of GDP), of which 40 percent can be attributed to the drop in cotton fiber export prices from the 1998/99-crop year and the remainder to the higher-than-foreseen costs of the CMDT. The cost-reducing measures to cover this deficit included a lowering of the announced producer floor price from CFAF 160 per kilogram to CFAF 150 per kilogram (50 percent of the sales revenue of the CMDT), and would yield a combined cost savings of some CFAF 22 billion.6 The remainder of the deficit would be covered by a one-year loan from the Cotton Sector Stabilization Fund.

17. Concerning the telecommunications sector, the government adopted in April 2000 a legal and regulatory framework to open the sector to competition, as originally programmed for September 1999. However, the granting of cellular telephony licenses to private operators, a performance criterion for end-November 1999, was postponed to later in 2000. In the meantime, the authorities have frozen the operations of a mixed public/private subsidiary (MALITEL-SA) of the national telecommunications company (SOTELMA), which was poised to take a privileged position in the cellular telephony subsector after bypassing the agreed transparent and competitive bidding process for operating licenses. As regards the remainder of the public enterprise sector, the number of nonbank enterprises in the government’s portfolio was reduced from 31 at end-1998 to 24 at end-1999, including through the sale of the Hôtel de l’Amité (Table 13). In addition, the tobacco company (SONATAM) was partly privatized in March 2000. However, the call for bids to privatize the EDM, the management of the ADM, and a pharmaceutical factory (UMPP) were postponed, and there were further delays in the transfer of the operation of the international Bamako-Dakar railway line to a majority privately owned company (SETI).

Table 7.

Mali: Monetary Survey, 1997-2002

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Sources: BCEAO and Fund staff estimates and projections.

Including transactions and reclassifications resulting from the restructuring of the Banque de Developpement du Mali and reclassifications of deposits resulting from other banks audits.

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

Including nonstatutory advance to the treasury resulting from the consolidation of the former Central Bank of Mali for CFAF 41.8 billion, and interest thereon.

Percentage growth from end of previous period.

Table 8.

Mali: Summary Accounts of the Central Bank and Commercial Banks, 1997-2002

(In billion of CFA francs, end of period)

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Sources: BCEAO, and Fund staff estimates and projections.

Reflects revision of the monetary accounts made by the BCEAO, which excludes revaluation of the operations account, following the 1994 devaluation of the CFA franc.

Table 9.

Mali: Balance of Payments (CFA francs), 1997-2002

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Table 10.

Mali: Balance of Payments, 1997-20021

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Sources: Malian authorities; and staff estimates and projections.

Data may not add up because of rounding.

Reflects past agreements on debt rescheduling and moratoriums, including with (lit People’s Republic of China, Arab bilateral funds. Cole d’lvoire, and debt under negotiation.

Based on assistance of US$ 118 million in NPV terms committed at the decision point under the original framework with delivery of assistance after the completion point expected in September 2000. The original amount programmed for 2000 was based on higher debt projections and thus relief required, with a completion point envisaged at and-1999.

In percent of eicpatts of goods and nonfactor services.

Gross international reserves are the sum of the nouonal Mali allocation of the BCEAO grass international reserves and the grass international reserves of commercial banks.

Goods and nontactor services.

Table 11.

Mali: External Financing Requirements and Resources, 1997-20021

(In billions of CFA francs, unless otherwise indicated)

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Sources: Malian authorities; and estimates and projections of the Fund and World Bank staffs.

Data may not add up due to rounding.

After debt forgiveness.

Excluding the change in the net position vis-a-vis the Fund.

Including revaluation adjustment and errors and omissions.

Includes both existing and expected new commitments.

HIPC assistance of US$ 128 million in NPV terms committed at the decision point under the original framework with delivery of assistanceafter the completion point expected in September 2000. The original amount programmed for 2000 was based on higher debt projections and thus relief required, with a completion point envisaged at and-1999.

Russian Federation and China.

Table 12.

Mali. Indicators of Fund Credit and Debt Servicing, 1999-2013

(In percent, unless otherwise indicated)

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Sources: IMF, Treasurer’s Department; Malian authorities; and Fund staff estimates and projections.

Outstanding Fund credit includes loans and outstanding purchases under the Structural Adjustment Facility (SAF), the Enhanced Structural Adjustment Facility (ES AFX and the Poverty Reduction and Growth Facility (PRGF).

Financing needs are defined as the sum of the current account deficit, including grants, amortization due, repurchases and repayments of SAF and ESAF to the Fund, targeted accumulations of reserves, and the reduction of external arrears if any.

Debt service, before debt relief, moratoria, and potential HIPC Initiative assistance (estimated for the period 2000-02), and including SDR charges, as a percentage of exports of goods and nonfactor services.

Debt service, after debt relief, moratoria, and potential HIPC Initiative assistance (estimated for the period 2000-02), and including SDR charges, as a percentage of exports of goods and nonfactor services.

Table 13.

Mali : Restructuring of the Public Enterprise Sector, 1999-20021

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Source: Matian authorities.

Of the six banks in the government portfolio, the following are schedided to be fully privatized by 2004: BMCD, BDM-SA, BCS-SA, and BIM-SA The government will keep minority shareholdings in agricultural bank (BNDA) and the housing bank (BHM) and the financing institution for small and medium-sized enterprises (CI)

III. Policy Discussions

18. In light of the less favorable external economic environment and slippages in program implementation during 1999 and early 2000, as: well as the need to meet the requirements for reaching the. completion point under the original HIPC Initiative and the decision point under the enhanced framework, the discussions with the Malian authorities focused on (i) the effective implementation of all the measures envisaged under the PRGF-supported program; (ii) the fiscal stance for 2000; and (iii) the interim PRSP that the authorities were preparing. The government emphasized its commitment to implement Mali’s economic program in full, as well as its determination to make up for the delays that had been incurred. To this end, the new Prime Minister has assumed the chairmanship of an interministerial committee that will ensure the necessary policy coordination and the timely undertaking of the programmed actions.

19. The main macroeconomic projections and objectives for 2000-02 have been revised on the basis of the most recent available information and the latest projections of the World Economic Outlook (Box 1). For 2000, another record food crop is being produced, but real GDP growth is projected to slow to about 4½ percent, owing to a 11 percent decline in seed cotton production, to about 460,000 metric tons, and a more moderate expansion in gold mining. Nonagricultural real GDP growth would remain at close to 3 percent in 2000. Despite higher petroleum retail prices, inflation, as measured by the harmonized CPI for Bamako, is expected to remain below 3 percent during 2000. The external current account deficit (excluding official transfers of 5⅓ percent of GDP) is projected to widen to some l4½ percent of GDP in 2000, owing to smaller cotton fiber shipments and a further deterioration in the external terms of trade of almost 9 percent, largely due to higher petroleum import prices. After taking into account commitments of foreign assistance and a net inflow of private capital, partly related to the ongoing privatization program, the overall balance of payments deficit in 2000 is projected to increase to a level equivalent to 4½ percent of GDP.

A. Financial Policies

20. The authorities intend to adhere to a fiscal policy stance that will allow a gradual return to the original program objectives, by the end of the three-year PRGF arrangement, by increasing tax revenue collections and tightly controlling spending. The basic budgetary surplus in 2000 is targeted to be increased by ½ of 1 percentage point to slightly above ½ of 1 percent of GDP, lower than initially envisaged. In view of the preparation for the Coupe d’Afrique des Nations (CAN), which Mali will host in early 2002, and the start of the construction of an administrative center in Bamako, foreign-financed public investment in 2000 would be 1 percent of GDP higher than in 1999. As a result, the overall budget deficit (commitment basis and excluding grants) would remain at 9 percent of GDP in 2000; including grants, the deficit would increase to 4¾ percent of GDP.

21. The authorities have already taken measures to improve government revenue performance and aim at maintaining tax revenue at 14¾ percent of GDP in 2000. The potential revenue losses related to the expected drop in tax receipts from the CMDT and an unchanged policy to stabilize petroleum retail prices were estimated to amount to almost 1½ percent of GDP. To offset this shortfall, the government increased retail petroleum prices by 12-18 percent as of end-March 2000 (with a revenue impact of some ½ of 1 percent of GDP). Further efforts will be undertaken to broaden the tax base and improve the efficiency of collection agencies; for which a Fund resident expert is stationed at the tax department (see also Appendix I, paragraph 15). The government is also determined to ensure that the 1999 domestic tax reforms and the CET are implemented effectively. On this basis, total government revenue in 2000 would remain at a level equivalent to 17 percent of GDP. Finally, the government intends to adopt by end-October a new taxation system for petroleum products that will set retail prices compatible with international prices and automatically adjust them to import price fluctuations, while safeguarding budgetary revenue. This new system would be applied in 2001, in line with the envisaged harmonization of petroleum taxation at the level of the WAEMU.

