## MALI — SEVENTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR EXTENSION AND AUGMENTATION OF ACCESS

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### Key issues and context
- Mali described as a fragile state with ongoing insurgency and terrorism; implementation of the June 2015 peace agreement difficult and attacks by groups not party to the agreement causing numerous casualties.
- 2016 economic performance: strong growth and low inflation but persistent high poverty and rising social discontent.
- Fiscal and external pressures stem from security needs and decentralization associated with the peace agreement.
- Near-term growth outlook subject to downside risks from volatile security conditions.

### Macroeconomic developments and outlook
- Real GDP growth:
  - 2016 preliminary real GDP growth: 5.8 percent.
  - Projected real GDP growth: 5.3 percent for 2017 and 5.0 percent for 2018.
  - Longer run: growth projected to slow to about 4.7 percent (Mali’s long-run potential).
- Inflation and prices:
  - Inflation through end-December 2016: negative (-0.8 percent) / consumer price inflation (end-2016 reported variants include -1.8 percent in tables).
  - Projected consumer price inflation (average): 2017 (proj.): 0.8; 2018 (proj.): 0.2; end-December 2017 expected to be about 1.0 percent; expected to remain contained at 1.4 percent in 2018 (text entries).
  - GDP deflator (annual % change): 2016: 1.5; 2017 (proj.): 1.5; 2018 (proj.): 1.7.
- External sector and terms of trade:
  - Overall balance of payments deficit widened by 2.5 percentage points to 3.9 percent of GDP in 2016.
  - External current account deficit in 2016: 7.1 percent of GDP (compared to 7.7 percent in the program).
  - WEO baseline revisions: gold prices revised downward by a cumulative 13 percent for 2017–18; oil prices revised upward by a cumulative 14.5 percent; contributing to deterioration of the terms of trade of about 11 percent in 2017.
  - Current account deficit projected to exceed 8 percent of GDP in 2017 and 6.5 percent of GDP in 2018.
  - Medium term: current account deficit projected to narrow to about 6 percent of GDP (about 0.7 percentage points of GDP higher than previously projected).
- Monetary and financial conditions:
  - BCEAO increased marginal lending rate by 100 basis points to 4.5 percent in December 2016 and restricted access to the refinancing window.
  - Reserve requirement ratio reduced from 5 to 3 percent in March 2017.
  - Staff projects credit to the economy to expand by 12.5 percent in 2017 (from 19 percent in 2016).
- Banking sector indicators:
  - Capital adequacy ratio in 2016: 14.7 percent (minimum required 8 percent).
  - Non-performing loans (NPLs) ratio: 15.4 percent in 2016; net NPLs and provisioning also reported (net NPL ratio 7.2 percent in 2016, net NPL ratio 5.4 percent noted elsewhere).
  - Micro-finance NPLs declined from 7.2 percent in 2015 to 6.2 percent at end-February 2017 (also reported as 6.6 percent in 2015 to 6.2 percent).

### Fiscal performance and public finances
- 2016 fiscal outcomes:
  - Overall fiscal deficit reached 3.9 percent of GDP in 2016 (slightly below program envisaged deficit).
  - All continuous and quantitative performance criteria and indicative targets for end-December 2016 were met.
- 2017–18 fiscal stance and adjustments:
  - 2017 supplementary budget: allows higher-than-programmed expenditures by 0.6 percent of GDP (0.4 percent of GDP capital/security; 0.2 percent of GDP current for elections) offset by one-off non-tax revenues and carried-over grants amounting to 1.2 percent of GDP.
  - Revised 2017 overall fiscal deficit (payment-order basis, including grants): CFAF 307 billion (3.5 percent of GDP); basic fiscal deficit: CFAF 101 billion (1.1 percent of GDP).
  - Authorities reaffirm commitment to converge the fiscal deficit to the WAEMU norm of 3 percent of GDP by 2019.
  - 2018 measures: new revenue measures and improved tax administration expected to boost tax revenue by about 0.6 percent of GDP in 2018; curtail domestically-financed capital expenditures by 0.5 percent of GDP and current expenditures by 0.3 percent of GDP to bring overall fiscal deficit to 3.4 percent of GDP in 2018.
  - Underlying deficits: 2017 underlying overall fiscal deficit amounts to 4.2 percent of GDP; 2018 underlying deficit amounts to 3.0 percent of GDP.
- Fiscal aggregates (selected shares of GDP from Text Table 1 / projections):
  - Revenue series (percent of GDP): 14.9, 16.4, 16.8, 16.7, 17.1, 18.3, 17.9, 18.3, 18.4, 18.5, 18.8.
  - Tax revenue (percent of GDP): 12.5, 14.0, 14.9, 14.9, 15.3, 15.3, 15.9, 16.2, 16.3, 16.5, 16.8.
  - Grants (percent of GDP): 2.2, 2.7, 2.0, 1.6, 2.0, 2.3, 2.1, 2.0, 1.9, 1.9, 1.8.
  - Total expenditure and net lending (percent of GDP): 20.0, 20.9, 23.2, 22.2, 23.1, 24.0, 23.4, 23.3, 23.3, 23.4, 23.6.
  - Overall balance (payment orders, percent of GDP): -2.9, -1.8, -4.3, -3.9, -4.1, -3.5, -3.4, -3.0, -3.0, -3.0, -3.0.
  - Total public debt (percent of GDP): 27.3, 30.7, 29.7, 30.4, 30.0, 31.8, 32.6, 33.9, 35.4, 36.7, 37.9.

### External financing and financing gap
- Financing gap and needs:
  - Mali has a financing gap in 2017–18 of about 0.6 percent of GDP due to additional security spending and constrained regional financing.
  - Domestic financing of the 2017 deficit revised downwards by 1.2 percent of GDP after BCEAO policy revisions.
  - Additional external financing required in 2017: 0.6 percent of GDP.
  - Development partners to provide about 0.4 percent of GDP in additional support; requested augmentation of access under the ECF would cover the remaining 0.2 percent of GDP.
- Fund financing role:
  - Fund financing in total official financing is projected to be around 17 percent in 2017–18.

### Program implementation, structural reforms, and risks
- Program performance:
  - All continuous and end-December 2016 performance criteria and indicative targets were met.
  - Cumulative ceiling on new external non-concessional debt was met; no external arrears accumulated.
- Structural reform progress:
  - Some end-December 2016 structural benchmarks were missed; authorities implemented three reforms in early 2017:
    - Senior officials began transmitting financial disclosures to the Supreme Court pursuant to the unlawful enrichment law (initial submissions limited to 2–3 percent of expected respondents).
    - On May 26, a bill prohibiting granting new discretionary exemptions was approved by Parliament.
    - Members of the anti-corruption commission were nominated; commission expected to become operational in June 2017.
  - Steps taken toward transition to the Treasury Single Account (TSA); full transfer awaits implementation guidelines. Structural benchmark: complete transition to the TSA by end-2017.
  - Introduction of an automatic pricing mechanism for petroleum products delayed; outreach campaign to be completed by end-August (revised structural benchmark) to facilitate 2018 introduction.
- Key risks:
  - Fragile security situation is an immediate downside risk.
  - Agricultural output vulnerable to adverse weather.
  - High export concentration: gold about 65 percent and cotton about 15 percent of total exports (text notes exposure).
  - Regional monetary policy tightening by BCEAO could slow private sector credit and increase domestic debt costs.

### Program extension, augmentation of access, and IMF support
- Authorities’ requests:
  - One-year extension of the ECF arrangement to December 17, 2018.
  - Augmentation of access by SDR 88.6 million: SDR 25.3 million in 2017 (13.6 percent of quota) and SDR 63.3 million in 2018 (33.7 percent of quota).
  - Resulting total access under the arrangement would be SDR 186.6 million, or 100 percent of quota.
- Staff recommendation and usage:
  - Staff supports authorities’ request for augmentation of access equivalent to 13.6 percent of quota in 2017 and extension through 2018; proposed access for 2018: 33.9 percent of quota (text contains both 33.7 and 33.9 percent references in places).
  - Augmentation intended to catalyze additional external assistance to maintain stability ahead of the November 2018 elections and to meet balance of payments and budget financing needs.
- Disbursement schedule under ECF (selected):
  - SDR 6 million — December 18, 2013.
  - SDR 4 million — May 1, 2014.
  - SDR 4 million — November 1, 2014.
  - SDR 4 million — May 1, 2015.
  - SDR 4 million — November 1, 2015.
  - SDR 19 million — May 1, 2016.
  - SDR 19 million — November 1, 2016.
  - SDR 31.65 million — May 1, 2017.
  - SDR 31.65 million — November 1, 2017.
  - SDR 31.65 million — May 1, 2018.
  - SDR 31.65 million — November 1, 2018.
  - Total for ECF arrangement: 100.0 (percent of quota).

### Financial sector and microfinance reforms
- Banking sector:
  - Gross outstanding loans: CFAF 374.9 billion at end-2016 (increase of CFAF 41.8 billion or 12.6 percent vs end-2015).
  - Net NPLs: CFAF 157.8 billion at end-2016 (CFAF 116.6 billion a year earlier).
  - Risk-weighted capital ratio: 14.7 at end-December 2016 (minimum regulatory standard: 8 percent).
  - Authorities developing a comprehensive NPL reduction strategy with IMF TA (structural benchmark, June 2017).
- Microfinance sector:
  - Audit of 32 decentralized MFIs in difficulty completed; operations of 23 MFIs suspended; two scheduled for liquidation in 2017; compensation of small depositors in a liquidated MFI (Jemeni) started.
  - Comprehensive plan to reform the microfinance sector with World Bank support being implemented.

### Public financial management, tax policy, and revenue measures
- Revenue mobilization targets:
  - Increase tax revenue by 0.3 percent of GDP in 2017 (performance criterion) and by 0.6 percent of GDP in 2018 through expanding the tax base and reducing exemptions.
  - Measures include prohibition of new discretionary exemptions (law adopted May 26), raising investment code eligibility threshold, publishing tax legislation review results, and simplifying tax legislation.
- Tax expenditures and exemptions:
  - 2015 DGI inventory: 452 tax exemption measures amounting to tax expenditures totaling CFAF 123 billion (US$ 226 million or 2.08 percent of GDP).
  - Distribution: 97.93 percent related to the VAT; 2 percent to tax on industrial and commercial profits and corporate tax; 0.07 percent to recording and stamp duties.
  - Legal basis: General Tax Code 11 percent; Mining Code 0.7 percent; Ministerial orders 80 percent; Investment Code 1.5 percent; Contracts 5 percent.
- VAT and VAT refunds:
  - VAT generates roughly 40 percent of tax revenue.
  - Special allocation account created exclusively for refunding VAT credits funded by: (i) full amount of VAT revenue paid by mining companies and their subcontractors on imports; and (ii) 10 percent of domestic VAT revenue (or more if needed).
  - System of withholding VAT at source to be abolished starting January 1, 2018.
- Petroleum pricing and revenue protection:
  - Pricing mechanism envisaged to ensure changes in cost of imported petroleum products are fully reflected in pump prices within a margin of 3 percent per month (structural benchmark); implementation scheduled for 2018.
  - Interim measures by August 31: public information campaign and measures to protect poorest/vulnerable in collaboration with World Bank.
- Tax administration modernization:
  - SIGTAS version 3.0 exemption management module to be developed; migration from NIF to NINA planned; target to increase DME revenue share and audit coverage (targets include average audit ratio of 25 percent in 2017).
  - DGI simplification outcomes: alternative minimum business tax (AMBT) single proportional rate of 3 percent of turnover; number of taxpayers filing in that segment increased by 19.8 percent from 35,278 in 2015 to 42,294 in 2016.

### Public investment, decentralization, and the Sustainable Development Fund (FDD)
- Fiscal decentralization:
  - Central government committed to transferring 30 percent of budget revenue to subnational governments by 2018 per the 2015 peace agreement.
  - Transfers to local government reached 22.9 percent of revenue in 2016 and expected to rise to 23.4 percent in 2017.
  - Decentralized resources increased to 18.3 percent of budgetary revenues.
- Sustainable Development Fund (FDD):
  - CFAF 18 billion executed in 2016 and CFAF 33 billion budgeted for 2017; included in the state budget and funded mainly through new export taxes and other sector-specific levies.

### EDM (state-owned electricity company) financial position and reforms
- EDM deficits and government support:
  - Overall deficit of EDM fell to about 0.7 percent of GDP in 2016 (from over 1.3 percent of GDP in 2015).
  - In CFAF terms: EDM reduced its pre-subsidy deficit to CFAF 57 billion in 2016 from CFAF 104 billion in 2015; deficit expected to decline to CFAF 35 billion in 2017.
  - Government transferred CFAF 33 billion in 2016 and will provide an additional CFAF 25 billion in 2017.
- Reform measures and commitments:
  - EDM to increase billing rates, reduce operating costs (including outsourcing fuel supply), reduce technical and non-technical losses, adopt pre-paid meters, accelerate monthly billing, and better monitor key customers.
  - EDM to publish quarterly financial statements and performance indicators; government to monitor EDM’s financial position closely and ensure timely reporting.
  - Plan to clear arrears implemented through conversion of short-term bonds to medium-term debt and settlement with public sector entities.

### Debt sustainability analysis (DSA) and fiscal vulnerability
- DSA findings:
  - Updated DSA concludes Mali’s risk of debt distress remains moderate.
  - Baseline: public debt dynamics sustainable; PV of external public debt to GDP projected to remain between 16 and 21 percent of GDP, below the indicative 40 percent threshold.
  - PV of external debt-to-exports ratio projected to increase from about 67 percent in 2016 to 130 percent in 2037 but remain below threshold of 150 percent under baseline.
  - Public debt projections: public debt to grow from about 30.4 percent of GDP in 2016 to 42.8 percent in 2037; external debt from about 25 percent of GDP to 36 percent in 2037.
- Sensitivities and stress tests:
  - Most extreme scenarios generate breaches of PV public debt-to-exports threshold in the medium to long term (examples: scenarios B5, A2, B4, B6).
  - Vulnerabilities: tightening of financing terms, reduction in transfers and FDI, and export concentration in gold.
- Policy implications:
  - Maintain prudent macroeconomic policies and continue securing grants and concessional loans where possible.
  - Strengthen public debt management and ensure high returns on financed projects.
  - Pursue structural reforms to improve investment climate and export diversification.

### Program monitoring, structural benchmarks, and capacity building
- Structural benchmarks and timelines (selected):
  - Prohibit granting of new discretionary exemptions (Parliament adoption in May 2017; implementation focus in 2018).
  - Publish tax legislation review results (June 2017).
  - Develop comprehensive NPL reduction strategy (June 2017).
  - Complete outreach campaign on fuel price reform by end-August 2017 to facilitate 2018 pricing mechanism.
  - Complete transition to the TSA by end-2017.
- Capacity building and TA priorities:
  - Fund TA areas: human resource management, revenue (tax and customs) administration, public financial management, financial sector weaknesses, and real sector statistics.
  - Authorities to participate in the IMF’s Capacity Building Framework/CDF; staff emphasizes importance of political support and resourcing for CBF.

### IMF staff appraisal and recommendations (selected)
- Macroeconomic stance:
  - Prudent policies and structural reforms supported a positive near-term outlook; growth solid, inflation subdued; risks tilted to downside.
- Fiscal policy:
  - Support revised 2017 budget; authorities should execute budget as planned and avoid relaxing fiscal stance in electoral context.
  - Prudent expenditure management and sustainable revenue increases critical to reaching 3 percent of GDP deficit by 2019.
- Revenue mobilization and tax policy:
  - Boost collection of indirect taxes; strengthen tax administration; eliminate discretionary tax exemptions; adopt law prohibiting new discretionary exemptions.
  - Simplify tax legislation and strengthen VAT collection efficiency.
- Governance and structural reforms:
  - Strengthen PFM, operationalize anti-corruption institutions, enforce asset declarations, and strengthen EDM’s financial position to mitigate fiscal risks.
- Financial sector:
  - Expedite comprehensive strategy to reduce legacy NPLs with Fund TA; continue microfinance sector consolidation.

