Statement by Mr. Daouda Sembene, Executive Director for Mali, and Mr. Oumar Diakite, Advisor to the Executive Director, July 7, 2017

Seventh Review Under the Extended Credit Facility Arrangement, and Request for Extension and Augmentation of Access-Press Release; Staff Report;


Seventh Review Under the Extended Credit Facility Arrangement, and Request for Extension and Augmentation of Access-Press Release; Staff Report;

Our Malian authorities are thankful to staff for their continued engagement and valuable policy advice. They also appreciate the substantial technical assistance and training provided by the Fund in recent years which have made a positive contribution to building capacity and establishing a solid track record for policy implementation. In this regard, Mali’s participation in the IMF’s Capacity Development Framework (CDF) should help strengthen further its technical and institutional capacities needed to formulate and implement reforms.

Despite important security and economic development challenges, the authorities continue to implement their ECF-supported program successfully and create the foundations for sustainable and inclusive growth. All performance criteria and indicative targets at end-December 2016 were met and good progress is being made towards meeting the structural benchmarks that were delayed.

With risks of terrorist attacks in some parts of the country, maintaining peace, stability and unity remains a major priority for the authorities. While growth has remained strong and the budget deficit in line with the objectives of the program, this progress must be consolidated further and the implementation of reforms steadfastly pursued. To this end, our authorities request an augmentation of access and a one-year extension of the program to help them address additional fiscal and balance of payment financing needs generated notably by security and terms of trade shocks.

Economic Developments in 2016 and Performance under the ECF-Supported Program

In 2016, real GDP growth remained strong at 5.8 percent driven by the solid performance of the agricultural sector and the strengthening of the tertiary sector, while inflation remained subdued at −1.8 percent. The overall balance of payment deficit widened to 3.9 percent despite a smaller than envisaged current account deficit (7.1 percent of GDP), due to higher than expected private capital outflows and delays in the receipts of grants and multilateral loans.

The overall fiscal balance (including grants) is estimated at 3.9 percent in line with program objectives. Tax revenue increased by 1 percent of GDP, reflecting a favorable oil product taxation that more than offset the underperformance in direct taxes and nontax revenue, while grants disbursements decreased by 1.1 percent. Total expenditures and net lending increased by 1.4 percent of GDP. This improvement in fiscal performance resulted from the tight control of current expenditures which helped create fiscal space for public investments and accelerate the momentum for timely compliance with the regional convergence criterion.

In the financial sector, the risk-weighted capital ratio of banks remained stable at 14.7 percent at end 2016. While the ratio of gross non-performing loans (NPL) remained constant at 15.4 percent compared to 2015, net NPL ratio declined from 7.2 percent to 5.4 percent. The financial stability of the microfinance sector continued to improve with the share of NPLs declining from 6.6 percent in 2015 to 6.2 percent in February 2017.

The overall performance under the ECF program continues to be satisfactory. All quantitative performance criteria and indicative targets at end- December 2016 were met. With regard to structural benchmarks, three of the nine benchmarks set for the seventh review were met at the agreed dates. The authorities achieved with delay in May 2017 the missed benchmark on the adoption of the Law to stop granting new discretionary tax exemptions. Progress is being made on the remaining benchmarks, notably the financial disclosure of senior officials, the operationalization of the anti-corruption commission and the completion of the transition to the single treasury account (STA). Concerning the automatic pricing mechanism on petroleum products, the authorities remain committed to its implementation but need more time to devise a strategy to sensitize social partners and work on measures to mitigate the adverse impact on vulnerable segments of the population.

Economic and financial policies and outlook in 2017–18

The near-term outlook remains positive with growth expected to remain strong in 2017 at 5.3 percent fueled by strong domestic demand. Inflation is expected to increase slightly and reach 1 percent because of higher oil prices. While the current account deficit is projected to widen to 8.1 percent of GDP in 2017 amid strong import growth, higher oil and lower gold prices, it should be financed by net capital inflows mainly in the form of foreign aid and foreign direct investment. The medium term economic and financial policies of the government will continue to be driven mainly by the priorities of the strategic framework for economic growth and sustainable development (CREDD) covering the period 2016-18.

Achieving progress in Fiscal Policy and Reforms

The Malian authorities will continue implementing a sustainable fiscal policy in compliance with their commitments under the West African Economic and Monetary Union’s (WAEMU) surveillance framework. They remain focused on maintaining the overall fiscal balance (including grants) at levels compatible with debt sustainability and the WAEMU convergence criteria of 3 percent fiscal deficit by 2019.