22. The authorities are also determined to maintain total expenditure and net lending at a level equivalent to 26 percent of GDP in 2000 – some 2.9 percent of GDP higher than initially foreseen because of the higher public investment outlays. They have also decided to reduce nonpriority outlays in 2000 by some ½ of 1 percent of GDP, and current spending will be kept below the initial program level. The wage bill will be strictly contained at CFAF 73.1 billion (4¼ percent of GDP), despite an upward revision of the salary grid for civil servants without special status (about one-third of all government agents on the payroll) by 15 percent, as of May 1, 2000.7 There will be no further wage increases in 2000, and net recruitment will be limited to 2,000 contractual teachers, 350 health workers, and 200 agents in other sectors. The share of the health and education sectors in current government expenditures will be increased from 28 percent in 1999 to 32 percent in 2000, and social safety net outlays will be maintained at their initial program level. Furthermore, the authorities will ensure that the costs of the administrative decentralization is strictly controlled, and that the government’s legal defenses with regard to claims brought against it before the courts will be reinforced. Finally, the programming and monitoring of public investment will be strengthened, and the government will adopt before year’s end, in consultation with the World Bank, a new three-year public investment program for 2001-03 giving priority to agriculture, infrastructure, and human resources development.

23. The regional monetary policy pursued by the BCEAO will remain prudent and consistent with the exchange rate peg between the CFA franc and the euro. Mali will continue to support the efforts of the monetary authorities to strengthen the indirect instruments of monetary policy and the functioning of the interbank and money markets, including by reinforcing the flexible interest rate policy and by issuing treasury bills to replace the statutory advances. In this context, the BCEAO raised, as of June 19, 2000, its repurchase and discount rates by ¾ of 1 percentage point to 6 percent and 6½ percent, respectively.

24. Broad money growth in Mali is projected to increase to about 4 percent in 2000, remaining somewhat below that of nominal GDP. The government’s net creditor position vis-a-vis the banking system would fall by some CFAF 10 billion, but the authorities intend to continue to refrain from direct borrowing from the central bank. Credit to the economy could increase by some 17½ percent, while the net foreign assets of the banking system are projected to register a further decline of about 14½ percent in terms of beginning-of-period money stock.

25. The government is determined to strengthen financial intermediation and improve the health of the banking system, in order to better mobilize financial savings and ensure an efficient credit allocation. In June 2000, the authorities reached agreement with the World Bank on a project for financial sector reform, which focuses, inter alia, on improving the legal and judicial environment of the sector; reducing the level of nonperforming loans; and ensuring better compliance with the prudential regulations established by the Regional Banking Commission. Government interests in the banking sector will be fully divested by end-2004, except for minority shareholdings in the agricultural and housing banks (BNDA and BHM, respectively). As a first step, the government’s share in the capital of the BMCD and the BIM-SA will be reduced to no more than 20 percent by end-June 2001. The reform program also contains actions to put in place an institutional framework conducive to developing the microfinance subsector and to strengthening the insurance industry. Finally, an action plan to rehabilitate the financial situation of the CRM and the INPS will be adopted by end-October 2000, based on the outcomes of their financial audits, which started in June and early August, respectively.

B. Structural Policies and Governance

26. The government has indicated that it is fully aware of the need to pursue the planned structural reforms with greater vigor, and it has already made encouraging progress in resolving outstanding structural issues. With the World Bank taking the lead, the discussions focused on areas where slippages had occurred and for which revised timetables were agreed (Box 2). The key measures are the following:

  • In the cotton sector, the authorities have replaced the President of the CMDT and initiated an independent financial audit of the company, which is aimed at fully disclosing the CMDT’s financial situation, in order to improve financial management and transparency, as well as to identify and implement cost-cutting measures. The final report of the audit was completed by mid-July 2000. Furthermore, seven additional studies, including on the CMDT’s industrial and commercial activities and on its withdrawal from providing public services, are programmed to be completed by end-September 2000. This would allow a new performance contract to be signed in December, which would include all the elements of the 1999 action plan for the sector aimed at enhancing private sector participation and preparing it for open competition.

  • In the telecommunications sector, the authorities have officially announced on July 5, 2000, their decision to transform MALITEL-SA into a fully state-owned enterprise and to restart the liberalization of the sector on the basis of an open call for bids for cellular telephony licenses, to be launched by end-November 2000. The call for bids to privatize SOTELMA is now scheduled to take place by end-June 2001.

  • Concerning the reform of other public enterprises, the final call for bids for the privatization of at least 60 percent of the capital of the EDM was issued on August 11, 2000, and the call for bids for UMPP and the management of the ADM are now planned by year’s end. The SETI is expected to start operations by end-September 2000. Finally, the staff urged the authorities to execute their public enterprise reform program in an open and transparent manner, in order to bolster its credibility for potential investors and obtain the envisaged beneficial outcomes for the Malian economy.

27. The authorities are also stepping up their efforts to promote good governance. In this context, they created in October 1999 an ad hoc commission to systematically follow up on the reports of the Inspector General’s office concerning irregularities in the use of public resources, including in public enterprises. The recommendations of this commission have led to ongoing measures to strengthen administrative procedures, including on procurement, and have also resulted in sanctions and referral of certain cases to the judicial authorities.8

C. Poverty Reduction and Human Resources Development

28. The higher economic growth since the devaluation of the CFA franc—with real GDP growth averaging 5 percent per year during 1995-99, compared with less than 1½ percent during 1990-94—was instrumental in reversing the upward trend of poverty in Mali, as described in the authorities’ interim PRSP (paragraph 1.2).9 However, poverty remains widespread, and Mali’s social indicators are among the weakest in the world (Table 14). Moreover, the modest progress recently made is tenuous because of the vulnerability of the Malian economy to exogenous shocks and its limited diversification. For example, the difficulties in the cotton sector in 1999/2000 resulted in a drop of almost 30 percent in gross nominal income of the cotton farmers. Also, in view of the salary increases granted to civil servants in 1999 and 2000, it is likely that the distribution of income became more unequal in 1999-2000. Therefore, the interim PRSP placed poverty reduction at the center of Mali’s development efforts by integrating the financial and structural policies needed for more robust economic growth with the National Strategy for the Fight against Poverty, and the ongoing programs aimed at the development of human resources.

Table 14.

Mali: Selected Social and Demographic Indicators

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Source: World Bank, 2000 World Development Indicators, CD-ROM.

29. The efforts of the government regarding the development of human resources aim at improving the availability and quality of education, and at increasing access to quality health services.10 To achieve these goals, the government has Updated the ten-year development program for education (PRODEC) and adopted, in consultation with the World Bank, the financing plan for the sector in June 2000. In addition, the authorities are determined to accelerate the implementation of the ten-year social and health development strategy (PRODESS) and of the investment program in the health sector covering the period 1997-2002. Financial assistance provided under the original HIPC Initiative and the prospective interim assistance under the enhanced framework will be fully used to cover the additional outlays under these programs.

D. Medium-Term Balance of Payments Outlook and Debt Sustainability

30. The medium-term balance of payments projections presented in EBS/99/129 (7/16/99) were updated to take account of the more difficult external and domestic economic setting (Tables 9, 10, and 11).11 Export volumes, notably of cotton fiber, are expected to decline in 2000 before picking up strongly again in 2001-02. In 2001, two new gold mines are expected to start operation and, beginning with the 2001/02 crop year, cotton fiber shipments are projected to increase again. Import volume growth is projected to average close to 3 percent a year over the 2000-02 period, with imports of intermediate and capital goods growing more rapidly than imports of consumer goods, partly related to public investments and the preparation for the CAN 2002. In view of the good cereal harvests in 1999 and 2000, and assuming normal weather conditions in 2001-02, imports of foodstuffs are projected to increase only slowly. Following a further deterioration of the terms of trade of almost 9 percent in 2000, these are expected to improve during 2001-02, reflecting the projected further recovery of world cotton prices and a gradual decline in petroleum prices. As a result of these developments, the external current account deficit (excluding official transfers) is projected to narrow from 14½ percent of GDP in 2000 to about 8½ percent by 2002; including official transfers, the deficit would fall from 9¼ percent of GDP in 2000 to 3½ percent by 2002.

