Press Release: IMF Executive Board Completes Sixth Review Under Mali's PRGF Arrangement and Approves US$2.1 Million Disbursement
October 31, 2007
The Executive Board of the International Monetary Fund (IMF) today completed the sixth and final review of Mali's economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review allows the release of SDR 1.34 million (about US$2.1 million) to Mali, which will bring the total amount drawn under the arrangement to SDR 9.33 million (about US$14.6 million).
In completing the review, the Executive Board also approved Mali's request for waivers of nonobservance of performance criteria pertaining to the implementation of two structural performance criteria on the Caisse des Retraites du Mali (CRM) and the Banque de l'Habitat du Mali (BHM) as well as the nonobservance of the performance criterion on the concessionality of external financing. The Executive Board also approved a short extension of the arrangement to November 30, 2007 to allow the final disbursement. The three-year PRGF arrangement with Mali was approved on June 23, 2004 (see Press Release No. 04/125) in a total amount of SDR 9.33 million (about US$14.6 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 today's Executive Board discussion of Mali, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"Mali's economic program supported by the IMF through its Poverty Reduction and Growth Facility has broadly succeeded in maintaining macroeconomic stability. As a result of the authorities' efforts and the Multilateral Debt Relief Initiative, the public debt is well within sustainable levels. However, economic growth per capita remains below the level required to significantly reduce poverty or achieve the Millennium Development Goals (MDGs), and the economy remains highly vulnerable to external shocks.
"Mali needs to accelerate growth and poverty reduction through vigorous implementation of structural reform. Important reforms are under way, although implementation of some measures under the program has remained incomplete. A key reform would be to disengage the government from commercial activities, including those in the cotton, banking, and telecommunications sectors. In this context, the authorities' renewed commitment to restructure the state-owned housing bank and improve governance at the loss-making state-owned cotton ginning and energy companies is welcome.
"Fiscal policy should maintain its focus on macroeconomic stability. The authorities are committed to closing the 2008 budget financing gap through spending measures, if necessary, while protecting social outlays. It will be important that legislation to reform the civil service pension fund be submitted to the national assembly soon, as it remains essential to longer-term fiscal sustainability.
"It is important to keep strengthening debt management and increasing the transparency of borrowing. The recent nonconcessional financing for the electricity sector was an exceptional stop-gap measure in response to urgent needs for power generation. Going forward, it will be important to avoid recourse to high-cost financing to maintain debt sustainability.
"With a renewed political mandate, the authorities have an opportunity to reinvigorate the reform agenda. Implementation of the Poverty Reduction Strategy through a detailed action plan could give a renewed impetus to reforms and accelerate progress towards achieving the MDGs," Mr. Portugal said.