Mali: Sixth Review Under the Poverty Reduction and Growth Facility
Author: International Monetary Fund
Publication Date:
07 Aug 2003
eISBN:
9781451826388
Language:
English
Keywords:
ISCR; CR; PRGF arrangement; PRGF loan; poverty-reducing objective; PRGF-supported program; equivalent; SDR; consumer price index; financial support; U.S. dollar; government portfolio; authorities' effort
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This report summarizes the sixth review of the economic program of Mali under the Poverty Reduction and Growth Facility (PRGF) and assesses the progress made in adjusting the economy. The Malian authorities continued to make good progress in implementing the IMF program, under difficult conditions. Executive Directors stressed the need for prudent macroeconomic policies and structural reforms. They emphasized the need to enhance private sector competitiveness, liberalize the cotton sector, and promote good governance.

Abstract

This report summarizes the sixth review of the economic program of Mali under the Poverty Reduction and Growth Facility (PRGF) and assesses the progress made in adjusting the economy. The Malian authorities continued to make good progress in implementing the IMF program, under difficult conditions. Executive Directors stressed the need for prudent macroeconomic policies and structural reforms. They emphasized the need to enhance private sector competitiveness, liberalize the cotton sector, and promote good governance.

I. Introduction

1. This report reviews developments during 2002 and the first quarter of 2003 in the context of the sixth and final review of the program supported by the Fund with an arrangement under the Poverty Reduction and Growth Facility (PRGF), and sets forth the policies and measures the government intends to implement during the rest of 2003. The report also assesses progress made in adjusting the economy since 1999, when the current arrangement was approved by the Fund. In the attached letter dated June 23, 2003 (Appendix I), the authorities request the completion of the sixth review and release of the last disbursement. Mali’s financial position in the Fund is summarized in Table 2 and Appendix II.

2. At the time of the fifth review of the program on February 28, 2003, Executive Directors commended the authorities for their strong implementation of the PRGF-supported program despite the adverse impact of the crisis in Côte d’Ivoire on Mali’s economy. They urged the authorities to speed up structural reforms, diversify the productive base, promote private sector development, and strengthen governance, in order to help the economy withstand the adverse effects of exogenous shocks and contribute to reducing poverty.

3. The World Bank approved a third structural adjustment credit (SAC III) in the amount of SDR 55 million (US$70 million equivalent) in December 2001. Two of the three planned disbursements were made in January and December 2002, respectively. A summary of Mali’s relations with the World Bank Group is presented in Appendix III.

4. Mali’s statistical database is sufficient for program monitoring (see Appendix IV). Mali has been participating in the General Data Dissemination System (GDDS) since September 2001, and its metadata are posted on the Fund’s Dissemination Standards Bulletin Board. A recent multisector mission from the Fund’s Department of Statistics noted a number of methodological shortcomings and institutional weaknesses, especially in the compilation of the national accounts. The implementation of the recommendations, which are outlined on the Dissemination Standards Bulletin Board, is expected to further improve data quality and timeliness.

II. Background and Program Implementation in 2002

5. President Amadou Toumani Touré took office in June 2002, following presidential elections in April and May 2002, and appointed Mr. Ag Hamani as Prime Minister. After the legislative elections in July 2002, Prime Minister Ag Hamani was reappointed to form a new coalition government in October. The government has started implementing the PRSP, adopted in May 2002, and is committed to preserving macroeconomic stability, spurring growth, and reducing poverty. However, with no political party having a majority in the National Assembly, advancing the reform agenda, including liberalizing the cotton sector and carrying out the privatization program, will require the government to build broad coalitions, which is likely to take time.

6. Since September 2002, the crisis in Côte d’Ivoire and the closing of the Abidjan-Bamako road have hit Mali’s economy hard. In response, the authorities promptly took actions to channel trade through ports other than Abidjan and find new sources of supply for key products. However, these measures have encountered difficulties because the new ports are further away and the transportation system is in poor condition.

7. As indicated at the time of the fifth review, Mali enjoyed a strong economic performance in 2002. A doubling of cotton production and double-digit increases in cereal and gold production boosted real GDP growth from 3.5 percent in 2001 to 9.7 percent in 2002 (Figure 1 and Tables 3 and 4). Average annual inflation remained at 5.0 percent in 2002, owing to supply shortages resulting from the closure of the Abidjan-Bamako road and inadequate rainfall in the second half of the year.

Figure 1.
Figure 1.

