Mali: First Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of a Performance Criterion and Modification of Performance Criteria—Press Release; Staff Report; and Statement by the Executive Director for Mali
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International Monetary Fund. African Dept.
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Publication Date:
16 Jan 2020
eISBN:
9781513526461
Language:
English
Keywords:
ISCR; CR; authority; executive board assessment; SDR; equivalent; government plan; reform priority; development expenditure; reform agenda; primary focus; reform strategy; Credit; Tax administration core functions; West Africa; IMF staff estimate; current account; economic activity; cash management
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First Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of a Performance Criterion and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Mali

Abstract

First Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of a Performance Criterion and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Mali

Background

1. The difficult security situation, which impacts millions of Malians and the broader Sahel region, weighs on economic activity and development prospects, and constrains the scope for policy implementation (Text Figure 1). Implementation of the 2015 peace agreement, including the related revisions of the Constitution, the disarming of rebel groups, and the restoration of state authority to the whole country, is challenging (Box 1). The security situation remains volatile in northern Mali and continues to deteriorate in central Mali causing significant population displacement, undermining the delivery of health care, education and social and services and giving way to rampant banditry, including drug and human trafficking. However, with most economic activity concentrated in the relatively unscathed South, annual economic growth has remained solid at around 5 percent.

Text Figure 1.
Text Figure 1.

Mali: Security and Social Challenges, 2011–18

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Source: Control Risks; IMF staff estimates.

2. Rising security spending has been crowding out priority social and development spending. In response to the deteriorating security situation, military and other security-related spending has been taking up an increasing share of public spending (Text Figure 2), at the cost of much needed social spending.

Text Figure 2.
Text Figure 2.

Mali: Security and Priority Social Spending, 2013–18

(Percent of budgetary expenditure)

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Source: Malian authorities; IMF staff calculations

3. The three-year ECF arrangement approved in August 2019 supports the authorities’ new medium-term development strategy (CREDD 2019–23). In the short term, the primary focus of the Fund-supported program is to (i) significantly improve fiscal governance on the revenue side through tax administration and customs reforms, (ii) increase revenue collections and reverse the revenue 2018 shortfall, (iii) create fiscal space for priority security, social, and development spending, (iv) address the unsustainable financial situation of the state-owned electricity company (EDM), and (v) strengthen the business environment.

Recent Economic Developments, Outlook, and Risks

4. Despite the persistence of the difficult security situation, economic developments have been broadly favorable and in line with program expectations in 2019:

  • Real GDP is expected to grow by 5.1 percent, driven by generous harvests and strong activity in the mining, construction, and tertiary sectors (Text Table 1, Figures 1 and 2, Tables 1 and 2). Inflation has recently turned negative, reflecting high levels of food production, notably of grains, as well as low euro-area inflation.

  • The growth of private credit has accelerated from its subdued level in 2018 driven by the growth in the non-agricultural economy (Table 3).

  • The current account deficit is expected to remain essentially flat at 4.8 percent of GDP with the rise in import volume being offset by an improvement in the terms of trade (Figure 3 and Table 4).

  • The banking sector continues to be broadly stable and financial soundness indicators improved in the first half of 2019, the latest period for which data is available (Table 5).

Text Table 1.

Mali: Key Economic Indicators, 2017–24

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

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the Extended Credit Facility

Figure 1.
Figure 1.

Mali: Recent Economic Developments

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Sources: Malian authorities; and IMF staff estimates and projections.
Figure 2.
Figure 2.

Mali: Real Sector Developments

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Sources: Malian authorities; and IMF staff estimates and projections.
Figure 3.
Figure 3.

Mali: External Sector

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Sources: Malian authorities; and IMF staff estimates and projections.
Table 1.

Mali: Selected Economic and Financial Indicators, 2017–24

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

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the Extended Credit Facility

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

Table 2.

Mali: National Accounts, 2017–24

article image
Sources: Malian authorities; and IMF staff estimates and projections.
Table 3.

Mali: Monetary Survey, 2016–20

article image
Sources: BCEAO; and Fund staff estimates and projections.

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the Extended Credit Facility

Table 4.

Mali: Balance of Payments, 2017–24

(CFAF billion, unless otherwise indicated)

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

Includes financing by the international community for imports of security services in relation to the foreign military intervention in the country.

5. Near- and medium-term prospects continue to be subject to downside risks.1 Real GDP growth is projected to remain at about 5 percent in 2020 and over the medium term, in line with long-term trends, and inflation should continue to be well below the WAEMU ceiling. The current account deficit is projected to gradually widen to around 6.5 percent of GDP over the medium term, reflecting a steady increase in imports and a slowdown in the growth of cotton and gold exports, highlighting the need to diversify the economy. The most immediate and critical risk remains a further deterioration of the security conditions. Agricultural output also remains vulnerable to adverse weather conditions, while high dependence on gold and cotton exports and fuel imports leaves Mali vulnerable to terms of trade shocks. Other external risks arise from possible future reductions in external support.

Performance Under the Program

6. The authorities have taken a variety of corrective measures to restore revenue performance. At end-September, they had collected 73 percent of the tax revenue target for 2019 (Text Table 2), with tax administration meeting its target and therefore partially offsetting the remaining shortfall in custom collection. The tax and custom administrations have made significant progress in implementing actions and strategic measures devised with the support of the IMF’s technical assistance program. Notably, the tax administration (DGI) has: (i) strengthened the collection of tax arrears; (ii) increased audit coverage, as well as VAT and PIT taxpayers’ monitoring; and (iii) launched the project for the implementation of online payment of taxes. As a result, the stock of tax arrears decreased by 20 percent between November 2018 and July 2019, and the share of issue-oriented audits now represents 25 percent of the audit program. The customs administration (DGD) has also recorded some achievements. It reduced the number of transit documents (T1) not validated or not registered in the customs data recording system2 (structural benchmark for end-September 2019, MEFP ¶5). Some progress has also been made in modernizing the organization and operating procedures of the DGD, though with room for more improvement. Finally, a formal coordination framework was devised to allow a seamless sharing of information between the tax administration and customs databases (end-December 2019 structural benchmark, met at end-November). The non-tax revenue at end-September fell short due to delays in the sale of the fourth telecommunications operating license.

Text Table 2.

Mali: Revenue Performance at End-September 2019

(CFAF billion, unless otherwise specified)

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Source: Malian authorities; IMF staff calculations.

Ratio of actual as of end-September 2019 to seasonaly adjusted

Ratio of actual as of end-September 201 9 to program targets at end-December 2019.

7. Budget implementation through the first three quarters was marked by severe liquidity constraints. The need to clear the large float accrued in 2018 (about 2 percent of GDP) and delays in disbursement of budget support3 hampered the implementation of spending, particularly domestically-financed capital spending, and domestic arrears in the amount of CFAF 36.9 billion (0.4 percent of GDP) were accrued in the third quarter.

8. Program implementation was broadly satisfactory through end-September. Five of six quantitative performance criteria (QPC) for end-September were met (MEFP Table 1). The continuous zero-ceiling on the accumulation of domestic arrears was breached, as noted in ¶7. Clearance of these arrears is a prior action for the completion of the first review under the ECF arrangement. Moreover, the authorities are pursuing efforts to strengthen the implementation of the single treasury account (TSA) and cash management (new structural benchmark for end-March 2020) The indicative target (IT) for priority social spending for end-September 2019 was missed by a small margin but is expected to be met by end-December. The structural benchmarks (SB) on improving customs administration, finalizing specifications for online payment of taxes and levies, and completing EDM’s performance contract were met, and the benchmark on operationalizing cooperation between tax and customs administrations was met ahead of schedule, as noted above (MEFP Table 2). The implementation of the remaining SBs for December 2019 is also on track.

9. The program is expected to be on track for end-December 2019. Based on the continued satisfactory revenue performance in October and historical seasonality, tax revenue collections are on target to reach 14.6 percent of GDP for 2019, 0.1 percentage point higher than the program target (Text Figure 3). The sale of the fourth telecommunications license has been delayed to 2020 but this shortfall will be offset by the small overperformance of tax revenue and somewhat lower current spending than budgeted. The 2019 overall fiscal deficit on an accrual basis is projected to comply with the WAEMU ceiling of 3 percent of GDP (Text Table 3, Figure 4, Table 6). The authorities anticipate that both the World Bank’s budget support and the Abu Dhabi loan will be fully disbursed by year-end.

Text Figure 3.
Text Figure 3.

Mali: Cumulative Tax Revenue

(CFAF billion)

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Source: Malian authorities; IMF staff calculation
Table 5.

Mali: Financial Soundness Indicators for the Banking Sector, 2015–19

(Percent)

article image
Source: BCEAO

Average

New prudential framework (Basel II/III)

Table 6a.

Mali: Consolidated Fiscal Transactions of the Government, 2017–24

(Billions of CFAF)

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

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the Extended Credit Facility

Commitment basis

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

Table 6b.

Mali: Consolidated Fiscal Transactions of the Government, 2017–24

(Percent of GDP)

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

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the Extended Credit Facility

Commitment basis

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

Table 6c.

Mali: Central Government Consolidated Financial Operations, 2019–20

(Billions of CFAF)

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

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

Policy Discussions

The discussions focused on setting up a sound fiscal framework for 2020 based on an ambitious but realistic domestic revenue mobilization target and an overall fiscal deficit that would allow a moderate increase in social and development spending. Other issues that were discussed included how to strengthen governance and reduce vulnerabilities to corruption, improve the business environment, progress with the financial restructuring of EDM, and advance inclusiveness.

