## cr18360 - 186.6 million (100 percent of quota). All continuous and all but one end-June 2018

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---

### Background and program performance
- ECF arrangement objectives:
  - Maintain macroeconomic stability while allocating resources to poverty reduction and other priority spending, including in the North.
  - Mobilize domestic revenue.
  - Strengthen public financial management (PFM).
  - Improve the business environment, including by implementing anti-corruption measures.
- Program adjustments and access:
  - Program extended twice by one year each.
  - Two augmentations of access increased arrangement to 100 percent of quota, first in 2016 and then in 2017.
- Performance to end-June 2018:
  - All continuous and all but one end-June 2018 quantitative performance targets were met.
  - Gross tax revenue target missed by about 1.2 percent of GDP at end-June 2018.
  - The ceiling on government bank and market financing was met with a significant margin.
  - Continuous performance criteria on external payment arrears and contracting or guaranteeing of new external debt were met.
  - Indicative target on the basic fiscal balance was observed with a large margin.
  - Poverty-reducing expenditure target observed despite weak revenue performance and low budget support.
- Structural benchmarks (end-October 2018):
  - Four structural benchmarks met; six unmet.
  - Met: assessment of expenditure management software; assessment of the financial and accounting information system; transmission of asset declarations of government officials to the Supreme Court (exceeded at end-June and end-October 2018).
  - Delays / unmet benchmarks and causes:
    - Raising investment tax-exemption eligibility from CFAF 12.5 million to CFAF 100 million: draft law awaiting presentation to the Council of Ministers in the first quarter of 2019.
    - Treasury Single Account (TSA): slower-than-envisaged progress due to technical and administrative difficulties transferring accounts of public administrative institutions to the BCEAO.
    - Strategy to reduce non-collateralized NPLs and non-operating assets (NOAs): could not be fully developed by end-June; proposal including timeline presented in October and expected to be finalized by end-2018.
    - Taxpayer compliance improvement plan: not implemented by end-October 2018 due to delays in validation by the technical committee; draft Strategic Plan (PS 2019–21) of the Tax Directorate expected to be adopted by the Steering Committee in late November.
    - Oil price formula: implemented since September 2017 albeit with some suspensions; authorities committed to more systematic implementation.
  - Persistent challenges: weak institutional capacity, vested interests, political economy constraints.

### Outlook and risks
- Macroeconomic outlook:
  - Real GDP growth: projected to rebound to 5 percent in 2019, then settle around 4¾ percent (Mali’s long-run rate).
  - Inflation: expected to remain below the WAEMU criterion absent supply shocks.
  - Tax revenue: implementation of tax policy and administrative measures projected to sustain an annual increase in tax revenue by 0.4 percentage point of GDP.
  - Overall fiscal deficit: projected to stabilize at 3 percent of GDP.
  - Current account deficit: projected to improve slightly in 2019, then narrow gradually to about 7 percent of GDP over the medium term.
- Key risks:
  - Continued security-related shocks, commodity price volatility, and tighter financing conditions.
  - Vulnerability from primary sector dependence and weather-related shocks.
  - Fiscal risks from revenue shortfalls, weak taxpayer compliance, fraud, and organizational inefficiencies.
  - Structural risks in the banking sector from high NOAs and NPLs.
- Downside risks elaborated:
  - Security: intensification of violent attacks, especially if reaching Bamako, could dampen private sector confidence and affect growth and public finances.
  - Weather and agriculture: agricultural output remains vulnerable to adverse weather conditions.
  - Export concentration: gold and cotton exports represent about 65 percent and 15 percent of total exports respectively, heightening exposure to commodity price fluctuations.
  - External financing: potential reductions in donor funding and falling FDI.
  - Regional liquidity: further tightening of liquidity conditions at the regional level could slow credit to the private sector and increase cost of domestic debt.

