IMF Policy Paper: Mali: Sixth Review Under the Extended Credit Facility Arrangement and Request for Modification of A Performance Criterion—Press Release; and Staff Report

This paper discusses Mali's Sixth Review Under the Extended Credit Facility Arrangement and Request for Modification of a Performance Criterion. Economic activity in Mali remains robust, aided both by higher public investment and accommodative monetary conditions. Inflation remains subdued, helped by favorable weather conditions and low global inflation. The external position has weakened, reflecting strong domestic demand growth, but is expected to strengthen in the near term as terms of trade improve and demand growth slows down. The near-term outlook remains positive but is subject to downside risks, stemming mainly from the fragile security conditions.

Abstract

This paper discusses Mali's Sixth Review Under the Extended Credit Facility Arrangement and Request for Modification of a Performance Criterion. Economic activity in Mali remains robust, aided both by higher public investment and accommodative monetary conditions. Inflation remains subdued, helped by favorable weather conditions and low global inflation. The external position has weakened, reflecting strong domestic demand growth, but is expected to strengthen in the near term as terms of trade improve and demand growth slows down. The near-term outlook remains positive but is subject to downside risks, stemming mainly from the fragile security conditions.

Background, Recent Developments, and Outlook

1. Mali’s political situation remains broadly stable, notwithstanding persistent security challenges. Former rebel groups and a coalition of pro-government armed groups signed an agreement with the government in mid-June to put in place provisional authorities to govern the administrative regions in the North. The provisional authorities, which include representatives of armed groups and the government, will enable the redeployment of state administration and the return of basic services. However, recent armed clashes between some signatories of the agreement over control of several Northern regions could affect this process. The UN has extended its peacekeeping mission (MINUSMA) for another year (until June 2017), strengthened its mandate, and authorized the deployment of 2,500 additional soldiers, with the aim of bolstering their peacekeeping work and their support to the government in the gradual restoration and extension of state authority. The security situation remains fragile, with persistent attacks by jihadist groups on Malian and MINUSMA forces, including in the center of the country.

2. The short-term macroeconomic outlook remains favorable, but subject to downside risks (Figure 1, Text Table 1, Tables 1-6). GDP growth for 2016 is projected at 5.4 percent, aided both by public capital spending and the regional central bank’s accommodative policy. Inflation, which has been mostly in negative territory during the year—reflecting mainly good weather conditions and low global inflation—is projected to remain subdued, reaching percent (y-o-y) at end-December. As envisaged under the program, the fiscal stance will loosen in 2016, with the overall deficit projected at 4% percent of GDP—to accommodate peace and security expenditure and help implement the government’s regional development strategy—before becoming slightly tighter next year (116). The external account deficit is projected to widen to 7% percent of GDP, driven by a large increase in imports fueled by rapid domestic demand growth. For 2017, GDP growth is projected to continue robust at 5.3 percent and inflation is expected to remain low, at 1 percent. The current account deficit is projected to narrow to 6¾ percent of GDP, reflecting more favorable terms of trade and lower domestic demand growth. Risks to the outlook are tilted to the downside, with Mali’s fragile security situation remaining the most significant risk. Setbacks in improving security, especially in Bamako, may dampen the economic recovery while potentially affecting the public finances. Growth is also vulnerable to adverse weather conditions, while weaker export commodity prices would impact both the external sector and, to a lesser extent, the public finances.

Text Table 1.

Mali: Key Economic Indicators, 2014-21

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

Defined in Table 3, footnote 3.

Table 1.

Mali: Selected Economic and Financial Indicators, 2013—21

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Sources: Ministry of Finance; and IMF staff estimates and projections.

IMF Country Report No. 16/49, Mali: Fifth Review Under the Extended Credit Facility Arrangement.

Total revenue, plus general budgetary grants, plus revenue from HIPC debt relief, minus total expenditure and net lending excluding foreign-financed capital spending.

Includes BCEAO statutory advances, government bonds, treasury bills, and other debts.

Table 2.

Mali: National Accounts, 2012-16

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

IMF Country Report No. 16/49, Mali: Fifth Review Under the Extended Credit Facility Arrangement.

Table 3.

Mali: Consolidated Fiscal Transactions of the Government, 2013-21

(in billions of CFAF)

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Sources: Ministry of Finance; and IMF staff estimates and projections.

IMF Country Report No. 16/149, Mali: Fifth Review Under the Extended Credit Facility Arrangement.

Adjustment to account for the difference between the definitions of the government in the fiscal table and the monetary situation.

Total revenue, plus general budgetary grants, plus revenue from HIPC debt relief, minus total expenditure and net lending excluding externally financed capital spending.

Table 4.

Mali: Central Government Consolidated Financial Operations, 2016

(in billions of CFAF)

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Sources: Ministry of Finance; and IMF staff projections.

IMF Country Report No. 16/149, Mali: Fifth Reviews Under the Extended Credit Facility Arrangement.

Adjustment to account for the difference between the definitions of the government in the fiscal table and the monetary situation.

Total revenue, plus general budgetary grants, plus revenue from HIPC debt relief, minus total expenditure and net lending excluding externally financed capital spending.

Table 5.

Mali: Consolidated Fiscal Transactions of the Government, 2013-21

(percent of GDP)

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Sources: Ministry of Finance; and IMF staff estimates and projections.

IMF Country Report No. 16/149, Mali: Fifth Review Under the Extended Credit Facility Arrangement.

Adjustment to account for the difference between the definitions of the government in the fiscal table and the monetary situation.

Total revenue, plus general budgetary grants, plus revenue from HIPC debt relief, minus total expenditure and net lending.

Table 6.

Mali: Central Government Consolidated Financial Operations, 2017

(in billions of CFAF)

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Sources: Ministry of Finance; and IMF staff projections.

Adjustment to account for the d ifference between the definitions of the government in the fiscal table a nd the monetary situation.

Total revenue, plus general budgetary grants, plus revenue from HIPC debt relief, minus total expenditure and net lending, excluding externally financed capital spending.