A. The 2020 Fiscal Framework

10. The fiscal framework for the program seeks to strike a balance between spending needs and available resources. Mali faces large spending needs, including to improve the delivery of social services and close wide infrastructure gaps. As the difficult security situation in the country is likely to persist, increased security spending risks further crowding out development expenditures. Amid these challenges, the government’s primary focus is on increasing domestic revenue mobilization and seeking external support. The authorities have approached the WAEMU Council of Ministers to request a relaxation of the convergence criterion for the fiscal deficit. The Council will consider this request in early 2020 in the context of an overall evaluation of the economic impact of the security situation in the Sahel. Against this background, the authorities requested that the 2020 program ceiling on the overall fiscal deficit be set at 3.5 percent of GDP (Text Table 3). Staff underlined the importance of seeking grants and other concessional financing, while the part of the additional deficit could be financed regionally as its impact on the external sustainability of the WAEMU would be manageable.

Text Table 3.

Mali: Fiscal Framework for 2020

(Percent of GDP)

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Source: Malian authorities; IMF staff calculations

Budget Law submitted to the Malian parliament.

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the Extended Credit Facility

11. The proposed fiscal framework for 2020 sets an ambitious but realistic revenue target of 15.5 percent of GDP. Staff assessed that the increase in the tax revenue-to-GDP ratio from 14.6 percent of GDP in 2019 to 15.5 percent in 2020 was achievable based on tangible measures to strengthen revenue administration (structural benchmarks focusing on improving the performance of the custom administration) and proposed tax policy measures (the limitation of tax exemptions and the taxation of non-profit entities that engage in normal business activities, Text Table 4). Continued strengthening in revenue administration in subsequent years should result in a similar revenue yield. The authorities indicated that they would pass a supplementary budget in the first quarter of 2020 to reflect this fiscal framework. Staff and the authorities agreed to closely monitor the impact of a pre-program agreement with the private sector to reduce the VAT rate on selected products and firms, which came into effect in October2019 (MEFP ¶13).4 If revenue were to underperform, the government has the authority to cancel or freeze any approved spending according to Article 29 of the 2020 budget law. Should recourse to this article become necessary to preserve adherence to the fiscal deficit target, the government will seek to protect priority social and capital spending.

Text Table 4.

Mali: Expected Yields from Revenue Measures, 2020–23

(Percent of GDP)

article image
Sources: Malian authorities; IMF staff estimates

Budget Law submitted to the Malian parliament.

IMF Country Report No. 19/289, Mali : Request for Three-Year Arrangement Under the

12. The fiscal space created by the proposed higher deficit target would be allocated to social and development spending under the program. This includes spending to support food security and the restoration of health and education services in conflict areas, as well as address significant and immediate road maintenance needs. The scope of priority social and development spending targeted under the program has been broadened to include priority road projects to allow connectivity to underserved areas (Text Table 5, and Technical Memorandum of Understanding (TMU)). For monitoring priority social and development spending, the authorities will provide the data from Text Table 5 (in CFAF terms) on a quarterly basis. In light of the increasing fiscal space taken by the security spending operations and the need to ensure they are efficient and subjected to adequate procurement arrangements, the authorities are committed to ensure that such operations will be subject to proper and transparent procedures. They requested the World Bank’s assistance for a public expenditure review of security spending (expected for 2020) and are committed to set up a software to improve the human resources management in the army.

Text Table 5.

Mali: Priority Social and Development Spending, 2019–20

(Percent of GDP)

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Sources: Ministry of Finance; and IMF staff estimates

13. The authorities expressed concern over the short overall maturity of domestic debt and the related rollover risks (Text Figure 4). The previously envisaged World Bank policy-based guarantee 5 operation to refinance short-term domestic debt is no longer available, but the authorities are discussing additional funding on top of the 2020 IDA budget support allocation with the World Bank to address these vulnerabilities. Staff encouraged the authorities to tap the regional market and concessional budget support loans to address rollover risk. More generally the authorities remain committed to prudent debt management that prioritizes concessional borrowing and debt sustainability (MEFP ¶23). Their external borrowing plan for 2020 is in line with these objectives (MEFP ¶24).

Text Figure 4.
Text Figure 4.

Mali: Maturity Profile of Domestic Debt Issued, End-September 2019

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

Source: UEMOA-Titres; IMF staff calculation

14. The authorities acknowledged the need to strengthen liquidity forecasting and cash management. They recognized that improved cash management was essential to avoid the recurrence of domestic arrears. They are pursuing a program of significantly expanding the scope of the Treasury Single Account (TSA) and better link spending commitments to available and forecast resources. To facilitate the operation of the expanded TSA, the government will strenghten their information management system (AICE2, new structural benchmark for end-March 2020; MEFP H22).

B. Enhancing Revenue Mobilization

15. Notwithstanding the progress made by tax administration and customs, the authorities acknowledged that there is still significant room for further improvements. They indicated their commitment to implement measures to boost tax and customs revenue collection, such as improving large and medium-sized taxpayers’ compliance, increasing capacity in the core functions of taxpayer registration, collection, and audit, and revamping the personnel incentive system, based on recent IMF TA recommendations. They are in the process of digitalizing procedures in DGI and DGD. The authorities are planning to implement measures aiming at enhancing customs administration and reducing opportunities for fraud, including by (i) strictly limiting the application of special regimes to urgent and perishable goods, and only those coming through the airport, which automatically fully excludes petroleum products from this procedure (D24) (a new structural benchmark for April 2020), (ii) applying the transaction value throughout the national territory (new structural benchmark for end-March 2020), in line with TA recommendations. The authorities are also moving ahead with the deployment of e-filing and payment of taxes online or via mobile banking (the latter is a new structural benchmark for end-June 2020). They recognized the importance of improving cargo traceability and conducting effective and systematic follow-up and control of companies receiving tax exemptions (MEFP ¶7–9). Finally, with the formal coordination framework between the tax and custom administrations already in place (end-December 2019 structural benchmark), efforts will focus on implementing the effective sharing of information between the DGI and DGD. Staff welcomed the authorities’ efforts to strengthen tax administration and customs and urged the authorities to avoid any discriminatory practices in the implementation of tax policy and administration.

16. The authorities recognized that lack of regulation and poor control procedures for imported petroleum products has led to severe revenue losses. A Fund TA mission in September 2019 noted the absence of physical and accounting controls in petroleum warehouses and that two-thirds of fuel products were granted clearance with no follow-up, thus generating tax arrears that were often underestimated and went frequently uncollected. Moreover, the Fund TA experts noted that the petroleum tax structure was poorly implemented and did not reflect actual import volumes nor comply with the WAEMU framework.6 The authorities concurred with the need to strictly limit the possibility of importers to clear merchandise without payments of tax and custom duties; and introduce traceability for petroleum products to control exemptions. Staff underlined that the performance of petroleum taxes warrants close monitoring and possible structural measures in future reviews should the underperformance persist.

17. A tax administration diagnostic assessment tool (TADAT) mission took place in November 2019. Its aim was to provide a comprehensive assessment of tax administration that could inform future policy reform and program design. The authorities welcomed a clear structure for future capacity development work related to revenue mobilization, including for a more integrated tax law framework and intend to base future reforms (MEFP ¶7), and the opportunity to develop a Medium-Term Revenue Strategy (MTRS) as a successor to the Revenue Mobilization Thematic Fund (RMTF) program that will expire in April 2020.

C. Supporting Inclusive Growth through Strengthened Governance and Business Environment

18. Mali’s governance challenges adversely impact sustainable economic growth and development. Businesses face challenging obstacles, including governance problems and corruption, poor contract enforcement, tax disputes, lack of basic infrastructure, poor access to banking services, and competition from the informal economy. Some positive steps have been taken in recent years to close infrastructure gaps and improve the business environment. The authorities are seeking to implement the findings and recommendations of the 2017 Public Investment Management Assessment, including by strengthening administrative procedures to improve infrastructure quality. They are also seeking to: (i) continue to strengthen the framework for public-private partnerships (PPPs) following the forthcoming adoption of the WAEMU framework; (ii) implement the new legal framework for tax disputes; and (iii) accelerate the development of mobile banking, including for the provision of public services (MEFP ¶28–32).

19. The authorities are committed to improving governance and controlling corruption. The law against illicit enrichment has been enacted in 2014.7 The authorities plan to expand the list of civil servants subject to asset declarations (new structural benchmark for end-March 2020, MEFP ¶37 bullet 1). Staff and the authorities also agreed on the importance of further strengthening the Law’s implementation including the verification process, and the sanctions for failure to disclose and false disclosure. Important gaps remain in the anti-corruption and rule of law framework (contract enforcements and property rights). A governance assessment is tentatively planned for 2020 alongside the next Article IV consultation, which should inform the authorities’ subsequent efforts to strengthen the governance framework. With reference to AML/CFT, in November 2019 the Groupe Intergouvernemental d’Action contre le Blanchiment d’Argent en Afrique de l’Ouest (GIABA) adopted the evaluation report for Mali, indicating low level of effectiveness of its AML/CFT regime and calling for fundamental improvements The authorities indicated that they intended to prepare an action plan for addressing the weaknesses in their AML/CFT framework identified by the GIABA report. Such efforts will reduce reputational risks for the financial sector and prevent pressure on correspondent banking relationships and “de-risking” of the remittances sector. (MEFP ¶40).

20. Progress is being made in improving the provision of electricity and strengthening the finances of the state-owned electricity company (EDM-SA). The authorities have taken measures to improve the operation and financial situation of the company, including by replacing its management, increasing supervision, increasing tariffs to industrial customers and signing of the performance contract between the government and EDM-SA (the latter a structural benchmark for end-November 2019). They also made progress in securing lower-cost electricity imports from the region. The implementation of the World Bank’s 2019–20 development program is broadly on track. The authorities intend to use part of the proceeds of the recently signed Loan from the Abu Dhabi Fund for Development (ADFD) to help EDM-SA restructure its short-term financial debt, on which they are seeking a haircut from commercial banks (0.9 percent of GDP, Box 2). Staff encouraged the authorities to expedite reforms as defined and agreed with the World Bank.