### Policy actions, waiver request, and staff views
- Authorities’ commitments and corrective measures:
  - Authorities committed to meeting the end-December 2018 deficit target of 3.3 percent of GDP and to abiding by the WAEMU deficit criteria of 3 percent of GDP in 2019.
  - Identified remedial measures: intensified revenue collection, tax administration measures, and spending cuts.
  - Expressed interest in a successor ECF arrangement to lock in gains achieved under the current program.
- Waiver and review requests:
  - Authorities requested a waiver for nonobservance of the performance criterion on gross tax revenue at end-June 2018.
  - Authorities requested completion of the tenth (and last) ECF review; disbursement upon completion would amount to SDR 31.65 million.
  - Authorities consented to publication of the staff report and the Letter of Intent.
- IMF staff position:
  - Staff support the authorities’ requests for a waiver for nonobservance of a performance criterion and for completion of the tenth ECF review.
  - Staff recommend the completion of the tenth review under the ECF arrangement based on broadly satisfactory performance and the authorities’ forward-looking policy commitments.
  - Staff recommend granting a waiver of nonobservance of a performance criterion based on the corrective measures adopted by the authorities.

### Fiscal adjustment plan to address 2018 revenue shortfall
- September 2018 preliminary data: tax revenue shortfall about 2 percent of GDP for full 2018 year.
- Authorities’ offset plan: remedial revenue measures about 1 percent of GDP and spending cuts about 1 percent of GDP.
- Non-tax revenue shortfall: about CFAF 58 billion (0.5 percent of GDP) by end-December 2018 (mostly due to renegotiation of the royalty related to the license of the fourth telecom operator and the renewal of the existing 4G license).
- Remedial measures (Text Table 3 totals):
  - Revenue measures: 120 Billion CFAF (1.3 percent of GDP)
    - Tax administration (tax arrears recovery): 90 Billion CFAF (0.9 percent of GDP)
    - Customs: 30 Billion CFAF (0.3 percent of GDP)
  - Spending cuts: 129 Billion CFAF (1.3 percent of GDP)
    - Current: 39 Billion CFAF (0.4 percent of GDP)
      - Goods and services: 23 Billion CFAF (0.2 percent of GDP)
      - Transfers: 16 Billion CFAF (0.2 percent of GDP)
    - Capital: 90 Billion CFAF (0.9 percent of GDP) — Domestically financed: 90 Billion CFAF (0.9 percent of GDP)
- Tax arrears recovery expectations:
  - Authorities expect to recover CFAF 72 billion (0.7 percent of GDP) out of CFAF 144 billion tax arrears identified for 2015–17, and another CFAF 20 billion (0.15 percent of GDP) from tax adjustment of a mining company.
- Spending prioritization:
  - Capital expenditure has borne the brunt of cuts; authorities noted careful selection of postponed projects and commitment to reaching the ceiling on social spending.
- Staff caution:
  - Heavy reliance on tax arrears recovery may not be realistic; authorities stopped commitments on non-essential public expenditures from November 1, 2018 to help achieve spending cut target.

### Preserving fiscal sustainability and recommended reforms
- 2019 fiscal targets and budget stance:
  - Authorities reaffirmed commitment to WAEMU fiscal deficit target in 2019 and agreed with staff to tighten the 2019 fiscal stance.
  - Draft 2019 budget envisages reduction in the overall and basic deficits to 3 percent of GDP and 1.1 percent of GDP, respectively.
  - 2019 budget projection: tax revenue projected to reach 15.6 percent of GDP (an 0.8 percentage point increase relative to the revised 2018 estimate).
  - Spending limits: Authorities committed to limiting capital and current spending and targeting least efficient current or capital projects for cuts.
- Revenue mobilization priorities and measures:
  - Strengthen tax administration and customs reforms: expedite implementation, develop taxpayer compliance improvement plan, enhance use of third party information, improve large- and medium-sized taxpayers’ compliance, increase capacity in taxpayer registration and audit.
  - Reduce exemptions: tax exemptions about 3.5 percent of GDP in 2017; expedite adoption of law raising eligibility threshold for investment exemptions from CFAF 12.5 million to CFAF 100 million; reduce exemptions identified by 2018 review.
  - Address transfer pricing and profit shifting: strengthen requirement to document transfer prices consistent with international standards; adopt specific under-capitalization rule; follow up on revised mining code (IMF TA recommendations; TA mission scheduled in February 2019).
  - Petroleum taxation and pricing formula:
    - With rising international oil prices, petroleum price revenue decreased by 0.3 percentage point of GDP at end-June 2018 due to limited pass-through, increased exempted quantities, fraud, and porous borders.
    - Example: assuming full taxation (no implicit subsidy), consumer price would have been 816 CFAF instead of 717 CFAF in July 2018.
    - The automatic price formula caps the price increase at 3 percent of the international price in any given month.
    - Staff recommended a comprehensive strategy: systematic pricing mechanism implementation, holistic fuel taxation approach (revisit fuel margins and large exemptions), avoid differentiated pricing that enables arbitrage, and improve social safety nets with World Bank support.
  - Digital taxation: Authorities agreed that digital taxation could enhance revenue collection by capitalizing on fast expansion of mobile banking and by reaching those unable to hold a bank account.

