Press Information Notice: IMF Concludes Article IV Consultation with Mali

April 1, 1998

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF's assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board.

The IMF Executive Board on December 22, 1997 concluded the 1997 Article IV consultation1 with Mali.


Following the devaluation of the CFA franc in January 1994, Mali adopted a comprehensive adjustment strategy aimed at achieving sustained economic growth and financial viability over the medium-term. Mali’s efforts, which are supported by the IMF with a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) approved in April 1996, have resulted in significant improvements in a number of areas, including per capita GDP growth, a decline in inflation, and a reduction in internal and external imbalances.

Over the last three years, real GDP growth averaged about 4 percent a year, and real per capita income has been rising. This reflects strong increases in agricultural production, especially of cotton, a vigorous expansion in the mining sector and continued robust growth in services, including commerce. Recent indications suggest that these trends are continuing in 1997, with the coming on stream of a new gold mine, and further gains in agricultural output.

Inflation, based on the consumer price index (CPI) for Bamako, declined from about 32 percent in 1994 to less than 3 percent in 1996, and remained low and stable during the first half of 1997. The CPI-based real effective exchange rate is estimated to have depreciated by about 1.5 percent in 1996, compared to 1995, and by 4 percent in the first half of 1997, contributing to a further improvement in the competitiveness of the Malian economy. The external current account deficit was reduced from about 17 percent of GDP in 1994 to less than 15 percent in 1996. There were continued strong increases in export volumes, especially cotton fiber, while import volumes, dominated by capital goods and equipment, expanded at a more moderate pace over the same period.

The overall fiscal deficit (on a commitment basis and excluding grants) was reduced from 13¾ percent of GDP in 1994 to 7.9 percent in 1996 through the authorities’ continued efforts to increase revenues, while restraining nonpriority current spending. Measures to strengthen tax and customs administrations, enlarge the tax base, and improve compliance contributed to raising the tax revenue to GDP ratio to almost 13 percent in 1996, from 10 percent in 1994. Over the period, total government expenditure was reduced by 3.5 percent to 24 percent of GDP, through the containment of the wage bill and lower-than-expected interest payments on external debt. At the same time, spending on basic education and primary health services, reached some 25 percent of total outlays in 1996.

Broad money is estimated to have increased by 12 percent in 1996, in line with nominal GDP. Credit to the economy rose by 29 percent, reflecting private sector financing of activity in the construction, industry, and the mining sector. Reflecting the easing of interest rates abroad, the Central Bank of West African States, which conducts monetary policy at the regional level, lowered the discount rate, and the banks’ average prime lending rate declined, from 13 percent in 1994 to about 9 percent in 1997.

On the structural front, some progress have been made in promoting private sector development, restructuring public enterprises and implementing agricultural reforms. However, delays were incurred in the implementation of a number of structural reforms as some of the public enterprises slated for privatization failed to attract buyers, and the financial audit needed to prepare for the sale of a tobacco company was not completed on time.

Developments thus far in 1997 suggest that real GDP could increase by close to 7 percent, bolstered by strong growth in gold production and a record cotton crop. Inflation is expected to remain in the 2-3 percent range. The overall fiscal deficit (excluding grants) is expected to be in line with initial projections at about 9 percent of GDP. The external current account deficit (excluding official transfers) could narrow by close to 4 percentage points of GDP to 11 percent, due to sharp increases in cotton fiber and gold exports.

Despite these achievements, Mali remains one of the low-income countries with the weakest social indicators including low life expectancy, low primary school enrollment, and high illiteracy rate.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They were encouraged by developments during the first half of 1997 and under the second annual ESAF-supported program, with real GDP growing faster than projected and inflation declining further. However,Directors emphasized the importance of strengthened adjustment efforts, in particular, in the areas of fiscal consolidation, structural reforms, and the promotion of the private sector, in order to strengthen economic performance, to reduce vulnerability to shocks, and to address poverty concerns.

In the fiscal area, Directors hoped for a speedy adoption of the draft supplementary budget by the National Assembly. Noting the expenditure overruns in the first half of 1997 associated with the recent elections and the shortfall in external assistance, this measure would help address these overruns and ensure the attainment of the original program fiscal target for 1997.