21. Rural poverty remains widespread. Agriculture is the backbone of the Malian economy, accounting for about one-third of GDP and four-fifths of employment, both levels considerably higher than regional averages. Agricultural growth in Mali has traditionally relied on extension strategies. With climate change (to which the Sahel region is highly susceptible), rapid population growth, and declining soil fertility, it is likely that it will be increasingly difficult to continue to rely on these strategies to drive agricultural growth and meet the needs of the Malian population. Moreover, a holistic approach to reducing gender inequality, increasing resilience against adverse weather conditions, improving literacy, and developing secondary and tertiary sectors with direct links to agricultural outputs would promote inclusive growth and contribute to the diversification of the economy. Policies and investments that promote off-farm food economy segments could have a particularly large impact on the economic activity of women. The authorities are promoting agricultural sector reforms, including rationalizing subsidies for inputs such as seeds and fertilizer, in cooperation with the World Bank, to promote inclusive growth and private sector development. Targeted and timely government support for farmers, including female shea butter farmers, to increase agricultural yields and reduce the gender gap would be critical (MEFP ¶33).

Program Modalities

22. Modified quantitative performance criteria (QPCs) and indicative target (IT) for end-June 2020 and new targets for end-December 2020 have been proposed in line with the revised macroeconomic framework of the program (MEFP Table 1). Structural benchmarks have been proposed for 2020 (MEFP Table 3). The clearance of the domestic arrears incurred during the third quarter of 2019 (CFAF 36.9 billion) has been set as a prior action for the completion of the first review. With the projected support from development partners and the Fund, the program is fully financed (Table 7). The next test dates for the program are end-December 2019 and end-June 2020.

Table 7.

Mali: External Financing Requirements, 2018–23

(Billions of CFAF)

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Sources: Malian authorities; IMF staff estimates and projections

Financing by the international community for imports of security services in relation to the foreign military intervention in the country and debt foregiveness.

23. Completion of the review will release a disbursement of SDR 20 million (10.7 percent of quota) (Table 8). Following this disbursement, Mali’s capacity to repay the Fund would remain adequate (Table 9). Obligations to the Fund would peak in 2027 at 1.6 percent of government revenue or 0.4 percent of GDP. Mali has a long track record of Fund borrowing and repayments that is a testament to its ability and willingness to repay any Fund lending on time. Moreover, Mali has unrestricted access to the pooled reserves of the BCEAO, further bolstering the safety of IMF lending to the country.

Table 8.

Mali: Schedule of Disbursements Under Three-year ECF Arrangement, 2019–22

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Sources: IMF staff estimates and projections.

Using the new quota under the 14th General Review of Quotas (SDR 186.6 million)

In addition to the generally applicable conditions under the Extended Credit Facility.

Table 9.

Mali: Indicators of Capacity to Repay the Fund, 2019–33

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Sources: IMF staff estimates and projections.

Total debt service includes IMF repurchases and repayments.

Includes future disbursements proposed in Table 6.

Using the new quota under the 14th General Review of Quotas (SDR 186.6 million).

24. The authorities’ commitment to program engagement with the Fund along with its design mitigate risks to the program. The main fiscal risks pertain to the possibility of underperformance of domestic revenue collections. Other risks relate to a potential further deterioration in the security environment, adverse weather conditions, and terms of trade shocks.

25. Capacity building is focused on improving revenue administration as well as cash management. Mali has received extensive TA for tax administration and customs, following the contraction of revenue collections in 2018, as well as in public financial management. TA efforts will continue in these areas in the coming period.

26. Safeguards assessments. The last safeguards assessment of the BCEAO completed in 2018 found that the central bank had maintained a strong control environment, audit arrangements were in broad conformity with international standards, and the financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). The BCEAO enhanced the oversight role of its audit committee and is making progress to strengthen its risk management function in line with the recommendations of the assessment. The central bank’s financial statements continue to be published on a timely basis.

Staff Appraisal

27. The security situation is Mali remains highly challenging. Continuous attacks by rebel groups in the North and Center regions have compounded fragile conditions in these areas, where establishing the presence of the state through delivering public services remains critical.

28. Nonetheless, performance under the IMF-supported program has been broadly satisfactory, for which the authorities deserve credit. Five of six QPCs for end-September 2019 were met, while the breach of the zero-ceiling on the accumulation of domestic arrears at end-September 2019 is expected to be temporary as these arrears should be cleared prior to the Board meeting, with corrective steps taken to ensure that domestic arrears do not recur. The IT on priority social spending was temporarily missed by a small margin but is expected to be met for the full year. Four of seven SBs for 2019 have been met and good progress has already been made on the remaining three end-December 2019 SBs.

29. The economic outlook for Mali remains broadly positive but subject to downside risks. The growth rate is estimated at about 5 percent per year and inflation is expected to continue to remain below the WAEMU ceiling. The stable current account deficit is expected to be fully financed by official and private inflows. However, downside risks relate to the possible further deterioration of the security situation, potential shocks to the terms of trade (the price of gold, cotton, and fuels), and adverse weather conditions.

30. In staff’s view, the proposed fiscal framework strikes an appropriate balance between spending needs and available resources. The small relaxation of the overall deficit target for 2020 from 3 to 3.5 percent of GDP is justified by the need to increase priority social and development spending in the context of the precarious security situation and its increasing costs. The wider deficit can be financed without adverse repercussions for regional financial stability, while the authorities need to be mindful of addressing short-term rollover risks and lengthening the maturity of the debt.

31. The 2020 budget is based on an ambitious but realistic revenue target. Significant progress has already been made in restoring revenue collections in 2019 and further progress is expected in 2020. Staff urges the authorities to continue to pursue revenue administration reform in line with TA recommendations and the outcome of the TADAT review. Staff also encourages the authorities to adopt a medium-term revenue strategy.

32. Staff concurs with the authorities that greater spending efficiency is needed in the context of limited domestic and external resources. Staff welcomes the authorities’ intentions to rationalize subsidies, strengthen project selection and execution, and improve overall cash management to avoid the recurrence of domestic arrears. Cooperation with the World Bank on securing transparent and efficient security spending will also be critical.

33. Staff supports the authorities’ reform strategy for the state-owned electricity company. Putting EDM-SA on a sound financial footing is instrumental to reducing fiscal pressures and securing an adequate supply of electricity. The increase in tariffs to industrial customers and the finalization of the performance contract between the government and EDM-SA are welcome, and efforts should continue to lower costs through changes to the energy mix and financial restructuring.

34. Staff welcomes the authorities’ continued efforts to create conditions for a stronger private sector. Well-designed and implemented PPPs can pay a role in closing infrastructure gaps, while mobile banking has the potential to foster inclusive economic growth and expand the formal economy. Agriculture is a mainstay of the Malian economy but is faced with the potentially adverse impact of climate change. Targeted and timely government support for farmers to increase agricultural yields is critical for raising output and reducing the gender gap.

35. The authorities’ commitment to improving governance and fighting against corruption is commendable. The planned governance assessment will inform plans for future reforms in this area. In the meantime, the authorities have agreed to upgrade the law against illicit enrichment. Staff urges the authorities to expeditiously implement their forthcoming action plan to address AML/CFT deficiencies identified by the recent GIABA assessment. Reforms to improve fiscal governance in the areas of revenue administration, tax policy, and cash management will also play a critical role in improving transparency and reducing vulnerabilities to corruption.

36. Staff supports the Malian authorities request for the completion of the first review under the ECF arrangement, including a waiver for the non-observance of the performance criterion on non-accumulation of domestic arrears, and the release of the second disbursement under the arrangement in the amount of SDR 20 million (10.7 percent of quota).

Implementation of the 2015 Peace Agreement

An agreement for peace and reconciliation in Mali (APRM) was signed in May 2015, between the government and some rebel groups from the North, to restore peace, social cohesion and stability. Progress in the implementation of the APRM has been uneven.

  • Political and administrative reforms. A new electoral code was adopted in 2016, along with a revised Local Authorities Act (LAA) in 2017, which should pave the way to regional assemblies’ elections by direct universal suffrage. But the spiral of insecurity, coupled with divergences of understanding on the legal requirements for holding these elections, have prevented their organization so far. The installation of interim authorities in the regions is also facing significant delays. A general amnesty law was also enacted in July 2019. The creation of a second chamber in Parliament as well as of a Court of Accounts (in line with WAEMU’s directives) are pending a Constitutional review.

  • Defense and security. A decree clarifying the modalities for setting former rebels’ grades was recently adopted, which should help accelerate the integration of about 1,840 former rebels into a unified and inclusive army, through the ongoing demobilization, disarmament and reinsertion process (DDR), along with the formation of mixed patrol units in some regions (Timbuktu and Gao). But such mixed patrol units are not present in Kidal yet. The law creating the territorial police has not yet been adopted.

  • Socio-economic development. The 2018–008 Act, creating the sustainable development fund (FDD) for the financing of development projects and programs in the Northern regions, was adopted in February 2018. Its implementation texts were adopted in June 2018, while its manual of administrative, financial and accounting procedures is under preparation. Resources should accrue to the FDD through various taxes (on tobacco, airline tickets, tourism vehicles, and exit duties on cotton). Pending the operationalization of the FDD, emergency projects were executed in 2017 and 2018 in the North with advance payments from the budget (0.1 percent of GDP). Fiscal decentralization is also proceeding, with technical assistance from the IMF and the World Bank, including for strengthening budget execution capacities and audit and control mechanisms in the regions. The principle of local authorities’ ability to set the rates of some taxes, fees, and levies and introduce new taxes was enacted in the revised LAA, but may need to be asserted in the Constitution, for consistency purposes. The same applies to the provision requesting the allocation of a share of natural resources revenue to regions. The government started transferring resources to regions, though not yet up to the 30 percent set in the APRM (19.7 percent in 2018 and 21.7 percent in 2019). A decree clarifying the responsibilities to be transferred to the regions, including education and health services, was enacted in March 2018.