### Public investment management, decentralization, and governance
- Public investment management:
  - 2017 IMF PIMA mission found important deficiencies undermining the contribution of investment to the domestic capital stock.
  - Authorities prepared a methodology for elaborating a standard unit cost market price list for roads, buildings, hydro-agricultural development and hydraulic structures (SB for August 2018; not met but implemented with delay in October 2018).
  - Staff encouraged expedited implementation of a comprehensive action plan to raise public investment managers’ accountability and stewardship, strengthen social-economic impact of investment spending, and accrue and maintain existing infrastructure in the long term.
  - Staff urged strengthening institutional framework to identify, monitor, and manage fiscal risks arising from PPPs.
- Decentralization and subnational finance:
  - Central government transfers to local governments projected to rise from 24.4 percent of budgetary revenue in 2017 to 25.3 percent in 2018; draft 2019 budget projects 30.6 percent.
  - Staff urged expedited design of subnational taxation (including property taxation), funding social and pro-poor spending, and framework for monitoring and managing contingent liabilities from decentralization.
- Governance, anti-corruption, and PFM:
  - Laws to fight corruption and illicit enrichment (LAIE) passed in 2013 and 2015; limited increase in indictments or convictions observed.
  - Authorities committed to expand the TSA by closing non-active accounts and repatriating balances, avoid opening new accounts.
  - Staff encouraged comprehensive assessment of governance vulnerabilities in context of a possible successor program and consolidation of LAIE implementation and AML/CFT framework.

### Energy sector — EDM’s difficult financial situation
- Causes of EDM’s financial distress:
  - Long-standing inadequacy between production price and sale price of electricity, insufficient and delayed critical investment, and poor management.
- Cash position and debt:
  - Total debt in early 2018 estimated at CFAF 304 billion (3.2 percent of GDP), split almost evenly between commercial banks and suppliers.
- Government and World Bank response:
  - Government increased its subsidy by CFAF 15 billion in 2018, bringing the total to CFAF 42 billion.
  - Short-run World Bank restructuring program measures include improving revenue collection through smart meters and combating illegal connections and leakages; revising tariffs (e.g., increase in rates for institutional consumers, removal of subsidy on connection fees for medium voltage users); improving loan portfolio via refinancing and collateralization.
  - Long-run measures: improve investment plan to reverse energy mix toward renewable sources, eliminate generator leasing, reduce national thermal production (diesel and heavy fuel), increase national hydroelectric production and imports of low-cost electricity from neighboring countries (Côte d'Ivoire, and Guinea).
- Policy admonition:
  - Tackle energy sector problems both short term and long run without further increasing unsustainable subsidies in order to free up resources for investment and social spending.

