Press Release: IMF Executive Board Completes First Review Under Mali's PRGF Arrangement and Approves US$2 Million Disbursement
March 8, 2005
The Executive Board of the International Monetary Fund (IMF) has completed the first review of Mali's economic performance under an SDR 9.33 million (about US$14.2 million) Poverty Reduction and Growth Facility (PRGF) arrangement (see Press Release No.04/125). The completion of the review enables the release of a further SDR 1.33 million (about US$2 million), which will bring the total amount drawn under the arrangement to SDR 2.66 million (about US$4.1 million).
In completing the review, the Executive Board granted a waiver for the nonobservance of three structural performance criteria.
Following the Board discussion of Mali, on March 7, 2005, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair, stated:
"In mid-2004, Mali embarked on an ambitious macroeconomic program. In recent months, economic performance has been adversely affected by the economy's vulnerability to exogenous shocks—in particular, terms of trade losses and a locust infestation—as well as delays in the implementation of structural reforms. Nevertheless, the authorities remain committed to moving ahead purposefully with the two main pillars of their program—namely, fiscal consolidation and structural reforms aimed at boosting growth and diversifying the economy.
"Overall fiscal performance through 2004 was generally good. A slowdown of economic growth necessitated corrective fiscal measures in 2005 to keep budgetary policies on track. These measures include a scaling back of non-poverty focused spending, and passing global oil price increases through to domestic pump prices. Over the medium term, the authorities' fiscal program will need to focus on increasing government revenue through an improvement in tax administration and policy, and on strengthening public expenditure management.
"Ambitious structural reforms aimed at improving the business climate and enhancing the economy's competitiveness remain crucial for the success of the economic program. Of particular importance are the ongoing reforms in the cotton sector focused on improving the producer price mechanism, and preparatory steps toward privatization of the state-owned cotton company. Careful development and steadfast implementation of plans to privatize other key public enterprises, strengthen the financial system, and reform the pension funds will be essential.
"Notwithstanding the progress made, poverty remains widespread. To assist Mali in progressing toward the Millennium Development Goals, the PRGF-supported program is fully aligned with the authorities' poverty reduction strategy. To implement its ambitious program, Mali will remain heavily dependent on foreign financial assistance in the future. To ensure continued debt sustainability, the government should encourage donors to increase the grant element of external financing," Mr. Carstens said.
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper, or PRSP. This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies, to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.