Financial position of the FDD (CFAF billion)

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The Financial Situation of EDM-SA

The Malian electricity company (EDM-SA) is facing insolvency. EDM-SA’s revenues are insufficient to cover its operating expenses, financing costs, and investment needs. This situation results mainly from insufficient investment, poor management, and the long-standing practice of charging electricity prices well below the cost of generation. Inadequate revenue and subsidies have forced the company to borrow from suppliers and banks. EDM-SA’s debt (including arrears) was estimated at CFAF 319 billion (3.1 percent of GDP) at end-June 2019.

The government is implementing a two-pronged strategy to strengthen EDM-SA’s financial position, efficiency, and investment, with technical and financial support of the World Bank. In the short run, the strategy involves streamlining tariffs, reducing operational costs as well as addressing EDM-SA’s short-term debt and arrears. In the long run, the World Bank is supporting the investment plan for the electricity sector with a view to lowering EDM-SA production and procurement costs by favoring solar generation and electricity imports over the use of expensive hydrocarbon fuels in electricity generation.

EDM-SA’s short-term debt to commercial banks urgently needs to be restructured to prevent default. This debt amounted to an estimated CFAF 85 billion at end-October 2019. The government has decided to use CFAF 50 billion from the Abu Dhabi loan and a further CFAF 35 billion budget allocation in 2020 to retire this debt. The part of this operation financed from the Abu Dhabi loan is an on-lending operation recorded below the line in the fiscal accounts as EDM-SA will be expected to repay this amount, albeit on favorable terms. In the meantime, negotiations continue with the commercial banks on improved terms on their loans to EDM.

Figure 4.
Figure 4.

Mali: Fiscal Developments

Citation: IMF Staff Country Reports 2020, 008; 10.5089/9781513526461.002.A001

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

Appendix I. Letter of Intent

Bamako, December 20, 2019

Ms. Kristalina Georgieva,

Managing Director,

International Monetary Fund, (IMF)

Washington, D.C., 20431

Dear Ms. Georgieva:

My government greatly appreciates the consistent support that the IMF has provided to Mali in terms of policy advice, technical assistance, and financing over a prolonged period. This support has been essential to enable us to maintain a record of strong economic performance in very challenging circumstances.

As you know, Mali has faced an unprecedented security crisis in recent years. In response, the government has been forced to allocate steadily increasing budget resources to military and security spending at the expense, unfortunately, of social and development spending.

Since the approval of the ECF arrangement in August 2019, the security situation has taken a decisive turn for the worse. Terrorist attacks on our military bases along the border with Burkina Faso and Niger have become a weekly occurrence with significant loss of life. We will, therefore, again be forced to devote significant resources to security spending in the face of steadily expanding jihadist terrorist activity.

We have made important progress in restoring revenue collections in 2019 with the extensive assistance of IMF technical experts. The performance of tax administration has been particularly impressive while customs has lagged somewhat, partly on account of difficulties in collecting taxes on petroleum products. Our latest tax revenue projections for 2020, agreed with IMF staff as the basis for the program next year, suggest that collections will be about 0.3 percent of GDP lower than in the proposed 2020 budget. However, this shortfall will be more than offset by the revenue from the issuance of the fourth telecommunications license 0.5 percent of GDP.

In these circumstances of higher security spending needs and our strong commitment to address urgent social and development needs, we are requesting a relaxation of the ceiling on the overall fiscal deficit in the program for 2020 from 3 percent of GDP to 3.5 percent so as to be able to increase overall spending for 2020 including on our efforts to enhance development spending and reinforce the presence of the State in the Center and North of the country, where fragility stemming from the lack of security is pronounced. We have engaged extensively with our WAEMU peers and the WAEMU Commission to request the adjustment of the WAEMU convergence criterion.

As to performance under the program thus far, all but one of the quantitative performance criteria (QPC) for end-September 2019 were met. The zero-ceiling on the non-accumulation of domestic arrears was breached by CFAF 36.9 billion (0.4 percent of GDP) in the third quarter owing to a very tight liquidity situation resulting from a very high float carried over from 2018 and the delayed release of external budget support loans. We recognize that clearing these arrears is a prior action for the completion of the first review under the Extended Credit Facility (ECF) arrangement. We are also taking measures to ensure that domestic arrears are not incurred again, including strengthening liquidity forecasting and cash management. The indicative target (IT) for priority social spending was missed by a small margin. Four of seven structural benchmarks (SB) for 2019 have been met in a timely fashion.

The Government continues to pursue efforts to strengthen the country’s electricity company, Energie du Mali (EDM), as part of our efforts to strengthen the business environment in support of private sector development. We are working closely with the World Bank and the IMF on these reforms. The Government is also acting to reduce the country’s gender gap, including the women’s empowerment program for shea butter production.

The Government is acutely aware of the need to further improve governance and battle corruption. Measures to improve revenue performance and the transparency and efficiency of spending operations are a part of our efforts to this end. We are also taking action to enhance the implementation of the United Nations Convention Against Corruption, as well as to strengthen the substance and implementation of the law on the prevention of illicit enrichment. We are looking forward to the IMF’s governance assessment scheduled for early 2020 and the recommendations arising from it.

In view of Mali’s track record of satisfactory performance under IMF-supported programs and the corrective actions that have been taken, we request a waiver for the non-observance of the QPC for domestic arrears and modification of QPCs for end-June 2020. Moreover, we request the completion of the first review under the ECF arrangement and the second disbursement thereunder in the amount of SDR 20 million (10.7 percent of quota).

The attached Memorandum of Economic and Financial Policies (MEFP) presents the policies that the Government intends to carry out in the remainder of 2019 and in 2020. The program aims to preserve macroeconomic stability, including debt sustainability, and consolidate the foundations for accelerated, sustainable, and inclusive growth and job creation, consistent with our development strategy, Cadre Stratégique pour la Relance Économique et le Développement Durable 2019–23 (CREDD).

The Government believes that the measures presented in the MEFP will serve to achieve the economic and social objectives of its program. Nevertheless, we remain committed to taking any further measures that may prove necessary to this end. The Government will consult with the

IMF prior to the adoption of any such measures, and in advance of revisions to the policies contained in the MEFP, in accordance with applicable IMF policies.

The Government will also communicate to the IMF any information concerning implementation of the agreed measures and program execution, as specified in the attached Technical Memorandum of Understanding (TMU), or as the IMF may request.

As in the past, the Government authorizes the IMF to publish this letter, the attachments hereto, and the related IMF staff report upon approval by the IMF Executive Board.

Sincerely,

/s/ Dr. Boubou Cissé

Prime Minister, Head of Government, Minister of Economy and Finance

Attachments: Memorandum of Economic and Financial Policies

Technical Memorandum of Understanding

Attachment I. Memorandum of Economic and Financial Policies

1. The principal aim of the program supported by the Extended Credit Facility (ECF) is to preserve macroeconomic stability through a credible fiscal policy and to strengthen the foundations for sustained and inclusive growth in line with the objectives outlined in the Strategic Framework for Economic Recovery and Sustainable Development (CREDD) for 2019–2023. In order to achieve this, the government is planning to: (i) improve the effectiveness of tax and customs administration; (ii) contain the overall budget deficit, while protecting priority expenditures and improving the efficiency and execution of public spending; (iii) pursue a sustainable debt policy; (iv) strengthen the financial position of the Malian energy company (EDM-SA); (v) improve the business climate and economic diversification; and (vi) promote good governance.

A. Economic Outlook for 2019 and 2020

2. For 2019, real GDP is projected to grow at 5.1 percent and inflation should decrease to turn slightly negative. The higher projected growth in GDP is driven by the recovery of the tertiary sector (projected at 5.3 percent in 2019 compared to 4.8 percent in 2018) and the construction sector (projected at 5.5 percent in 2019 compared to 0.2 percent in 2018), which indicates a return to the previous growth trajectory. Inflation should be slightly negative due to significant food price deflation. Budget execution is expected to be marked by higher tax revenue mobilization (14.6 percent of GDP expected in 2019 compared to 11.9 percent in 2018). The strengthening and implementation of operational measures, as well as efforts under way within the tax administration and customs, should allow for a full recovery of tax and customs revenues by 2021. The overall fiscal balance is projected at 2.9 percent of GDP (commitment basis) in 2019. The overall balance of payments is expected to remain positive as a result of strong growth in exports and capital and financial accounts. The increase in budget support from the World Bank ($250 million) and the Abu Dhabi Fund for Development ($250 million) in 2019 will support the budget execution and should provide opportunities for the restructuring of the short-term commercial bank debt of EDM-SA, thus facilitating a comprehensive reform of the energy sector.

3. In 2020, real GDP growth is projected at 5 percent and inflation is expected to remain very low. Budget execution should be marked by an increase in tax revenue (15.5 percent of GDP) through the implementation of structural reforms in the General Directorate of Taxation (DGI) and the General Directorate of Customs (DGD). The overall budget balance is forecast at 3.5% of GDP (commitment basis). The overall balance of payments should remain slightly positive driven by a strong increase in gold exports.

B. Program Performance

4. All the performance criteria were met at end-September 2019, with one exception (Table 1). The ceiling on domestic arrears was exceeded by CFAF 36.9 billion. The indicative target on priority social spending was missed by CFAF 14 billion.