### Key economic indicators (selected, percent of GDP unless noted)
- Real GDP growth (2014–2023): 7.1, 6.2, 5.4, 5.8, 5.3, 5.4, 5.0, 4.9, 5.0, 4.9, 4.8, 4.8, 4.8
- Consumer price inflation (average): 2.7, 1.4, -1.6, -1.8, 0.2, 1.8, 1.4, 2.0, 2.0, 2.1, 2.2, 2.2, 2.2
- Revenue: 14.9, 16.4, 16.8, 16.7, 18.3, 18.4, 19.4, 17.9, 18.5, 19.1, 19.3, 19.6, 19.9
  - of which: Tax revenue: 12.6, 14.0, 14.9, 14.9, 15.3, 15.2, 15.8, 14.8, 15.6, 16.2, 16.5, 16.8, 17.1
- Grants: 2.2, 2.7, 2.0, 1.6, 2.3, 1.6, 1.2, 1.0, 2.0, 2.0, 2.1, 2.1, 2.1
- Total expenditure and net lending: 20.0, 20.9, 23.2, 22.3, 24.0, 22.9, 23.9, 22.1, 23.5, 24.1, 24.4, 24.6, 24.9
- Overall balance (payment orders): -2.9, -1.8, -4.3, -3.9, -3.5, -2.9, -3.3, -3.3, -3.0, -3.0, -3.0, -3.0, -3.0
- Basic fiscal balance: -1.2, 0.5, -2.1, -1.9, -1.1, -0.9, -1.3, -1.3, -1.1, -0.9, -0.9, -0.7, -0.7
- Total public debt: 27.4, 30.7, 29.7, 35.9, 31.8, 35.4, 35.9, 37.3, 37.5, 38.1, 38.7, 39.3, 39.5
- Current external balance (including official transfers): -4.7, -5.3, -7.7, -7.2, -8.1, -5.9, -6.5, -7.4, -7.2, -7.4, -7.2, -7.0, -6.8
- Overall balance of payments: -2.5, -1.6, 0.1, -3.9, -2.9, 0.7, -2.0, -2.3, -2.6, -2.2, -1.9, -1.5, -1.4

### Program financing, performance criteria, and structural benchmarks (2018)
- ECF disbursements and schedule highlights:
  - SDR 6 million (3.2 percent of quota) — December 18, 2013.
  - SDR 31.65 million (17.0 percent of quota) — May 1, 2018 and SDR 31.65 million (17.0 percent of quota) — November 1, 2018 (completion of the ninth and tenth reviews respectively).
  - Total for ECF arrangement: 100.0 (percent of quota).
- Selected program targets and status (June/September 2018 indicators):
  - Ceiling on net domestic bank and market financing of the government: Prog. 389; Adj. 336; Target 105; Est. Status Met 467.
  - Cumulative increase in external payments arrears (ceiling): Prog. 0; Adj. 0; Target 0; Est. Status Met 0.
  - New external debt contracted or guaranteed by the government, in PV terms (cumulative ceiling from June 2015): Prog. 557; Adj. 441; Target Met 557.
  - Gross tax revenue (floor): Prog. 775; Adj. 659; Not met; Est. 1,146.
  - Indicative targets: Basic fiscal balance (floor) Prog. -155; Adj. -155; Est. 51 Met; Priority poverty-reducing expenditure (floor) Prog. 142; Adj. 147; Est. 341 Met.
- Structural benchmarks (Table 13 excerpts):
  - Assess implementation of recommendations of the 2017 report on compliance of PRED and AICE with new budgeting and accounting processes: Implementation Deadline May 28; Status Met.
  - Continue implementation of oil product pricing formula to reflect cost changes within a margin of 3 percent per month: Implementation Deadline Continuous; Status Not met.
  - Develop a strategy to reduce non-collateralized NPLs in the banking system: Implementation Deadline June 30; Status Not met (expected to be implemented in December).
  - Achieve a transmission rate of 35 percent of asset declarations to the Supreme Court for government officials: Implementation Deadline June 30; Status Met (transmission rate exceeded 40 percent).
  - Transfer 50 percent of public institution (EPAs) funds from commercial banks to the BCEAO relative to end-2017 deposits: Implementation Deadline June 30; Status Not met.

### Program and succession intentions
- Capacity to repay the Fund is adequate; Mali has a good track record of timely payment of external debt obligations, including to the Fund.
- Total outstanding debt to the Fund is expected to peak in 2018 at SDR 227.5 million (121.9 percent of quota).
- Authorities have requested a successor ECF-supported program; negotiations tentatively planned for March 2019.
- Staff encouraged finalization of the authorities’ medium-term (2019–23) development strategy to form the basis for a successor ECF-supported program.
- Safeguards assessment of the BCEAO (April 2018) found central bank controls and governance broadly appropriate, IFRS adopted beginning with the 2015 financial statements, and a risk management framework established in 2014 is progressing well.