*International Monetary Fund, June 20, 2017 — Statement following Executive Board discussion and staff report for Mali (Seventh Review under the ECF).*

### 5.3 percent for 2017 and 5.0 for 2018. Activity is being supported both by robust public

### MALI — SEVENTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR EXTENSION AND AUGMENTATION OF ACCESS

### Key issues and context
- Mali is described as a fragile state, struggling with insurgency and terrorism; implementation of the June 2015 peace agreement is difficult and attacks by terrorist groups not part of the agreement are causing numerous casualties.
- Economic performance in 2016: strong growth and low inflation, but high poverty and rising social discontent.
- Fiscal and external pressures from security needs and decentralization associated with the peace agreement.
- Near-term outlook for strong growth is subject to downside risks from volatile security conditions.

### Recent developments and macro outlook
- Real GDP growth:
  - 2016 preliminary real GDP growth: 5.8 percent.
  - Projected real GDP growth: 5.3 percent for 2017 and 5.0 percent for 2018.
  - Longer run: growth projected to slow to about 4.7 percent (Mali’s long-run potential).
- Inflation:
  - Inflation through end-December 2016: negative (-0.8 percent).
  - Projected inflation: increase to 1.0 percent by end-December and expected to remain contained at 1.4 percent in 2018.
  - Consumer price inflation (average) and (end of period) entries included in Text Table 1 (various years).
- External sector and terms of trade:
  - Overall balance of payments deficit widened by 2.5 percentage points to 3.9 percent of GDP in 2016.
  - External current account deficit in 2016: 7.1 percent of GDP (compared to 7.7 percent in the program).
  - WEO baseline revisions: gold prices revised downward by a cumulative 13 percent for 2017–18; oil prices revised upward by a cumulative 14.5 percent; contributing to deterioration of the terms of trade of about 11 percent in 2017.
  - Current account deficit projected to exceed 8 percent of GDP in 2017 and 6.5 percent of GDP in 2018.
  - Over the medium term, current account deficit projected to narrow to about 6 percent of GDP (about 0.7 percentage points of GDP higher than previously projected).
- Monetary and financial conditions:
  - BCEAO increased marginal lending rate by 100 basis points to 4.5 percent in December 2016 and restricted access to the refinancing window.
  - Reserve requirement ratio reduced from 5 to 3 percent in March 2017.
  - Staff projects credit to the economy to expand by 12.5 percent in 2017 (from 19 percent in 2016).
- Banking sector indicators:
  - Capital adequacy ratio in 2016: 14.7 percent (minimum required 8 percent).
  - Non-performing loans (NPLs) ratio: 15.4 percent in 2016.
  - Micro-finance NPLs declined from 7.2 percent in 2015 to 6.2 percent at end-February 2017.

### Fiscal performance and public finances
- 2016 fiscal outcomes:
  - Overall fiscal deficit reached 3.9 percent of GDP in 2016 (slightly below program envisaged deficit).
  - All continuous and quantitative performance criteria and indicative targets for end-December 2016 were met.
- 2017–18 fiscal stance and challenges:
  - 2017 expenditures will exceed previously programmed levels to address new security needs and decentralization costs; increased spending will be offset by one-off non-tax revenues and grants.
  - Authorities reaffirm commitment to converge the fiscal deficit to the WAEMU norm of 3 percent of GDP by 2019.
  - 2017 budget reflects the 3 percent of GDP objective while providing for pressing spending needs.
  - 2018 budget aims to maintain expenditures in line with budgetary resources while protecting social spending and stimulating medium-term public investment.
  - Fiscal consolidation anchored on improved resource mobilization: boosting collection of indirect taxes, eliminating discretionary tax exemptions, containing current spending while accommodating security and decentralization needs.
- Fiscal statistics from Text Table 1 (selected entries):
  - Revenue: 14.9, 16.4, 16.8, 16.7, 17.1, 18.3, 17.9, 18.3, 18.4, 18.5, 18.8 (percent of GDP for various years).
  - Tax revenue: 12.5, 14.0, 14.9, 14.9, 15.3, 15.3, 15.9, 16.2, 16.3, 16.5, 16.8 (percent of GDP).
  - Grants: 2.2, 2.7, 2.0, 1.6, 2.0, 2.3, 2.1, 2.0, 1.9, 1.9, 1.8 (percent of GDP).
  - Total expenditure and net lending: 20.0, 20.9, 23.2, 22.2, 23.1, 24.0, 23.4, 23.3, 23.3, 23.4, 23.6 (percent of GDP).
  - Overall balance (payment orders): -2.9, -1.8, -4.3, -3.9, -4.1, -3.5, -3.4, -3.0, -3.0, -3.0, -3.0 (percent of GDP).
  - Total public debt: 27.3, 30.7, 29.7, 30.4, 30.0, 31.8, 32.6, 33.9, 35.4, 36.7, 37.9 (percent of GDP).
  - Current external balance (including official transfers): -4.7, -5.3, -7.7, -7.1, -6.8, -8.1, -6.5, -6.2, -6.2, -6.2, -6.0 (percent of GDP).
  - Overall balance of payments: -2.5, -1.6, 0.1, -3.9, -1.1, -2.9, -1.3, -0.9, -0.5, -0.5, -0.4 (percent of GDP).

### Program implementation, structural reforms, and risks
- Program performance:
  - All continuous and end-December 2016 performance criteria and indicative targets were met.
  - Revenue growth was slightly above target; adjusted ceiling on net bank and market financing met with significant margin.
  - Cumulative ceiling on new external non-concessional debt was met; no external arrears accumulated.
- Structural reforms status:
  - Some end-December structural benchmarks were missed, but authorities implemented three planned reforms in early 2017:
    - Senior government officials began transmitting financial disclosures to the Supreme Court pursuant to the law against unlawful enrichment.
    - On May 26, a bill prohibiting granting new discretionary exemptions was approved by Parliament.
    - Members of the anti-corruption commission were nominated; commission expected to become operational in June 2017.
  - Steps taken toward transition to the treasury single account (TSA); full transfer awaits implementation guidelines.
  - Introduction of an automatic pricing mechanism for petroleum products delayed.
- Risks:
  - Outlook tilted to the downside; immediate risk is fragile security situation.
  - Agricultural output vulnerable to adverse weather; high dependence on gold and cotton exports (about 65 percent and 15 percent of total exports, respectively) raises exposure to commodity price fluctuations.
  - Regional monetary policy tightening by BCEAO could slow private sector credit and increase domestic debt costs.

### Policy discussions and financing needs
- Additional 2017 spending needs:
  - Spending projected to increase by about 0.6 percent of GDP: a 0.4 percent of GDP increase in capital spending (including on security) and 0.2 percent of GDP increase in current spending for elections.
- Financing constraints and external support:
  - Access to regional financing constrained after BCEAO policy revisions; domestic financing of the 2017 deficit revised downwards by 1.2 percent of GDP.
  - Additional external financing required: 0.6 percent of GDP in 2017.
  - Development partners to provide about 0.4 percent of GDP in additional support; requested augmentation of access under the ECF would cover remaining 0.2 percent of GDP.
  - In absence of ECF augmentation, additional spending cuts beyond programmed levels would be needed.
- Staff and IMF decisions:
  - Staff supports the authorities’ request for an augmentation of access equivalent to 13.6 percent of quota in 2017 and extension of the program through 2018.
  - Proposed access for 2018: 33.9 percent of quota.
  - The augmentation is expected to catalyze increased external assistance to help maintain stability ahead of the November 2018 elections.
  - Staff considers the authorities’ commitment to meeting the 2019 WAEMU convergence criteria and envisaged policies adequate to balance risks.

### Policy recommendations and priorities highlighted by IMF staff
- Fiscal policy and revenue mobilization:
  - Reaffirm commitment to converge to the WAEMU norm of 3 percent of GDP by 2019.
  - Boost collection of indirect taxes; strengthen tax administration; raise efficiency of VAT collection.
  - Eliminate discretionary tax exemptions; adopt law prohibiting new discretionary exemptions.
  - Reform incentives for tax inspectors.
  - Contain current spending while accommodating security and decentralization spending needs.
- Public financial management and SOE reforms:
  - Further strengthen public financial management to support fiscal discipline.
  - Strengthen the financial position of the state-owned electricity company to mitigate fiscal risks and free up resources for investment and priority spending.
- Governance and decentralization:
  - Continue reform momentum to improve the business climate and sustain inclusive growth.
  - Pursue fiscal decentralization to implement the 2015 Peace Agreement.
  - Implement the law against unlawful enrichment and consolidate governance reforms.

*International Monetary Fund, June 20, 2017 — Statement following Executive Board discussion and staff report for Mali (Seventh Review under the ECF).*

### 10. For the medium term, the challenge is to achieve fiscal consolidation in support of

### 10. For the medium term, the challenge is to achieve fiscal consolidation in support of regional external stability while meeting critical security-related spending needs.

### Fiscal Policy and Reforms

- Medium-term objective:
  - Authorities reiterated intention to meet the WAEMU 3 percent of GDP fiscal deficit convergence criterion by 2019.
  - Proposed extension of the ECF arrangement to December 17, 2018 includes policies to support this effort.

- 2017 budget and revisions:
  - 2017 budget (passed December 2016) targeted a deficit (payment-order basis) of 4.1 percent of GDP, and a basic fiscal balance below 2 percent of GDP.
  - Revised budget submitted for approval by mid-June allows higher-than-programmed expenditures by 0.6 percent of GDP (higher security and local elections spending).
  - One-off non-tax revenues and carried-over grant disbursements amounting to 1.2 percent of GDP more than offset these additional expenditures.
  - Overall fiscal deficit is lower than initially programmed at 3½ percent of GDP, whereas the underlying overall fiscal deficit is slightly wider by 0.1 percent of GDP.
  - Staff supports the revised budget and stresses prompt adoption and adherence in execution.

- 2018 fiscal plan:
  - Authorities plan new revenue measures, improved tax administration, and reduced domestically-financed capital outlays and current expenditures.
  - Committed to implementing law prohibiting granting of new discretionary exemptions (Structural Benchmark).
  - Measures expected to boost tax revenue by about 0.6 percent of GDP in 2018.
  - Expenditure offsets: curtail domestically-financed capital expenditures by 0.5 percent of GDP and current expenditures by 0.3 percent of GDP.
  - Together these measures aim to bring the overall fiscal deficit to 3.4 percent of GDP in 2018.
  - Underlying deficit excludes one-off items: for 2017 it amounts to 4.2 percent of GDP (0.1 percentage point above program projections); for 2018, the underlying deficit amounts to 3.0 percent of GDP. The adjustment of 1.2 percent derives equally from tax efforts and lower spending.
  - Authorities shifted spending priorities while increasing tax revenue from 15.3 to almost 16 percent of GDP.
  - Staff encouraged building fiscal buffers for election-year contingencies and adverse terms of trade shocks.

- 2019 outlook:
  - Implementing limits on tax exemptions in 2018 will boost tax revenue by 0.3 percent of GDP in 2019.
  - With spending broadly at its projected 2018 level, the overall deficit expected to be brought down to 3 percent of GDP in 2019, in line with WAEMU criteria.

- External financing and financing gap:
  - Mali has a financing gap in 2017–18 of about 0.6 percent of GDP due to additional security spending and difficulties raising funds on the regional market following the BCEAO’s revision of the refinancing policy.
  - Widening of the external current account deficit by a cumulative 2.6 percentage points of GDP over 2017–18 relative to program projections raises the need for increased external financing.
  - Additional commitments from the AfDB, the EU, and the World Bank have been secured to help fill the gap.
  - Fund financing in total official financing is projected to be around 17 percent in 2017–18.

- Fiscal reforms and revenue measures:
  - Continue to strengthen tax administration and enhance VAT collection efficiency; step up efforts to reduce tax exemptions.
  - Parliament adopted a law in May to prohibit granting of new discretionary exemptions; eligibility threshold for exemptions through the investment code is being raised (Structural Benchmark, August 2017).
  - Authorities to publish results of tax legislation review to identify other exemptions to reduce (structural benchmark, June 2017).
  - Simplification of tax legislation to reduce administrative burden; establishment of a medium-size taxpayer office for audits and training on mining, telecommunications, banking and insurance activities.
  - Expansion of selective audits to avoid accumulation of VAT credits and streamlining VAT refund process.
  - Customs improvements: better information system, fraud reduction, operationalizing online settlement of customs duties.
  - Together these measures expected to boost revenues by 0.6 percent of GDP in 2018.

- Petroleum pricing mechanism:
  - Introduction of a more flexible pricing mechanism for petroleum products is a benchmark under the program (MEFP, ¶19).
  - Authorities working to establish an excise tax level for each product and a smoothing rule to reflect international oil price changes.
  - Automatic pricing mechanism delayed from end-December 2016 to allow outreach due to concerns over higher domestic fuel prices; structural benchmark modified to emphasize building consensus.
  - Authorities agreed to launch a public information campaign and work with the World Bank on protection measures for the poorest and assistance for middle-income groups.
  - Outreach campaign to all stakeholders to discuss fuel price reform and assess protection measures to be completed by end-August (revised structural benchmark), facilitating introduction of the new pricing mechanism in 2018.

- Fiscal decentralization and regional development:
  - Central government committed to transferring 30 percent of budget revenue to subnational governments by 2018 per the 2015 peace agreement.
  - Transfers to local government reached 22.9 percent of revenue in 2016 and are expected to rise to 23.4 percent in 2017.
  - Three-year strategy prepared to finance regional development projects by increasing transfers to the National Support Fund for Territorial Communities (FNACT).
  - Performance contracts signed with five regions, including Kidal and Timbuktu; creation of regional development agencies.
  - Decentralized resources increased to 18.3 percent of budgetary revenues.
  - Given limited subnational capacity, central finance ministry retains budgeting and financial control services for subnational governments.

- Sustainable Development Fund (FDD):
  - Established as part of the 2015 peace agreement to finance regional development projects, especially in the North.
  - Included in the state budget and funded mainly through new export taxes and other sector-specific levies.
  - CFAF 18 billion executed in 2016 and CFAF 33 billion budgeted for 2017.

- Public financial management reforms:
  - Finalized new program budgeting classification and presented a medium-term expenditure framework outline for pilot ministries in the 2017 budget.
  - Budget Directorate updating information system towards program-based budgeting with IMF assistance.
  - Interface with Accounting IT system expected to be rolled-out by end-2017.
  - Authorities committed to completing transition to the Treasury Single Account (TSA) by end-2017 (structural benchmark); decree issued in June 2016 setting rules for public accounts at commercial banks.
  - Measures to enhance budget transparency and improve presentation of Mali’s fiscal accounts, including submitting draft finance law under program budgeting format and presenting consolidated fiscal transactions based on the 2001 Government Finance Statistics Manual starting in 2018.

### Financial Sector Issues

- Banking sector soundness and NPLs:
  - Banking system remains generally sound; credit expansion slowing to a more sustainable pace.
  - NPLs remain high at 15.4 percent in December 2016; large NPL figure reflects mainly legacy NPLs related to two public banks (BHM and BDM).
  - Strengthening of the Malian Solidarity Bank (BMS-SA), merged with the former state-owned Malian Housing Bank (BMH) in March 2016, helped reduce NPLs.
  - BMS-SA’s gross NPL rate declined from 17 percent to 14.5 percent at end-2016.
  - Authorities developing a comprehensive strategy to reduce NPLs in collaboration with IMF technical assistance (structural benchmark, June 2017).
  - Aligning taxation and prudential norms (in context of adopting Basel II) recommended; eliminate tax impediments limiting full deductibility of write-offs.
  - Need to identify risks associated with real estate collaterals and strengthen central credit bureau operations to ensure reliable borrower information.

- Microfinance sector reforms:
  - Implementation of comprehensive plan to reform the microfinance sector with World Bank support.
  - Audit of 32 decentralized microfinance institutions (MFIs) in difficulty completed; audits to be extended to other troubled MFIs.
  - Compensation of small depositors in a liquidated MFI (Jemeni) started.
  - Operations of 23 MFIs suspended; two scheduled for liquidation in 2017; plan to liquidate remaining suspended MFIs being prepared.