31. Mali’s trade regime is relatively open, as it remains rated as 2 on the 10-point Fund scale of trade restrictiveness, and the authorities indicated that they would continue to limit the application of safeguard and protection mechanisms. They also reiterated that Mali intended to keep its exchange system free of restrictions on payments and transfers for current international transactions.

32. Over the medium term, Mali will need to continue to rely on concessional external assistance to finance public investment projects. Taking into account the projected disbursements of project aid, private capital inflows, and Fund assistance under the PRGF arrangement, the remaining financing requirements for 2000 total CFAF 22¼ billion. These are expected to be fully covered by assistance from the European Union, the World Bank, and Mali’s bilateral partners, as well as by debt relief under the original HIPC Initiative.

33. Given Mali’s eligibility under the HIPC Initiative, an update of the debt sustainability analysis was undertaken by Fund and World Bank staff, in collaboration with the authorities.12 This analysis was based on end-1999 external public debt data for assessing assistance at the completion point under the original HIPC Initiative, and on end-1998 debt data in the context of the enhanced framework. After taking account of the expected assistance under the original HIPC Initiative, the debt-service ratio is projected to decrease from 15 percent in 2000 to 12¾ percent in 2002. Including prospective assistance under the enhanced HIPC Initiative, the debt-service ratio would drop to 8¼ percent in 2002. Under the updated scenario, payments to the Fund are projected to peak at 3¾ percent of exports of goods and nonfactor services in 2002 (Table 12). Given Mali’s excellent record in meeting its debt-service obligations to the Fund, the country is expected to meet its future obligations to the Fund in a timely manner.

IV. Staff Appraisal

34. Since the devaluation of the CFA franc in early 1994, Mali has made sustained overall progress in reducing macroeconomic imbalances, improving the competitiveness of the economy, and alleviating economic distortions. Relatively high economic growth has been accompanied by an encouraging beginning in poverty reduction. However, poverty remains widespread and much remains to be done to address deep-seated rigidities in the economy, reduce the country’s vulnerability to exogenous shocks, and develop Mali’s human resources. The insufficient progress in resolving key structural issues was compounded in 1999/2000 by the sharp deterioration in the external terms of trade, leading to the crises in the cotton and electricity sectors, and a worsening of economic performance. The public finance situation was also adversely affected, but the planned fiscal reforms for 1999/2000 were put in place, while the authorities succeeded in eliminating the outstanding stock of verified domestic payments arrears and continued to refrain from recourse to direct central bank financing.

35. In view of the fragile economic situation and the urgent need to push firmly ahead with Mali’s economic reform program, it is encouraging that the government. has shown renewed determination to continue Mali’s economic and structural reforms, and improve its social indicators. In the period ahead, the authorities should concentrate their efforts on the following key areas.

36. It is essential that the government consolidate further the fiscal situation. To this end, it is important that the authorities continue their efforts to modernize the tax and customs administrations and broaden the tax base, and that petroleum taxes be automatically based on import prices. At the same time, the authorities should continue to adhere to their prudent spending policy, while increasing expenditures on human resources development, the judiciary, and basic infrastructure. The staff welcomes the decision to increase petroleum retail prices in March 2000, the paring down of nonpriority spending, and the steps the authorities are taking to strengthen good governance in the management of public resources.

37. It is important that, after lengthy preparations, the authorities implement promptly the financial sector reform program. The staff supports the approach taken with regard to the two problem banks (BIM-SA and the BMCD) and welcomes the decision of the government to fully privatize four commercial banks by end-2004. Given the structural deficits of the CRM and the precarious financial situation of the INPS, it is also crucial to push ahead with preparation of an action plan to rehabilitate these institutions, based on the outcomes of the ongoing financial audits.

38. The experience during 1999-2000 has demonstrated that postponing key structural reforms can entail significant costs for the economy. Therefore, it is of the highest importance that the government firmly adhere to its renewed resolve to carry out the envisaged reforms in the cotton sector - which are needed to ensure its profitable expansion, while improving the income of producers and reducing rural poverty - as well as the ongoing liberalization and privatization activities in the energy, telecommunications, and transport sectors in an effective and transparent manner. It is also important for the government to improve the functioning of the judiciary and streamline the regulatory framework, so as to create a more hospitable environment for investors and private enterprise.

39. The staff welcomes the authorities’ intention of preparing a full PRSP by mid-2001, in consultation with civil society and Mali’s development partners. In this context, targeting and monitoring mechanisms will need to be put in place to ensure that the additional assistance envisaged under the enhanced HIPC Initiative will effectively help reaching Mali’s social objectives, including in the health and education sectors.

40. The Malian authorities have demonstrated their commitment to the PRGF-supported program by taking the following prior actions: (i) the completion of the financial audit of the CMDT; (ii) the issuance of the final call for bids to privatize at least 60 percent of the capital of the EDM; (iii) the official announcement of the new reform program for the telecommimications sector; and (iv) the start of the financial audits of the CRM and INPS.

41. The risks to the program pertain notably to a further deterioration of the external terms of trade, changing weather conditions, worsening instability in the region and political uncertainties in neighboring countries, as well as internal social pressures from a number of interest groups, including organized labor and students. The government should therefore endeavor to gain broad-based support for its economic policies, while standing ready to take any additional measures that may be required and firmly resisting excessive demands from pressure groups. Timely availability of external financial assistance, including under the HIPC Initiative, is also key for the success of the program.

42. In view of the renewed commitment of the Malian authorities to the success of their economic program and the corrective actions already taken, the staff supports the authorities’ request for waivers for the nonobservance of one quantitative performance criterion and three structural performance criteria, and recommends that the first review under the PRGF arrangement be completed.

43. It is also proposed that the next Article IV consultation with Mali be held on the standard 12-month cycle.

V. Proposed Decision

The following draft decision is proposed for adoption by the Executive Board:

Mali: First Review Under the PRGF Arrangement

1. Mali has consulted with the Fund in accordance with paragraph 2(e) of the three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) for Mali (EBS/99/129, Supplement 1; 8/16/99), and paragraph 7 of the letter of July 12, 1999, from the Minister of Finance of Mali.

2. The letter with annexed memorandum of the Minister of Finance and Economy of Mali dated August 11, 2000, shall be attached to the PRGF arrangement for Mali, and the letter with annexed memorandum of July 12, 1999, shall be read as supplemented by the letter dated August 11, 2000.

3. Accordingly, the three-year PRGF arrangement for Mali is hereby amended as follows:

  • (a) the following shall be added to paragraph 1(c): “(iii) the third disbursement, in an amount equivalent to SDR 6.75 million, will be available after December 31, 2000, at the request of Mali and subject to paragraph 2 below.”

  • (b) paragraph 2 is amended to read as follows: “2. Mali will not request the disbursement specified in paragraph l(c)(ii) or l(c)(iii) above: (a) If the Managing Director of the Trustee finds that the data at September 30, 1999 or September 30, 2000, respectively indicate that:”

  • (c) the quantitative performance criteria for September 30, 2000 provided for in paragraph 2(a) shall be as set forth in Table 3 to the memorandum attached to the letter dated August 11, 2000, and

  • (d) the following shall be added after paragraph 2(b):

    • “(bb) with respect to the disbursement specified in paragraph l(c)(iii), if the Managing Director of the Trustee finds that, by October 31, 2000, Mali has not carried out its intentions regarding:

      • (i) adoption of a new taxation system of petroleum products that reflects changes in import prices automatically in retail sales prices, or

      • (ii) adoption of an action plan to rehabilitate the financial situation of the CRM and the INPS, based on the conclusion and recommendations of specified audits,

    • as specified in Table 4 of the memorandum attached to the letter dated August 11, 2000.”

    • (e) paragraph 2(c) is amended to delete the words “prior to the completion of the midterm review.”

    • (f) paragraph 2(e) is amended to read: “until the Trustee has determined that the respective reviews of Mali’s program referred to in paragraph 7 of the letter dated July 12, 1999 and paragraph 36 of the memorandum attached thereto, and in paragraph 7 of the letter dated August 11,2000.”