_Italic: IMF staff report excerpt (cr18360) as provided in the content unit._

### 186.6 million (100 percent of quota). All continuous and all but one end-June 2018

### cr18360 - 186.6 million (100 percent of quota). All continuous and all but one end-June 2018

### Background and program performance
- ECF arrangement objectives:
  - Maintain macroeconomic stability while allocating resources to poverty reduction and other priority spending, including in the North.
  - Mobilize domestic revenue.
  - Strengthen public financial management (PFM).
  - Improve the business environment, including by implementing anti-corruption measures.
- Program adjustments and access:
  - Program extended twice by one year each.
  - Two augmentations of access increased arrangement to 100 percent of quota, first in 2016 and then in 2017.
- Performance to end-June 2018:
  - All continuous and all but one end-June 2018 quantitative performance targets were met.
  - Gross tax revenue target missed by about 1.2 percent of GDP at end-June 2018.
  - The ceiling on government bank and market financing was met with a significant margin.
  - Continuous performance criteria on external payment arrears and contracting or guaranteeing of new external debt were met.
  - Indicative target on the basic fiscal balance was observed with a large margin.
  - Poverty-reducing expenditure target observed despite weak revenue performance and low budget support.
- Structural benchmarks (end-October 2018):
  - Four structural benchmarks met; six unmet.
  - Met: assessment of expenditure management software; assessment of the financial and accounting information system; transmission of asset declarations of government officials to the Supreme Court (exceeded at end-June and end-October 2018).
  - Delays / unmet benchmarks and causes:
    - Raising investment tax-exemption eligibility from CFAF 12.5 million to CFAF 100 million: draft law awaiting presentation to the Council of Ministers in the first quarter of 2019.
    - Treasury Single Account (TSA): slower-than-envisaged progress due to technical and administrative difficulties transferring accounts of public administrative institutions to the BCEAO.
    - Strategy to reduce non-collateralized NPLs and non-operating assets (NOAs): could not be fully developed by end-June; proposal including timeline presented in October and expected to be finalized by end-2018.
    - Taxpayer compliance improvement plan: not implemented by end-October 2018 due to delays in validation by the technical committee; draft Strategic Plan (PS 2019–21) of the Tax Directorate expected to be adopted by the Steering Committee in late November.
    - Oil price formula: implemented since September 2017 albeit with some suspensions; authorities committed to more systematic implementation.
  - Persistent challenges: weak institutional capacity, vested interests, political economy constraints.

### Recent developments, fiscal details, and banking sector
- Macroeconomic performance and outlook signals:
  - Real GDP growth: projected to grow by 4.9 percent in 2018 (0.2 percentage points below program projection).
  - Inflation: about 2 percent y-o-y in June 2018, below the WAEMU convergence criterion of 3 percent.
  - Current account deficit: about 7.4 percent of GDP expected in 2018.
- Fiscal performance H1 2018:
  - Tax revenue shortfall at end-June 2018: about CFAF 110 billion (1.2 percent of GDP).
  - Shortfall evenly split between customs and domestic tax revenues.
  - Authorities offset revenue shortfall with significant public spending cuts.
  - June overall balance and basic fiscal balance were in surplus versus program-projected deficits of CFAF 236.5 billion and CFAF 155.5 billion (or 2.5 and 1.6 percent of GDP), respectively.
- Central government consolidated financial operations (Table, end-December 2018 projections):
  - Total revenue and grants: Prog. 1,825.7; Proj. 1,667.1; Difference -158.6 (Billions of CFA Francs).
  - Total revenue and grants (percent of GDP): Prog. 19.3; Proj. 17.4; Difference -1.8.
  - Tax revenue: Prog. 1,498.9; Proj. 1,418.8; Difference -80.1; (15.8 percent of GDP Prog.; 14.8 percent Proj.; -1.0).
  - Nontax revenue: Prog. 212.3; Proj. 153.8; Difference -58.5 (2.2 percent of GDP Prog.; 1.6 percent Proj.; -0.6).
  - Grants: Prog. 114.6; Proj. 94.6; Difference -20.0 (1.2 percent of GDP Prog.; 1.0 percent Proj.; -0.2).
  - Total expenditure and net lending: Prog. 2,138.1; Proj. 1,979.4; Difference -158.7 (22.6 percent of GDP Prog.; 20.7 percent Proj.; -1.9).
  - Capital expenditure: Prog. 897.5; Proj. 778.6; Difference -118.9 (9.5 percent of GDP Prog.; 8.1 percent Proj.; -1.3).
  - Overall fiscal balance (incl. grants): Prog. -312.3; Proj. -312.3; Difference 0.1 (−3.3 percent of GDP Prog.; −3.3 percent Proj.; 0.0).
  - Basic fiscal balance: Prog. -124.3; Proj. -124.4; Difference -0.1 (−1.3 percent of GDP both Prog. and Proj.; 0.0).
  - Nominal GDP: Prog. 9,474; Proj. 9,557 (Billions of CFAF).
- Banking sector and financial stability:
  - Overall capital adequacy ratio (CAR) for the sector: 13.4 percent at end-December 2017.
  - Nonperforming loans (NPLs): around 16.5 percent.
  - Non-operating assets (NOAs): 19 percent (in breach of WAEMU regulatory ceiling of 15 percent).
  - Compliance issues: one bank non-compliant under Basel I; two banks non-compliant under Basel II/III due to high NOAs.
  - Authorities and banks developing a strategy to reduce NOAs.
  - Expected reduction of NPLs due mainly to: (i) more favorable asset classification under Basel II/III; and (ii) five-year maximum for holding NPLs in banks’ balance sheets.

