Press Release: IMF Approves Third Annual ESAF Loan for Mali
August 7, 1998
The International Monetary Fund (IMF) has approved the third annual loan for Mali under the Enhanced Structural Adjustment Facility (ESAF),1 equivalent to SDR 20.7 million (about US$28 million) in support of the government’s program for 1998–99. The loan is available in two equal semiannual installments, the first of which is available immediately.
Mali successfully implemented its adjustment program supported by the ESAF arrangement that was approved on April 10, 1996 (see Press Release No. 96/14). Nearly all the performance criteria and the quantitative and structural benchmarks under the 1997 program were observed. Real GDP grew by about 6.7 percent in 1997, with cotton production rising to a record level and gold output expanding nearly threefold, following the opening of a new goldmine. The favorable performance, also experienced in most other sectors of the economy, reflects the strong adjustment policies implemented in the 1990s under the ESAF-supported programs and the substantially enhanced international competitiveness that developed in the aftermath of the 1994 devaluation of the CFA franc. Consumer price inflation declined to 1 percent in 1997 from about 3 percent in 1996, owing to an abundant supply of food crops as well as the sound monetary policy pursued by the Central Bank of West African States (BCEAO). Other macroeconomic indicators in 1997 also showed improvement. Strong export growth and a moderate expansion in imports limited the external current account deficit to 9.3 percent of GDP from a deficit of 14.2 percent of GDP in 1996. The overall budgetary deficit in 1997 is estimated at 7.8 percent compared to a deficit of 7.9 percent a year earlier.
Medium-Term Strategy and the Program for 1998-2001
The government’s medium-term development strategy aims to consolidate macroeconomic stability and attain sustainable economic growth that will reduce poverty and raise the living standards of the population. The principal macroeconomic objectives for 1998/99-2000/01 are to achieve an average annual GDP growth of at least 5 percent, limit inflation to 2-3 percent, and reduce the external current account deficit to 7 percent by 2001. To achieve these objectives, Mali’s strategy will be to reinforce macroeconomic policies and deepen and accelerate structural reforms.
Within this medium-term strategy, Mali’s program for 1998/99, which will be supported by the third annual ESAF arrangement, projects a real GDP growth of 5 percent, of consumer price inflation of 2-3 percent, and an external current account deficit of 8 percent. To these ends,fiscal consolidation efforts in 1998–99 are aimed at reducing the overall budget deficit to 7.6 percent in 1998 and 6.4 percent in 1999. The government intends to increase the revenue base while keeping overall outlays under control. A determined effort will be made to collect overdue taxes, and the value-added tax (VAT) will be restructured and its base expanded. Current outlays, including the wage bill, will be closely monitored and adequate allocations will be provided for the education and health sectors, the social safety net, the revenue collection agencies and counterparts funds for the investment program. In line with the BCEAO’s monetary policy, the program envisages an annual average expansion in broad money of about 9 percent in 1998 and 1999.
The government’s agenda of structural reforms is designed to support the goal of pursuing widespread poverty reduction and improving living standards. The key structural reforms are in the areas of agricultural development, public enterprises, the regulatory system, and regional cooperation and integration. The government plans to sustain the momentum for privatization by selling its stake in four state enterprises this year. Mali’s efforts to improve the regulatory system will focus on the continued reform of the judicial framework and the provision of incentives for increased private sector participation in all areas of economic activities. In keeping with the agreed timetable for establishing a customs union among the West African Economic and Monetary Union (WAEMU) countries, Mali has lowered its maximum import tariff to 30 percent effective July 1, 1998.
The government’s medium-term social objective is to achieve a broadly based improvement in living standards through the implementation of well-targeted poverty reduction programs and sustained economic growth. The Malian authorities have prepared a 10-year development strategy aimed at improving the quality of education as well as its access. The official target is to raise the enrollment rate for primary education to 55 percent in 1999 from 47 percent in 1997. In the health sector, the government has adopted a 10-year program with a view to increasing the quality of health services and extending coverage. The shares of education and health in the government’s budget are [.] being increased accordingly during 1998 and 1999.
The Challenge Ahead
Mali has implemented its adjustment programs for 1996 and 1997 with determination and has improved growth prospects by reducing inflation, and trimming financial imbalances. Continued implementation of strong macroeconomic policies and critically needed structural reforms will help the authorities move toward achieving their goals over the medium-term. The timely availability of external project and budgetary assistance will also be important for the success of the authorities’ program.
Mali joined the IMF on September 27, 1963. Its quota2 is SDR 68.90 million (about US$92 million). As of end-July 1998, Mali’s outstanding use of IMF resources totaled SDR 125.1 million (about US$167 million).