4. The Fund decides that the review contemplated in paragraph 2(e) of the three-year PRGF arrangement for Mali is completed and that Mali may request the second disbursement under that arrangement notwithstanding the nonobservance of the performance criterion relating to the ceiling on national bank credit set forth in paragraph 2(a)(i) and the structural performance criteria set forth in paragraphs 2(b)(i), 2(b)(ii) and 2(b)(iii) of the arrangement, on the condition that (i) the information provided by Mali on the implementation of the measures specified in Table 4 to the memorandum attached to the letter dated August 11, 2000 is accurate, and (ii) with respect to the disbursement subject to the performance criteria specified above, the information provided by Mali on performance under these criteria is accurate.

Mali: Revised Macroeconomic Framework for 2000-02

The macroeconomic objectives of the medium-term economic program have been revised in light of the deterioration in the external terms of trade of almost 19 percent during 1999-2000; the serious difficulties in the cotton and electricity sectors; and the delays in implementing the structural reform program.

The revised program seeks to increase gross domestic investment from 21 percent of GDP in 1999 to at least 21½ percent beginning in 2001. Nongovernment investment is projected to rise from 11¾ percent of GDP in 1999 to almost 13 percent by 2002, reflecting improvements in the business climate, new investments in the gold mining sector, and the completion of the privatization program. Gross domestic savings would need to increase from 10 percent of GDP in 1999 to 12½ percent by 2002, partly through higher government savings. Nongovernment savings are projected to rebound from a low level of 2¾ percent of GDP in 2000 to some 8½ percent by 2002, largely reflecting the expected return to profitability of the cotton sector, higher gold mining profits, and improvements in financial intermediation.

The main macroeconomic objectives are the following:

  • after a projected real GDP growth of 4½ percent in 2000, to achieve growth rates averaging at least 5 percent per year from 2001;

  • to limit annual inflation to 2½ percent from 2001; and

  • to reduce the external current account deficit (excluding official transfers) from 14½ percent of GDP in 2000 to 8½ percent by 2002.

The annual growth rate of real GDP from 2001 onward is projected at some 5 percent, based on a labor force growth rate of 3 percent and an assumed growth rate of labor productivity of close to 2 percent. The staff concurs with the view of the Malian authorities that the prompt and efficient implementation of all the planned structural reforms would allow Mali to achieve an average real GDP growth rate of at least 6 percent per year.

Mali: Key Macroeconomic Indicators, 1999-2002

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Sources: Malian authorities; and staff estimates and projections.

Mali: Summary of Structural Reforms, June 2000-02

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APPENDIX I

Bamako, August 11, 2000

Mr. Horst Köhler

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Mr. Köhler:

1. The Executive Board of the International Monetary Fund approved on August 6,1999 a third three-year arrangement for Mali under the Enhanced Structural Adjustment Facility (ESAF).13 This arrangement was in support of Mali’s economic and financial adjustment program for the period April 1,1999-March 31, 2002. In accordance with this arrangement, the government of Mali has conducted with a Fund mission a review of the program covering the period April 1, 1999-March 31, 2000. The review covered the progress made in implementing the program during the last nine months of 1999 and the first quarter of 2000, as well as the outlook and economic and financial measures to be implemented by end-2000. The government of Mali remains determined to implement the policies and measures described in the medium-term policy framework paper (1999-2002), as well as in the memorandum attached to this letter, which supplements the memorandum of July 12, 1999.

2. In order to create the conditions for strong, durable, and more equitable economic growth, the government of Mali is committed to preparing and implementing, for the period April 1,2000-December 31,2002, the policies and measures defined in the interim poverty reduction strategy paper (PRSP), sent to you under separate cover. The government has also prepared the memorandum attached herewith, setting forth its economic and financial objectives and policies for the period from April 2000 to end-2000.

3. The government remains committed to widely disseminating its memorandum on economic and financial policies for 2000 and authorizes the IMF to publish it also, including on its website.

4. All the quantitative performance criteria and benchmarks set for end-September 1999, end-December 1999, and end-March 2000 were observed, except for the criterion and benchmark related to net bank credit to the government for end-September 1999 and end-December 1999, respectively. There have also been delays in implementing the structural reforms. In particular, the performance criteria for end-November 1999 concerning the signing of a new government-CMDT-producers performance contract, including the elements of the action plan based on the technical audit of the sector; the call for bids for opening up the capital of the national electricity and water company (EDM); and the opening up of the telecommunications sector to competition by granting at least one cellular telephony operating license to private operators, as well as the structural performance criterion for end-March 2000 on the completion of audits of the Malian Retirement Fund (CRM) and the National Social Security Agency (INPS), were not observed.

5. We have reached understandings on the economic and financial measures to be implemented in order to ensure achievement of the economic objectives of the program for the remainder of 2000, as set forth in the attached memorandum. Based on these indications, we request that the appropriate waivers be granted in the context of the completion of the review.

6. The government will provide the Fund with any information it may request on progress made in implementing its economic and financial policies and in achieving the program objectives. Accordingly, it will regularly submit data on the operations of key public enterprises.

7. The government of Mali believes that the policies and measures set forth in the attached memorandum will enable it to achieve its program objectives. Moreover, it will take any additional measures that may prove necessary to this end. The government of Mali will, of its own accord or at your request, engage in consultations on the adoption of any further measures that may be deemed appropriate. Mali and the International Monetary Fund will also conduct a review of the country’s economic program, which is to be completed no later than December 31, 2000.

Sincerely yours,

/s/

Bacari Koné

Minister of Economy and Finance

Chevalier de l’Ordre National

Attachment: Memorandum on Economic and Financial Policies for 2000

MALI: Memorandum on Economic and Financial Policies for 2000

August 11, 2000

I. Introduction

1. The 1999/2000 economic and financial program was prepared within the framework of the medium-term adjustment strategy described in the policy framework paper (PFP) for 1999-2002. This strategy aims at ensuring sustainable economic growth, reducing poverty, and achieving domestic and external financial viability in the medium term through the implementation of rigorous fiscal policies, as well as the deepening of structural and social reforms. The program envisaged a real GDP growth rate of about 6½ percent in 1999 and 5 percent in 2000; maintenance of the average inflation rate below 2½ percent; and a reduction in the external current account deficit (excluding official transfers) from 9½ percent of GDP in 1998 to 8½ percent in 2000. The program also aimed at raising the investment ratio from 21 percent of GDP in 1998 to 22 percent in 2000, and at increasing the domestic savings rate from 10⅓ percent of GDP in 1998 to 12¾ percent in 2000.

II. Recent Economic Developments

2. In 1999, the economic and financial situation was marked by a significant deterioration in the terms of trade and serious difficulties in the key cotton and electricity sectors. The terms of trade deteriorated by 11 percent in 1999, as compared to 1998, notably reflecting a 19 percent drop in cotton fiber export prices and a 27 percent increase in the import prices of petroleum products. In the cotton sector, weak financial management and overinvestment resulted in a marked increase in the production costs of the Compagnie Malienne pour le Développement des Textiles (CMDT), as compared to the level projected on the basis of the technical audit completed at end-1998. These slippages were reported only in the last quarter of 1999 and contributed to a large consolidated cotton sector deficit of about CFAF 32½ billion (equivalent to 2 percent of GDP) for the 1999/2000 crop year. Measures have been taken to reduce this deficit, notably a lowering of the announced floor price of seed cotton from CFAF 160 per kilogram to CFAF 150 per kilogram; the implementation of a set of measures to reduce the CMDT’s costs by about CFAF 10 billion; the suspension of the value-added tax (VAT) exemption for cotton fiber; and an increase in the sale price of cotton seeds to the oil and soap company (HUICOMA) from CFAF 11 per kilogram to CFAF 20 per kilogram. The remainder of the consolidated deficit was covered by a CFAF 15.1 billion loan from the Cotton Sector Stabilization Fund. In the electricity sector, serious managerial shortcomings and delays in implementing the rehabilitation plan for the sector resulted in power cuts that had a severe impact on economic activity.

3. Real GDP growth in 1999, while higher than in 1998, remained below expectations at an estimated rate of 5½ percent, against 6½ percent under the program. Improved weather conditions resulted in a large increase in cereal production of 20 percent, while seed cotton production stabilized at around 520,000 metric tons. Growth was moderate in the secondary sector, mainly reflecting the effects of the power cuts on industrial activities. Gold output increased from 22.8 metric tons in 1998 to 25.3 metric tons in 1999. The harmonized consumer price index for Bamako fell by about 1 percent during 1999, largely because of the good harvest of food crops. In the external sector, despite an increase in the export volume of cotton fiber and gold, and a moderate increase in that of imports, the external current account deficit (excluding official transfers) rose to 10½ percent of GDP, 2 percentage points higher than foreseen.

