IMF Executive Board Concludes 2008 Article IV Consultation with Mali

Public Information Notice (PIN) No. 08/93
July 29, 2008

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On May 28, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Mali.1


Mali's economy has doubled in size since the democratic transition of the early 1990s. Sound macroeconomic management produced average economic growth of almost 5 percent, and raised the tax ratio from less than 10 percent to around 16 percent of GDP. Together with external aid, including debt relief under the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative, the increase in resources has fueled a rapid expansion of poverty-reducing spending and helped sustain economic growth. Nonetheless, Mali is still very poor, and activity remains highly vulnerable to natural and external shocks. Agriculture, which is the mainstay of the economy, has been buffeted by recurrent drought, flood, locust infestation, diseases, and depressed world prices for cotton—owing in part to subsidies in advanced countries.

Economic growth slowed to less than 3 percent in 2007, reflecting the impact of late and excessively heavy rainfall on agriculture, especially cotton (Table 1). Inflation remained subdued, at 2.3 percent (12-monthly rate), but surged to 6 percent in February 2008, mainly because of higher cereals prices. Although the terms of trade improved slightly, with higher gold export prices more than offsetting the increase in oil import prices, the impact of these shifts was unevenly distributed (especially since gold is an enclave sector). Thus, the urban population's real purchasing power declined in the past year. The government tried to offset higher import costs, providing tax breaks for food and fuel imports and announcing wage increases for civil servants (5 percent for 2008 and another 5 percent for 2009). With almost half of tax revenue coming from international trade, however, these measures led to a weakening of the fiscal outturn, and the basic balance turned from a surplus of 0.3 percent in 2006 to a deficit of 1.1 percent in 2007.

The balance of payments weakened in 2007. The trade balance turned from a surplus in 2006 into a deficit, largely owing to lower gold output. Foreign exchange reserve accumulation slowed from the robust levels of 2005-06, leaving reserve cover steady at around 6 months of imports. As reserve accumulation slowed, the contribution of net foreign assets to broad money growth was only 1.2 percent for 2007. The smaller cotton harvest to finance, the less favorable economic environment, and persistently weak conditions at the state-owned banks all contributed to a decline in credit to the economy of 0.8 percent.

The authorities have continued to advance the implementation of structural reforms. In particular, in December 2007, four regional subsidiaries of the state cotton ginner (CMDT) were chartered as a precursor to privatization. The National Assembly approved in January 2008 a law granting the housing bank (BHM) greater powers to collect on non-performing loans, and the Council of Ministers approved in March a draft law to reform the civil service retirement fund (CRM). In April, the authorities completed the tariff study for the electricity company, which is under consideration by the electricity and water regulatory commission, and they launched a tender for privatizing the state-owned International Bank of Mali (BIM). In addition, the authorities revised their financial sector development strategy, based in part on the conclusions of the FSAP mission in February.

Executive Board Assessment

Executive Directors commended the Malian authorities for their good performance under Fund-supported programs in securing a sound environment for economic growth and poverty reduction. Directors noted that, notwithstanding the progress made over the years, growth has been inadequate to make a significant reduction in poverty, and the economy is still vulnerable to natural and exogenous shocks. Rising oil and food import costs, as well as stagnating cotton prices, have put considerable pressure on the fiscal position.

Directors commended the authorities for their ambitious medium-term economic policies aimed at raising the growth potential and boosting external competitiveness. They emphasized the importance of adhering steadfastly to the policy priorities, notably to strengthen budget management and pursue structural reforms in key areas such as food production, telecommunications, water and electricity, and the financial sector. Restructuring state-owned enterprises, particularly in the cotton sector, is also a priority. Most Directors were of the view that continued support from the Fund through a new financial arrangement would help Mali cope with the increasing challenges and deepen the authorities' reform agenda. A few Directors, on the other hand, noted a limited impact of the current food and fuel shocks on the balance of payments and expressed reservations with regard to the need for Fund financial assistance in these circumstances.

Directors agreed that the CFA franc-based fixed exchange rate system has served Mali well, and that it has provided a solid anchor for economic stability. They nonetheless stressed the need to avoid an erosion of competitiveness and encouraged the authorities to continue monitoring developments closely. At the same time, structural reforms should be accelerated to reinvigorate economic activity, diversify exports, and generate employment for a growing population. Effective use of the windfalls from higher gold export prices for the development of infrastructure would also help to improve competitiveness.

