IMF Executive Board Completes Fifth Review
Press Release No. 07/23
under the PRGF Arrangement for Mali, Approves US$2 Million Disbursement, and Extends the Commitment Period until October 2007
February 14, 2007
The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Mali's economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review enables the release of SDR 1.3 million (about US$2 million), which will bring the total amount drawn under the arrangement to SDR 8 million (about US$12 million).
The Executive Board also approved Mali's request to extend the commitment period of the PRGF arrangement until October 31, 2007 to allow for the completion of the sixth review. The three-year PRGF arrangement with Mali was approved on June 23, 2004 (see Press Release No. 04/125) in a total amount of SDR9.33 million (about US$13.9 million).
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies that are adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are 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 5½-year grace period on principal payments.
Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"The Malian authorities are to be commended for their solid record of maintaining macroeconomic stability. Building on prudent fiscal policies and positive external developments, Mali secured reasonable growth, low inflation, and a sustainable external debt position in 2006. Higher gold prices and production in particular fueled exports and GDP growth, while the MDRI led to a marked improvement in Mali's external debt position.
"Sound macroeconomic performance is expected to continue in 2007. The 2007 fiscal framework is reasonably prudent and should not require recourse to domestic financing. Growing external assistance and debt service savings from the MDRI are being devoted to
increasing poverty spending. To address medium-term fiscal challenges, the authorities also plan to curtail nonpriority spending, improve tax administration, and strengthen further public finance management. To reduce the vulnerability of the public finances to oil price shocks, the authorities appropriately completed their program to liberalize pump prices in December 2006.
The mixed performance in implementing structural reforms is constraining Mali's ability to keep economic growth above the levels required to reduce poverty rapidly, and reduce its vulnerability to external and natural shocks.
"To reduce poverty more rapidly, the authorities are committed to accelerating growth over the coming years by strengthening structural reform. In this connection, their renewed resolve to complete this year the key reforms identified at the inception of the current arrangement in 2004 is welcome. In addition to restructuring the state-owned housing bank, the authorities plan to improve governance at the loss-making state-owned cotton ginning and energy companies. They also plan to submit legislation to reform the civil service pension fund, an important step to safeguard public finances over the long term.
"Mali's second-generation PRSP (2007-11) rightly makes private-sector-led growth the cornerstone of its development strategy, notably by improving Mali's difficult business climate. Measures such as strengthening property rights, streamlining the regulatory environment, and modernizing the public administration would help increase productivity, promote economic diversification and enhance international competitiveness. The Malian authorities are encouraged to implement their reform program consistently, so as to raise sustainably economic growth beyond its current 5 percent trend rate-an increase necessary for significant poverty reduction," Mr. Portugal said.