4. Program implementation in 1999 was mixed, notably with regard to the structural reforms (Tables 1 and 2). The quantitative performance criteria and benchmarks, as well as most of the indicative financial targets established for September and December 1999 and March 2000, were observed, except for the criterion and benchmark on net bank credit to the government for end-September and end-December 1999, respectively. However, none of the structural performance criteria established for end-November 1999 and end-March 2000 were met, and only two of the seven structural benchmarks were observed. Regarding the structural performance criteria, a one-year performance contract for the cotton sector was signed on October 21, 1999 by the government, the CMDT, and the producers. However, additional measures are needed, as this performance contract does not include all the elements of the action plan for the cotton sector adopted by the government in July 1999, nor does it take account of the CMDT’s higher production costs. The call for bids to open up the capital of Éinergie du Mali (EDM) to the private sector and the opening up of the telecommunications sector to competition by granting at least one cellular telephony operating license to private operators, both of which were programmed for end-November 1999, were postponed to 2000. Lastly, audits of the Caisse de Retraite du Mali (CRM) and the Institut National pour la Prevoyance Sociale (INPS) were not completed at end-March 2000, as planned.

5. Regarding the structural benchmarks, a steering committee with private sector participation was established on September 8, 1999, with the goal of simplifying administrative procedures and reducing the time required for setting up new enterprises. In addition, the call for bids to open up 49.98 percent of the capital of the Banque Malienne de Credits et de Dépôts (BMCD) to the private sector was launched in September. In contrast, the restructuring of the Banque Internationale pour le Mali (BIM-SA), planned for August 1999, could not be completed. Instead, the government decided to place the bank under temporary receivership, in order to prepare its privatization. Implementation of the other measures established as structural benchmarks was also delayed. These refer to the adoption of an action plan for financial sector reform; the preparation of a financing plan to implement the ten-year development program for education (PRODEC); the launching of the call for bids for the privatization of the management of Aeroports du Mali (ADM); and the appointment of new associate judges at the commercial courts, including representatives from the banking and insurance sectors. To give Mali’s economic program a fresh boost, the government has taken the corrective measures described below on in this memorandum.

6. The government’s financial situation in 1999 was affected by the unfavorable economic environment, particularly as regards fiscal revenue. The overall fiscal deficit (commitment basis and excluding grants) increased to 9 percent of GDP, compared with the 7½ percent envisaged under the program. Budgetary revenue was CFAF 12 billion below target (¾ of 1 percentage point of GDP). This shortfall reflected a decline in tax receipts from the cotton sector and the larger-than-foreseen impact of the application of the new West African Economic and Monetary Union (WAEMU) imports classification system and the abolition of the customs service fee (CPS) following the introduction of the VAT at the single rate of 18 percent in April 1999.

7. Budgetary expenditure in 1999 remained slightly below the programmed level. Current expenditure was contained at CFAF 193 billion, compared with CFAF 1971/2 billion foreseen, essentially reflecting a lower wage bill and interest charges. The government granted a 7 percent increase in civil service base pay, effective September 1,1999, which is compatible with the programmed wage bill for 1999/2000. In fact, the 1999 wage bill remained below the program ceiling on account of delays in implementing special regulations for certain categories of civil servants, and in making certain promotion-related payments. Payments arising from the enforcement of court rulings against the government totaled CFAF 4.5 billion in 1999, and the amount outstanding at year’s end is estimated at about CFAF 14 billion. Overall investment expenditure was slightly above the level envisaged, with, however, a lower-than-expected execution rate for foreign-financed investment. Verified domestic payments arrears were eliminated as planned, and, despite the low level of repayments of on-lent loans, all public debt-service obligations were paid on time, including higher-than-expected amortization payments, notably because of payments made early in anticipation of the Year 2000 (Y2K) bug. In addition, CFAF 11.7 billion in payments orders issued in 1999 was paid in early 2000 during the supplementary period. External budgetary assistance slightly exceeded the programmed amount, and privatization receipts totaled CFAF 10½ billion. In 1999, advances to the CRM reached CFAF 5 billion, reflecting its structural deficit. In total, recourse to net bank credit amounted to CFAF 3.8 billion at end-1999.

8. Implementation of tax reforms in 1999 was satisfactory. Effective January 1, 1999, Mali instituted a system of imports classification in preparation for the entry into force in January 2000 of the common external tariff (CET) within the WAEMU.14 Regarding intracommunity trade, the tariff reduction for approved industrial products of WAEMU origin was raised in 1999 to 80 percent of the rates applicable to third countries, and these customs duties were eliminated in 2000. Customs revenue losses are estimated at 1 percent of GDP in 1999 and at about ½ of I percent of GDP in 2000. Other reforms pertained to the modernization of the direct and indirect taxation system, particularly through the introduction of a VAT at a single rate of 18 percent beginning on April 1, 1999 and a reduction in the number of VAT-exempt commodities. Furthermore, measures aimed at strengthening tax administration and improving collection were pursued with Fund technical assistance at the tax department. The large enterprise division was fully computerized, and tax collection from large enterprises was transferred from the treasury to the tax department in January 2000, while the extension of the new taxpayer registration system using a single fiscal number for each taxpayer continued. The new customs code, aimed at simplifying procedures and intensifying the fight against fraud, was adopted by the government in February 2000. Regarding expenditures, the payroll records were merged with the civil service roster on September 30, 1999, as scheduled.

9. The demand for money was weaker than expected in 1999, as reflected in broad money growth of 1⅓ percent, against 9 percent projected and 4⅓ percent in 1998. Net credit to the government was higher than programmed, and credit to the economy increased by 14½ percent, much more than projected and reflecting, in part, delays in the repayment of cotton sector crop credits in the wake of the CMDT’s financial difficulties. These developments resulted in a marked decrease in the net external assets of the banking system.

10. The health of Mali’s banking system has improved since 1995, and most of the banks showed profits in 1999. However, their situation remains precarious, especially in regard to certain banks’ compliance with the prudential ratios set by the WAMU Banking Commission and the level of gross nonperforming loans. At end-December 1999, these amounted to 25 percent of the banks’ portfolio of credit to the economy. Loan loss provisions amounted to 61 percent of the amount of nonperforming loans. In addition, the CMDT’s financial difficulties in 1999 further weakened the banks, and, for most of them, the claims on the CMDT exceeded actual equity capital. Conscious of the risks inherent in this situation, the government is committed to taking the necessary measures to financially rehabilitate the CMDT and to pursue the reform of the financial sector in a determined manner. Accordingly, the consultations with the World Bank on an action plan for the financial sector were concluded. This action plan is aimed at improving the sector’s legal and judicial environment, fully divesting the government’s interests in the commercial banks by end-2004, and determining the measures to be taken to resolve the problem of banks’ nonperforming loans and ensure compliance with prudential ratios.

11. Regarding the other structural reforms, progress was made in implementing the action plan to reform the public enterprise sector that was adopted in June 1999. The Hôtel de l’Amitié was sold in December 1999, and the Société Nationale des Tabacs et Allumettes du Mali (SONATAM) was partly privatized in March 2000 through the sale of 35 percent of its capital to a strategic partner; the government is determined to continue divesting itself fully from the capital of this company. In addition, the Société Malienne de Matériel de Travaux Publics (SLMTP) and the Office des Relais Touristiques (ORT) were put up for liquidation in 1999, and, in January 2000, the government adopted the draft law on the liquidation of the Société Nationale de Recherche et d’Exploitation Miniere (SONAREM). In contrast, the government’s adoption of the draft laws on the fundamental principles of privatization and the issuance of the call for bids for privatizing the management of Aéroports du Mali (ADM) and the Usine Malienne des Produits Pharmaceutiques (UMPP) did not take place at end-December 1999, as planned. Finally, there were also delays in establishing the Société d’Exploitation du Trafic International (SETI), a company with majority private shareholding that will operate international traffic on the Bamako-Dakar railroad.

