Press Release: IMF Approves Three-Year Loan for Mali Under the ESAF
April 10, 1996
The International Monetary Fund (IMF) today approved a new three-year loan for Mali under the enhanced structural adjustment facility (ESAF)1 equivalent to SDR 62.01 million (about $91 million) to support the Government's 1996-98 economic reform program. The first annual loan in an amount equivalent to SDR 20.67 million (about $30 million) will be disbursed in two equal semiannual installments, the first of which will be available on April 30, 1996.
Mali successfully implemented its economic reform programs supported by a three-year ESAF loan which expired at the end of March 1996. Especially after the devaluation of the CFA franc in January 1994, important strides were made in reducing financial imbalances, containing inflation, improving the competitiveness of the economy, and lessening distortions, thus revitalizing the private sector and boosting economic growth prospects. Under the 1995 program, economic developments were particularly encouraging: real GDP growth is estimated to have been about 6 percent, and average consumer price inflation was reduced from 24.8 percent in 1994 to 12.4 percent. Notwithstanding the important headway that has been made, the economic and financial situation of Mali remains fragile and vulnerable to exogenous shocks, while poverty remains widespread.
Medium-Term Strategy for 1996-98 and the 1996 Program
Building on the progress achieved so far, Mali's economic program for 1996-98, supported by the ESAF loans, focuses on the following three key areas: (a) preserving the competitiveness gains achieved; (b) ensuring a sound basis for sustained economic growth through further improvements in resource allocation and a more conducive environment for private sector activity; and (c) taking well-targeted actions to make inroads against poverty. The basic medium-term macroeconomic objectives are (i) to achieve an average annual economic growth rate of about 4-5 percent; (ii) to reduce inflation to less than 5 percent in 1996 and to 2-3 percent beginning in 1997; and (iii) to lower the external current account deficit, excluding official transfers, to about 10.5 percent of GDP by 1998.
Within this medium-term strategy, the program for 1996, to be supported by the first annual ESAF loan, aims at a real GDP growth rate of 4 percent; limiting average inflation to 4-5 percent; and reducing the external current account deficit, excluding official transfers, to about 13 percent of GDP. To achieve these objectives, the authorities will reduce the overall fiscal deficit (on a commitment basis and excluding grants) to 10.1 percent of GDP in 1996, from 10.5 percent of GDP in 1995 and 13.7 percent of GDP in 1994, through measures designed to increase government revenue by about 13 percent in 1996, to the equivalent of 14 percent of GDP, and by cutting the ratio of total expenditure to GDP by 1 percent. On the revenue side, a large taxpayer unit will be created to improve tax collections from the largest enterprises; the fiscal identification system will be improved; tax audits will be increased and better targeted; and tax administration will be computerized. On the spending side, nonpriority expenditure is to be contained, while proper provisions are to be made for social services and the investment program. Monetary and credit policy will continue to be prudent, consistent with the regional balance of payments objective. To provide for adequate credit to the private sector, government indebtedness to the banking system will not be increased; at the same time, the Malian authorities will work, in collaboration with their West African Economic and Monetary Union (WAEMU) partners, towards the establishment of a true open-market monetary policy and ensure that interest rates are determined by market forces.
The Government will give priority to structural measures designed to promote private sector activities and will continue to pursue reform of the public enterprise and agricultural sectors. Actions will focus on the following: (i) encouraging private sector activities by establishing a clear, simple, and properly enforced legal framework; (ii) stepping up efforts to reform public enterprises; (iii) enhancing the competitiveness of the cotton and rice sectors; (iv) improving the monitoring of public investment projects; and (v) promoting regional integration within the framework of the WAEMU.
Addressing Social Costs
The Government's strategy in the social and environmental spheres aims at raising living standards, reducing poverty, and improving management of natural resources and the urban environment. A key element in the improvement of living conditions of most social groups will be sustaining the pickup of economic activity. At the same time, to support human resource development, the authorities intend to rapidly raise primary education enrollment rates; increase the share of spending on health in the recurrent budget; reinvigorate primary health care through greater community participation; and ensure the availability of essential medicines.
The Challenge Ahead
Mali made important strides under its first ESAF-supported program, but, as noted, the economic and financial situation remains fragile and vulnerable to exogenous shocks. The authorities must, therefore, persevere with their reform efforts, and continue to implement sound macroeconomic policies effectively, as well as to deepen and accelerate structural reforms.
Mali joined the IMF on September 27, 1963, and its quota2 is SDR 68.9 million (about $101 million). Its outstanding use of IMF credit currently totals SDR 96 million (about $139 million).
Sources: Malian authorities; and IMF staff estimates and projections.
1. The ESAF is a concessional IMF facility for assisting eligible 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 per annum 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 share in the allocation of SDRs.