Table 1.

Mali: Performance Criteria and Indicative Target for 2019 and 20201

(in CFAF billions)

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Sources: Malian authorities; and IMF staff projections.

Cumulative figures from the beginning of the year, unless otherwise indicated. See Technical Memorandum of Understanding (TMU) for definitions.

This performance criterion is subject to adjustment for budget support loans, net change in budgetary float, and payment of tax refunds.

These performance criteria will be monitored on a continuous basis.

In PV terms, cumulative from the start of the program. The 2020 ceiling applies continuously from the beginning of the year.

This performance criterion is subject to adjustment for budget support.

The floor on net tax revenue will be adjusted downward (upward) to the extent that tax refunds exceed (fall short of) the projected amount.

The definition of priority social spending as of 2020 is different from before as specified in the TMU.

5. Four of seven structural benchmarks for 2019 have been met (Table 2). These are structural benchmarks on the reduction of the number of transit documents that have not been validated and/or recorded in the DGD’s Automated System for Customs Data (ASYCUDA) (the reduction rate is estimated at 62.5%), finalization of the specifications for the implementation of online payment of taxes and duties, finalization of the performance contract between the government and EDM-SA, and finalization and operationalization of the formal framework for collaboration and information-sharing among the DGI, the DGD, the Treasury, the General Directorate of the Budget (DGB), the General Directorate for Public Procurement and Public Service Delegation (DGMP-DSP), the General Directorate for Trade, Consumer Affairs, and Competition (DGCC), the National Social Security Institute (INPS), and the Support Unit for the Computerization of Tax and Financial Services (CAISFF). The other three structural benchmarks for 2019 are expected to be met within the timeframe initially established.

Table 2.

Mali: Prior Actions and Structural Benchmarks for 2019

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C. More Effective Tax and Customs Policies and Administration

Administrative Measures

6. One of the government’s top priorities is to address the underperformance of the tax and customs administrations. The sharp decline in revenues in 2018 highlighted weaknesses and bottlenecks in the collection of direct and indirect taxes. Corrective measures are being implemented based on the IMF technical assistance recommendations and internal audits of Ministry of Economy and Finance departments.

General Directorate of Taxation (DGI)

7. The government is committed to the implementation of the following major reforms:

  • Immediate audits in response to the 2018 revenue shortfall. The government will be performing extended audits of all of the businesses that have signed up for flat-rate tax declarations, in particular with regard to the handling of wages (taxes on wages and salaries, or ITS). It also intends to establish extended auditing of all businesses operating at a loss or those that have declared lower corporate taxes in spite of an increase in their turnover. As of November 23, 2019, staff identified 574 taxpayers based on targeted inspections; 316 of these taxpayers received notifications totaling CFAF 1.8 billion, CFAF 586 million of which was confirmed following responses to the notifications received and processed.

  • Improved monitoring. Going forward, the government plans to strengthen the monitoring of tax declarations with regard to the handling of wages (ITS) and VAT and to perform targeted audits of businesses affected by identified risks. Particular attention will also be paid to cross-checking wages and social contributions information from the INPS, the continued use of flat-rate tax declarations despite adjustments made following previous audits, the maintenance of management indicators, the recovery of failing businesses, monitoring of VAT deductions according to Annex 1.1 (including efforts to strengthen legislation), close monitoring of installment payments of corporate taxes and the tax on business profits (IBIC) by all entities, and close monitoring of the use of cross-checked information from the DGD, the Directorate General of Public Procurement and Delegation of Public Services (DGMP), the Malian Fund for Social Security (CMSS), and the INPS.

  • Improved audits. Tax declarations with a credit or zero balance, flat-rate declarations for ITS and payroll taxes, and personnel placement firms will be subject to spot and targeted audits. The government is committed to increasing the proportion of spot audits for VAT and ITS. It will also ensure that the officials performing the audits follow the spot audit procedure (Article 562 of the Tax Procedure Handbook of the General Tax Code) that is best suited to the handling of frequent cases of failure to comply with tax discipline. For cases involving regressive tax declarations, a thorough audit of the accounting will be performed, in particular where mining companies and industrial entities are concerned. The ratio of spot audits in the execution of the tax audit program is 53 percent (the number of taxpayers scheduled for tax audits is 1,814, of whom 574 are subject to spot audits and 1,241 to document-based audits (CSP) and general audits of accounting (VGC)). The tax audit performance target calls for 598 taxpayers, of whom 316 are subject to spot audits and 282 to CSP and VGC. For 2020, the ratio of spot audits is expected to be at least 50 percent of the tax audit program.

  • Collection and settlement of tax arrears. The government plans to establish a central structure for the management of collection actions consisting of a special unit responsible for the collection of tax arrears from distressed taxpayers. This will also include the implementation of rigorous collection methods with the support of enforcement agents, in particular seizure sale, seizure of property by customs, the establishment of various timetables for payment guarantees, and the creation of tracking units within all revenue structures. The establishment of the central structure for the management of collection actions is expected by December 31, 2019. The government also intends to provide for the widespread use of the collection module available as part of the Standard Integrated Government Tax Administration System (SIGTAS) software by end-2019 with the aim of improving the monitoring of outstanding balances. The government will establish and operationalize a commission to implement the procedure for writing off irrecoverable claims by end-December 2020.

  • Information systems and data quality. The government will continue to streamline and upgrade the taxpayer database by deactivating inactive or dormant Tax Identification Numbers (TINs) and tax accounts, and by making the SIGTAS system the only reference source for the tax population accessible by all of the departments under the Ministry of Economy and Finance. The government also plans to promote the regular use of the verification, in dispute, and tracking of exemptions modules in SIGTAS. The acquisition of the software dedicated to the production of performance indicators is expected by end-June 2020.

  • Remote electronic procedures. The government is committed to providing for the widespread use of electronic procedures (online filing and online payments) for all businesses subject to the VAT. While online filing is already available to taxpayers, specifications for the operational implementation of online payments were approved in October 2019. The government is committed to modifying the provisions of the Tax Procedure Handbook to make the use of online services mandatory for companies subject to the VAT (April 2020 session of the National Assembly). The implementation of the new provisions will start with the taxpayers managed by the Directorate for Large Businesses (DGE) in 2020 and those managed by tax centers for medium-sized businesses (CIME) from January 2021.

  • Strengthening of tax discipline. The government plans to step up its efforts to finalize the new plan to strengthen tax discipline, with implementation scheduled by end-2019. This plan will be supported by indicators drawn automatically from SIGTAS (the indicator tables were produced for the months of June to September 2019) and it will be focused on strengthening the management of taxpayer records and management of the default rate related to tax obligations. The promotion of tax compliance will also be part of this plan (Box 1). It will include actions aimed at making significant improvements in the quality of taxpayer services, among other things.

  • Tax administration-customs cooperation. The government finalized and operationalized, in July 2019, the formal and expanded framework for collaboration among the DGI, the DGD, the Treasury, the DGMP-DSP, the General Directorate of Trade, Consumption, and Competition (DGCCC), the DGB, the INPS, and the CAISFF, which will facilitate data sharing. This makes it possible to streamline the use of TINs and to revitalize the actions of the joint tax-customs team through the quantitative and qualitative strengthening of staff and more decisive implementation of controls. A detailed report on the use of information and data collected within the context of this collaboration will be made available by November 30, 2019.

Main measures to strengthen tax compliance

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8. The government intends to carry out reforms of the DGI that are necessary for its modernization and for the strengthening of its performance. This effort will be focused on the following key areas:

  • Human resources management. It is committed to adapting staff to the new organization of the DGI, streamlining and clarifying the individual and collective personnel objectives, and increasing the number of personnel through the recruitment and redeployment of administrative staff. Assignments to the DGE (15) and the Directorate for Medium-Sized Businesses DME (12) already took place in 2019. The 2019 training plan has been developed and approved. To date, the implementation of the training plan has trained 602 agents. The 2020 training plan is being prepared.

  • Improvement of the incentive system. The government intends to develop the incentive system based on performance evaluations of structures and personnel according to quantitative and qualitative criteria, such as the quality of services provided to users, productivity, effectiveness, and efficiency. A study has been initiated and conclusions are expected by December 31, 2019.

  • Results-based management. The government is also committed to promoting results-based management and to implementing participatory management based on delegation (hierarchical control) and the strengthening of internal control (quality control). Strategic and work plans have been developed and the internal control reports for the first and second quarters of 2019 have been approved.

  • Research activity. The government intends to restructure the research unit with the aim of enhancing and evaluating the information collected. The manual cross-checking of company invoices requires the deployment of a large number of agents. This method must be abandoned and replaced with the automated use of supplier and customer electronic records in a format that allows for their integration into the database. For this purpose, the Tax Procedure Handbook will be amended accordingly (session of the National Assembly of April 2020).

  • Operationalization of new structures. Tax centers for medium-sized businesses will be established in Bamako (two centers) by June 2020 and in Kati (one center) by 2021 within the context of the revision of the texts on the organization and methods of operation of the DGI and Regional and Subregional Directorates (draft texts to be submitted for the approval of the Council of Ministers) and the operationalization by end-2019 of the Joint Pre-Litigation Commission for Tax Conciliation (inter-ministerial meeting held on June 14, 2019).

General Directorate of Customs (DGD)

9. The government is planning to strengthen the organizational and functional structure of customs, and also to rectify deficient procedures. With this aim, it intends to implement an action plan, the principal measures of which are as follows:

  • New Customs Code. The government has drafted and submitted to the National Assembly a Customs Code Act, which is expected to be adopted by June 30, 2020, to take into account international best practices, improve the efficiency of the administration, and modernize its procedures. It intends to implement all the regulations resulting from the new Customs Code (decrees, orders, instructions) by end-September 2020.