Noting the fiscal impact of increases in food and oil prices, Directors underscored that sound budget management will be critical to fiscal sustainability and poverty reduction efforts. In this context, they welcomed the authorities' commitment to protect the revenue base, notably by reining in customs exemptions and preserving a minimum level of taxation on petroleum products, and to readjust expenditure ceilings while protecting priority spending. It will also be important to intensify efforts to raise additional funds from donors, and to ensure that the wage bill remains well within the ceiling set by the WAEMU convergence criteria. While recognizing the need to alleviate the impact of higher food prices, Directors saw scope for better targeting subsidies for the most vulnerable groups so as not to reduce incentives to expand irrigation and cultivation. They welcomed the progress achieved in strengthening public finance management and encouraged the authorities to address the shortcomings highlighted in the 2007 report on public expenditure and financial accountability.

Directors discussed financial sector developments based on the staff's Financial Sector Stability Assessment. They considered that there is a need to strengthen Mali's banking system, particularly in view of the persistently large exposure to a few borrowers and the high level of nonperforming loans, notably at the state-owned housing bank. They encouraged the authorities to step up their efforts to restructure the banking system and to enforce prudential regulations in an even-handed manner. Directors welcomed the preparation by the authorities of a financial sector development strategy designed to enhance the efficiency and soundness of the financial sector in support of private sector development.

Mali: Selected Economic and Financial Indicators, 2005-091



2006 2007
  (Annual percentage change)

National income and prices


Real GDP

6.1 5.3 2.8 5.4 5.1

GDP deflator

2.1 5.1 2.1 2.0 2.6

Consumer price inflation (average)

6.4 1.5 1.4 2.5 2.5

External sector (percent change)


Terms of trade (deterioration -)

-10.7 18.9 5.3 25.1 -4.7

Real effective exchange rate (depreciation -)

3.9 3.1 3.2 ... ...

Money and credit (contribution to broad money growth)


Credit to the government

4.3 -12.1 1.3 5.3 ...

Credit to the economy

-1.1 11.5 -0.8 3.7 ...

Broad money (M2)

9.5 10.9 1.2 8.4 ...
  (Percent of GDP)

Investment and saving


Gross domestic investment

22.3 23.7 23.9 23.3 23.6

Of which: Government

7.1 8.2 9.0 7.3 6.7

Gross national savings

14.1 20.0 15.7 17.3 17.9

Of which: Government

2.0 3.2 3.0 2.1 2.4

Gross domestic savings

13.7 18.9 16.0 19.0 21.0

Central government finance



17.9 17.7 17.3 17.1 18.4


4.1 39.7 4.8 4.3 4.0

Total expenditure and net lending

25.2 25.4 25.3 25.8 25.2

Overall balance (payment order basis, excluding grants)

-7.3 -7.7 -8.4 -8.7 -6.8

Basic fiscal balance 2

-0.2 0.3 -1.1 -1.9 -0.7

External sector


Current external balance, including official transfers

-8.2 -3.7 -8.2 -6.0 -5.7

Current external balance, excluding official transfers

-10.4 -6.4 -9.8 -7.5 -7.2

Exports of goods and services

25.6 31.1 26.9 29.3 29.2

Imports of goods and services

-34.2 -35.9 -34.7 -33.6 -31.8

Debt service to exports of goods and services

7.4 3.7 3.4 3.4 3.6

External debt (end of period)

49.4 20.0 22.9 26.9 29.3

Memorandum items:

(Units indicated)

Nominal GDP (CFAF billions)

2,829 3,132 3,289 3,538 3,818

Overall balance of payments in US$ millions

96.4 119.7 0.6 -5.3 -6.4

Money market interest rate in percent

(end of period)

5.0 5.0 5.0 ... ...

Gross international reserves in US$ millions

942 1,182 1,192 1,217 1,248

Months of next year's imports

5.7 5.9 5.8 5.8 5.7

U.S.$ exchange rate (end of period)

541.5 514.9 511.9 ... ...

Sources: Malian authorities; and IMF staff estimates and projections.
1 2006 data after adjustment for MDRI.
2 Revenue (excluding grants) less total expenditure (excluding foreign-financed investment projects and HIPC initiative-related spending.

1 Under 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 Executive Directors, and this summary is transmitted to the country's authorities.


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