### Other Structural Reforms

- Tax administration incentives and human resource management:
  - Reforms to incentives for tax and customs inspectors adopted to modernize tax administration.
  - Measures to increase transparency: paying all penalties and premiums through bank transfer and recording incentive payments as part of the wage bill.
  - Commitment to implement February 2017 IMF technical assistance recommendations: adopt performance-based compensation, enhance vocational training, and strengthen internal controls.
  - Regional perspective to be drawn upon via a seminar planned later in the year.

- Program benchmarks and timelines (selected):
  - Structural Benchmark: prohibition of new discretionary exemptions (Parliament adoption in May; implementation focus in 2018).
  - Structural Benchmark: raising investment code eligibility threshold (August 2017).
  - Structural Benchmark: publish tax legislation review results (June 2017).
  - Structural Benchmark: develop comprehensive NPL reduction strategy (June 2017).
  - Structural Benchmark: complete outreach campaign on fuel price reform by end-August to facilitate 2018 pricing mechanism introduction.
  - Structural Benchmark: complete transition to the TSA by end-2017.

- Box 1 findings (recent fiscal performance highlights):
  - Tax revenue increase has averaged 0.7 percent of GDP in Mali, 0.5 percent of GDP above the WAEMU average over 2012–15.
  - Momentum persisted in 2016 with 1 percent of GDP increase in tax revenue versus a 0.2 percent of GDP decline for WAEMU peers.
  - Mali maintained a relatively low fiscal deficit compared to WAEMU peers despite political and security challenges.

*IMF staff report excerpt: "10. For the medium term, the challenge is to achieve fiscal consolidation..."*

### 23. The authorities are taking measures to strengthen the state-owned electricity

### 23. The authorities are taking measures to strengthen the state-owned electricity

### EDM financial situation and reform measures
- Findings:
  - The financial situation of the electricity company (EDM) remains weak, reflecting inefficient management practices and the application of below-production costs tariffs.
  - The overall deficit of the company fell to about 0.7 percent of GDP in 2016 (from over 1.3 percent of GDP in 2015).
  - The deficit is expected to decline to about 0.4 percent of GDP in 2017.
  - The budget continues to cover over 60 percent of this deficit.
- Authorities’ objectives:
  - Improve EDM’s performance to support economic growth and free up resources for investment and social spending.
  - Reduce operating costs, improve efficiency and raise revenues.
  - Fully clear all existing arrears while avoiding the accumulation of new arrears.
- Transparency and monitoring:
  - EDM has started publishing quarterly financial statements, which will allow better monitoring of its financial position.

### Public-private partnership (PPP) law and FDI framework
- Actions taken:
  - The authorities adopted a (PPP) law in late 2016 and established a PPP unit to oversee implementation.
- Staff assessment (summarized):
  - The law has weaknesses that may imply new risks to the public finances, including issues with the legal regime for privately initiated projects, limited constraints on derogatory procedures, unclear risk allocation between partners, and insufficient Ministry of Finance role during implementation.
- Authorities’ stance:
  - Agree on need to improve the law but prefer revision after a reasonable period of implementation.

### Governance, asset declarations, and anti-corruption measures
- Challenges:
  - Difficulties in fully enforcing the law against corruption and unlawful enrichment, including presenting asset declarations to the Supreme Court due to the large number of senior government officials required to submit disclosures.
  - Many required to declare assets face difficulties completing forms, especially valuing and reporting real estate held in traditional ownership not easily attributable to individuals.
  - Despite the Prime Minister’s letter calling for submission by December 31, 2016, only a limited number (2–3 percent of the total expected respondents) transmitted disclosures to the Supreme Court.
- Measures and targets:
  - Operationalization of the Central Office for the fight against corruption (December 2016 structural benchmark) to oversee and assess asset declarations.
  - The Office plans a major campaign to explain how to complete forms and raise awareness of consequences of non-declaration.
  - The Office expects to achieve a reporting rate of 20 percent by senior officials by end-August (proposed structural benchmark) and to target further progress toward comprehensive reporting in 2018.
  - The action plan to combat money laundering and the financing of terrorism has been updated to reflect the new AML/CFT legislation approved in February 2016, which has enabled indictments of agents involved in acts of corruption.

### Technical assistance and capacity building (CBF)
- Agreed priorities:
  - Continue to build capacity for successful implementation of the ECF program under the Capacity Building Framework (CBF) pilot project.
  - Secure necessary political support, staffing, and other resources to implement the CBF.
- Fund TA focus areas:
  - Developing capacities in human resource management in all areas, especially revenue (tax and customs) administration.
  - Revamping the employment framework (recruitment, promotion, and training).
  - Reforming salary structures and incentive systems.
  - Enhancing public financial management.
  - Strengthening capacity to address weaknesses in the financial sector.
  - Expanding support to improve real sector statistics.

### Program extension, augmentation of access, and debt sustainability
- Requests by authorities:
  - One-year extension of the ECF arrangement to December 17, 2018 to respond to needs from the peace accord and decentralization, catalyze external budget support, maintain fiscal discipline, and advance reforms.
  - Augmentation of access by SDR 88.6 million: SDR 25.3 million in 2017 (13.6 percent of quota) and SDR 63.3 million in 2018 (33.7 percent of quota).
  - Resulting total access under the arrangement would be SDR 186.6 million, or 100 percent of quota.
- Intended use of augmentation:
  - In 2017: meet balance of payments needs from (a) shift toward external financing of the fiscal deficit following tightening of regional financial policies, and (b) execution of expenditures linked to the peace agreement.
  - In 2018: fill a balance of payment gap, maintain fiscal discipline while providing for security needs, and support structural reforms ahead of the November 2018 presidential elections.
- Debt sustainability:
  - Mali’s capacity to repay the Fund would remain adequate following the requested augmentation.
  - Mali has relatively light external and public debt burdens; obligations to the Fund measured in relation to official reserves or exports are modest.
  - An update of the debt sustainability analysis points to a slight deterioration in key indicators relative to the 2016 DSA; Mali’s classification remains at “moderate risk of debt distress”.

### Program risks
- Key risks to program implementation:
  - The ongoing monetary tightening could reduce bank financing to the government further.
  - Delay in implementing the new pricing mechanism for fuel products could negatively affect tax revenue.
  - Resistance to plans to reduce tax exemptions could undermine revenue performance.
  - Fiscal decentralization poses a risk, though a gradual approach and safeguards are being adopted.
  - Political support for economic adjustment and reform could wane as the 2018 presidential elections approach.

### Staff appraisal and policy recommendations
- Macroeconomic outlook:
  - Prudent policies and structural reforms have helped maintain a positive near-term macroeconomic outlook despite tighter financial conditions and rising external vulnerabilities.
  - GDP is expected to grow at a solid pace, supported by domestic demand, and inflation to remain subdued.
  - Risks to growth are tilted to the downside and relate to adverse movements in export prices, tighter financial conditions, and the fragile domestic security situation.
- Fiscal policy and consolidation:
  - The revised 2017 budget provides an adequate basis for fiscal policy, accommodating security, decentralization, and election-related spending while maintaining the program deficit objective.
  - Authorities need to remain vigilant to execute the budget as planned and resist relaxing the fiscal stance despite the electoral context.
  - Prudent expenditure management and sustainable revenue increases are critical to reducing the overall fiscal deficit to 3 percent of GDP over the medium term (consistent with the WAEMU norm).
- Revenue mobilization:
  - Bolstering tax revenue is crucial for planned budget consolidation.
  - Staff welcomes significant increases in tax revenue in recent years but notes room for the tax-to-GDP ratio to rise.
  - Staff supports measures including prohibition of new discretionary exemptions and plans to reduce other tax exemptions, expansion of the tax base, and increased taxpayer compliance.
- Structural reforms and governance:
  - Staff welcomes laws boosting revenues and improving governance but urges strengthening and broadening structural reform efforts.
  - Continue PFM reforms and expedite measures to strengthen the financial position of the state-owned electricity company to mitigate fiscal risks and free up resources for investment and social spending.
  - Step up efforts to implement the law against corruption and unlawful enrichment by enforcing compliance with asset declarations and operationalizing the Central Office for the fight against corruption.
- Revenue policy advice:
  - While supporting the creation of the FDD, staff reiterated advice against new export taxes and levies targeting specific sectors and encouraged exploring other revenue options, including broadening the tax base and further reduction of exemptions.
- Financial sector vulnerabilities:
  - The NPL ratio in the banking sector remains high despite recent declines.
  - Ongoing efforts to reduce legacy NPLs and develop a more comprehensive strategy to address the problem with Fund TA support should be expedited.
  - Progress in implementing the comprehensive plan to consolidate microfinance institutions and reform the microfinance sector is encouraged.
- Capacity building:
  - Capacity building is critical to prepare and implement key reforms.
  - Staff welcomes the authorities’ participation in the Capacity Building Framework initiative and their commitment to provide necessary staffing and resources to achieve agreed TA and capacity building goals.

*International Monetary Fund — excerpt from country report content unit*

### 40. Staff supports the authorities’ request for augmentation of program access under the

### Staff supports the authorities’ request for augmentation of program access under the ECF arrangement

### Program augmentation, access, and program support
- Staff supports augmentation of program access under the ECF arrangement by SDR 88.6 (47.5 percent of quota) and a one-year extension.
- Total access under the arrangements would be SDR 186.6 million (100 percent of quota).
- The attached Letter of Intent (LOI) and Memorandum of Economic and Financial Policies (MEFP) set out policies to achieve the program’s objectives.
- Capacity to repay the Fund is assessed as adequate; risks to program implementation are described as manageable given the government’s solid track record for policy implementation.

### Macroeconomic developments and projections (selected)
- Real GDP growth:
  - 2016: about 5.8 percent.
  - Projected 2017: 5.3 percent (noted as a deceleration but above historical trends).
- Consumer price inflation (average):
  - 2016: -1.8
  - 2017 (proj.): 0.8
  - 2018 (proj.): 0.2
  - 2019 (proj.): 1.2
  - 2020 (proj.): 1.6
  - 2021 (proj.): 1.9
  - 2022 (proj.): 2.1
- GDP deflator (annual % change): 2016: 1.5; 2017 (proj.): 1.5; 2018 (proj.): 1.7; 2019 (proj.): 1.2; 2020 (proj.): 1.4; 2021 (proj.): 0.7; 2022 (proj.): 0.9
- Terms of trade (deterioration -):
  - 2016: 4.4
  - 2017 (proj.): 16.7
  - 2018 (proj.): 4.5
  - 2019 (proj.): -6.4
  - 2020 (proj.): -0.1
  - 2021 (proj.): 0.3
  - 2022 (proj.): -0.4

### Fiscal developments, key fiscal balances, and public expenditure
- Total revenue and grants (percent of GDP):
  - 2016: 17.4
  - 2017 (proj.): 17.1
  - 2018 (proj.): 19.1
  - 2019 (proj.): 18.9
  - 2020 (proj.): 18.3
  - 2021 (proj.): 19.4
  - 2022 (proj.): 20.6
- Total expenditure and net lending (percent of GDP):
  - 2016: 19.7
  - 2017 (proj.): 20.0
  - 2018 (proj.): 20.9
  - 2019 (proj.): 23.2
  - 2020 (proj.): 22.2
  - 2021 (proj.): 23.1
  - 2022 (proj.): 24.0
- Overall fiscal balance (incl. grants, percent of GDP):
  - 2016: -2.4
  - 2017 (proj.): -2.9
  - 2018 (proj.): -1.8
  - 2019 (proj.): -4.3
  - 2020 (proj.): -3.9
  - 2021 (proj.): -4.1
  - 2022 (proj.): -3.5
- Basic fiscal balance (WAEMU definition, percent of GDP):
  - 2016: -0.7
  - 2017 (proj.): -1.2
  - 2018 (proj.): 0.5
  - 2019 (proj.): -2.1
  - 2020 (proj.): -1.9
  - 2021 (proj.): -1.6
  - 2022 (proj.): -1.1
- Government debt (percent of GDP):
  - 2016: 26.4
  - 2017 (proj.): 27.3
  - 2018 (proj.): 30.7
  - 2019 (proj.): 29.7
  - 2020 (proj.): 30.4
  - 2021 (proj.): 30.0
  - 2022 (proj.): 31.8
- Noted fiscal developments:
  - Growth in public expenditure since 2012 driven by capital project spending.
  - Efforts to address past governance lapses in public financial management helped unlock budget support grants and loans.
  - Debt relief in the last decade provided some fiscal space; more revenues need to be mobilized to keep recent momentum.

### Central government financial operations (selected 2016 and 2017 figures, in Billions of CFAF)
- 2016 (Est.):
  - Revenue and grants: 336.9
  - Total revenue: 324.9
  - Budgetary revenue: 299.0
  - Tax revenue: 287.0
  - Total expenditure and net lending (payment order basis): 423.5
  - Budgetary expenditure: 398.4
  - Capital expenditure: 129.5 (externally financed: 32.8; domestically financed: 96.7)
  - Overall fiscal balance (incl. grants): -86.7
  - Overall balance (cash basis, incl. grants): -120.7
  - Financing (total): 120.5 (external financing (net): 12.1; domestic financing (net): 108.4)
- 2017 (Prog., selected columns: Mar./Jun./Sep./Dec.):
  - Revenue and grants (Dec. Prog.): 1,823.0
  - Total revenue (Dec. Prog.): 1,620.4
  - Budgetary revenue (Dec. Prog.): 1,509.0
  - Tax revenue (Dec. Prog.): 1,357.5
  - Total expenditure and net lending (Dec. Prog.): 2,130.2
  - Budgetary expenditure (Dec. Prog.): 2,028.0
  - Capital expenditure (Dec. Prog.): 877.3 (externally financed: 306.5; domestically financed: 570.7)
  - Overall fiscal balance (incl. grants, Dec. Prog.): -307.2
  - Overall balance (cash basis, incl. grants, Dec. Prog.): -300.8
  - Financing (Dec. Prog.): 300.8 (external financing (net): 195.8; domestic financing (net): 105.0)

### External sector, balance of payments, and reserves (selected)
- Current external balance (including official transfers, percent of GDP):
  - 2016: -7.7
  - 2017 (proj.): -7.1
  - 2018 (proj.): -6.8
  - 2019 (proj.): -8.1
  - 2020 (proj.): -6.5
  - 2021 (proj.): -6.2
  - 2022 (proj.): -6.2
- Exports of goods and services (percent change / levels reported in Table 7):
  - Exports f.o.b. (2016): 1,606.8 (Billions of CFAF)
  - Exports f.o.b. (2017 proj.): 1,556.4; (2018 proj.): 1,662.2; (2019 proj.): 1,708.0
  - Gold exports (selected): 2016: 1,004.1; 2017 proj.: 1,050.0; 2018 proj.: 1,146.9; 2019 proj.: 1,156.5
- Imports f.o.b. (selected): 2016: -1,888.1; 2017 proj.: -1,992.5; 2018 proj.: -2,042.2; 2019 proj.: -2,113.1
- Trade balance (Billions of CFAF, selected): 2016: -126.5; 2017: -251.1; 2018: -240.9; 2019: -281.3
- Transfers (net) (Billions of CFAF, selected):
  - 2016: 1,005.5
  - 2017: 957.2
  - 2018: 1,117.9
- Capital and financial account (Billions of CFAF, selected):
  - 2016: 120.1
  - 2017: 175.3
  - 2018: 397.5
- Overall balance (Billions of CFAF, selected):
  - 2016: -86.2
  - 2017: -174.5
  - 2018: 42.8
- Memorandum ratios (current account as percent of GDP):
  - Excluding official transfers: 2016: -17.0; 2017: -14.6; 2018: -15.9; 2019: -16.6
  - Including official transfers: 2016: -7.7; 2017: -7.1; 2018: -6.8; 2019: -8.1