For 2017, the authorities envisage an overall fiscal deficit of 3.5 percent of GDP to be reached with total revenue and grants reaching 20.6 percent of GDP. To this end, they will continue to improve public financial management and enhance revenue mobilization. They intend to increase tax revenue by 0.3 percent of GDP in 2017 and by 0.6 percent in 2018 notably through reforms aimed at broadening the tax base, reducing exemptions after implementing the Law to eliminate discretionary tax exemptions, and strictly controlling and verifying imports to reduce fraud. The reforms initiated at the Tax, Customs and Government Property and Lands administrations will be expanded and a results-based management framework to enhance revenue collection will be implemented. The strengthening of the tax administration continues with the reduction of exemptions and various codes and legislations (investment, petroleum, telecommunication, customs etc.) are being revised to this effect.

The authorities are also committed to preserving fiscal revenue on petroleum products. In this regard, they will continue their efforts to implement the new pricing mechanism for petroleum products which will pass on the evolution of petroleum products prices to retail prices within a margin of 3 percent a month. They will devise a strategy to sensitize social partners and work with the assistance of the World Bank on measures to mitigate the adverse impact on vulnerable segments of the population

The efforts aimed at simplifying fiscal legislation will also be pursued with the objective of reducing the administrative burden on taxpayers and simplifying tax collection. The authorities will also continue their efforts to increase revenue from mining and oil activities with Fund technical assistance. Improving and modernizing the mining and petroleum codes based on international standards remains a priority of the authorities. Fund technical assistance also helps to address the weaknesses in the system of incentives for tax and customs inspectors in the context of the modernization of the tax administration.

With regard to expenditures, the authorities will continue their efforts to improve the regulatory framework for public financial management consistent with regional directives and regulations. In this regard, they will continue to transpose into Malian legal framework WAEMU directives as was the case for the transparency code, budget laws, public accounting, and the government chart of accounts and flow of funds table (TOFE). Efforts to improve the preparation, execution and control of the budget, and treasury operations will also be stepped up. To improve budget preparation and facilitate the review of the effectiveness of public expenditures, program budgeting and results based management will be gradually implemented, following the presentation of the 2017 budget in that format for information to the National Assembly.

The authorities continue to improve cash management and progress in the implementation of the Single Treasury Account (STA). Bank accounts of the central government in 11 out of 14 banks have been identified as of December 2016. Inactive accounts which are no longer needed will be closed by the Treasury which will also decide on the necessity for any public entity to open an account in the commercial banking system. The goal is to ultimately ensure that all public administrative entities deposit their funds at the Treasury.

The authorities also intend to pursue the national internal control strategy which they implemented during the period 2012–15 with the aim of enhancing the capacities of internal control structures and improving public procurement.

Conducting a sustainable borrowing policy and improving the business environment

The authorities will continue to conduct a borrowing policy consistent with the preservation of debt sustainability. To this end, they will have recourse primarily to grants and highly concessional loans. The authorities have prepared a detailed borrowing plan underlying the execution of the 2017 and 2018 budgets. Debt management continues to strengthen with the implementation of the recommendations of Fund’s technical assistance aimed at improving the quality of the database on public debt.

Structural reforms will also be steadfastly pursued. The authorities are committed to further improving the business environment by addressing the major constraints to private sector development. Our Malian authorities recognize that infrastructure investments notably in the energy sector, good governance and stability of the financial sector are essential to private sector development. To improve the investment framework, they have adopted a law on public-partnerships (PPP) with the assistance of the World Bank, and established a PPP unit with assistance from the African Development Bank. The Fund has also contributed to improving the law with the view to minimizing fiscal risks.

The authorities are determined to address the weaknesses of the financial sector and reduce the level of NPLs. With Fund’s assistance, they are taking steps to designing by June 2017 a strategy to reduce the level of NPLs. Efforts to strengthen the new bank resulting from the merger of the Housing Bank (BHM) and the Malian Solidarity Bank (BMS) will also be pursued. In the microfinance sector, continuing to restore confidence by implementing the action plan prepared with the assistance of the World Bank remains critical for the authorities, including the audit of microfinance institutions in difficulty, the revocation of operating permits for institutions to be liquidated and the adoption of favorable compensation of small depositors.


Our Malian authorities are committed to pursuing sound macroeconomic policies, improving public financial management and achieving strong and inclusive growth. They request an augmentation of access and a one year extension of the ECF program to help them meet additional financing needs to restore peace and stability in the country and consolidate the progress achieved in the implementation of their reforms agenda.

In view of Mali’s satisfactory progress under the ECF arrangement, we would appreciate Directors’ support for the completion of the seventh review under the arrangement, the augmentation of access and the extension of the program through December 2018.