III. Policies and Measures for Implementation in 2000

12. Given the unsatisfactory results achieved in 1999, the government has taken corrective measures to reinvigorate program implementation and ensure that the objectives for 2000 are met. Despite a sizable decline in cotton production in 1999/2000, real GDP is projected to grow by about 4½ percent, essentially because of the good grain harvest anticipated for 2000. Inflation, as measured by the harmonized consumer price index for Bamako, should remain below 3 percent on a year-on-year basis. In the external sector, the terms of trade are expected to further deteriorate, owing to the large rise in the import prices of petroleum products and the ongoing decline in cotton fiber export prices. While gold exports will rise slightly, cotton fiber shipments will be below their 1999 level. Import volumes should increase moderately, with a larger increase in construction materials related to the starting of major public investment projects. Thus, the external current account deficit (excluding official transfers) should widen further to 14½ percent of GDP in 2000, against 10½ percent in 1999. Taking into account the net capital inflows expected in 2000, the overall balance of payments deficit would amount to CFAF 77 billion, against the CFAF 1 billion initially projected.

13. In the public finance area, the government is determined to avoid a further deterioration of its financial situation. Specific measures have already been taken to limit revenue shortfalls and reduce nonpriority spending. On this basis, the program aims at increasing the basic budgetary surplus from 0.2 percent of GDP in 1999 to 0.6 percent in 2000. Taking into account a level of foreign-financed public investment that is 1 percent of GDP higher than in 1999, the overall budget deficit (commitment basis and excluding grants) will be maintained at a level equivalent to 9 percent of GDP in 2000.

14. Regarding budgetary revenue, projections without additional measures indicate a revenue shortfall on the order of 1½ percent of GDP, mainly due to the drop in taxes from the CMDT, implementation of the petroleum products’ taxation system in such a fashion as would result in stable retail prices, and lower economic growth than initially forecast. To limit the fall in revenue from petroleum products, the government decided in March 2000 to increase their retail prices by 12-18 percent. The government has also decided to reexamine its policy of taxing petroleum products, in the context of actions under way in the WAEMU. By end-October 2000, it will adopt a new system that will automatically reflect import price changes in retail prices. This system will be implemented in 2001.

15. The government is determined to ensure that the tax reforms undertaken in 1999 and the CET are implemented effectively, and to continue taking measures aimed, at improving the efficiency of the tax collection agencies, Application of the variable tax on imports (TCI) will be limited to wheat, flour, and sugar, and the administrative value tax to petroleum products. Other measures envisaged at customs include: continuing the staff reorganization and increasing its resources; implementing the new customs code once it has been approved by the National Assembly; and strictly limiting exemptions not based on international agreements. The tax administration will continue with the introduction of the single taxpayer identification number and the modernization of the large enterprise division. Based on these measures, total government revenue in 2000 should amount to CFAF 290 billion, equivalent to 17 percent of GDP.

16. On the expenditure side, the government has decided to reduce nonpriority spending, including on supplies, travel, and domestically financed public investment, by CFAF 10 billion as compared to the 2000 finance law levels. Following discussions with trade unions in 1999, the government has adopted a new salary scale for the 16,000 civil servants not covered by special regulations. This adjustment implies a 15 percent rise in the monthly wage and has been in effect since May 1, 2000. Nonetheless, the wage bill will be strictly limited to CFAF 73.1 billion (4¼ percent of GDP), within the ceiling envisaged under the initial program. Social sector spending will amount to 37 percent of current expenditure, including 9 percent and 23 percent for the health and education sectors, respectively. Social safety net expenditures will be maintained at their initial program level. Moreover, the government remains determined to monitor closely the costs related to the administrative decentralization and is committed to strictly limiting transfers to the municipalities to CFAF 1½ billion. In addition, in view of the disturbing trend in payments resulting from court rulings against the government in recent years, these obligations will be closely monitored, and the legal department will be strengthened.

17. Mali will host the African Nations Cup (CAN) in 2002, which is a major challenge. The authorities are committed to strictly limiting the annual budgetary contribution to CFAF 10 billion in 2000-02 (½ of 1 percent of GDP annually). A significant share of the financing of the public investments needed to organize this event will come from external partners in the form of grants and concessional loans. Moreover, in May 2000, the authorities contracted two concessional loans to finance the construction over the 2000-02 period of an administrative center, housing the Prime Minister’s office and 12 ministries. In total, externally financed public investment in 2000 is projected to be CFAF 17½ billion (1 percent of GDP) higher than in 1999. Thus, total expenditure and net lending would amount to CFAF 445½ billion; in terms of GDP, they would be kept at 26 percent.

18. The government also intends to adopt, by end-2000 and in consultation with the World Bank, a three-year public investment program (PIP) for the period 2001-03. Under this new PIP, priority would be given to the agricultural and infrastructure sectors and to human resources development. The authorities will also strengthen their monitoring of project execution in close collaboration with donors and creditors.

19. The monetary policy of the Central Bank of West African States (BCEAO) will continue to be prudent, in accordance with the objectives of the pegged exchange rate between the CFA franc and the euro, and consolidation of the union’s external position. Broad money should increase by about 4 percent in 2000, somewhat less than the growth of nominal GDP. Based on the expected fiscal outcomes, net credit to the government should reach CFAF 10.3 billion at end-December 2000, allowing for an adequate allocation of credit to the private sector. Credit to the economy could increase by some 17½ percent. The net foreign assets of the banking system are projected to show a decline of CFAF 53 billion, compared with end-1999.

20. In the financial sector, the government adopted in June 2000 the action plan for the reform of the sector, prepared in collaboration with the World Bank. This action plan contains specific measures to resolve the problem of nonperforming loans and induce the banks to comply with the WAMU Banking Commission’s prudential ratios. Regarding government withdrawal from the banking sector, it is envisaged that the government will reduce its participation in the capital of the BMCD and the BIM-SA to a maximum of 20 percent by end-June 2001. Because of the structural financial difficulties of the CRM and the financial fragility of the INPS, an action plan for their rehabilitation will be prepared by end-October 2000, based on the results of audits of both institutions, which began in June and early August 2000, respectively.

21. The government is determined to continue implementing structural reforms with greater vigor, in order to make up for the delays incurred in 1999. In the cotton sector, the government ordered an independent financial audit which was completed in July 2000. Based on the conclusions and recommendations of the financial audit, the authorities will prepare a set of measures aimed at strengthening the transparency and effectiveness of the CMDT’s financial management and markedly reducing its production costs. It is also expected that the seven studies identified in the action plan for the cotton sector, notably the industrial and commercial technical audit of the CMDT and the study on a strategy for withdrawal of the CMDT from providing public services, will be completed by end-September 2000. This will make it possible to sign a new performance contract for the cotton sector in December 2000, that will include all the elements of the sectoral action plan adopted in 1999, particularly with regard to increased participation by private operators and preparation of the sector for competition.

22. In the electricity sector, reforms are under way, and the final call for bids to privatize at least 60 percent of the EDM’s capital was launched in August 2000. Meanwhile, measures were taken to safeguard against a further deterioration in the company’s financial situation. Regarding the telecommunications sector, the government adopted, on April 12, 2000, a new legal and regulatory framework opening up the sector to competition. In addition, the government has frozen the activities of the company MALITEL-SA (a subsidiary of SOTELMA), which was to provide cellular telephony services with private sector participation and was created under conditions that were not consistent with the principles set forth in the policy statement on the telecommunications sector adopted in 1998. The government is determined to establish transparency and fair competition in the sector by transforming this company, MALITEL-SA, into a subsidiary whose capital will be held entirely by the government (SOTELMA), and to resume the process of opening up the sector by means of an international call for bids in order to grant at least one cellular telephony operating license to private operators by end-November 2000. Finally, the government intends to launch the call for bids to privatize SOTELMA by end-June 2001.

23. Regarding the action plan for the other public enterprises, the government will issue the call for bids to privatize UMPP and the management of the ADM by end-2000. Furthermore, the SETI is expected to begin operations by end-September 2000.

24. Work on the strategy to reform the civil service will be pursued vigorously and the action plan for implementing this strategy will be prepared by end-2000. Moreover, the merit-based promotion system will continue to be applied equitably and rigorously. Furthermore, the government adopted, in consultation with the World Bank, the financing plan for the education sector in June 2000.

25. Private sector activity is encouraged by the establishment of a credible, impartial, and transparent legal and judicial system. Aware of this, the government is determined to strengthen the inspection of legal services, computerize the clerks’ offices at commercial courts, and, by end-September 2000, appoint new associate judges in commercial courts, including representatives from the banking and insurance sectors. The government has also decided to improve the procedures for providing budgetary funds for road maintenance. It has further decided to create a Road Authority that will operate without resorting to earmarked budgetary resources. The modalities for private sector participation in the financing and management of this authority will be determined by end-2000.