### Monetary and banking sector (selected)
- Broad money (M2) growth (contribution):
  - 2016: 18.9 (percent, contribution)
  - 2017 (proj.): 6.4
  - 2018 (proj.): 14.4
  - 2019 (proj.): 7.8
  - 2020 (proj.): 9.4
- Credit to the economy (annual change, percent):
  - 2016: 17.2
  - 2017 (proj.): 14.7
  - 2018 (proj.): 10.2
  - 2019 (proj.): 10.8
  - 2020 (proj.): 10.3
- Net foreign assets (BCEAO and commercial banks, Billions of CFAF, selected):
  - Net foreign assets (2016): 758
  - BCEAO (2016): 482
  - Commercial banks (2016): 277
- Financial soundness indicators (banking sector, selected):
  - Capital to risk-weighted assets (2016 average): 14.3–15.5 range shown across periods; 2016 average reported as 14.3 and 14.7 in different quarterly snapshots.
  - Non-performing loans to total loans: 2016 (average snapshots): 15.4 to 17.2 across periods; 2015: 19.3; 2014: 21.0
  - Provisions to gross non-performing loans: 2016 snapshots 57.7–67.3 range; 2015: 62.0; 2014: 65.0
  - Liquid assets to total assets (2016 snapshots): around 49.0–51.8
  - Ratio of loans to deposits: 2016 snapshots: 83.4–95.8 (varies by quarter)
  - Return on assets (ROA) and return on equity (ROE) reported in series: ROA examples: 2013: 1.2; 2014: 1.6 (select periods); ROE examples: 2013: 14.1; 2014: 21.5 (select periods)

### Program financing under the ECF and IMF repayment capacity
- Schedule of disbursements under the ECF arrangements (selected):
  - SDR 6 million (3.2 percent of quota) — December 18, 2013 (Executive Board approval).
  - SDR 4 million (2.1 percent) — May 1, 2014.
  - SDR 4 million (2.1 percent) — November 1, 2014.
  - SDR 4 million (2.1 percent) — May 1, 2015.
  - SDR 4 million (2.1 percent) — November 1, 2015.
  - SDR 19 million (10.2 percent) — May 1, 2016.
  - SDR 19 million (10.2 percent) — November 1, 2016.
  - SDR 31.65 million (17.0 percent) — May 1, 2017.
  - SDR 31.65 million (17.0 percent) — November 1, 2017.
  - SDR 31.65 million (17.0 percent) — May 1, 2018.
  - SDR 31.65 million (17.0 percent) — November 1, 2018.
  - Total for ECF arrangement: 100.0 (percent of quota).
- Indicators of capacity to repay the Fund (Millions of SDRs and ratios, Table 11, selected):
  - Fund obligations based on existing credit — Principal:
    - 2015: 5.7
    - 2016: 8.2
    - 2017: 10.7
    - 2018: 12.7
    - 2019: 13.8
    - 2020: 15.2
    - 2021: 15.4
    - 2022: 17.0
  - Total obligations based on existing and prospective credit (Millions of SDRs):
    - 2015: 5.7
    - 2016: 8.2
    - 2017: 10.7
    - 2018: 12.8
    - 2019: 14.2
    - 2020: 15.6
    - 2021: 15.7
    - 2022: 17.3
  - Total obligations (in billions of CFA francs):
    - 2015: 4.7
    - 2016: 6.7
    - 2017: 9.0
    - 2018: 10.7
    - 2019: 11.9
    - 2020: 13.0
    - 2021: 13.2
    - 2022: 14.5
  - Total obligations as percent of government revenue:
    - 2015: 0.4
    - 2016: 0.5
    - 2017: 0.6
    - 2018: 0.6
    - 2019: 0.7
    - 2020: 0.7
    - 2021: 0.6
    - 2022: 0.7
- Outstanding Fund credit (Millions of SDRs, selected):
  - 2015: 95.4
  - 2016: 125.2
  - 2017: 177.8
  - 2018: 228.4
  - 2019: 214.6
  - 2020: 199.4
  - 2021: 184.0
  - 2022: 167.0
- Outstanding Fund credit as percent of quota (using new quota SDR 186.6 million):
  - 2015: 102.2
  - 2016: 67.1
  - 2017: 95.3
  - 2018: 122.4
  - 2019: 115.0
  - 2020: 106.9
  - 2021: 98.6
  - 2022: 89.5

*Source: IMF staff report text, tables, and figures provided in the content unit.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Program background and request
- On December 18, 2013, the IMF Executive Board approved a three-year arrangement under the Extended Credit Facility (ECF) for Mali in an amount equivalent to SDR 30 million.  
- Access was increased to SDR 98 million in June 2016 and the arrangement was extended to December 17, 2017.  
- After 3½ years of implementing the program, the government reports stabilizing the macroeconomic environment despite a continued jihadist insurgency and requests:  
  - Completion of the Seventh Review under the ECF Arrangement and disbursement of the eighth tranche of SDR 31.65 million.  
  - A one-year extension of the current ECF arrangement to December 2018 and an augmentation of resources by SDR 88.6 million, for an overall access of SDR 186.6 million.  
- The government prepared a supplementary budget in 2017 to reflect additional expenditures of 0.6 percent of GDP (security spending 0.4 percent of GDP; local elections 0.2 percent of GDP). The overall deficit (payment-order basis, including grants) would be contained to 3 ½ of GDP.

### Program implementation and structural measures (performance through end-2016 and early-2017)
- The attached MEFP indicates:  
  - All performance criteria and indicative targets at December 31 were met as well as all continuous performance criteria.  
  - Four measures subject to structural benchmarks could not be implemented on time because of legislative delays and a difficult social context; corrective actions taken thereafter.  
  - On May 26, a bill prohibiting granting new discretionary exemptions was approved by Parliament.  
  - The Office against Corruption and Unlawful Enrichment was established and expected to become operational by mid-June, 2017.  
  - The adoption of an automatic pricing mechanism for petroleum products remains pending; the government is consulting stakeholders and working with donors on short-term mitigation measures for vulnerable populations.

### Economic developments: 2016 results and 2017–18 outlook
- Real GDP growth: estimated at 5.8 percent in 2016; projected at 5.3 percent in 2017.  
- Consumer price inflation: -1.8 percent at end-2016; expected to increase to about 1 percent in 2017.  
- Balance of payments: overall deficit widened to 3.9 percent of GDP in 2016.  
  - Current account deficit: 7.1 percent of GDP in 2016 (program: 7.7); projected at 8.1 percent of GDP in 2017.  
  - Wider overall deficit attributed to higher private capital outflows and delays in receipts of grants and multilateral loans.  
  - Financing: current account deficit expected to be financed essentially by net capital inflows (foreign aid and FDI).

### Financial sector indicators (end-2016 and early-2017)
- Risk-weighted capital ratio: 14.7 at end-December 2016 (14.8 at end-December 2015). Minimum regulatory standard: 8 percent.  
- Gross outstanding loans: CFAF 374.9 billion at end-2016 (increase of CFAF 41.8 billion or 12.6 percent compared to end-2015).  
- Net NPLs: CFAF 157.8 billion at end-December 2016 (CFAF 116.6 billion a year earlier).  
- Gross and net NPL ratios: 15.4 percent and 7.2 percent, respectively, at end-2016 (15.4 percent and 5.4 percent at end-2015).  
- Micro-finance sector: share of non-performing loans declined from 6.6 percent in 2015 to 6.2 percent in February 2017.

### Fiscal results and composition (2016 and 2017 supplementary budget)
- Budgetary revenue increased by 0.9 percent of GDP in 2016.  
  - Tax revenue increased by 1 percent of GDP; grants disbursements decreased by 1.1 percent of GDP.  
  - Total expenditures and net lending increased by 1.4 percent of GDP.  
  - Overall balance (including grants) estimated at 3.9 percent of GDP in 2016.  
- 2017 supplementary budget (LFR) projections:  
  - Revenue and grants: CFAF 1,823.1 billion (20.6 percent of GDP).  
  - Net tax revenue: CFAF 1,358 billion (15.3 percent of GDP).  
  - Grants disbursement: CFAF 203 billion (2.3 percent of GDP).  
  - Projected expenditure and net lending: CFAF 2,130 billion (24.0 percent of GDP).  
  - Domestically financed expenditure: CFAF 1,824 billion (21.0 percent of GDP).  
  - Overall fiscal deficit (payment order basis, including grants): CFAF 307 billion (3.5 percent of GDP).  
  - Basic fiscal deficit: CFAF 101 billion (1.1 percent of GDP).  
  - Additional LFR spending items: wages CFAF 5 billion; elections CFAF 18 billion; investment and domestic security programming law (LPSI) CFAF 20 billion.  
- Decentralization and transfers: Government intends to increase decentralized resources to 18.3 percent of budgetary revenues; deconcentrated expenditure reached 23.4 percent of budgetary revenues. Commitment to transfer 30 percent of budget revenue in 2018 (APRM).

### Program performance against quantitative targets (summary)
- End-December targets and continuous criteria: met. Specific outcomes:  
  - Net domestic financing of the government by banks and the financial market: CFAF 235 billion (adjusted target CFAF 281 billion).  
  - Zero ceiling on cumulative increase in external payment arrears: met.  
  - Ceiling on new external non-concessional loans: CFAF 250 billion: met.  
  - Floor on gross tax revenue: gross tax revenue CFAF 1,311 billion (exceeding planned levels by CFAF 9 billion).  
  - Floor on basic fiscal balance: basic budget deficit CFAF 156 billion (1.9 percent of GDP) vs. target CFAF 181 billion (including adjusters).  
  - Floor on priority poverty-related spending (domestically financed on education, scientific research, health, social development excluding transfers to CMSS): spending CFAF 410 billion.

### Structural benchmarks, compliance, and corrective actions
- Of nine structural benchmarks for the seventh review: three met by the agreed date; one achieved after the agreed date; three progressed but not yet completed. Details:  
  - Met: Public Procurement Management Integrated Systems; Integrated Debt Management System; inventory of tax exemptions.  
  - Financial disclosures: Prime Minister instructed officials to submit disclosures by December 31, 2016; by end-March 2017 only 2–3 percent had submitted.  
  - Central Office Against Unlawful Enrichment: members appointed by decree and released from original departments; operationalization expected to improve compliance.  
  - Draft law on discretionary exemptions: adopted by National Assembly on May 26, 2017; enactment expected to increase tax revenue by at least 0.2 percent of GDP in 2018.  
  - Oil pricing mechanism: not yet in effect; envisaged mechanism to ensure price changes in imported petroleum products are reflected in pump prices within a margin of 3 percent; plan to sensitize social partners and design measures to support vulnerable populations; efforts expected to facilitate implementation in 2018.

### Policy priorities and reforms for 2017–2018
- Overarching government objectives (CREDD 2016–18): promote inclusive and sustainable development to reduce poverty and inequalities and achieve the Sustainable Development Objectives (SDGs) by 2030 through three pillars: (i) promoting inclusive and sustainable economic growth; (ii) improving access to basic social services; (iii) strengthening institutional development and governance; supported by consolidating peace/security and macroeconomic stability.  
- Sustainable Development Fund (FDD): CFAF 18.0 billion executed in 2016 and CFAF 33.0 billion provided in the 2017 budget to implement Specific Development Strategy for Northern Regions and other regional projects; inclusion in national budget and drafting/adoption of regulatory texts underway.  
- Fiscal strategy: maintain overall fiscal balance consistent with public debt sustainability and aim to meet WAEMU convergence criterion of 3 percent of GDP overall fiscal deficit by 2019.  
- Public financial management (PFM): continue remedial actions addressing weaknesses identified by 2016 PEFA, PAGAM/GFP II evaluation, and IMF FAD technical assistance through Mali’s PFM reform plan.

### Revenue mobilization and tax policy measures
- Targeted increases in tax revenue: increase by 0.3 percent of GDP in 2017 (performance criterion) and by 0.6 percent of GDP in 2018 through expanding the tax base and reducing exemptions. Measures include:  
  - Implement law to eliminate discretionary exemptions; ramp up reporting; strictly apply the import verification program (PVI).  
  - Continue reforms in DGI, DGD, and DNDC; promote ethical standards and performance-based management in revenue units; cooperate with economic operators to improve compliance.  
- Steps already taken to phase out exemptions:  
  - Revised Investment Code in 2012 eliminating certain exemptions.  
  - Removed exemptions in the petroleum code in 2015.  
  - Eliminated internet and telecommunication tax exemptions (TARTOP).  
- Further measures to roll back exemptions and improve tax administration:  
  - From January 2017, all public projects financed by domestic revenues are subject to taxes.  
  - Engage with development partners to ensure projects financed with foreign aid are subject to taxes starting in 2017; report by August 31, 2017.  
  - Include IMF TA recommendations in draft new mining code to preserve government revenues and limit duration of agreements.  
  - Review legislation (Investment Code, General Tax Code, Customs Code, Law on Partnerships, and others) and prepare amendment proposals by end August 2017 to reduce scope, duration, dues, taxes, and rates of exemptions.  
  - Increase threshold for granting exemptions for investments from CFAF 12.5 million to 100 million by August 31, 2017 (structural benchmark).  
  - Produce exhaustive inventory of tax exemptions granted in 2016 and prepare analytical report by June 2017 (structural benchmark).  
  - Include tables in draft budgets identifying each exemption and estimated revenue loss.  
  - Exploit central database of tax and customs exemptions finalized in 2014; DGI memorandum in February 2016 analyzed exemptions and amounts for 2015. CAISFF published list of beneficiaries (with unique identifiers) and will publish associated tax expenditures for 2016 by August 2017.  
  - Set up technical working committee (DGI, DGD, CAISSF) to interface databases by August 31, 2017; committee defined a single code for legal basis of exemptions and initiated interfacing pending installation of SIGTAS version 3.0.

*Source: Letter of Intent and attached Memorandum of Economic and Financial Policies, Bamako, June 19, 2017.*

### 0.4 percent of GDP) in VAT.

### cr17209 - 0.4 percent of GDP) in VAT.

### Tax expenditures and exemptions
- In 2015 the DGI listed 452 tax exemption measures that amounted to tax expenditures totaling CFAF 123 billion (US$ 226 million or 2.08 percent of GDP).
- Distribution of these tax expenditures by tax type:
  - 97.93 percent related to the VAT.
  - 2 percent to the tax on industrial and commercial profits and the corporate tax.
  - 0.07 percent to recording and stamp duties.
- Legal basis breakdown:
  - General Tax Code: 11 percent.
  - Mining Code: 0.7 percent.
  - Ministerial orders: 80 percent.
  - Investment Code: 1.5 percent.
  - Contracts: 5 percent.
- DGI system actions planned:
  - Development in the DGI information system, SIGTAS version 3.0, of a specific exemption management module.
  - Review and adaptation of printed tax return forms.

### Petroleum product revenue protection and pricing mechanism
- Since 2005, tax revenue from petroleum products declined from 3 percent of GDP to less than 1 percent of GDP in 2012; in 2014 it increased to 1.5 percent of GDP.
- Government measures to protect tax revenue from petroleum products:
  - Calculation of retail petroleum product prices based on actual market values of imported products, as provided by Community legislation; determination and publication of the loss of revenue or potential revenue attributable to setting retail prices below those calculated prices.
  - Implementation of a pricing mechanism that ensures changes in the cost of imported petroleum products are fully reflected in pump prices within a margin of 3 percent per month (structural benchmark, Table 3 and 4).
  - By December 31, 2017, the government will determine and fix the level of tax (TIPP) consistent with appropriate domestic prices for petroleum products, to ensure protection of revenue and pass-through of international price changes to domestic prices. Implementation of this mechanism is scheduled for 2018.
  - Interim measures by August 31st:
    - (1) Launch a public information campaign to explain costs of current practices, the need for reform and advantages of the new petroleum pricing mechanism.
    - (2) Develop, in collaboration with the World Bank, measures to protect the poorest and most vulnerable sections of society from the impact of rising petroleum product prices and to assist middle-income ones to adjust.
  - Presentation in budget laws of the potential loss of revenue on petroleum products during the preceding year.