### Outlook and risks
- Macroeconomic outlook:
  - Real GDP growth: projected to rebound to 5 percent in 2019, then settle around 4¾ percent (Mali’s long-run rate).
  - Inflation: expected to remain below the WAEMU criterion absent supply shocks.
  - Tax revenue: implementation of tax policy and administrative measures projected to sustain an annual increase in tax revenue by 0.4 percentage point of GDP.
  - Overall fiscal deficit: projected to stabilize at 3 percent of GDP.
  - Current account deficit: projected to improve slightly in 2019, then narrow gradually to about 7 percent of GDP over the medium term.
- Key risks:
  - Continued security-related shocks, commodity price volatility, and tighter financing conditions.
  - Vulnerability from primary sector dependence and weather-related shocks.
  - Fiscal risks from revenue shortfalls, weak taxpayer compliance, fraud, and organizational inefficiencies.
  - Structural risks in the banking sector from high NOAs and NPLs.

### Policy actions, waiver request, and staff views
- Authorities’ commitments and corrective measures:
  - Authorities committed to meeting the end-December 2018 deficit target of 3.3 percent of GDP and to abiding by the WAEMU deficit criteria of 3 percent of GDP in 2019.
  - Identified remedial measures: intensified revenue collection, tax administration measures, and spending cuts.
  - Expressed interest in a successor ECF arrangement to lock in gains achieved under the current program.
- Waiver and review requests:
  - Authorities requested a waiver for nonobservance of the performance criterion on gross tax revenue at end-June 2018.
  - Authorities requested completion of the tenth (and last) ECF review; disbursement upon completion would amount to SDR 31.65 million.
  - Authorities consented to publication of the staff report and the Letter of Intent.
- IMF staff position:
  - Staff support the authorities’ requests for a waiver for nonobservance of a performance criterion and for completion of the tenth ECF review.

*Source: IMF staff.*

### 10.      Risks to the outlook remain tilted to the downside. The most immediate risk remains the

### 10.      Risks to the outlook remain tilted to the downside. The most immediate risk remains the

### Downside risks to the outlook
- Security: The most immediate risk is the volatile security situation. The intensification of violent attacks, especially if reaching Bamako, could dampen private sector confidence, and affect economic growth and public finances.
- Weather and agriculture: Agricultural output remains vulnerable to adverse weather conditions.
- Export concentration: High dependence on gold and cotton exports (about 65 percent and 15 percent of total exports, respectively) leaves Mali’s balance of payments vulnerable to commodity price fluctuations.
- External financing: Potential reductions in donor funding and falling FDI.
- Regional liquidity: Further tightening of liquidity conditions at the regional level could slow credit to the private sector and increase the cost of domestic debt.

### Fiscal risks and public sector vulnerabilities
- Central government stance: The central government’s fiscal stance has strengthened since 2013, but broader public sector risks could undermine fiscal performance (Text Figure 3).
- Key identified fiscal risks (from the September 2018 IMF TA mission and staff analysis):
  - Unfavorable terms of trade shocks.
  - Insufficient pass-through of international oil price changes to domestic petroleum prices.
  - Revenue losses on production, particularly cotton and gold.
  - High exposure to liabilities accumulated in other state-owned companies.
  - Institutional risks related to decentralization.
  - Natural disasters.
- SOEs and information gaps: In the absence of a centralized database for SOEs, their liabilities are not systematically known and managed, making it difficult to determine their budget risk.