26. The government will continue its policy of prudent external debt management and will have recourse only to grants or concessional loans. To this end, no external loans with a grant element of less than 35 percent will be contracted or guaranteed, except for nonconcessional loans within the ceiling indicated in Table 3 attached, normal short-term import credits, and loans related to the rescheduling or refinancing of external debt. In addition, all new loans contracted or guaranteed by the government will continue to be subject to authorization by the Minister of Finance. The government will discharge its public debt obligations on a timely basis and will not accumulate any payments arrears.

27. In the context of the Initiative for Heavily Indebted Poor Countries (HIPC Initiative), the authorities, in collaboration with IMF and World Bank staff, have updated the results of the debt sustainability analysis based on debt data at end-1998 and end-1999, and have examined the progress achieved in implementing the reforms envisaged under the original HIPC Initiative. On the basis of this work, it appears that Mali has satisfied the necessary conditions for reaching the completion point under this Initiative.

28. To allow Mali to benefit as quickly as possible from the additional assistance available under the enhanced HIPC Initiative, the authorities have prepared an interim poverty reduction strategy paper (PRSP) based on the National Strategy for the Fight against Poverty (SNLP) adopted by the government in 1998 and the PFP for 1999-2002. The latter is presented under separate cover.

29. The authorities will continue to participate actively in all the initiatives aimed at promoting regional integration and will endeavor to implement those that have been adopted. In particular, this concerns the implementation of the CET, which entered into force on January 1, 2000; the harmonization of the business law through the Organization for the Harmonization of Business Law in Africa (OHADA) uniform acts; the harmonization of indirect taxation within the WAEMU; the elimination of nontariff barriers; the adoption of a common investment code; the development of the regional financial market; and the strengthening of multilateral surveillance.

30. Efforts undertaken in recent years to improve the quality, coverage, and availability of economic and social statistical data will be continued. Particular emphasis will be placed on the national accounts, public investment monitoring, and the compilation of balance of payments statistics. To ensure that data are available within the required time frames, the authorities will revitalize the statistical coordination committee by implementing legal provisions against economic agents who fail to communicate information within prescribed deadlines.

IV. Program Monitoring and Prior Actions

31. Execution of the 2000 program will be monitored through quarterly quantitative performance criteria and benchmarks as specified in Table 3 (attached), including (a) a ceiling on net bank credit to the government; (b) the nonaccumulation of domestic and external payments arrears; (c) the nonrecourse to short-term external credits (excluding normal import credits and loans related to debt-relief operations); and (d) a ceiling on nonconcessional external debt having a maturity of one year or longer, contracted or guaranteed by the government and certain public enterprises. The above variables relating to end-September 2000 will constitute performance criteria. The performance criterion on nonaccumulation of domestic and external payments arrears will be applied on a continuous basis. In addition, quarterly financial indicators will be established for tax revenue, the wage bill, and the basic budgetary surplus (the latter is defined as the overall fiscal deficit, excluding grants and externally financed investment spending).

Table 1.

Mali: Program Quantitative Performance Criteria and Benchmarks for the Period April 1, 1999 to March 31, 2000

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The program provides that external budgetary assistance, excluding project aid, will in 1999, on a cumulative basis, reach CFAF 12.1 billion by June 30 and CFAF 26.3 billion by September 30 and December 31, 1999. It will total CFAF 5.3 billion by March 31,2000. The ceilings for these dates will be adjusted downward by the amounts of excess external budgetary assistance received, net of the amounts used to accelerate the reduction of the government’s domestic payments arrears or the refund of VAT credits owed to the cotton company, CMDT. In the event of a shortfall in external budgetary assistance, as defined above, the ceilings will be adjusted upward accordingly, but not exceeding CFAF 12.1 billion for the first half of 1999, CFAF 20 billion at September 30, 1999, CFAF 15 billion at December 31, 1999, and CFAF 4 billion at March 31, 2000.

Excluding the cotton sector stabilization fund and excluding changes in the amounts of consolidated pubic debt securities held outside the Malian banking system.

Maximum.

Minimum.

These performance criteria will be monitored on a continuous basis.

The public enterprises in question are: the cotton company: CMDT, the telecommunications company: SOTELMA, the electricity and water company: EDM, and the railroad company: RCFM.

Excluding debt relief obtained in the form of rescheduling or refinancing.

Including planned loans on nonconcessional terms to be contracted with the West African Development Bank, the African Development Bank, and the Caisse de Cooperation Francaise in 1999-2000.

Cumulative amounts from April 1, 1999 to March 31, 2000.

With the exception of normal import credits and debt relief.

Excluding privatization receipts, which are included in financing.

Overall balance, on a commitment basis, excluding grants and externally financed capital expenditure.

Excluding use of Fund resources.

Table 2.

Mali: Structural Measures Adopted as Prior Actions, Performance Criteria, and Structural Benchmarks, 1999/2000

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A one-year performance contract was signed in October 1999. However, it does not take account of the increase in the CMDTs production costs as compared with the technical audit that served as a basis for the sectoral action plan, and does not include all the elements of the latter.

Table 3.

Mali: Program Quantitative Performance Criteria and Benchmarks for the Period April 1 to December 31, 2000

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The program provides that external budgetary assistance, excluding project aid, will in 2000, on a cumulative basis, reach CFAF 2.9 billion by June 30, CFAF 15.4 billion by September 30, and CFAF 26.9 billion by December 31, 2000. The ceilings for these dates will be adjusted downward by the amounts of excess external budgetary assistance received. In the event of a shortfall in external budgetary assistance, as defined above, the ceilings will be adjusted upward accordingly, but not exceeding CFAF 10 billion at September 30 and CFAF 15 billion at December 31, 2000.

Excluding the cotton sector stabilization fund and excluding changes in the amounts of consolidated pubic debt securities held outside the Malian banking system.

Maximum.

Minimum.

These performance criteria will be monitored on a continuous basis.

The public enterprises in question are: the cotton company: CMDT, the telecommunications company: SOTELMA, the electricity and water company: EDM, and the railroad company: RCFM.

Excluding debt relief obtained in the form of rescheduling or refinancing.

Including planned loans on nonconcessional terms to be contracted with the West African Development Bank, the African Development Bank, and the Caisse de Cooperation Francaise in 2000.

With the exception of normal import credits and debt relief.

Overall balance, on a commitment basis, excluding grants and externally financed capital expenditure.

Excluding use of Fund resources.

32. To ensure the success of the program, the authorities have taken the following actions; (i) the completion of the CMDT’s financial audit; (ii) the launch of the final call for bids to privatize at least 60 percent of the EDM’s capital; (iii) the official announcement by the government of the new reform plan for the telecommunications sector (see paragraph 22); and (iv) the start of the financial audits of the CRM and the INPS. The program will also include a certain number of structural performance criteria and benchmarks, which are described in Table 4.

Table 4.

Mali: Structural Measures Adopted as Prior Actions, Performance Criteria, and Structural Benchmarks, 2000

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APPENDIX II Mali: Relations with the Fund

(As of May 31, 2000)

I. Membership Status: Member since September 27, 1963; Article VIII.

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Financial Arrangements:

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VI. Projected Obligations to the Fund1/ (SDR million; based on existing use of resources and present holdings of SDRs):

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VII. Exchange Rate Arrangement

Mali is a member of the West African Economic and Monetary Union (WAEMU). The exchange system, common to all members of the Union, is free of restrictions on the making of payments and transfers for current international transactions. The Union’s common currency, the CFA franc, was pegged to the French franc at the rate of CFAF 50 = F 1 from 1948 until early 1994. Effective January 12, 1994, the CFA franc was devalued, and the new parity set at CFAF 100 = F 1. Effective January 1, 1999, the CFA franc was pegged to the euro at a rate of CFAF 655.96 = Euro 1. On May 31, 2000, the rate of the CFA franc in terms of the SDR was SDR 1 = CFAF 930.75. As of June 1, 1996, and in conjunction with its WAEMU partners, Mali accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund’s Articles of Agreement.

VIII. Article IV Consultations

Mali is on the standard 12-month Article IV consultation cycle. The 1998 Article IV consultation was completed by the Executive Board on February 10, 1999 (EBS/99/9; 1/27/99; and SM/99/24; 1/29/99).

IX. Technical Assistance

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X. Resident Representative

Between 1982 and 1991, from October 1993 until October 1995, and from July 1996 to August 1998, a Resident Representative was stationed in Bamako. Mr. Williams, the current Resident Representative, took up this assignment in September 1998.

