A preliminary version of this DSA was discussed with the Malian authorities, who share staff views regarding the risk of debt distress.
HIPC debt relief was granted by all multilaterals, Paris Club bilateral creditors, and three non-Paris Club creditors (Saudi Arabia, Kuwait and China). Negotiations with four countries are still ongoing.
The Poverty Reduction Strategy Paper (PRSP) is based on an annual economic growth of 7 percent. The teams assumed a more conservative approach, taking into account the historical trends, the projected decline of the gold mining sector, and the related difficult economic transition that requires a higher momentum of structural reforms.
Gold output accounted for about 7 percent of GDP and 75 percent of exports in 2009. Staff has analyzed an alternative baseline scenario with economic growth slightly above 4½ percent per year to illustrate a slower growth response of sectors, such as agriculture, to ongoing structural reforms and development policies; under this scenario, prudent macroeconomic policies help to keep the risk of debt distress at a low level; in the sensitivity analysis, only the ratio of the present value of debt to exports breaches slightly the threshold of 150 percent after 2025 under a most extreme shock hypothesis. This alternative baseline points to the need to monitor new indebtedness and to implement effective growth strategies in the future.
Based on the World Bank three-year average CPIA ratings, Mali is classified as a ‘medium performer’. Consequently, the external debt burden thresholds relevant for Mali are (i) NPV of debt-to-exports ratio of 150 percent; (ii) NPV of debt-to-revenue of 250 percent; (iii) NPV of debt-to-GDP of 40 percent; and (iv) debt service-to-exports and revenue ratios of 20 and 30 percent, respectively.