### Box 1 — EDM’s Difficult Financial Situation
- Causes: Long-standing inadequacy between production price and sale price of electricity, insufficient and delayed critical investment, and poor management.
- Cash position and debt: Sales revenue and government subsidies fall short of financial commitments; total debt in early 2018 is estimated at CFAF 304 billion (3.2 percent of GDP), split almost evenly between commercial banks and suppliers.
- Government and World Bank response:
  - Government increased its subsidy by CFAF 15 billion in 2018, bringing the total to CFAF 42 billion.
  - Short-run World Bank restructuring program includes: (i) improving revenue collection through smart meters and combating illegal connections and leakages while controlling costs; (ii) revising tariffs to identify potential improvements (e.g., increase in rates for institutional consumers, removal of subsidy on connection fees for medium voltage users); (iii) improving the loan portfolio through refinancing and collateralization of existing short term commercial debt.
  - Long-run measures: improve the investment plan to reverse the energy mix in favor of renewable sources, eliminate generator leasing, reduce national thermal production (diesel and heavy fuel), increase national hydroelectric production and imports of low-cost electricity from neighboring countries (Côte d'Ivoire, and Guinea).
- Policy admonition: It is critical to tackle energy sector problems both short term and long run without further increasing unsustainable subsidies in order to free up resources for investment and social spending.

### Key economic indicators (selected, percent of GDP unless noted)
- Real GDP growth (2014–2023): 7.1, 6.2, 5.4, 5.8, 5.3, 5.4, 5.0, 4.9, 5.0, 4.9, 4.8, 4.8, 4.8
- Consumer price inflation (average): 2.7, 1.4, -1.6, -1.8, 0.2, 1.8, 1.4, 2.0, 2.0, 2.1, 2.2, 2.2, 2.2
- Revenue: 14.9, 16.4, 16.8, 16.7, 18.3, 18.4, 19.4, 17.9, 18.5, 19.1, 19.3, 19.6, 19.9
  - of which: Tax revenue: 12.6, 14.0, 14.9, 14.9, 15.3, 15.2, 15.8, 14.8, 15.6, 16.2, 16.5, 16.8, 17.1
- Grants: 2.2, 2.7, 2.0, 1.6, 2.3, 1.6, 1.2, 1.0, 2.0, 2.0, 2.1, 2.1, 2.1
- Total expenditure and net lending: 20.0, 20.9, 23.2, 22.3, 24.0, 22.9, 23.9, 22.1, 23.5, 24.1, 24.4, 24.6, 24.9
- Overall balance (payment orders): -2.9, -1.8, -4.3, -3.9, -3.5, -2.9, -3.3, -3.3, -3.0, -3.0, -3.0, -3.0, -3.0
- Basic fiscal balance: -1.2, 0.5, -2.1, -1.9, -1.1, -0.9, -1.3, -1.3, -1.1, -0.9, -0.9, -0.7, -0.7
- Total public debt: 27.4, 30.7, 29.7, 35.9, 31.8, 35.4, 35.9, 37.3, 37.5, 38.1, 38.7, 39.3, 39.5
- Current external balance (including official transfers): -4.7, -5.3, -7.7, -7.2, -8.1, -5.9, -6.5, -7.4, -7.2, -7.4, -7.2, -7.0, -6.8
- Overall balance of payments: -2.5, -1.6, 0.1, -3.9, -2.9, 0.7, -2.0, -2.3, -2.6, -2.2, -1.9, -1.5, -1.4
(Sources: Malian authorities; and IMF staff estimates and projections.)