APPENDIX III Mali: Relations with the World Bank Group

(As of May 31, 2000)

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Less cancellations.

Total commitments including closed credits.

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2. World Bank Group Operations

As of May 31, 2000, IDA has extended 67 credits to Mali (including Africa Facility, special funds and supplementary credits) totaling US$ 1,231.4 million. The current IDA portfolio in Mali consisted of 14 projects under implementation, in the amount of US$390.7 million (13 investment projects in the amount of USS330.7 million, and one adjustment operation in the amount of US$60 million). The Improving Learning in Primary School project was approved by the Board of Executive Directors on January 31, 2000. The undisbursed amount totaled US$183.8 million. In addition, as of May 31, 2000, the portfolio held by the International Finance Corporation for Mali consists of 6 operations totaling US$37.3 million in loans and US$22.5 million in equity. Mali Joined MIGA on October 5, 1990.

In support of Mali’s effort to restructure its economy, IDA has approved a structural adjustment credit, an economic recovery credit, an economic management credit, and sector adjustment operations in the public enterprise, education, and agriculture sectors. The Bank has also provided technical assistance to strengthen the Malian institutions responsible for the design and implementation of economic and financial policies.

Source: The World Bank Group.

APPENDIX IV Mali: Statistical Issues

1. Mali’s economic database remains weak. The authorities are continuing their efforts to improve the quality, timeliness, and availability of economic and financial data. In particular, arrangements have been made to ensure enforcement of the legal provisions instituted in 1991, which require economic transactors to respond within prescribed deadlines to public agencies requests for information. A statistical coordination committee established in 1992 has also been strengthened in order to improve cooperation between the various public agencies involved.

Real sector

2. The national accounts data are poor in accuracy, coverage, and timeliness. Although technical assistance was granted to Mali during 1995-96 with a Fund resident expert in national accounting, further assistance is still needed. The revised national accounts data compiled using the 1993 System of National Accounts (SNA) expected at end-1998 have not been produced and it is likely that the end-2000 target date set for the transition to the 1993 SNA will not be met.

3. The harmonized consumer price index (CPI) for the capital, Bamako, is consistently available on a timely basis since early 1998, in line with publication standards for WAEMU member countries. It is being used to monitor inflation in the context of Fund-supported programs. The methodology for calculating the industrial production index was improved in 1999 when the base year was changed and the size of the sample was expanded. Further improvements are expected with the completion of an industrial survey, scheduled for end-2000.

4. The government has increased efforts aimed at improving quality and availability of needed data for an efficient implementation of social policies in the context of the 1998 National Strategy for the Fight against Poverty (SNLP). Particular emphasis is given to the completion of a household survey expected to be launched in September 2000, the preparation of the final results of the population census published in June 1998, and the launching of a general agricultural census for which financial and technical assistance is required.

Public finances

5. Comprehensive data on public finances are compiled by the Ministry of Economy and Finance on the basis of inputs from the customs, tax, and treasury directorates. These data are available on request with a one- to three-month lag. Progress is being made in harmonizing the presentation of public finance statistics within a common framework for all WAEMU member countries, which was developed with technical assistance from the Fund. The authorities also continued efforts to monitor closely the financial operations of local authorities, and to strengthen internal audit procedures. The Treasury’s accounts are published regularly, and budget execution laws (Loi des reglements) are presented to the National Assembly, which recently adopted those relating to 1993-95.

Monetary data

6. Preliminary monetary data for Mali are prepared by the national agency of the Central Bank of West African States (BCEAO), and released officially by the headquarters of the BCEAO with a lag of two to three months. However, the BCEAO headquarters is working on the reduction of the lag through the standardization of computer-based reporting procedures, particularly for commercial banks. The improvements in quality and timeliness of money and banking data reflect recommendations made by the 1997 AFR/STA and 1998 STA/BCS missions.

Balance of payments data

7. Balance of payments data remain weak, and official data are still produced with a lag of two years despite three STA technical assistance missions since October 1990. In early 1996, the authorities released definitive balance of payments statistics for Mali through 1993; preliminary data are available up to 1997. Rotation of personnel has slowed the implementation of the recommendations left by the technical assistance mission on balance of payments undertaken in April 1993.

8. A STA resident expert was posted at BCEAO headquarters in Dakar during 1996-1999, to address statistical issues in the area of the balance of payments on a zone-wide basis. The expert’s terms of reference included the provision of assistance in implementation of the new standards required by the fifth edition of the Balance of Payments Manual, the review of compilation procedures and methodologies utilized in each WAEMU member country, as well as the training of newly recruited staff.

Mali: Core Statistical Indicators

(As of May 31, 2000)

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IMF, Economic Information System (EIS).

Central Bank of West African States (BCEAO).

Preliminary data for staff use only; actual data unrestricted.
1

Defined as total government revenue (excluding grants) minus total expenditure and net lending, excluding externally financed capital expenditure.

2

Almost ½ of 1 percentage point of this increase was due to a smaller-than-foreseen nominal GDP in 1999, as real growth was lower and the GDP-deflator fell by 2 percent from 1998, instead of increasing by 2¼ percent as projected.

3

In addition to a zero percent tariff rate, the corresponding maximum customs duties on imports from non-WAEMU countries were reduced to 5 percent, 10 percent, and 25 percent, respectively. On January 1,2000, the CET was fully applied, and these duty rates were fixed at 5 percent, 10 percent, and 20 percent, respectively, with, in addition, a statistical tax of 1 percent.

4

On nonexempted, nonpetroleum imports from non-WAEMU countries.

5

Monetary data should be interpreted with caution, as uncertainties in the estimation of currency in circulation are common to all member states of the WAEMU.

6

For a more detailed description, see the Memorandum of Economic and Financial Policies for 2000 (Appendix I, paragraph 2). The total producer price for seed cotton for the 1998/99 crop year, including a profit bonus of CFAF 40 per kilogram, was CFAF 185 per kilogram (56 percent of the sales revenue of the CMDT).

7

The salary grid revision would result in a 3⅓ percent increase of the wage bill in 2000.

8

Between October 1999 and May 2000, the commission reviewed a total of 618 reports, prepared over the 1992-99 period, on investigations of possible financial or administrative wrongdoings involving public agencies. The commission issued four types of recommendations for action: (i) referral for further investigation; (ii) application of purely administrative sanctions; (iii) requirement of financial restitution; and (iv) referral to the Public Prosecutor in 72 cases (12 percent of the total).

9

Annual real GDP growth per capita averaged some 2½ percent during 1995-99.

10

These policies are described in more detail in the interim PRSP (paragraph 3.2.2) and the HIPC Initiative document for the completion point under the original framework and decision point under the enhanced framework (Section III.B).

11

Balance of payments projections for 2000-19 are presented in the HIPC Initiative document for the completion point under the original framework and decision point under the enhanced framework (Section IV).

12

The debt sustainability analysis is presented in the HIPC Initiative document for the completion point under the original framework and decision point under the enhanced framework (Section IV).

13

The Enhanced Structural Adjustment Facility (ESAF) was renamed the Poverty Reduction and Growth Facility (PRGF) in November 1999.

14

Excluding the zero percent rate, customs duties on imports from third countries were capped in 1999 at 5, 10, arid 25 percent and fixed as of January 1, 2000 at 5, 10, and 20 percent.

1

The projection of charges and interest assumes that overdue principal at the report date (if any) will remain outstanding, but that forthcoming obligations will be settled on time.

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Cover IMF Staff Country Reports
MALI: Staff Report for the 2000 Article IV Consultation, First Review Under the Poverty Reduction and Growth Facility, and Request for Waiver of Performance Criteria
Author:
International Monetary Fund
Volume/Issue:
Volume 2000: Issue 126
Publisher:
International Monetary Fund
ISBN:
9781451826319
ISSN:
1934-7685
Pages:
75
DOI:
https://doi.org/10.5089/9781451826319.002
  • Figure 1.
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    Figure 1.

    Mali: Main Economic Indicators, 1987-2002

  • Figure 2.
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    Figure 2.

    Mali: Real and Nominal Effective Exchange Rates, January 1990 - March 2000

    (Period average; 1990=100)

Figure 1.

Mali: Main Economic Indicators, 1987-2002
Figure 2.

Mali: Real and Nominal Effective Exchange Rates, January 1990 - March 2000

(Period average; 1990=100)