  • Organizational and functional structure. The government intends to complete the review of decrees establishing the organization and functional procedures of the DGD (2012–146/P-RM) and defining the organic framework of the DGD (2012–148/P-RM), allowing for a reduction in the fragmentation and duplication of activities among departments and for the recruitment of personnel specialized in planning, information technology, and auditing. The adoption of new decrees is planned for end-2019 with operationalization expected in the first quarter of 2020.

  • Interconnection of the Interconnected System of Goods Management in Transit (SIGMAT). Mali started the installation work in September 2019, in accordance with the Economic Community of West African States (ECOWAS) timetable, with the integration of the SIGMAT transit module into its ASYCUDA WORLD system. The interconnection with Senegal will be effective at end-March 2020, followed by Côte d’Ivoire and other countries (Benin, Burkina Faso, Guinea, Niger, and Togo).

  • Transaction value. The government intends to deploy the necessary actions (structural, technical and IT) for a strictly rule-based application of the transaction value throughout the country as of March 31, 2020, through an action plan developed for this purpose. The operationalization of the Value module of ASYCUDA WORLD is scheduled for March 31, 2020.

  • Strengthening the monitoring of commitments through a systematic cessation of the issuing of duties and fees at the end of the calendar month and cessation of collections after a period of five (5) business days from the cessation of issues.

  • Consolidation of the processing of direct collections by restricting the use of the procedure to a number of goods exclusively listed in the regulation. Direct collections will be authorized only at the Airport Office from April 1, 2020. A new order will be issued to operationalize this. The blocking of operations of operators who have not cleared their D24 has been effective since November 11, 2019. A report on the monitoring of direct collections by product is compiled quarterly.

  • The automation of procedures for the control of suspensive regimes is scheduled for December 31, 2019.

  • The electronic acceptance of air waybills (AWB) in ASYCUDA WORLD is scheduled for December 31, 2019.

  • Strengthening of customs controls based on risk assessment. The government has implemented a risk-based approach to customs control for cargo and exemption requests.

  • Automated risk management for all of the operational departments. Work is currently underway to improve its reliability, particularly through the computerization of litigation. The staff of the Intelligence and Risk Analysis Division (DRAR) were strengthened in the second half of 2019 (five IT staff).

  • Strengthening the physical control of goods. The implementation and use of scanners at certain strategic locations now allow agents to scan goods. Those declared suspect are subject to escort and mandatory physical checks.

  • Implementation of the provisions of the new Import Inspection Program (PVI) by making the Technical Assessment Center (CET) operational before December 31, 2019, and by expanding the training activities already under way to include all of the DGD personnel, with an emphasis on the training of a critical mass of inspectors. Assignment of officers to the CET is expected by December 31.

  • Marking of exempt petroleum products. The government intends to introduce the marking of exempt petroleum products. A detailed action plan for the implementation of this measure is planned for the second half of 2020 with a view to subsequent operationalization.

  • Price structure of petroleum products. The government is committed to conducting a simulation of the changeover of valuation from weight to volume of petroleum products by December 31, 2019.

  • Continued deployment of base camps to combat fraud, in particular smuggling. Four base camps have been operational since November 2019 for a period of four months. The four localities are Sienso, Diema, Bancoumana, and Kadiolo.

  • Common external tariff (CET). The government is committed to justifying or remedying, if necessary, the discrepancies found from the analysis of the list of goods whose tariffs do not appear to correspond to the West African Economic and Monetary Union (WAEMU) CET by December 31, 2019.

Fiscal Policy Measures

10. The government intends to abolish the VAT withholding practice as soon as possible. In order to do this, it will carry out transitional measures such as the launching of a public information campaign aimed at taxpayers who are subject to the VAT, the mandatory use of remote electronic services by all taxpayers subject to the VAT to enable the automatic use of the VAT Annex 1.1 (a statement that describes the purchase transactions of a company indicating the names of the suppliers of goods and services, TINs, amounts exclusive of VAT, VAT amounts, transaction amounts with all duties included).

11. The government is committed to improving fuel tax revenues by implementing a more systematic application of the automatic mechanism for setting fuel prices at the pump within the margin of 3 percent. In the event of particularly steep increases in international fuel prices, the government will put in place compensatory measures to reduce the impact on total revenues, including spending cuts, with the exception of priority spending (education and health). The government recognizes the need for an overall strategy for the energy sector that re-examines fuel margins and streamlines tax exemptions, including those granted to mining companies in order to improve the mobilization of fuel-based revenues.

12. New Mining Code. The government has taken into consideration the recommendations of IMF experts regarding the mining sector. In particular, the new Code, which is currently being discussed by the National Assembly, will make it possible to rationalize the exemptions while specifying their beneficiaries. Specifically, it will limit tax benefits to suppliers whose activities are directly related to mining activities. The government is committed to adopting the relevant implementing texts as soon as the new Code is passed by the National Assembly.

13. The government intends to take new measures to expand the tax base:

  • Property taxation. The government plans to develop property taxation by introducing a new tax on developed and undeveloped land, which would replace the current property tax by 2021. In addition, it is committed to making significant improvements in the recording of property and real estate titles in the database of the Information System for Property and Real Estate Titles (SITFI) that is currently being developed by the National Property Directorate (DND). This database will be accessible by DGI staff.

  • Mobile banking services. The government expects to make the payment of certain taxes through mobile banking services available by end-2020 with a view to simplifying the procedures for taxpayers and encouraging tax compliance. This could make it possible to add potential taxpayers from the informal sector to the tax base. To that end, an action plan is expected by end-June 2020.

  • Nongovernmental associations and organizations. The government plans to revise certain provisions of the General Tax Code with a view to taxing the income of so-called “non-profit” associations and non-governmental organizations that provide services or perform work under the same conditions as for-profit businesses. Some provisions have already been included in the fiscal annex of the 2020 Budget Law.

  • Selected VAT measures. A pre-program agreement with the private sector has entered effect on October 1, 2019 to reduce the VAT rate on selected products and enterprises from 18 percent to 9 percent. Initial estimates by the authorities suggest that the revenue impact will be negligible, but the government will provide data on the sale of and VAT on the targeted products as required under the agreement with the private sector by mid-January 2020. Based on the final loss estimates to be agreed with staff, the government commits to identifying the needed measures to offset the potential impact of these measures. Going forward, the government also commits to refraining from any discriminatory practices in the implementation of tax policy and administration.

D. Control the Overall Budget Balance while Protecting Priority Spending and Improving the Management of Expenditures

14. The government has submitted to the National Assembly a supplementary budget law for the year 2019 that meets the performance criteria and the level of spending defined in the macroeconomic framework linked to the new three-year arrangement under the ECF. This supplemental budget law was adopted by the Parliament on October 5, 2019.

15. The government has submitted to the National Assembly a 2020 budget law that complies with program parameters under the three-year arrangement under the ECF on September 26, 2019. This budget law will be adopted no later than December 31, 2019, or in accordance with Article 57 of Law No. 2013–28.1

16. The government is committed to maintaining its original targets in terms of investment and priority expenditures, in particular in the education and health sectors. It will ensure that an emergency budget plan and prioritization of expenditure items accompanies the 2020 budget law in order to guarantee compliance with the WAEMU convergence criteria. The level of social spending and priority development (health, education, social development, decentralization/FNACT2, roads) for 2020 is set at about CFAF 651 billion (6 percent of GDP).

17. Regulatory measures. The government plans to pursue regulatory measures in the event of underperformance in revenue collection. To this end, it will take steps to freeze and/or cancel budget appropriations in accordance with Article 29 of the 2020 budget law, while preserving the social and priority expenditures, in particular investments. In the event of overperformance in revenue collection, the government is committed to consulting with the IMF on the utilization of the resources available.

18. The government plans to streamline budget transfers and grants. It will seek to improve transparency and visibility over the medium term, including through efforts to improve predictability for all of the recipients of budget transfers and grants, in particular in the agricultural sector.

19. The government intends to strengthen the selection and implementation of investment projects, in particular by following the recommendations of the 2017 Public Investment Management Assessment (PIMA), so as to maximize fiscal efficiency and the impact on the real economy, the business environment, and potential output growth. This also means an improvement in the systematic assessment of projects ex ante, the regular technical review of project assessments, and strengthening of the legal framework governing public private partnerships (PPPs) with the aim of mitigating the risk of accumulation of contingent liabilities by the government. In addition, on the basis of existing studies, the government is committed to preparing a market price list of standard costs for transportation infrastructure, public works, and agricultural irrigation facilities for implementation by end-September 2020.

20. The government has cleared all payment arrears accrued in 2018.

21. The government is committed to no longer resorting to the accumulation of domestic payments arrears, especially by strengthening cash management, the commitment control system, and revenue collection. In addition, it is committed to not exceeding the mechanical ceiling on the float.3

22. Cash management. The authorities continue to improve cash management and strengthen budget execution controls in order to control the level of the float and avoid the recurrence of arrears. They continue to consolidate the Treasury Single Account (TSA) for more efficient cash management. An AICE2 computer accounting system module will be developed and interconnected with the WAEMU banking system to automate expenditure and revenue transactions. The implementation is planned for end-March 2020. In addition, the TSA coverage will also be expanded to include deposits of 50 national public institutions by end-2020, with the remaining institutions being integrated in subsequent years. Ex ante controls on expenditure commitments will be strengthened through commitment plans aligned with cash flow forecasts to manage expenditures based on available cash. These commitment plans will be introduced in the 10 largest ministries, in collaboration with IMF technical assistance, during the implementation of the 2021 budget and extended to the rest of the government the following year.