Mali: Main Economic Indicators, 1995–2006

Citation: IMF Staff Country Reports 2003, 246; 10.5089/9781451826388.002.A001

Sources: Malian authorities; and staff estimates and projections.1/ Percentage change in average consumer price index.2/ Central government, on commitment basis.
Table 1.

Mali: Quantitative Performance Criteria and Indicative Targets for March 2002–June 2003

(In billions of CFA francs)

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The adjustment factors are described in paras. 9 and 10 of the technical memorandum of understanding of the staff report EBS 03/16.

Maximum.

These performance criteria will be monitored on a continuous basis.

The public enterprises in question ore the cotton company (CMDT), the telecommunication company (SOTELMA), and the railway company (KCFM).

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

See para. 19 of the technical memorandum of understanding of the staff report EBS 03/16 for the donors concerned.

Excluding import-related credit and CMDT borrowing from foreign banks secured by the proceeds of cotton exports, and debt relief.

Minimum. The program figures for December 2001 and June 2002 were corrected because they previously showed total revenue.

Minimum. See paragraph 34 of the technical memorandum of understanding of the staff report EBS 03/16 for definition.

Excluding use of Fund resources.

Excluding World Bank disbursement in January 2002.

At end-December 2000, the balance was CFAF 1.6 billion.

Table 2.

Mali: Fund Position, 2002–06

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Source: IMF, Finance Department.
Table 3.

Mali: Selected Economic and Financial Indicators, 2001–05 1/

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Sources: Malian authorities; and staff estimates and projections.

The staff has updated the balance of payments to be fully consistent with the IMF’s balance of Payments Manual (5th ed.) and the authorities’ presentation.

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.

Defined as total revenue (excluding giants) minus total expenditures and net lending (excluding foreign-financed investment).

Defined as footnote 5 above, but also excluding MPC Initiative-related expenditure and exceptional expenditure financed by World Bank credit.

In percent of exports of goods and services.

Goods and services.

Table 4.

Mali: Selected National Accounts Indicators, 2001–05 1/

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Sources: Malian authorities; and staff estimates and projections.

The staff has updated the balance of payments to be fully consistent with, the IMF’s Balance of Payments Manual (5th ed.) and the authorities’ presentation.

Including official transfers.

8. The external current account deficit, excluding official transfers, narrowed from 14.2 percent of GDP in 2001 to 6.3 percent in 2002, even though one-fourth of the cotton output could not be shipped owing to transportation difficulties (Table 8). Including current official transfers, the deficit is estimated at 4.9 percent of GDP. The volume of exports rose by 29.2 percent in 2002, mainly because of a sharp increase in the volume of cotton and gold exports. In addition, the terms of trade improved by 6.7 percent, instead of deteriorating slightly as anticipated. Nevertheless, the positive impact of gold exports was partly offset by transfers abroad of the sizable profits of foreign-owned mining companies.1 The overall balance of payments recorded a large surplus, owing to the improvement in the current account balance, as well as the significant capital inflows connected with the sale of a telephone license to a foreign company, investments by the mining companies, and the sustained flow of foreign assistance. Hence, Mali contributed almost US$100 million to the international reserves of the Central Bank of West African States (BCEAO) in 2002.

Table 5.

Mali: Central Government Consolidated Financial Operations, 2000–051

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Sources: Malian authorities; and staff estimates and projections.

The historical GDP figures through 2000 have been revised upward to be fully consistent with the authorities’ data. Thus ratios to GDP in the program column may not be strictly comparable with the new ratios.

Expenditures from World Bank credit and financing of Public Enterprises Structural Adjustment Project (P.E.S.A.P.) and public enterprises.

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

Expected to be covered by donor assistance.

Defined as footnote 3 above, but also excluding HIPC Initiative-related expenditure and exceptional expenditure financed by World Bank credit.

Table 6.

Mali: Compliance with WAEMU Convergence Criteria, 2000–05

(Ratios in percent, unless otherwise indicated)

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Sources: Malian authorities; and staff estimates and projections.
Table 7.

Mali: Monetary Survey, 2001–03

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Sources: BCEAO; and staff estimates and projections.
Table 8.

Mali: Balance of Payments, 2001–05 1/

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Sources: Malian authorities; and staff estimates and projections.

Presented according to the Balance of Payments Manual (5th ed).

Includes short-term capital inflows.

Sum of the original and enhanced HIPC Initiative assistance.

In percent of exports of goods and services.