Press Release: IMF Approves Third Annual Loan for Mali Under the ESAF
April 12, 1995The International Monetary Fund (IMF) today approved the third annual loan for Mali under the enhanced structural adjustment facility (ESAF)1 in an amount equivalent to SDR 29.46 million (about $46 million) to support the Government's medium-term economic stabilization and structural reform program. The loan will be disbursed in two equal, semiannual installments.
In many respects, 1994 was a decisive year for the Malian economy. Important strides were made under the second annual ESAF supported program that was adopted after the devaluation of the CFA franc and the macroeconomic objectives under that program were achieved. Real GDP grew by 2.5 percent in 1994, reflecting growth in the agricultural sector and an increase in private sector activity, and inflation was more moderate than projected with the average increase of the consumer price index rising by 25 percent against an expected 40 percent. The 34 percent depreciation of the real effective exchange rate strengthened the competitiveness of the economy, leading to a pickup in exports, a lower volume of imports due to a shift in private consumption in favor of local products, and significant capital reflows, and as a result the external current account deficit remained below the program target.
Medium-Term Strategy and the 1995-97 Program
Building on the gains made in 1994, the authorities' adjustment efforts for the next three years aim at achieving sustained economic growth and financial viability over the medium term through the continuation of sound fiscal and monetary policies and the deepening of structural reforms. The macroeconomic objectives for 1995-97 are: to (i) achieve an average growth rate of 4.5-5 percent; (ii) limit inflation to its predevaluation level of 2-3.5 percent by 1996; and (iii) reduce the external current account deficit, excluding official transfers, to less than 13 percent of GDP by 1997. Within this medium-term strategy, the third annual ESAF-supported program aims at (i) achieving a real GDP growth rate of around 5 percent; (ii) reducing average inflation to 8 percent; and (iii) lowering the external current account deficit, excluding official transfers, to 14.5 percent of GDP. To achieve those objectives, the authorities will strengthen public finances by reducing the overall fiscal deficit to 12.4 percent of GDP in 1995, through improved revenue performance and continued restraint in spending. Total receipts are targeted to increase 14 percent by improving the tax and customs administrations, eliminating exemptions, and combating fiscal fraud, while total expenditure will increase by less than 10 percent from the 1994 level, by limiting the growth of the wage bill and curtailing nonessential expenditures.
In addition to greater efforts to foster human resource development, structural reforms will focus on measures to support private sector development and sustained economic growth. Investment and the creation of enterprises will be encouraged through the introduction of a new unified business registration system. Other key reform areas include the acceleration of public enterprise reform through the privatization and restructuring of a number of enterprises and the further strengthening of reforms in the agricultural sector to increase efficiency and encourage diversification. The authorities will also continue to promote regional trade and economic integration among the member countries of the West African Economic and Monetary Union (WAEMU).
Addressing Social Costs
The Government's strategy in the social and environmental sectors aims at increasing the standard of living, reducing poverty, and improving management of natural resources and the urban environment. To support these aims the authorities intend to raise enrollment rates in primary education, increase the share of the recurrent budget devoted to health, and ensure the availability of essential drugs.
The Challenge Ahead
Attaining the objectives of the program remains subject to the evolution of the terms of trade, and political uncertainties in the North of the country. Timely availability of external financial assistance, including adequate debt relief, will also be a key condition for the program's success.
Mali joined the IMF on September 27, 1963 and its quota2 is SDR 68.9 million (about $108 million). Its outstanding use of IMF credit currently totals SDR 72 million (about $113 million).
Sources: Malian authorities and IMF staff estimates.
1. The ESAF is a concessional IMF lending facility for assisting low-income members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent and are repayable over 10 years with a 5 1/2-year grace period.
2. A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.