News Brief: IMF Completes Review Under Mali's PRGF Arrangement and Approves US$9 Million Disbursement
December 17, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Mali's performance under the three-year Poverty Reduction and Growth Facility (PRGF)1 arrangement. As a result, Mali will be able to draw up to SDR 6.75 million (about US$9 million).
Mali's program was originally supported under the Enhanced Structural Adjustment Facility (ESAF), approved on August 6, 1999 (see Press Release No. 99/39) for SDR 46.65 million (about US$59.24 million). So far, Mali has drawn SDR 24.92 million (about US$31.64 million) under the arrangement.
After the Executive Board's discussion on Mali, Mr. Eduardo Aninat, Deputy Managing Director and Acting Chairman, stated:
"Notwithstanding several adverse economic shocks, program implementation to date has been satisfactory, with all quantitative performance criteria and benchmarks observed through end-July 2001. Structural measures have been implemented in the cotton sector and with respect to the taxation of petroleum products, the pricing of public utilities, and the tracking of expenditures financed by the HIPC Initiative.
"With the deterioration in the world cotton price outlook, the macroeconomic outlook is projected to weaken over the medium term. Notwithstanding a projected rebound in cotton production in 2002, the external current account balance is expected to deteriorate relative to earlier projections owing to a sharp decline in private transfers from abroad and an increase in net remittances of mining companies. Also, the pace of fiscal consolidation in 2002 and beyond will be slower than envisaged owing primarily to the lower profitability in the cotton sector.
"The 2002 budget reflects efforts to lower poverty, address the problems in the cotton sector, foster the democratization process, minimize the social impact of economic liberalization, and start the fiscal consolidation process. Addressing these priorities will require additional expenditures, for which the authorities aim to mobilize additional revenues and minimize non-essential expenditures.
"The structural reform program focuses on the cotton sector and public expenditure management. The preparation of an action plan for the reform of the cotton sector, as well as of a short-term financial rescue plan for the Compagnie Malienne de Développement des Textiles, is encouraging. The authorities will need to maintain the momentum of reform in the cotton sector during the run-up to the upcoming presidential elections. The early implementation of delayed reforms in this sector will signal the authorities' resolve to move ahead with the reform program. A key measure in 2002 will be the completion of a study on the liberalization of the cotton sector. Also, in preparation for the switch to a market-based pricing mechanism, the sole cotton buyer is expected to deepen its cost-cutting efforts. The reform of public expenditure management will focus on improving the external control system and the tracking of poverty-related spending," Mr. Aninat said.
1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework of macroeconomic, structural, and social policies to foster growth and reduce poverty. For Malian authorities, the poverty reduction objectives remain the top priority and their implementation is being made along the lines described in the interim PRSP. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.