The debt relief provided to Mali by the IMF, World Bank (IDA), and African Development Bank (AfDB), including HIPC, amounts to about US$2.07 billion or 60 percent of Mali’s total nominal external debt stock at end-2005.
Due to cyclical weather patterns, rainfall levels in the long-term are assumed to remain at their average levels.
In the medium term (2007-11), annual economic growth is expected to hover around 5 percent based on moderate growth in the mining sector and a pick-up in the services sector. In the long term (2012-26), at the current pace of economic reform, it is prudently assumed that the economy will grow at its historical trend rate of 5 percent per year. The Malian authorities, who commented on the DSA, expressed preference in having the government’s own assumptions reflected in the DSA. In this regard, consideration of the medium-term GDP growth rate of 7 percent per annum projected in the new PRSP (2007-2011) would reduce the debt ratios even further.
Debt Sustainability for Mali (IMF Country Report No. 06/73) and Program Document for the Mali Economic Policy and Public Finance Management Credit (IDA Report No. 34053-ML, Annex 9).
After HIPC and MDRI, US dollar denominated debt represents only 13 percent of Mali’s external debt stock in 2006.
Based on the average of 2003-2005 World Bank Country Policy Institutional Assessment (CPIA) ratings, Mali is classified as a “medium performer”, which determines the relevant debt thresholds of debt indicators.
Mali’s current debt strategy relies on lower cost concessional external financing, thereby reducing the stock of the government’s domestic borrowing and promoting the “crowding in” of credit to the private sector.
Mali’s macroeconomic indicators, and therefore its capacity to repay its debt, are subject to risks from climatic and commodity price shocks. They are also dependent upon increased investment in productive sectors that could deteriorate the current account and affect external debt dynamics. Furthermore, in the last two decades, Mali has benefited from highly concessional loans, which may not necessarily continue to be available in the future. The standard and bound sets of sensitivity tests assess the effect of these risks on the debt indicators.
Assuming that the interest rate on all new borrowings is 2 percentage points higher than in the baseline, the average concessionality decreases from 50 percent to 24 percent.
Currently, Mali’s external financing depends on highly concessional donor assistance, amounting to about 10½ percent of GDP, of which about half is in the form of grants. Loans have an average concessionality element of 50 percent. The baseline DSA trend projections assume a similar external financing profile. However, Mali recently contracted a non-concessional loan and lease agreement with the Islamic Development Bank for an energy project. The loan and lease agreement amounts to 1 percent of GDP with a concessionality of 8.5 percent, which has a minor impact on debt dynamics, given its limited size.