### Simplification of tax laws and taxpayer procedures
- Measures already undertaken:
  - Provide taxpayers with a single tax declaration form for all dues and taxes with the same filing frequency.
  - Establish a tax system based on self-assessment and a single proportional rate of 3 percent of taxpayer turnover for the alternative minimum business tax—AMBT. This eliminated 288 different contribution rates listed in the AMBT schedule.
  - Revamp the simplified tax regime by reducing the number of prepayments from 12 to 4.
- Outcomes and targets:
  - Number of taxpayers in this segment filing tax returns increased by 19.8 percent from 35,278 in 2015 to 42,294 in 2016.
  - Contributions of these enterprises increased by 16.48 percent from CFAF 1,416 billion in 2015 to CFAF 1,649 billion in 2016.
- Further simplification commitments:
  - Simplify income taxes (ordinary tax for large taxpayers and the simplified version for medium-size taxpayers); local taxation with an alternative minimum tax allocated to local governments; tax on wages and salaries; employer contributions; land taxes; tax on securities; taxes on financial and real estate transactions as well as commissions and other costs associated with real estate transactions.
  - Produce a report on implementation of these simplification measures by end-August 2017.
  - Use the 2015 AMBT simplification (single rate of 3 percent of turnover) as a model.

### Improving DGI effectiveness and taxpayer management
- Taxpayer segmentation and dispute management:
  - Division of taxpayers into three groups: small enterprises, medium-sized enterprises, and large enterprises.
  - Modernization of tax dispute management: creation of Disputes Division in the DGE, DME, DID, and DRI; reduction in legal time limit for processing disputes from nine months to four months for the administrative phase.
- Payment and compliance measures:
  - Introduction of the bank draft for tax payments. In 2016 the number of taxpayers paying by bank draft increased from 65 to 107 (20 percent of the DGE’s taxpayers).
  - DGI publishes regular updates of lists of taxpayers managed by the DGE and DME on the MEF website; target to increase the share of DME revenue in the DGI from 5.3 percent in 2016 to 7.1 percent in 2017.
- Audit and filing coverage:
  - Coverage rates in 2016: 37 percent for the DGE (large enterprises), 15 percent for the DME (medium-sized enterprises), and 14 percent for the DID (district taxes).
  - Target for 2017: an average audit ratio of 25 percent.
  - Plans to reduce non-filing rates of medium-sized enterprises and individual taxpayers managed by tax centers (CDI) to less than 10 percent and 15 percent, respectively, in 2017.
- Income and land tax yield improvements:
  - Improved inventories of property rentals.
  - Awareness campaign targeting diplomatic organizations, cooperation agencies, international NGOs on reporting rents and paying applicable taxes; DGI to take stock of results concerning rents for period 2014, 2015, and 2016 by end-August 2017.
- Identification and migration to NINA:
  - Identification of all taxpayers using a national identification number (NINA).
  - Retained a private firm to conduct a feasibility study for migration from NIF to NINA; report submitted and an action plan adopted and being implemented. Action plan includes:
    - Creation and activation of a committee to implement migration from the NIF to the NINA.
    - Amendment of certain provisions in the law establishing the NINA.
    - Computerization of the issuance of the RCCM (commercial and property register) number.
    - Preparation and allocation of a budget to finance migration activities.
- Tax dispute practice improvements (World Bank TA recommendations):
  - By June 2017: establish a joint mediation committee composed of representatives from the private sector and the tax administration, chaired by an individual independent of the government and the private sector; two draft decrees prepared for the National Conciliation Commission and the National Tax Commission.
  - By June 2017: strengthen the Office of the Mediator of the Republic by recruiting tax experts to receive and review taxpayer complaints against staff of revenue-collecting agencies.
  - Establish taxpayer rights to bring disputes before the Office of the Auditor General (BVG) or the Anti-Corruption and Unlawful Enrichment Commission when operational.
  - DGI to send a progress report to MEF by August 31, 2017 on processing of outstanding claims by economic agents. In 2016, decisions were made on 60 percent of the requests addressed to the DGI: of 723 claims received, 435 cases were processed.

### Human resources management, incentives, and institutional strengthening
- FAD technical assistance mission (February 2017) and HRM recommendations based on DGI questionnaire:
  - (i) Rebalance base salary as indicated in the Public Service Index Grid and the bonuses and incentives awarded to staff.
  - (ii) Establish structured management dialogue at all levels and tools for measuring collective and individual performance.
  - (iii) Set up tools for analysis and predictive workforce management.
  - (iv) Strengthen vocational training and the role/competence of department heads in supervision and steering.
  - (v) Strengthen internal control.
- Authorities committed to implementing recommendations; incentive regulations published in the official gazette since 2016; all incentives are paid by bank draft only.
- Planned regional seminar organized by FAD in 2017 as an outcome of the final report.

### DGI, DGD, DNDC, and DGABE coordinated measures to expand the tax base
- DGI actions:
  - Strengthen the research division: increase human resources, renovate facilities, provide training in surveys.
  - Computerize recording of government contracts.
  - Interconnect different management systems (CAISFF, DGI, DGB, DNCF, DNTCP, DGD, and DGMP).
  - Increase responsibility of tax collectors (now government accountants) after payment of deposit and taking the oath.
  - Establish ad hoc controls of VAT payment.
  - Adopt laws strengthening transfer pricing management.
  - Ongoing training of auditors, particularly in extractive industries, telephone, banking, and insurance.
- Specific DGI measures to undertake:
  - Organizational reform: creation of two medium-sized taxpayer centers (CME) in Bamako under the District Taxes Directorate (DID) and one CME in Kati under the Koulikoro Regional Tax Directorate (DRI); creation of verification brigades.
  - Pursue ad hoc controls of VAT payment.
  - Better management of unpaid taxes.
  - Capacity building for tax auditors, especially for supervision of mining companies, new technologies and the financial sector.
  - Computerization of management of exemptions ongoing at DGI; opening a module in SIGTAS and interconnection with DGI, DNDC, DNCC, and DNTTMF.
  - Strengthening internal and external communications.

### DGD (Customs) modernization and measures
- Action plan to implement IMF FAD June 2013 TA recommendations; progress includes:
  - Use of PEDONIA personnel management database to optimize HR management.
  - Computerized customs funds and strengthened capacity of responsible officers.
  - Acquisition of 44 all-terrain vehicles, bullet-proof vests and heavy helmets.
  - Migration to ASYCUDA World with a coverage rate of 99 percent in terms of relative contribution of offices connected to the network to revenue; aim to process customs documents paperless and institute fully electronic customs declarations.
- Additional DGD measures:
  - Use reports produced by BIVAC surveillance firm to improve administration performance.
  - Introduce payment of customs duties to DGD via bank transfer; DGD and DNTCP raising awareness among operators and consulting banks to increase taxpayers paying by bank transfer; mapping to interface STAR-UEMOA (interbank system) with ASYCUDA World.
  - Verify WAEMU and ECOWAS certificates of origin in cooperation with issuing authorities and a committee including DGD and OPI; certificates of origin audits since July 2014 uncovered CFAF 2.4 billion of compromised customs duties; claims for these amounts have been issued.
  - Create a one-stop facility under ASYCUDA World to bring together stakeholders of the customs clearance chain; aim to establish a single facility by December 31, 2017.
  - Automatic selectivity project (ongoing since 2005 with IMF AFRITAC West support) to culminate in second phase of ASYCUDA World; electronic management of customs disputes application validated and will serve as basis for automatic selectivity criteria; expected operational by December 31, 2017.

### DNDC modernization and property administration
- DNDC reform early 2017 produced two structures:
  - National Land Registry Directorate.
  - National Government Property Directorate.
- Interim measures:
  - Collect capital gains taxes on real estate sales by individuals.
  - Use electronic document management system (Modonum) to store property files.
  - 33,900 land titles were digitized in Modonum compared with 108,000 digitized property titles inventoried in 2016.
  - DNDC intends to continue the digitization process.

### Implementation of multidisciplinary audits and anti-fraud efforts
- Mixed Committee on Economic and Financial Information and Investigation (CMRIEF) created in March 2012; first results significant.
- Ministry of Economy and Finance to revitalize and strengthen the Committee.
- Report on investigations conducted and processed in 2015 was published in March 2017.
- From January 2017, the Committee will produce quarterly reports.
- DGD strengthening actions include systematic check of T1 transport titles by the transit control office and strengthening advanced brigades as part of the national anti-fraud plan; mission ongoing throughout 2017.

*Source: cr17209 - 0.4 percent of GDP) in VAT.*

### 2017. In addition, progress toward activating the two new structures will continue.

### cr17209 - 2017. In addition, progress toward activating the two new structures will continue.

### Modernizing the DGABE
- The MEF will modernize the DGABE through:
  - Introduction of results-based management (RBM).
  - Greater use of IT (use of inventory accounting software in the accounting offices of ministries and public institutions).
  - Implementation of reforms for better monitoring and appraisal of the government portfolio.

### VAT refunds
- VAT generates roughly 40 percent of tax revenue.
- Measures being implemented:
  - A special allocation account was created exclusively for refunding VAT credits. The account will continue to be funded by:
    - the full amount of VAT revenue paid by mining companies and their subcontractors on imports, and
    - 10 percent of domestic VAT revenue, or more if needed.
  - The MEF issued a directive indicating that if the balance of the account is insufficient to cover the refund of VAT credits, the contribution of VAT revenue collected by the DGI can be increased by the amount required.
  - The mechanism will ensure VAT credits are refunded regularly to all companies that generate VAT credits, with the exception of resellers without transformation.
  - The DGI and the mining companies consult regularly on monitoring VAT credit refunds.
  - The system of withholding VAT at source will be completely abolished, including for the Treasury, starting in January 1st, 2018; the government has implemented measures to secure collections, including setting a proper interface between the Treasury and DGI information systems.
  - To increase the number of businesses that effectively pay VAT, the DGI has been expanding selective audits of VAT credits, beginning with businesses whose activity should not systematically generate VAT credits (particularly commercial activities and service providers). Reports on targeted audits were produced in 2015 and 2016. DGI continued training staff for research, targeted VAT audits, and audits of VAT credits.
- Footnote data: In 2014, 51 percent of large businesses and 51 percent of medium-sized businesses required to pay VAT effectively paid the tax, compared to 27 percent and 20 percent, respectively, between January 2012 and May 2013.

### Improve Expenditure Management — Regulatory framework and WAEMU transposition
- The government will improve the regulatory framework for public financial management and budget preparation, execution, monitoring, and control.
- Transposition progress:
  - WAEMU directives 01/2009 and 06/2009 through 10/2009 (transparency code, budgets, public accounting, budget nomenclature, government chart of accounts, TOFE) were transposed into national laws and regulations.
  - The government is in the process of transposing Directive 01/2011 concerning subnational jurisdictions’ financial regimes.
  - A draft law establishing the code for local governments was drafted and submitted to government for consideration.
  - Most implementing regulations have been drafted and adopted; remainder are in the pipeline.
  - The government will ensure all regulatory texts related to the 2009 WAEMU directives are published.
  - AFRITAC West and the World Bank provided support.

### Improve government budget preparation
- Gradual implementation of program budgeting and results-based management per WAEMU directive.
- 2017 budget law presented to the National Assembly in program budget form; annexes prescribed by the directive submitted plus distribution of appropriations under resource-based budget and by region.
- Technical assistance and capacity building:
  - IMF seminar in Dakar in June 2016 for DGB, DNTCP, CARFIP, DNPD, DNCF and line ministries identified priority actions.
  - Government plans:
    - Adopt a decree on organization of program management, role of program manager and related personnel by end-June 2017.
    - Budget Directorate to prepare Guidelines (manual) on preparation and execution of program budgeting by March 2017.
    - National training strategy designed in January 2017; implementation began February 2017 with DNTCP, DNPD, DNCF.
- Information system adaptation:
  - Expenditure management software (PRED) adapted to program budgeting preparation in 2015.
  - March 2017 added modules: (i) results-based budgeting; and (ii) implementation in program mode.
  - Final mode for performance monitoring to be completed by end-December 2017.
  - AFRITAC mission validated PRED functions April 24–28, 2017 and recommended testing phase.
  - Testing began May 2017 with a few departments under dual control for program mode execution; interfacing PRED with AICE to start by July 2017.
- TFP coordination:
  - Government requests TFPs provide information early (in April) on budget support planned for the following year.
- Parliamentary engagement:
  - Budget strategy discussions with the National Assembly during the first half of the year; discussions for the 2018 budget to be held before June 30, 2017.
  - All information and budget preparation/execution reports to be published on the MEF website.

### Improve government budget execution
- Operationalization targets as program budgeting is established:
  - Appointment of program managers and establishment of criteria to assess their financial management capabilities.
  - Introduction of ministerial management charter.
  - Establishment of Annual Performance Contracts (APCs) between program managers and administrative public entities (EPA).
- Commitments and timelines:
  - Government committed to appointing all program managers by end-December 2017.
  - Budget Directorate to prepare criteria for financial management capacity assessment by end-March 2018.
  - Government plans to help program managers draft performance contracts with EPAs by end-June 2018.
  - Ministerial management charter for all government departments to be drafted by end-August 2018.
- Budget execution calendar for 2017 (pursuant to Community directives):
  - November 30, 2017: commitments of operating expenditures, investment expenditures, and expenditures under petty cash procedures.
  - December 20, 2017: commitments of other expenditures.
  - December 30, 2017: payment orders.
  - January 31, 2018: government accountants' acceptance of payment orders, approval, and ex post validation.
  - Carryover period limited to accounting operations.

### Personnel management and public contracts
- Civil service census:
  - Physical census of civil servants and staff of local authorities carried out in 2014 revealed management shortcomings.
  - Based on interim report, payment of wages suspended for those not accounted by the census; investigations ongoing for agents in security/military operations, on excused leave, or abroad for long-term training.
  - Final report will detail number checked, number removed from salary register and budget savings achieved in 2016 and 2017.
- Public procurement:
  - Integrated Public Contract Management System (SIGMAP) rolled out in the General Directorate of Public Contracting and public service offices in all ministerial departments on January 1, 2017.
  - Any hardcopy files not processed in SIGMAP are rejected. All plans by contracting authorities to award contracts after DGMP no-objection are entered into SIGMAP.

### Public investment monitoring and project management
- DGB, DNPD, and DGDP instituted an annual program to monitor 100 projects and programs to increase physical and financial execution rates of public investment projects; goal achieved in 2016.
- 2017 actions:
  - Additional field missions to monitor another 100 projects and programs.
  - Annual list of market prices drawn up regularly; cost of line ministry projects and programs under way in 2017 assessed using 2016 price listing. The 2017 listing will be used for PTI 2018-20 and BSI 2018.
  - DNPD and DGDP committed to publishing financial execution status of foreign-funded projects on a quarterly basis.
  - Reports on Q1, Q2, and Q3 execution of foreign financing under the 2016 BSI published on the DNPD website www.dnpd.ml.
- Research funds:
  - For 2016, the fund for project and program research and preparation amounted to CFAF 800 billion, entirely allocated to the energy sector for study of mini-hydroelectric dams.
  - The research fund for 2017 is also assigned in its entirety to the energy sector.
- SDNI and cofinanced projects:
  - Directorate of Finance and Equipment (DFM) issued an international request for expressions of interest to draft the forthcoming SDNI; a research firm was hired and the contract is being signed.
  - Domestic counterparties of new cofinanced projects deposit funds in an escrow subaccount with the BCEAO for projects accepted in principle by donors; process effective for all government-funded projects but only partially effective for TFP-financed projects and programs.

### Improving budgeting procedures and monitoring investment appropriations
- Measures to be adopted:
  - 2013 budget introduced budgeting of commitment authorizations (AEs) and payment appropriations (CPs) for three-year public investment expenditures; MEF arranged monitoring of AEs and CPs through PRED5 at end-February 2017.
  - Starting with 2016 budget, carryover procedure for CPs expected to take effect under WAEMU directives (only guaranteed CPs included in the cash flow plan may be carried over), but capacity constraints prevented implementation.
  - Government requested technical assistance from IMF’s Fiscal Affairs Department; workshop held April 2017 on AE and CP management and DGB IT tools compliance.

### Payment deadlines, arrears monitoring, and transparency
- Payment deadlines monitored to prevent arrears accumulation:
  - PRED5 and AICE to monitor payment order execution times and ensure payments made within 90 days of certification per WAEMU directives.
  - Monthly tables posted on the MEF website for this purpose.
  - Interface between AICE and PRED used to produce reports identifying orders older or younger than 90 days.
  - Periodic statements published on the MEF website based on PRED5 data.