E. Conducting a Sustainable Debt Policy

23. Debt sustainability. The government will continue to conduct a debt policy that is consistent with maintaining debt sustainability.

24. External borrowing contracted or guaranteed by the government. For 2019, the government is committed to not exceeding the ceiling for external borrowing contracted or guaranteed by the government, which is equal to CFAF 329 billion in present value terms. For 2020, the ceiling is set at CFAF 526 billion in present value terms (Table 4).

Table 3.

Mali: Proposed Structural Benchmarks for 2020

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Table 4.

Mali: Summary of the External Borrowing Program1

(in CFAF billions)

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Source: Malian authorities; IMF staff estimates

Indicative objective for new borrowing arranged or guaranteed

Debt in which the grant component exceeds a floor of 35 percent.

Debt comprising a grant component that is positive but does not comply with the established floor.

25. Reducing refinancing risk of domestic debt. The government is committed to reducing the risk of refinancing by favoring long-term concessional external loans and accelerating the implementation of the short- and medium-term debt management strategy.

F. Strengthening the Financial Position of the EDM-SA

26. Financial viability. The government is pursuing the implementation of a restructuring and reorganization plan supported by the World Bank. The execution of this plan should allow EDM-SA to find a financial balance by 2025. This includes the elimination of the annual subsidy from the state, with the exception of transfers necessary to maintain the social tariff to preserve the most vulnerable layers of the population.

27. Restructuring of the financial debt portfolio, of which the short-term debt vis-à-vis local commercial banks is estimated at around CFAF 85 billion as of October 31, 2019. The government plans to assist EDM in restructuring its short-term debt, in particular vis-à-vis Malian commercial banks. The financial operation is expected by end-December 2019.

  • Renegotiation of terms. It intends to enter into discussions with commercial banks on renegotiating the terms of bank debt with short-term maturity and on the refinancing conditions.

  • Refinancing. It is committed to assisting EDM-SA in gaining access to loans under more advantageous terms than those available in the local market. This assistance is backed by a performance contract, signed on November 18, 2019, between the government and EDM-SA with the aim of limiting the risk of moral hazard and ensuring the viability of the financial operation over time. The performance contract will spell out the terms, conditions, and reciprocal commitments for the government’s assistance in the financial recovery of EDM-SA, in particular the takeover and renegotiation of the bank debt, as well as a gradual reduction in the implicit subsidy for petroleum products, the EDM-SA cash plan, and priority investments.

G. Strengthening the Business Environment

28. Investment Code. The draft of the new Investment Code has been submitted to stakeholders and consultations are underway for adoption by June 2020. The new Code will promote private sector development while ensuring continued streamlining efforts of tax and customs exemptions.

29. Special Economic Zones (SEZ). The government is continuing consultations on a draft law on SEZs in order to make its industry more competitive and to promote the development of certain strategic sectors, while ensuring that efforts to rationalize tax and customs exemptions continue. The adoption of this law by the Council of Ministers will take place in the first quarter of 2020.

30. Public-private partnerships. The government intends to improve the investment framework and to enhance the attractiveness of foreign direct investment by improving PPPs.

  • Revision of the law on PPPs. The government is committed to revising the current PPP law, in consultation with IMF staff, as soon as the WAEMU Council of Ministers adopts the strategy for the management of PPPs and the methods for the implementation of the strategy for the management of PPPs within the WAEMU in 2020. The revised PPP law is expected to be adopted in 2021.

  • Strengthening the implementation of the revised PPP framework. The Project to Support the Competitiveness of the Malian Economy (PACEM) provides assistance in the implementation of the revised law on PPPs in Mali through activities to support the operationalization of the PPP Unit and to support the performance of PPP activities.

31. Non-operating fixed assets. The government plans to provide assistance to the financial system in the process of removing non-operating assets from banks’ balance sheets with the aim of ensuring compliance with the prudential policy in effect within the Union. Within this context, it could consider the establishment of a system of shares in the form of transferable securities that do not give the bearer, in this case banks, the right to vote or to a stake in the capital of the property company that would be created. To this end, a study was launched on October 21, 2019, with the final report expected by end-December 2019.

32. Development of the mobile banking sector. The government plans to capitalize on the rapid development of mobile banking in Mali to offer administrative services, such as the payment of certain taxes. This will make it possible to enhance access to basic banking services for segments of the population that have been excluded from the banking system, reduce the risk of fraud, shrink the informal sector, and promote the development of payment systems, especially for small and medium-sized businesses. Consultations with stakeholders are currently ongoing.

33. Reducing gender inequality. The government plans to boost its efforts aimed at reducing gender inequality. In particular, it intends to enhance women’s income and economic autonomy in the shea butter sector. This would allow for the creation and formal organization of 400 women’s cooperatives, as well as capacity building in cooperative and financial management for 50,000 beneficiaries. It also plans to launch a large-scale project with the support of the World Bank to improve women’s access to the labor market.

H. Promoting Good Governance

34. Public financial management. The government is committed to strengthening efforts aimed at ensuring integrity and transparency in public financial management within the context of the implementation of the Public Finance Reform Plan (PREM) for 2017–2021. Self-assessments based on the methodology set forth in the 2016 Public Expenditure and Financial Accountability (PEFA) framework will also be performed every two years by the Public Financial Management Self-Assessment team established for this purpose pursuant to decision No. 2018–0065/MEF-SG.

  • Self-assessments based on the 2016 PEFA Framework methodology will be conducted every two years by the GFP Self-Assessment Team set up for this purpose in accordance with Decision No. 2018–0065/MEF-SG. The first self-assessment began in July 2019 for finalization by end-December 2019.

  • Program Budget. All the tools required for budget-program management are operational, including those related to monitoring and evaluation.

  • Risk mapping will now cover 31 departments, with 4 planned by end-2019.

  • Accrual-based accounting. The steering committee has been set up. Since 2018, a certain number of accounting units (Kayes, Sikasso, Mopti) have produced their financial statements. The preparation of the opening balance sheet is ongoing through the commissions set up for this purpose (inventory, valuation, and valuation of state property).

  • Evaluation of the public procurement system based on the Procurement System Assessment Methodology (MAPS). The terms of reference were shared with the various technical and financial partners and the comments were forwarded to the Public Procurement Regulatory Authority for processing. The start of the evaluation is planned for the first quarter of 2020, with finalization expected by June 30, 2020.

  • Reform of the Finance Inspectorate. The draft texts were transmitted to the General Secretariat of the government in November 2019.

35. Revision of the Procedural Manuals of the Accounts Section of the Supreme Court. The four volumes of the procedural manual for judicial and non-judicial judgments harmonized at the Community level have been validated by the Steering Committee set up by the WAEMU Court of Accounts. Final validation by the conference of Heads of State and Government of WAEMU member countries is expected by end-December 2019.

36. Public-private partnerships. In the context of revising the PPP law, the government plans to establish an incentive system for the performance of projects and to strengthen the institutional framework, allowing for the assessment and management of fiscal risks associated with PPPs.

37. Prevention and suppression of corruption.

  • Upgrading the legal framework to fight corruption. The government is committed to speeding up the legal work on the review of the Criminal Code with the aim of taking the necessary corrective measures to criminalize corruption offences in line with the requirements of the United Nations Convention against Corruption (UNCAC). The authorities also aim to address deficiencies arising from or identified in the implementation of the Law on the Prevention and Suppression of Illicit Enrichment (Law No. 2014–015). To this end, it will ensure that the Commission for the Identification and Correction of Difficulties and Deficiencies of Law No. 2014–015 of May 27, 2014, on the Prevention and Suppression of Illicit Enrichment, submits its final report no later than December 31, 2019, for a government approval of the Law by March 2020.

  • Strengthening the asset declaration system. The government is committed to ensuring compliance of public officials subject to mandatory reporting to declare their assets and update their declaration of assets within the deadline. Ministers will ensure that persons under their purview file their asset declarations and/or update them within the required deadline. Subject to the confidentiality of the declarations, failure to declare will be reported to the Prime Minister. Public information campaigns and announcements will be arranged to ensure better compliance with the asset declaration process. A website will provide information on the procedure of asset declarations, statistics on number of declarations, proposed sanctions, and any information concerning the persons subject to reporting.

38. Promoting coordination among auditing, inspection, and control bodies. In order to conduct a more effective campaign against corruption, the government is committed to aligning the actions of control, auditing, and inspection bodies. In this respect, it has set up two frameworks for consultation between:

  • The Ministry of Justice and control, auditing, and inspection bodies;

  • The Ministry of Justice and the Central Office for Combating Illicit Enrichment (OCLEI), the Office of the Auditor General (BVG), and the Economic Center.

39. The government is committed to improving the administration and dispensing of justice with regard to economic and financial offenses.

  • It is committed to introducing direct referrals to the Prosecutor General by audit authorities (including general oversight by staff and the Office of the Auditor General), as well as control and inspection bodies, and incorporating a systematic procedure for the referral of cases by prosecutors to investigative magistrates in the code of criminal procedure by end-2020.

  • It intends to create a specialized economic and financial prosecution service with national jurisdiction operating under the Bamako Court of Appeals.

40. Anti-Money Laundering and Terrorist Financing (AML/CFT). The government is finalizing its National Risk Assessment (ENR) for money laundering and terrorist financing, which began in October 2018 with support from the World Bank. It also carried out the Peer Review (Mutual Evaluation) of its AML/CFT system, for which the final report was approved by the 21st meeting of the Ministerial Committee of the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) held in Senegal on November 16, 2019. It is committed to developing a national AML/CFT strategy and its implementation plan during the first quarter of 2020. This action plan will address the shortcomings identified by the ENR and the peer review.