Directors stressed that the fiscal situation remains fragile and that there is a need to improve the revenue situation. In particular, with the impending move toward a common external tariff in the West African Economic and Monetary Union during the period 1999–2000, the authorities should be prepared to offset any adverse impact of the tariff reform on government revenue. In this regard, early steps should be taken to expand the tax base through decisive reductions in tax and customs duty exemptions, the unification of the VAT rates, and the extension of the duty drawback system—introduced in 1997 for imports of petroleum products—to other duty-exempt imports. The revenue collection agencies should also be strengthened through the provision of adequate material and human resources. On the expenditure side, Directors noted that part of the social safety net allocations had been used to finance the elections. They urged the authorities to supplement the steps already taken to partially restore the social safety net allocations by additional measures to increase such allocations under the 1998 budget. They also encouraged the authorities to continue their policy of restraint on overall spending, particularly with regard to the wage bill, and ensure that more resources are allocated to education and health expenditures.

Directors welcomed the full repayment of central bank refinancing by end-October, noting that such instances of quasi automatic central bank refinancing to banks could undermine the development of an effective interbank market. Directors emphasized that the regional central bank should rely mainly on the use of indirect monetary instruments and refrain from market interventions aimed at accommodating bank-specific liquidity needs, and take steps to ensure that its refinancing (‘pension’) rate remains above the yield on alternative short-term funds. Directors welcomed the improvements in the health of the banking system in recent years, and encouraged the Malian authorities to take all necessary steps to enable commercial banks to recover bad loans and to promote the competitiveness of the financial sector. They urged expeditious restructuring of Banque Internationale du Mali and the privatization of Banque Malienne de Credits et de Depôts.

Directors expressed concern about the relatively slow progress in implementing the structural reform program, and stressed the need for an intensification of reforms, given their critical importance for improving the environment for private sector activity and diversifying the export base. In this context, Directors urged the Malian authorities to review the present institutional framework for public enterprises, including an in-depth assessment of the merits of continued government ownership of a large number of enterprises, and to strengthen the management of such enterprises. Directors were of the view that enlarging the privatization program to includemost of the enterprises still in the government’s portfolio, and in particular the cotton marketing company (CMDT), the electricity and water company (EDM), and the telecommunications company (SOTELMA), would contribute to strengthening the country’s growth prospects to a level that can help reduce poverty.

Directors noted that the judicial system appears unable to enforce contracts and protect private property rights, and urged the authorities to take steps to overhaul the system, starting with the commercial courts, and ensure a more balanced representation of all economic and financial interests.

Directors encouraged the authorities to step up their efforts to improve the coverage, consistency, and availability of the core economic indicators required for surveillance and program monitoring. In this regard, Directors pointed to the usefulness of technical assistance and the need to implement technical assistance recommendations.

It is expected that the next Article IV consultation with Mali will be held on the standard 12-month cycle.

Mali: Selected Economic Indicators

  1993 1994 1995 1996

  Annual percentage change
Domestic Economy  
Real GDP -2.4 2.3 6.4 4.0 6.7
GDP deflator 2.6 33.2 12.5 6.3 1.8
Consumer prices 0.4 32.0 9.2 2.8 2.6
  In percent of GDP
Gross fixed investment 21.9 26.0 26.0 26.5 25.8
Gross domestic savings 6.4 7.1 9.5 10.8 14.2
Gross national savings 9.0 9.1 10.7 11.8 15.0
  In millions of U.S. dollars 1
External Economy  
Exports, f.o.b. 349.3 336.5 452.3 446.3 545.7
Imports, f.o.b. 677.9 629.2 796.4 797.1 781.0
Current account deficit (excluding grants) -344.8 312.8 -377.2 -390.9 -279.4
Capital account -24.7 82.4 122.4 140.9 99.3
Overall balance 5.3 122.5 67.7 127.6 -12.2
Current account deficit (in percent of GDP) -12.9 -16.9 -15.3 -14.7 -10.8
Debt service (in percent of exports of goods and non factor services)2 39.6 41.8 31.6 29.3 25.0
Debt service (in percent of government revenue)2 72.0 67.8 47.3 36.3 38.7
External debt (in percent of GDP) 109.9 135.8 113.3 113.6 113.9
Real effective exchange rate (end of period; percent change)3 -2.0 -38.1 12.6 3.6 ...
  In percent of GDP 1
Financial Variables  
Government revenue 13.9 13.5 14.4 15.9 15.5
Total expenditure 23.5 27.2 24.9 23.4 24.3
Overall fiscal deficit (commitment basis, excluding grants) -9.6 -13.7 -10.5 -7.9 -8.8
Change in broad money (in percent) 8.4 39.1 19.6 11.9 7.6

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

1Unless otherwise specified.
2Before debt rescheduling, but after debt cancellation.
3Minus sign indicates depreciation of the CFA franc.

1Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of directors, and this summary is transmitted to the country's authorities. In this PIN, the main features of the Board's discussion are described.


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