### Improve Fiscal Transparency — TOFE and financial statements
- DNTCP will gradually implement the new WAEMU directive on the TOFE and other financial statements.
  - Transition approach: produce TOFE during 2015–17 using 1998 and 2009 nomenclatures; in 2016 program monitoring continued to use 1998 TOFE.
  - Beginning in 2018, DNTCP will produce TOFE using only the 2009 nomenclature; any new IMF program will be based on the 2009 TOFE.
  - A monitoring committee for migration to new TOFE created; roadmap prepared based on AFRITAC recommendation; weekly steering meetings held.
  - In 2016, DNTCP focused on producing three of the four financial statements provided by the 2009 directive: (i) TOFE; (ii) statement of public debt; and (iii) report on cash flow operations.
  - Government balance sheet produced for first time in 2015 based on position as at end-2014; same exercise in 2016.
  - 2016 financial balance sheet finalized during April 2017 workshop on expansion of TOFE to the 9 national public entities (EPN) monitored in the cash flow plan.
  - Expansion to cover a maximum number of EPNs by 2019; the 9 targeted EPNs include INPS, CMSS, and CANAM.

### Treasury accounting application (AICE) and accrual accounting
- AICE rolled out in all upper level accounting offices except two new regions (Ménaka and Taoudéni), which await release of AICE 2 in July 2017.
- New centralization module completed at central office and in progress in regional offices; output statements being designed.
- As part of program budgeting, accrual-based accounting, and patrimonialisation, a new version of AICE is being procured:
  - Specifications prepared and invitation to bid issued.
  - New application will reflect expenditure execution using new budget and accounting nomenclatures, integrate the new procedures manual, track budget execution in program budget mode in AEs and CPs, and provide a better interface with the DGB.

### Improve Cash Flow Management
- DNTCP prepared a monthly cash flow plan at the beginning of the year and updates it each month to reflect revenue collected, expenditures executed, and external financing disbursed; MEF and line ministry staff to receive IMF Fiscal Affairs Department training on preparing expenditure commitment plans.
- DNTCP is developing a more accurate understanding of components of the net government position (NGP) vis-à-vis the banking system:
  - Regular publication of reports on MEF website analyzing NGP components, highlighting activity in net Treasury position (NTP) and net position of other government entities (PNACP).
  - Reports present opening and closing stocks and identify all owners of accounts included in the PNACP; tables updated every six months. Report for end-December 2016 completed in May 2017.
  - BCEAO will continue to provide DNTCP with the NTP extracted from the monetary survey for TOFE compilation per WAEMU directives.
- Treasury Single Account (TSA) consolidation:
  - June 2016 decree set rules for opening, closing and management of public accounts at commercial banks.
  - Census of bank accounts at December 31, 2016 completed for 11 of 14 commercial banks; data showed a total of 3949 accounts surveyed.
  - DNTCP will ensure necessity for public institutions to open bank accounts and will close inactive accounts; 16 inactive accounts with the BCEAO have already been closed.
  - Draft bipartite agreement validated February 21, 2017 between DNTCP and APBEF.

*Source: cr17209 - 2017. In addition, progress toward activating the two new structures will continue.*

### 56.      The obligation to deposit EPA funds with the Treasury will be clearly reestablished and

### 56.      The obligation to deposit EPA funds with the Treasury will be clearly reestablished and 

### Reestablishment of Treasury deposit obligation
- The obligation to deposit EPA funds with the Treasury will be clearly reestablished and upheld in accordance with the principle of a single Treasury account and consolidation of cash holdings cited by the 2009 WAEMU directive.
- Exceptions to the deposit obligation:
  - Public hospitals;
  - the Malian Social Security Fund (CMSS), the National Social Insurance Administration (INPS)) and the National Health Insurance Fund (CANAM), described as jointly held entities over which the government does not exercise direct control;
  - EPAs that do not receive government subsidies.
- The DNTCP will issue a broad communique to the banks and institutions concerned for the progressive repatriation of their funds at the Treasury.
- Note on fiscal position: At end-2016, the net government position (NGP) vis-à-vis the banks was a creditor position of CFAF 183 billion (2.0 percent of GDP) for the government as broadly defined in the WAEMU directive in the Table of Financial Operations. That figure includes a net Treasury liability position of CFAF 165 billion (1.8 percent of GDP) and a net creditor position of CFAF 18 billion (0.2 percent of GDP) for other government entities.

### Supervision and fiscal oversight of EPAs
- The DNTCP is reinforcing supervision of EPAs.
- Budget approval conditionality:
  - The MEF will not approve EPA budgets until EPAs have forwarded their budget execution statements for the first half of the previous year to the DNTCP.
  - Approval of 2017 EPA budgets upon submission of half-yearly budget execution statements for 2016 is in effect.
  - No budget is approved by the MEF without submission of proof of filing the budget execution statement for the first half of the previous year with the Treasury.
- Submission progress:
  - For 2016, the DNTCP received financial execution statements from 89 EPAs, up from 79 in 2015.
- Capacity building:
  - Training events on accounting and reporting for EPA accounting staff planned under PAGE and PREM.
  - April 2017: 70 accounting officers from EPAs trained in “Management accounting by public accountants of national public institutions.”
  - Additional training on the decree establishing the budget and accounting nomenclature and the accounting operations manual planned in June 2017.
- Transparency requirement:
  - Once the National Assembly ratifies the order amending Law 90/110 establishing the EPAs, EPAs will be required to publish accounts certified by CPAs starting with the accounts for FY 2017.

### Strengthen internal and external controls
- Government adopted a National Internal Control Strategy in August 2011, implemented over 2012–16; remaining activities integrated into PREM.
- Measures and institutional developments:
  - New tools developed following transposition of WAEMU directives, including the order on ex-post assessment of program performance and the order on implementing selective ex-ante audits.
  - Selective ex-ante audits effective since February 1, 2017.
  - At end-2016, the DNCF trained 500 officers (300 from financial supervision and 200 from payment authorization units) on procedures for implementing selective audits after developing a computerized module in PRED5 on selective audits.
  - Creation of an Internal Audit Office to ensure compliance audits by financial supervision agencies and production of reports at end of each mission.
  - Establishment of a Program Performance Assessment Division, expected to be fully operational by 2018 when the program budget is scheduled to be implemented.
  - Regular publication of audit reports on service effectiveness and computerized acceptance reports.
  - Deconcentration progress: 20 of 35 planned sub-offices created in 2015 and 2016; remaining 15 scheduled for 2017. Deconcentrated DNCF units present in all regions, in 38 circles, in all ministerial departments, in 3 institutions, and in 47 public and equivalent entities.
- Government annual financial statements will be produced and audited regularly as provided by applicable Community directives.
- Budget review law for fiscal year 2015 adopted in November 2016 as provided by relevant community directives.

### Bring CMSS and INPS into financial balance
- Government actions intended to ensure financial soundness of:
  - Malian Social Security Fund (CMSS), public sector pension administrator;
  - National Social Insurance Administration (INPS), administering pensions, employee accident insurance, and benefits for private-sector employees.
- Planned measures:
  - Incorporation of relevant recommendations into a new Code under preparation, including increasing the state’s contribution to make the CMSS autonomous.
  - For INPS, a consulting company recruited; actuarial study underway since March 2017 with a preliminary report expected in December 2017.

### Sustainable borrowing policy and external debt management
- Government commitment:
  - Cover external financing needs primarily through grants and loans in foreign currency with a grant element of at least 35 percent.
  - Most loans contracted in 2016 have an average grant element of at least the required 35 percent.
- DGPD actions:
  - Prepared a detailed chart of loan agreements to support execution of the 2017 budget, identifying the amount disbursed and financial terms of each loan; borrowing plan to remain annexed to the budget.
- Borrowing figures:
  - In 2016, government mobilized about CFAF 192 billion in concessional loans and CFAF 33 billion non-concessional loans.
  - For 2017, government plans to contract CFAF 345 billion in new external borrowing (of which CFAF 49 billion would be non-concessional), equivalent to CFAF 180 billion in PV terms (Table 5).
  - Cumulative ceiling on external borrowing for 2015–17 remains consistent with the program and amounts to CFAF 426 billion in PV terms (continuous performance criterion, Table 2).
- Debt database and management strengthening (pre-new tool achievements):
  - Committee to update public debt database in place since January 2016.
  - Debt balances: CFAF 1,484.6 billion in 2014; CFAF 1,754.4 billion in 2015; CFAF 2,073.9 billion in 2016.
  - In-house training in CS-DRMS application.
  - Staffing increased in Operations Subdirectorate: three senior staff assigned in 2015 and one more in 2016.
  - Reconciliation missions: IFAD with IsDB in September and November 2015; BADEA, OPEC Fund and Kuwait Fund in November and December 2016.
  - Reconciliation at IsDB enabled Malian access to IsDB real-time project portfolio data via extranet.
  - For donors with representative offices in Mali (World Bank, African Development Bank), data are regularly cross-checked with DGDP.
  - Launch meeting for new debt management software project held January 2017; project timetable January 16 to August 31, 2017.
  - National Public Debt Committee (CNDP) launched March 2014 to provide opinions on borrowing initiatives and produce annual borrowing strategy annexed to the budget law; CNDP Technical Committee meets regularly; CNDP met four times in 2016.
  - Second phase (analysis) of integrated debt system project to be set up by end of August 2017, deploying complementary modules for net present value calculation, production of debt statistics, and debt simulations (structural benchmark, Table 4).

### Domestic debt management and arrears clearance
- Banks reporting and validation:
  - DGDP requested progress reports from banks on government commitments and repayment schedules.
  - Review confirmed CFAF 78.3 billion in outstanding commitments; CFAF 8.9 billion claims validated.
  - Some commitments rejected (related to advances on contracts and other indirect commitments); banks notified of reasons for rejection.
  - CFAF 6.2 billion of validated outstanding payments paid in 2016; remaining CFAF 2.7 billion to be paid in 2017.
- Guarantees and provisions:
  - No other recorded guarantees by the DGDP; not considered necessary to establish provisions in 2016 and 2017 budget laws.
- Clearing domestic arrears validated by audit:
  - Total arrears: CFAF 166 billion (2.6 percent of GDP), comprising CFAF 94 billion validated by the consultant and CFAF 72 billion not validated.
  - Government paid out CFAF 117 billion in 2013–16.
  - In 2016, government refused to pay remainder due to shortcomings in supporting documentation.
  - Validated arrears included a CFAF 30 billion court judgment against the government; an appeal decision is pending.
  - Government requested a supplementary audit to conclude by end-August 2016 to allow creditors of invalidated debts totaling CFAF 40 billion to supplement dossiers; supplementary audit process suspended due to shortcomings.
  - January 2017: Ministry of Finances resumed process, entrusting review to a commission to identify cases that can be paid.
  - CFAF 10 billion provided in the 2017 budget to make these payments when the commission completes its work.

### Improve business environment and mobilize resources
- Principal constraints identified in the latest Africa Competitiveness Report:
  - Access to financing;
  - Corruption;
  - Insufficient infrastructure (including energy sector);
  - Complex tax laws;
  - Government bureaucracy;
  - Inadequate workforce qualifications.
- Government measures:
  - Implementing measures to mobilize resources for infrastructure investment and simplify tax legislation (¶19).
  - Additional measures (¶56–58) to maintain financial sector stability, improve access to financing, strengthen electricity sector’s financial position and productive capacity, and reduce corruption.
- PPP framework:
  - 2016 law adopted defining legal and regulatory framework for Public-Private Partnerships (PPP) with technical and financial support from the World Bank.
  - A PPP unit created with support of the African Development Bank.
  - IMF's Fiscal Affairs Department commented on the law to improve management of PPP contracts and minimize budgetary risks; Government will take IMF comments into account in a future revision.

### Promote stability and development of the financial sector
- Key actions taken:
  - Provide security for bank branches reopened in Northern Mali since August 2013.
  - Strengthen bank created by merger of Malian Housing Bank (BHM) and Malian Solidarity Bank (BMS), completed March 2016:
    - Capital increased to CFAF 34.6 billion compared with a normal standard of CFAF 5 billion.
    - Remedial measures: intensified collection, sale of seized real estate, rationalization of management team.
    - Bank realized a significant profit in 2016 and became attractive for private investors; advanced discussions underway with a sound African banking group for participation in the bank’s capital.
  - Strengthen credibility of the credit bureau (established May 2015) with support from BCEAO and SFI; public awareness and training campaigns to increase collection of client consent.
    - End-April 2017 metrics:
      - More than 230,000 consents collected by banks from more than 970,000 active customers (rate of 24.0 percent).
      - Number of clients reported by banks in BIC database: over 64,000 (about 2,000 legal entities).
      - Over 180,000 loan contracts submitted to BIC database.
      - About 2,300 solvency reports consulted by credit institutions at end-April 2017.
  - Microfinance sector clean-up and reforms (action plan in 2016 agreed with World Bank):
    - 2016: audit of 32 decentralized financial systems (SFDs) in difficulty including 2 networks; TORs available for extension to all troubled SFDs.
    - Adoption of favorable compensation rule for small depositors of SFDs to be liquidated; tested in the case of Jemeni and to be assessed before replication.
    - 2016: delicensing notices signed for 23 SFDs already audited and slated for liquidation; in 2017 government will take steps to liquidate at least two SFDs that have been delicensed (two SFDs identified).
  - Reduce non-performing loans (NPLs) focus on two main sources:
    - Former Malian Development Bank (BDM) loans;
    - Non-operating property held by the banking system.
    - Measures:
      - Recruit a specialized firm to suggest practical solutions to non-operating property (firm recruited; contract in process of signature).
      - Process BDM’s impaired loans using modalities suggested by audit firm GMI; GMI interim report highlighted major difficulties reconstructing data back to the 1980s; retired former BDM executives and a software specialist recruited to reconstruct data; results awaited.
  - Strategy to reduce NPL level in banking system to be designed by June 2017 (Structural Benchmark, Table 4); IMF Capital Markets Department technical assistance requested.
    - May 2017 TA mission conclusion: NPL ratios in Malian context were not relevant due to differences in calculation between WAEMU and IMF-recommended standards; NPL situation less concerning than initially believed and in line with the region based on available data and Fund reports.
    - Implementation of Basel II / III provisions in 2018 expected to address issue by removing fixed receivables from overdue receivables and leaving bank balance sheets with outstanding debts due more than five (5) years.

### Reform the electricity sector
- Section heading present; substantive measures and analysis on electricity sector referenced earlier (financial position and productive capacity to be strengthened) but detailed reform actions are beyond the excerpt provided.

*International Monetary Fund — cr17209, excerpt covering paragraphs 56–65*

### 66.      The finances of the state-owned electricity company (EDM) remain weak, reflecting mainly

### 66.      The finances of the state-owned electricity company (EDM) remain weak, reflecting mainly 

### Financial status of EDM
- In 2016, EDM reduced its pre-subsidy deficit to CFAF 57 billion from CFAF 104 billion in 2015.
- The deficit is expected to be further reduced to CFAF 35 billion in 2017.
- The government transferred CFAF 33 billion in 2016 and will provide an additional CFAF 25 billion in 2017 to help EDM meet its financial commitments.

### Government measures and EDM reforms to restore sustainability
- Ensure adequate measures to reduce EDM’s deficit so the company can cover its financing needs and meet all its financial obligations.
- EDM will implement measures to increase billing rates and reduce operating costs, in particular by outsourcing the fuel supply function.
- Government commitments to ensure EDM reduces the deficit and does not accumulate new arrears include:
  - Implement measures to reduce technical and non-technical losses.
  - Use of pre-paid meters.
  - Adoption of accelerated monthly billing.
  - Better monitoring of key customers to protect revenue collection.
  - If necessary, adjust electricity rates to narrow the gap between rates and costs.
- Combined effect of the above measures and government transfers is intended to allow EDM to cover its financing needs and fully meet its obligations.