41. Diagnostic mission. The government takes note of the IMF mission planned for 2020 for the purpose of performing a detailed diagnostic analysis of governance problems, including those in the public finance sector and in the area of anti-money laundering and combating the financing of terrorism. As customary, it anticipates the publication of a final report and notes that this exercise will help sequence and prioritize measures in this area of the program.

I. Improving Statistical Data

42. Rebasing of national accounts, quarterly accounts, and short-term indicators. The government is committed to completing the work necessary for changing the base year of national accounts no later than end-2019 for the first current year of 2020. In addition, it will begin the dissemination of quarterly accounts at the end of 2019 and new short-term indicators will be introduced no later than the end of the first quarter of 2020.

J. Program Monitoring

43. The second, third, and fourth reviews will be based on end-December 2019, end-June 2020, and end-December 2020 performance criteria and indicative targets (Table 1) and prior actions and structural benchmarks (Tables 2 and 3). The performance criteria and indicative targets are defined in the Technical Memorandum of Understanding (TMU), which also specifies the nature and frequency of the information and data to be provided for program monitoring.

Attachment II. Technical Memorandum of Understanding

1. This Technical Memorandum of Understanding (TMU) defines the performance criteria and indicative targets presented in Table 1 of the Memorandum of Economic and Financial Policies (MEFP). It also determines the frequency and deadlines for reporting data to the staff of the International Monetary Fund (IMF) for program monitoring purposes.

Definition of Government

2. Unless otherwise indicated, the Government is defined as the central government of the Republic of Mali and does not include the local authorities, the central bank, or any other public entity with autonomous legal status that is not included in the Government Financial Operations Table (TOFE). The National Directorate of the Treasury and Government Accounting (DNTCP) reports the scope of the TOFE in accordance with the account classification provided by the BCEAO and forwards it to the central bank and IMF staff.

Performance Criteria

3. Except as noted, the following financial targets will serve as performance criteria at end-September 2019, end-December 2019, end-June 2020, and end-December 2020.

A. Ceiling on Net Domestic Financing

4. Net domestic financing of government, as defined in paragraph 2, is defined as the sum of (i) the change in the net position (difference between the government’s claims and debts) vis-à-vis the central bank and the commercial banks and (ii) financing of the government through the issuance (net of redemptions) of securities to individuals or legal entities outside the banking system or to nonresident banks domiciled in the West African Economic and Monetary Union (WAEMU).

Adjusters

5. The ceilings on net domestic financing of government will be adjusted upward if external budget support falls short of program projections (MEFP, Table 1) up to a maximum of CFAF 144 billion. External budget support is defined as grants, loans, and debt relief operations (excluding project grants and loans, sectoral budget support, IMF resources, and HIPC debt relief, but including general budget support).

6. The ceiling on net domestic financing of government will be adjusted upward (downward) if the net reduction in the budgetary float (instances de paiement) is higher (lower) than program amounts (MEFP, Table 1) as recorded in the TOFE.

7. The ceiling on net domestic financing will be adjusted upward (downward) for the payment of VAT credits, other tax refunds, and audited arrears from previous fiscal years, which exceed (fall short of) program amounts (MEFP, Table 1).

B. Ceiling on Accumulation of Government External Payments Arrears

8. External payment arrears are defined as external debt obligations of the government that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods). Under the program, the government agrees not to accumulate external payment arrears on its debt, except arrears arising from external payment obligations being renegotiated with creditors, including bilateral non-Paris Club creditors. Non-accumulation of new external arrears by the government is a performance criterion to be observed continuously. ‘External’ is defined by the residency of the creditor.

C. Ceiling on Accumulation of Government Domestic Payment Arrears

9. Domestic payment arrears are defined as undisputed overdue payment obligations for which the payment date exceeds 90 days, unless terms and conditions for settlement specify a longer grace period; arrears on the debt service refer to debt service obligations for which the payment date exceeds 30 days. Under the program, the government agrees not to accumulate new domestic payment arrears. Non-accumulation of new domestic payment arrears by the government is a continuous performance criterion. ‘Domestic’ is defined by the residency of the creditor.

D. Ceiling on the External Debt Contracted or Guaranteed by the Government

10. Definition of the debt. The definition of debt is set out in IMF Executive Board Decision No. 15688-(14/107), Point 8, as published on the IMF website. The term “debt” will be understood to mean all current, i.e. not contingent, liabilities, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take various forms; the primary ones being as follows:

  • (i) loans, i.e., advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements);

  • (ii) suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer payments after the date on which the goods are delivered or services are provided; and

  • (iii) leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of these guidelines, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair, or maintenance of the property.

Under the definition of debt set out in this paragraph, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on a contractual obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

11. Guaranteed debt. A government debt guarantee means an explicit legal obligation to service a debt in the event of nonpayment by the borrower (through payment in cash or in kind)

12. Concessional debt and present value of debt. A debt is considered concessional if it includes a grant element of at least 35 percent.1,2 The present value of the debt is calculated on the date on which it is contracted by discounting the future stream of payments of debt service due on this debt using a discount rate of five percent.

13. External debt. For the purposes of the relevant assessment criteria, external debt is defined as a debt denominated, or requiring payment, in a currency other than the CFA franc. This definition also applies to the debts contracted between WAEMU member countries.

14. External debt performance criterion. The ceiling on the contracting or guaranteeing of new external debt (MEFP, Table 1) applies to present value of all new external debt.

15. Special provision. The performance criterion shall not apply to import-related, short-term external loans (with maturities of less than one year).

16. Reporting. The government shall immediately report to the IMF staff any new external loans it contracts or guarantees, stating the conditions of these loans.

Adjuster

E. Ceiling on the Overall Fiscal Deficit

17. The overall fiscal deficit (commitment basis) is the difference between total budgetary resources and total spending and net lending as recorded in the TOFE.

Adjuster

18. The ceiling on the overall fiscal deficit (commitment basis) will be adjusted upward to the extent that budget support grants fall short of program projections (MEFP, Table 1) up to a maximum of CFAF 45 billion.

F. Floor on Net Tax Revenue

19. The government’s net tax revenue is defined as the revenue appearing in the TOFE and includes all tax revenue in the national budget, after deducting the tax refunds generated during the year, in particular VAT credits.

Adjuster

20. The floor on net tax revenue will be adjusted downward (upward) to the extent that tax refunds exceed (fall short of) the projected amount (MEFP, Table 1).

Indicative Target

21. The following serves as an indicative target at end-September 2019 and end-December 2019.

G. Floor on Priority Social Spending

22. Priority social spending for 2019 is defined as the sum of expenditure in the sectors of basic education, secondary and higher education, scientific research, health, and social development other than transfers to the Malian Social Security Fund (CMSS). It excludes project-related capital expenditure financed by foreign technical and financial partners. For 2020 and thereafter, priority social spending also includes priority development spending, such as on-roads.

Structural Benchmarks

23. Information concerning the implementation of measures constituting structural benchmarks will be reported to the IMF staff when the measures are implemented.

Additional Information for Program Monitoring

24. To facilitate program monitoring, the government will report the information (in Excel format for all quantitative data) indicated in the following summary table to the IMF staff.

Summary of Reporting Requirements

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2

Automated System for Customs Data (ASYCUDA).

3

The supplementary budget for 2019 relies on exceptionally high external budget support including a US$250 million budget support allocation from the World Bank and a near-concessional loan from the Abu Dhabi Fund for Development in the same amount. However, the bulk of this support had not yet been disbursed by end September 2019.

4

The initial estimate by the authorities suggests the impact is limited but staff underscored the importance to identify offsetting measures if needed

6

WAEMU Directive 06/2011CM/UEMOA which aims to harmonize the taxation framework for petroleum products.

7

Its implementation stalled in late 2017 amidst disagreement with civil servant unions about the scope of asset declarations by government officials to the Supreme Court and the role of the newly created anti-corruption office (OCLEI). The authorities succeeded in brokering a consensus among stakeholders to move this key governance reform forward and asset declaration resumed. As per Decision 2018–355/MTFP SG of February 23, 2018, a commission involving social partners to identify and remedy gaps in the law to fight corruption and illicit enrichment was tasked with making the appropriate amendments to the law and proposing a revised document that would be submitted to the Cabinet.

1

Article 57 of the Law No. 2013–28 on the Budget Law stipulates that if the draft Budget Law could not be voted on before the beginning of the financial year, the government is authorized to continue to collect taxes and to perform expenditures under the previous year’s budget in provisional twelfths.

2

National Fund for Support to Territorial Communities.

3

The mechanical ceiling on the float is the monthly average of total budget outlays less current staff costs and externally financed expenditures.

1

The reference to the IMF website below leads to a tool that can be used to calculate the grant element in a wide range of financial arrangements: https://www.imf.org/external/np/pdr/conc/calculator/

2

Calculation of the grant element takes account of all the aspects of the loan contracts, including maturity, grace period, repayment schedule, origination fees, and management fees.

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Cover IMF Staff Country Reports
Mali: First Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of a Performance Criterion and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Mali
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2020: Issue 008
Publisher:
International Monetary Fund
ISBN:
9781513526461
ISSN:
1934-7685
Pages:
69
DOI:
https://doi.org/10.5089/9781513526461.002
Text Figure 1.

Mali: Security and Social Challenges, 2011–18
Text Figure 2.

Mali: Security and Priority Social Spending, 2013–18

(Percent of budgetary expenditure)
Figure 1.

Mali: Recent Economic Developments
Figure 2.

Mali: Real Sector Developments
Figure 3.

Mali: External Sector
Text Figure 3.

Mali: Cumulative Tax Revenue

(CFAF billion)
Text Figure 4.

Mali: Maturity Profile of Domestic Debt Issued, End-September 2019
Figure 4.

Mali: Fiscal Developments