### Arrears clearance, debt restructuring, and transparency
- The plan to clear arrears prepared by EDM in 2016 has been implemented, based on:
  - Conversion of short term bonds to banks into medium term debts.
  - Settlement of other debts with other public sector entities including with the government.
- The plan provides for the payment of the ECOWAS subsidy (CFAF 12 billion) which did not happen in 2015; the government paid that amount instead of ECOWAS to enable EDM to meet its commitments.
- Transparency and reporting commitments:
  - EDM will publish its financial statements (balance sheet and income statement) and performance indicators on its website and in an annex to the annual draft budget.
  - The government will monitor closely the financial position of EDM and will ensure the company produces quarterly financial statements in a timely manner to make sure quarterly results of its cash-flow plans are respected so as to allow payment of the subsidy.

### Promote good governance (related measures in the same section)
- The government will continue measures to improve management and transparency of public finances and governance, including steps described elsewhere in the document to:
  - Forward to the Supreme Court senior government officials’ financial disclosures—pursuant to the unlawful enrichment law—by December 31, 2016 (structural benchmark, Table 3). A circular from the Prime Minister was sent requesting declarations of assets; submissions have begun but numbers remain low.
  - Operationalize the Central Office Against Unlawful Enrichment; members have been appointed and begun work (structural benchmark, Table 4).
  - Translate the law against illicit enrichment into Arabic, Bamabara, Peulh, Sonrhai, and Tamasheq to ensure broad dissemination.
  - Publish decisions of commercial courts and other courts concerning governance-related offenses to promote judicial transparency.
- Anti-money laundering and countering terrorism financing (AML/CFT):
  - In February 2016, the National Assembly approved new AML/CFT legislation.
  - The government acknowledges the new Uniform Law is not fully compliant with the international FATF standard and agrees to bring the matter before the WAEMU monetary authorities to amend it.
  - IMF concerns (definitions and specific requirements applicable to groups subject to the law) have been taken into account in new regulations (law and instructions of the BCEAO).
  - Other suggested improvements (incrimination of terrorists and terrorist organizations) have been taken into account via amendments to Mali's Code of Criminal Procedures and inclusion in the national anti-money laundering strategy.
  - Bribery of foreign public officials and officials of public international organizations, removal of property in the private sector and possession of stolen goods, and dissuasive financial penalties and penalties against banks that violated AML/CFT were incriminated in the Penal Code through Law No. 2016-039 of 7 July 2016 amending Law No. 01-79 of 20 August 2001.
  - Comments on the inclusion of Politically Exposed Persons and property declarations of parliamentarians were taken into account in the Law on the Suppression of Unlawful Enrichment. IMF comments on expanding the list of Members subject to declaration, including adult children and publication of declarations, were taken into consideration as part of the revision of the Act by March 31, 2018.

### Technical assistance, capacity building, and program monitoring (contextual linkages)
- Technical Assistance (TA) and training remain essential for continued strengthening of technical and institutional capacities; Mali confirms participation in the IMF’s Capacity Development Framework (CDF).
- Anticipated areas for Fund TA in 2017–18 include: human resources management, revenue administration, public financial management, and real sector statistics.
- Eighth and Ninth Reviews under the ECF Arrangement: based on performance criteria for end-June and end-December 2017, continuous performance criteria, and structural benchmarks. The Eighth and Ninth Reviews are expected to be completed on or after November 1, 2017 and May 1, 2018, respectively.

*Source: Attachment II and related sections (TMU and MEFP) in IMF staff report as provided.*

### 2.      Unless otherwise indicated, the government is defined as the central government of the

### 2.      Unless otherwise indicated, the government is defined as the central government of the

### Scope of government and accounting
- The government is defined as the central government of the Republic of Mali and does not include local authorities, the central bank, or any other public entity with autonomous legal status that is not included in the Government Financial Operations Table (TOFE).
- The National Directorate of the Treasury and Government Accounting (DNTCP) reports the scope of the TOFE in accordance with the account classification provided by the BCEAO and forwards it to the central bank and IMF staff.
- The BCEAO calculates both the broad and narrow net government positions (¶5–6).

### Performance criteria — overview
- Financial targets serve as performance criteria at end-June 2017 and end-December 2017, and as indicative targets at end-March 2017 and end-September 2017 (¶3).

A. Ceiling on Net Domestic Bank and Financial Market Financing of Government
- Definition: sum of (i) the net position of the government in the narrow sense; and (ii) financing through issuance (net of redemptions) of securities to individuals or legal entities outside the banking system or to nonresident banks domiciled in the WAEMU (¶4).
- Broad net government position (calculated by BCEAO) includes a broader definition of government than paragraph 2 and covers local authorities, certain projects, and some public administrative entities. Government claims include CFAF cash balances, postal checking accounts, secured liabilities, and deposits by government agencies with the BCEAO and commercial banks, except EPIC and state-owned corporations (¶5).
- Exclusions from the broad net position: Cotton Stabilization Fund deposits and government securities held outside the Malian banking system are not included (¶5).
- Narrow net government position: difference between government’s debts and claims vis-à-vis the central bank and commercial banks scoped as in paragraph 2; calculated by the BCEAO (¶6).

Adjusters to the ceiling on net domestic financing
- Upward adjuster if external budgetary support falls short of program projections. External budgetary support defined as grants, loans, and debt relief operations (excluding project grants and loans, sectoral budgetary support, IMF resources, and HIPC debt relief, but including general budgetary support). Adjuster applied at a rate of 100 percent up to a threshold of CFAF 25 billion and at a rate of 0 percent for larger amounts (¶7).
- Adjusted upward (downward) if net reduction in the budgetary float (instances de paiement) is higher (lower) than program amounts (¶8).
- Adjusted upward (downward) for payments of VAT credits, other tax refunds, external arrears, and audited arrears from previous fiscal years that exceed (fall short of) program amounts (¶9).

B. Ceiling on Accumulation of External Government Payments Arrears
- External payments arrears: obligations from servicing external debt (repayment of principal and interest) payable or guaranteed by the government not paid on due date as specified in loan agreement, taking any applicable grace period into account; definition of external debt in ¶15 applies (¶10).
- Arrears to official bilateral creditors are excluded if government is negotiating rescheduling and pays into an escrow account amounts coming due as specified in the loan agreement (¶10).
- The government undertakes not to accumulate external payments arrears (except on debts being renegotiated or rescheduled). This performance criterion is applied continuously throughout the program period (¶11).

C. Ceiling on Non-Concessional External Debt Contracted or Guaranteed by the Government and/or Public Enterprises
- Definitions follow IMF Executive Board Decision No 15688, point 8 (¶12):
  - “Debt” understood as current liability created under contractual arrangement requiring future payments; includes loans, suppliers’ credits, and leases (¶12(a)(i)–(iii)).
  - Arrears, penalties, and judicially awarded damages arising from failure to pay under contractual obligation that constitutes debt are debt (¶12(b)).
- Guaranteed debt: an explicit legal obligation by government to ensure debt is serviced in event of borrower nonpayment (¶13).
- Concessional debt: debt with grant element of at least 35 percent. Grant element calculated as difference between nominal value and present value, expressed as percentage of nominal value; discount rate used is five percent (¶14).
- External debt: debt denominated or requiring payment in a currency other than the CFA franc; applies also to debts contracted between WAEMU members (¶15).
- Debt-related performance criteria:
  - Through December 2016: applies to new non-concessional debt contracted or guaranteed by the government, EDM, and CMDT when government is majority shareholder (¶16).
  - Starting in 2017: applies to total new debt contracted or guaranteed by the government, EDM, and CMDT when government is majority shareholder (¶16).
  - Applies to debts/liabilities for which value has not yet been received and to private debt with official guarantees (contingent liabilities) (¶16).
  - Performance criteria are monitored continuously; no adjusters applied (¶16).
- Special provisions: performance criteria do not apply to (i) debt rescheduling in existence at approval of arrangement; (ii) import-related, short-term external loans with maturities < 1 year; (iii) external loans contracted by CMDT and guaranteed with cotton export revenue; and (iv) short-term external loans with maturities < 1 year contracted by EDM to finance petroleum product purchases (¶17).
- Reporting obligation: government shall immediately report any new external loans it contracts or guarantees, stating loan conditions (¶18).

D. Floor on Gross Tax Revenue
- Gross tax revenue defined as revenue appearing in the TOFE and includes all tax revenue in the national budget before deducting tax refunds generated during the year, in particular accumulated VAT credits (¶19).

### Indicative targets
- Indicative targets at end-March 2017, end-June 2017, end-September 2017, and end-December 2017 (¶20).

A. Floor on the Basic Fiscal Balance
- Basic fiscal balance: difference between net total revenue, plus budgetary grants (general budgetary support) and HIPC resources, and total authorized expenses plus net lending, excluding capital expenditure financed by creditors or donors, per WAEMU definition (Additional Act N° 05/2009/CCEG/UEMOA of March 17, 2009) (¶21).

Adjuster
- Floor adjusted downward if budgetary grants (general budgetary support) fall short of program projections. Adjuster applied at rate of 100 percent up to a threshold of CFAF 25 billion and at a rate of 0 percent for larger amounts (¶22).
- Floor adjusted downward (upward) for payments of VAT credits and other tax refunds exceeding (under) programmed amounts (¶23).

B. Floor on Priority Poverty-Reducing Expenditure
- Defined as sum of expenditure in sectors: basic education, secondary and higher education, scientific research, health, and social development other than transfers to the Malian Social Security Fund (CMSS). Excludes project-related capital expenditure financed by foreign technical and financial partners (¶24).

### Structural benchmarks
- Implementation of structural benchmark measures to be reported to IMF staff when measures are implemented (¶25).
- Changes to TOFE as of May 31, 2011:
  - Income and expenses recorded in suspense accounts reported above the line as income or expenses with no breakdown.
  - Cash basis adjustments distinguish operations charged to previous fiscal years vs. current fiscal year; within current fiscal year distinguish funds in transit (less than three months) and changes in arrears (more than three months), including VAT credits and called guarantees and pledges.
  - Under “net domestic financing,” separate bank financing from privatization income and other financing. Bank financing includes changes in net position vis-à-vis central bank, the IMF, and resident commercial banks. Differentiate operations with commercial banks by Treasury, INPS, and other government agencies. Other financing includes changes in cash accounts (uncashed checks), advance tax installments, adjustments to installments, operations with nonresident WAEMU creditors, and changes in deposits and consignments from Treasury correspondents (¶26).
- As of June 30, 2014, available balances in current accounts included within the narrow net government position (net Treasury position) will be transferred to the Treasury single account at the BCEAO, except:
  - frozen Treasury accounts at BDM: CFAF 19.5 billion (privatization agreement) (¶27);
  - blocked Treasury funds at BRS: CFAF 12 billion; Orabank to reimburse Treasurer at CFAF 500 million per month in 2014 and clear remaining balance no later than end-2015 (¶27);
  - accounts corresponding to grants from Japan: CFAF 3 billion at the BDM (¶27);
  - an account at BMS used for cash collection operations, zeroed daily and transferred to Receiver account at BCEAO (¶27);
  - term deposits (DAT) with commercial banks where DNTCP places cash surpluses so long as interest rates on such term deposits are greater than BCEAO deposit rates (¶27).
- Extra-budgetary expenditures defined as domestically funded expenditures by central government entities not provided for in the finance law and not executed in accordance with applicable budgetary rules and procedures; includes transactions, commitments, acceptances of goods or services, or provisions of guarantees that could create an expense not authorized in the budget law (¶28).

### Additional information for program monitoring — reporting requirements (summary)
- Government to report information in Excel format for all quantitative data (¶29).
- Selected reporting deadlines and frequencies (as specified):
  - Real sector: National accounts — Yearly — Year-end + 9 months; Revised national accounts — Variable — 8 weeks after revision; Consumer price index breakdowns — Monthly — Month-end + 2 weeks (Summary table).
  - Public Finance:
    - Net position of the government vis-à-vis the banking system in the broad and narrow senses; breakdown of nonbank financing — Monthly — Month-end + 4 weeks (provisional); month-end + 6 weeks (final).
    - Balance of SOTELMA privatization income account deposits with the BCEAO — Monthly — Month-end + 3 weeks.
    - Central government TOFE — Monthly — Month-end + 4 weeks (provisional); Month-end + 6 weeks (final).
    - Budget execution throughout the expenditure chain, as recorded in the automated system — Monthly — Month-end + 2 weeks.
    - Breakdown of income and expenses recorded in the TOFE — Monthly — Month-end + 6 weeks.
    - Separately report HIPC resources — Monthly — Month-end + 6 weeks.
    - Investment budget execution — Quarterly — End of quarter + 8 weeks.
    - Tax revenue as recorded in the TOFE showing tax refunds (including VAT credits) — Monthly — Month-end + 6 weeks.
    - Wage bill as recorded in the TOFE — Monthly — Month-end + 6 weeks.
    - Basic fiscal balance as recorded in the TOFE — Monthly — Month-end + 6 weeks.
    - Tax and customs exemptions — Monthly — Month-end + 4 weeks.
    - Order fixing petroleum prices, tax revenue from petroleum products, and total exemptions granted — Monthly — Month-end.
    - Imports of petroleum products broken down by type and point of entry — Monthly — Month-end + 2 weeks.
    - Expenses authorized and not paid 90 days after validation by the financial comptroller — Monthly — Month-end + 1 week.
    - Report by the Minister of Economy and Finance on extra-budgetary spending — Six-Monthly — End-February and August.
  - Monetary and Financial Data:
    - Summary survey of BCEAO, banks, monetary institutions — Monthly — Month-end + 4 weeks (provisional); Month-end + 8 weeks (final).
    - Foreign assets and liabilities and breakdown of OIN of BCEAO and commercial banks — Monthly — Month-end + 8 weeks.
    - Lending and deposit interest rates, BCEAO policy rate, BCEAO reserve requirements — Monthly — Month-end + 4 weeks.
    - Bank prudential ratios — Monthly — Month-end + 6 weeks.
    - Account statements showing escrow account balances at BCEAO for Libyan Foreign Bank debt service — Monthly — Month-and + 1 week.
  - Balance of Payments: Balance of payments — Yearly — Year-end + 12 months; Revised balance of payments — Variable — 8 weeks after each revision.
  - External Debt: Breakdown of all new external loans — Monthly — Month-end + 4 weeks; Debt service with breakdown of principal, interest, relief obtained under HIPC Initiative — Monthly — Month-end + 4 weeks.
  - Budget Directorate: Priority poverty-reducing expenditure as defined in ¶24 — Quarterly — End of quarter + 4 weeks.
  - EDM: Detailed financial statements showing EDM’s total revenues, including subsidies received; total expenditures; the level of debts to banks; and the situation in terms of arrears — Quarterly — Month-end + 4 weeks.

### Debt Sustainability Analysis update — key points (from DSA section)
- Risk of external debt distress: Moderate (unchanged from previous analysis) (cover page).
- Inclusion of domestic debt does not alter assessment of Mali’s debt sustainability (cover page).
- Background public debt composition at end-2016:
  - External debt: CFAF 2,074 billion (24.9 percent of GDP), held mostly by multilateral creditors (CFAF 1,678 billion) (Background ¶1).
  - Domestic debt: 5.5 percent of GDP, held mostly by commercial banks in treasury bills and bonds issued on the WAEMU regional market; includes some domestic arrears validated through audits and recognized as debt (Background ¶1).
- Macroeconomic outlook assumptions (2017–37) consistent with staff report for seventh ECF review (Macroeconomic Outlook ¶2):
  - Real GDP growth: projected at 5.3 percent in 2017; long-term convergence to 4.7 percent (Mali’s long-term growth potential) (¶2, bullet 1).
  - Fiscal policy: in 2017 authorities committed to containing the overall fiscal deficit (including grants) at 3.5 percent of GDP; path would help achieve an overall fiscal balance of 3 percent of GDP by 2019, in line with WAEMU convergence criterion (¶2, bullet 2).
  - External sector: current account deficit (including grants) projected to widen to an average of 7.3 percent (from 6 percent in the 6th review) during 2017–18 due to deterioration in terms of trade (higher oil prices, lower gold prices) and strong import growth associated with public and private investment; thereafter the current account deficit is projected to narrow (¶2, bullet 3).

*Prepared by staffs of the International Monetary Fund and the International Development Association; July 5, 2017.*

### 6.5 percent in 2018 to about 6.0 percent by 2022, and stabilize at about 6.3 percent of GDP

### cr17209 - 6.5 percent in 2018 to about 6.0 percent by 2022, and stabilize at about 6.3 percent of GDP

### External position and projections
- Current account deficit (including grants) projected to decline from 6.5 percent in 2018 to about 6.0 percent by 2022, and stabilize at about 6.3 percent of GDP over the longer term.
- Stabilization drivers:
  - Supportive macroeconomic policies.
  - Gradual increase in other exports (including food, cotton, tourism and other minerals such as phosphate, uranium, bauxite, iron ore, copper, and nickel).
  - Lower long-run oil prices.
  - These factors should help to offset the expected steady decline in export earnings from gold.
- The current account deficit continues to be financed mainly through foreign direct investment, public sector borrowing, and official grant flows.

### Financing composition and gross financing needs
- Gross financing needs will be covered by a combination of external and domestic debt.
- Near term (2017 and the near term): authorities plan to lower issuance of domestic debt and progressively increase reliance on external financing due to tighter regional financial conditions relative to the 6th review.
- Augmentation of access to IMF resources, and budgetary support from the EU, World Bank and AfDB will contribute to finance the 2017 budget.
- Over the long term: as access to regional financing sources is expected to gradually normalize, financing composition is expected to return broadly to previous DSA proportions: about 90 percent from external sources and 10 percent from regional and domestic sources.

### Key changes in medium-term macroeconomic assumptions (differences with previous DSA)
- GDP deflator in US dollar terms is projected to be lower during the projection period compared with the previous DSA, driven by a projected depreciation of the national currency by 0.2 percent over the projection horizon, compared with an appreciation of a similar magnitude in the previous DSA.
- Gold prices are projected to be lower than in the previous DSA. At the same time, gold production is projected to be higher following an upward revision of reserves; therefore gold export revenues as a share of GDP are projected to be higher compared with the previous DSA.
  - Note: Higher gold output is based on discussions with the authorities; gold reserves have increased slightly to 850 tons, from about 805 tons in the previous DSA.
- Oil prices during 2017 to 2018 are projected to be higher than in the previous DSA, but fall below it over the long term.
- The effective interest rate is projected to be marginally higher at 1.39 percent, compared with 1.36 percent in the previous DSA.
- External debt accumulation would be slightly higher than in the previous DSA as authorities are assumed to increase reliance on external funding during 2017–19.
- Public debt projections:
  - Public debt will grow from about 30.4 percent of GDP in 2016 to 42.8 percent in 2037.
  - External debt would increase from about 25 percent of GDP to 36 percent in 2037.

### Selected macroeconomic indicator highlights (current DSA projections vs. previous DSA where noted)
- Real GDP growth (Current DSA): 2015: 6.0; 2016: 5.8; 2017: 5.3; 2018: 5.0; 2019: 4.7; Long term: 4.7.
- GDP Deflator in US dollar terms (Current DSA): 2015: -14.2; 2016: 1.3; 2017: -2.9; 2018: 1.1; 2019: 0.7; Long term: 2.0.
- Overall fiscal deficit (excluding grants, percent of GDP) (Current DSA): 2015: -4.5; 2016: -5.5; 2017: -5.7; 2018: -5.5; 2019: -5.0; Long term: -4.2.
- Overall fiscal deficit (including grants, percent of GDP) (Current DSA): 2015: -1.8; 2016: -3.9; 2017: -3.5; 2018: -3.4; 2019: -3.0; Long term: -3.0.
- Current account deficit (excluding grants, percent of GDP) (Current DSA): 2015: -12.3; 2016: -14.6; 2017: -16.7; 2018: -14.7; 2019: -14.0; Long term: -7.5.
- Current account deficit (including grants, percent of GDP) (Current DSA): 2015: -5.3; 2016: -7.1; 2017: -8.2; 2018: -6.6; 2019: -6.2; Long term: -6.3.
- Official aid (percent of GDP) (Current DSA): 2015: 5.6; 2016: 3.4; 2017: 5.2; 2018: 5.2; 2019: 5.5; Long term: 4.6.
- Gold prices (US$/fine ounce London fix) (Current DSA): 2015: 1160; 2016: 1248; 2017: 1254; 2018: 1281; 2019: 1311; Long term: 1333.
- Gold exports (percent of GDP) (Current DSA): 2015: 13.0; 2016: 13.8; 2017: 13.5; 2018: 13.4; 2019: 13.0; Long term: 7.4.
- Oil prices (US$/barrel) (Current DSA): 2015: 51; 2016: [blank]; 2017: 43; 2018: 55; 2019: 55; Long term: 45; 55 (table formatting preserved as in source).

### Debt sustainability analysis — External DSA
- Baseline assessment:
  - Mali’s debt dynamics are sustainable under the baseline scenario.
  - Under the baseline scenario, all external debt ratios remain within their indicative thresholds, though the PV of external public debt to exports displays a distinct uptrend.
  - PV of external public debt to GDP (5 percent discount rate) projected to remain between 16 and 21 percent of GDP, well below the indicative threshold of 40 percent throughout the projection period.
  - PV of external debt-to-revenue ratio projected to remain broadly stable between about 85 percent and 95 percent, below the 250 percent threshold.
  - PV of external debt-to-exports ratio projected to increase from about 67 percent in 2016 to 130 percent in 2037, but remains below the threshold of 150 percent.
- Stress tests and scenarios:
  - Almost all debt indicators remain within indicative thresholds even under the most extreme scenario (tighter financing conditions on public debt).
  - The PV of the debt-to-exports ratio shows a breach of the threshold from 2027 to 2037 in the most extreme scenario, consistent with the previous DSA.
  - Sensitivities:
    - An export growth shock (bounds test reducing export growth temporarily in 2017–18 with permanent reduction in export levels) would cause the PV of the debt-to-exports ratio to breach its threshold in 2031 (Scenario B2).
    - A bounds test that reduces FDI and official and private transfers in 2017–18 would cause the PV of the debt-to-exports ratio to start rising toward the threshold, almost breaching it in 2037 (Scenario B4).
    - A bounds test combining shocks to growth, export values, the US dollar GDP deflator and FDI would cause the debt-to-exports ratio to breach its threshold in 2032 (Scenario B5).
- Policy and structural implications:
  - Full implementation of the 2015 peace agreement and continued policy reforms should promote economic development, increase flexibility and dynamism of the economy, and cushion shocks.
  - Scaling up and country-wide expansion of public sector investment in high-priority infrastructure could increase economy-wide productivity growth and foster development of other sectors, aiding diversification and resilience to export shocks.

### Debt sustainability analysis — Public DSA
- Inclusion of domestic debt does not alter the assessment of Mali’s debt sustainability given the small size of domestic debt and the planned reduction in domestic borrowing in the baseline.
- PV of public sector debt-to-GDP ratio stays between 22 and 27 percent of GDP during the entire projection period.
- Caveat: recent rapid growth of the domestic debt stock needs to be monitored closely to maintain debt sustainability and financial stability going forward.

*International Monetary Fund — Mali: Debt Sustainability Analysis and Macroeconomic Projections (excerpts).*

### 9.      This updated DSA, as the previous one, suggests that Mali’s risk of debt distress remains

### 9.      This updated DSA, as the previous one, suggests that Mali’s risk of debt distress remains 

### Assessment
- The updated DSA concludes Mali’s risk of debt distress remains moderate.
- Stress tests highlight a sustained breach of the threshold for the PV of public debt-to-exports under the most extreme shock.
- Mali’s debt sustainability is highly sensitive to a tightening of financing terms and to a combination shock.

### Vulnerabilities and stress-test findings
- Most extreme shock scenarios producing the highest ratios on or before 2027 include:
  - Combination of B1-B4 using one-half standard deviation shocks (B5).
  - New public sector loans on less favorable terms in 2017-2037 (A2).
  - Net non-debt creating flows at historical average minus one standard deviation in 2018-2019 (B4).
  - One-time 30 percent nominal depreciation relative to the baseline in 2018 (B6).
- Specific vulnerabilities identified:
  - Tightening of financing terms (less favorable terms for external finance looking forward) yields the noted breach in PV of public debt-to-exports.
  - Reduction in transfers and FDI.
  - An export shock owing to export concentration in gold.
- Historical/contextual note: The decline in grant-equivalent financing in 2016 reflects the return to more normal levels of concessional aid following the exceptionally high level of assistance related to the 2011-2012 crisis.

### Policy recommendations and priorities
- Maintain prudent macroeconomic policies.
- Strengthen the effectiveness of public debt management.
- Continue to meet external financing needs with grants and concessional loans, wherever possible.
- Ensure that underlying projects deliver a high return on investment.
- Continue implementation of structural reforms to improve the investment climate and export diversification, amid an expected decline in gold’s export performance over the medium term.

### Authorities’ reaction
- The Malian authorities broadly agreed with the conclusions of the DSA.
- They indicated they considered their economy could grow faster than envisaged by staff over the medium to long term, but shared staff’s overall assessment.

### Key recent economic and fiscal indicators (selected)
- Real GDP growth in 2016: 5.8 percent.
- Inflation in 2016 (GDP deflator): -1.8 percent.
- Overall balance of payments deficit in 2016: 3.9 percent.
- Current account deficit in 2016: 7.1 percent of GDP.
- Tax revenue change in 2016: increased by 1 percent of GDP.
- Grants disbursements in 2016: decreased by 1.1 percent of GDP.
- Total expenditures and net lending in 2016: increased by 1.4 percent of GDP.
- Grant element of new public sector borrowing (assumed): 48.0 (in percent).
- Grant-equivalent financing (selected projection values): 3.7, 3.6, 3.7, 3.6, 3.6 (in percent of GDP) in projection period entries shown.
- Effective interest rate examples in projections: 1.2, 1.3, 1.4, 1.5 (percent) as reported under key macroeconomic assumptions.
- Noted memorandum item: Nominal GDP (Billions of US dollars) entries include 14.4, 13.1, 14.0, 14.4, 15.2, 16.1, 17.0, 18.0, 19.0, 26.4, 50.7 (as listed in the table).
- Debt service and PV metrics in tables show elevated levels under stress scenarios; for example, PV of PPG external debt in percent of exports reaches values such as 105.4 and 130.1 in projection entries shown in the tables.

*International Monetary Fund.*

### 14.7 percent at end 2016. While the ratio of gross non-performing loans (NPL) remained

### 14.7 percent at end 2016. While the ratio of gross non-performing loans (NPL) remained

### Financial sector performance and non-performing loans
- Ratio of gross non-performing loans (NPL) remained constant at 15.4 percent compared to 2015.
- Net NPL ratio declined from 7.2 percent to 5.4 percent.
- Financial stability of the microfinance sector improved with the share of NPLs declining from 6.6 percent in 2015 to 6.2 percent in February 2017.
- Authorities, with Fund assistance, are designing by June 2017 a strategy to reduce the level of NPLs.
- Efforts to strengthen the new bank resulting from the merger of the Housing Bank (BHM) and the Malian Solidarity Bank (BMS) will be pursued.
- Microfinance sector actions: audit of institutions in difficulty, revocation of operating permits for institutions to be liquidated, and adoption of favorable compensation of small depositors.

### Performance under the ECF program and structural benchmarks
- Overall performance under the ECF program continues to be satisfactory.
- All quantitative performance criteria and indicative targets at end- December 2016 were met.
- Structural benchmarks for the seventh review: three of the nine benchmarks set were met at the agreed dates.
- Missed benchmark on the adoption of the Law to stop granting new discretionary tax exemptions was achieved with delay in May 2017.
- Progress is being made on remaining benchmarks: financial disclosure of senior officials, operationalization of the anti-corruption commission, and completion of the transition to the single treasury account (STA).
- Authorities request an augmentation of access and a one year extension of the ECF program to help meet additional financing needs and consolidate reforms.
- Request for Directors’ support for completion of the seventh review, augmentation of access and extension of the program through December 2018.

### Economic and financial outlook for 2017–18
- Near-term outlook: growth expected to remain strong in 2017 at 5.3 percent fueled by strong domestic demand.
- Inflation expected to increase slightly and reach 1 percent because of higher oil prices.
- Current account deficit projected to widen to 8.1 percent of GDP in 2017 amid strong import growth, higher oil and lower gold prices.
- Financing of the current account deficit expected from net capital inflows mainly in the form of foreign aid and foreign direct investment.
- Medium-term policies guided by the strategic framework for economic growth and sustainable development (CREDD) covering the period 2016-18.

### Fiscal policy stance and revenue measures
- Authorities will continue implementing a sustainable fiscal policy in compliance with WAEMU surveillance framework.
- Target: maintain overall fiscal balance (including grants) at levels compatible with debt sustainability and WAEMU convergence criteria of 3 percent fiscal deficit by 2019.
- For 2017, envisaged overall fiscal deficit of 3.5 percent of GDP with total revenue and grants reaching 20.6 percent of GDP.
- Authorities intend to increase tax revenue by 0.3 percent of GDP in 2017 and by 0.6 percent in 2018.
- Revenue measures: broadening the tax base, reducing exemptions after implementing the Law to eliminate discretionary tax exemptions, strict control and verification of imports to reduce fraud.
- Reforms expanded at the Tax, Customs and Government Property and Lands administrations; results-based management framework to enhance revenue collection to be implemented.
- Strengthening tax administration includes reduction of exemptions and revision of various codes and legislations (investment, petroleum, telecommunication, customs etc.).
- Continued efforts to preserve fiscal revenue on petroleum products via a new pricing mechanism that will pass on the evolution of petroleum products prices to retail prices within a margin of 3 percent a month.
- Authorities will devise a strategy to sensitize social partners and work with the assistance of the World Bank on measures to mitigate adverse impact on vulnerable segments of the population.
- Efforts to simplify fiscal legislation to reduce administrative burden on taxpayers and simplify tax collection.
- Continue efforts to increase revenue from mining and oil activities with Fund technical assistance; priority on improving and modernizing mining and petroleum codes based on international standards.
- Fund technical assistance to address weaknesses in incentives for tax and customs inspectors in the context of modernizing the tax administration.

### Public financial management, STA, and expenditure management
- Continued efforts to improve regulatory framework for public financial management consistent with regional directives and regulations; continued transposition of WAEMU directives (transparency code, budget laws, public accounting, government chart of accounts and flow of funds table (TOFE)).
- Program budgeting and results based management will be gradually implemented; 2017 budget presented in that format for information to the National Assembly.
- Cash management improvements and progress on implementation of the Single Treasury Account (STA): bank accounts of the central government in 11 out of 14 banks identified as of December 2016.
- Inactive accounts to be closed by the Treasury; Treasury to decide on necessity for any public entity to open an account in the commercial banking system.
- Goal: ensure all public administrative entities deposit their funds at the Treasury.
- Continue national internal control strategy implemented during 2012–15 to enhance capacities of internal control structures and improve public procurement.

### Debt management, borrowing policy, and business environment reforms
- Authorities will conduct a borrowing policy consistent with preservation of debt sustainability, relying primarily on grants and highly concessional loans.
- Detailed borrowing plan prepared underlying execution of the 2017 and 2018 budgets.
- Debt management strengthening with implementation of recommendations of Fund’s technical assistance to improve quality of the public debt database.
- Structural reforms to improve business environment and address major constraints to private sector development; priorities include infrastructure investments in energy, good governance, and financial sector stability.
- Adoption of a law on public-partnerships (PPP) and establishment of a PPP unit with assistance from the African Development Bank; Fund contributed to improving the law to minimize fiscal risks.

### Conclusion and authorities’ commitment
- Malian authorities committed to pursuing sound macroeconomic policies, improving public financial management and achieving strong and inclusive growth.
- Request for augmentation of access and a one year extension of the ECF program to meet additional financing needs, restore peace and stability, and consolidate reform progress.
- In view of Mali’s satisfactory progress under the ECF arrangement, authorities seek Directors’ support for completion of the seventh review, augmentation of access and extension of the program through December 2018.

*https://www.imf.org/-/media/files/publications/cr/2017/cr17209.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17209.pdf_