### Addressing the 2018 revenue shortfall (Boxed plan and staff assessment)
- September 2018 preliminary data: tax revenue shortfall about 2 percent of GDP for full 2018 year.
- Authorities’ offset plan: remedial revenue measures about 1 percent of GDP and spending cuts about 1 percent of GDP.
- Non-tax revenue shortfall: about CFAF 58 billion (0.5 percent of GDP) by end-December 2018 (mostly due to renegotiation of the royalty related to the license of the fourth telecom operator and the renewal of the existing 4G license).
- Remedial revenue measures (Text Table 3 totals):
  - Revenue measures: 120 Billion CFAF (1.3 percent of GDP)
    - Tax administration (tax arrears recovery): 90 Billion CFAF (0.9 percent of GDP)
    - Customs: 30 Billion CFAF (0.3 percent of GDP)
  - Spending cuts: 129 Billion CFAF (1.3 percent of GDP)
    - Current: 39 Billion CFAF (0.4 percent of GDP)
      - Goods and services: 23 Billion CFAF (0.2 percent of GDP)
      - Transfers: 16 Billion CFAF (0.2 percent of GDP)
    - Capital: 90 Billion CFAF (0.9 percent of GDP) — Domestically financed: 90 Billion CFAF (0.9 percent of GDP)
- Tax arrears recovery expectations: authorities expect to recover CFAF 72 billion (0.7 percent of GDP) out of CFAF 144 billion tax arrears identified for 2015–17, and another CFAF 20 billion (0.15 percent of GDP) from tax adjustment of a mining company.
- Spending prioritization: Capital expenditure has borne the brunt of cuts; authorities noted careful selection of postponed projects and commitment to reaching the ceiling on social spending.
- Staff caution: Heavy reliance on tax arrears recovery may not be realistic; authorities stopped commitments on non-essential public expenditures from November 1, 2018 to help achieve spending cut target.

### Preserving fiscal sustainability and recommended reforms
- 2019 fiscal targets: Authorities reaffirmed commitment to the WAEMU fiscal deficit target in 2019 and agreed with staff to tighten the 2019 fiscal stance. The draft 2019 budget envisages a reduction in the overall and basic deficits to 3 percent of GDP and 1.1 percent of GDP, respectively.
  - 2019 budget projection: tax revenue projected to reach 15.6 percent of GDP (an 0.8 percentage point increase relative to the revised 2018 estimate).
  - Spending limits: Authorities committed to limiting capital and current spending and targeting least efficient current or capital projects for cuts.
- Revenue mobilization priorities:
  - Strengthen tax administration and customs reforms: expedite implementation, develop taxpayer compliance improvement plan, enhance use of third party information, improve large- and medium-sized taxpayers’ compliance, increase capacity in taxpayer registration and audit.
  - Reduce exemptions: tax exemptions still significant (about 3.5 percent of GDP in 2017); expedite adoption of law raising eligibility threshold for investment exemptions from CFAF 12.5 million to CFAF 100 million; reduce exemptions identified by 2018 review.
  - Address transfer pricing and profit shifting: strengthen requirement to document transfer prices consistent with international standards; adopt specific under-capitalization rule; follow up on revised mining code (IMF TA recommendations; TA mission scheduled in February 2019).
  - Petroleum taxation: With rising international oil prices, petroleum price revenue decreased by 0.3 percentage point of GDP at end-June 2018 due to limited pass-through, increased exempted quantities, fraud, and porous borders. Example: assuming full taxation (no implicit subsidy), consumer price would have been 816 CFAF instead of 717 CFAF in July 2018. The automatic price formula caps the price increase at 3 percent of the international price in any given month. Staff recommended a comprehensive strategy: systematic pricing mechanism implementation, holistic fuel taxation approach (revisit fuel margins and large exemptions), avoid differentiated pricing that enables arbitrage, and improve social safety nets with World Bank support.
  - Digital taxation: Authorities agreed that digital taxation could enhance revenue collection by capitalizing on fast expansion of mobile banking and by reaching those unable to hold a bank account.

*Italic: IMF staff report excerpt as provided in the content unit.*

### 18.      Staff and the authorities agreed that strengthening the public investment

### 18.      Staff and the authorities agreed that strengthening the public investment

### Public investment management
- 2017 IMF PIMA mission found important deficiencies undermining the contribution of investment to the domestic capital stock.
- Staff and the authorities agreed that strengthening the public investment management framework could reduce the infrastructure gap.
- Urgent need to improve public investment management as authorities adjust capital spending in response to lower revenues to improve quality of and access to infrastructure.
- Authorities prepared a methodology for elaborating a standard unit cost market price list for implementation of road infrastructures, buildings, hydro-agricultural development and hydraulic structures (SB for August 2018; not met but implemented with delay in October 2018) to help streamline project costs.
- Staff encouraged expedited implementation of a comprehensive action plan to:
  - raise public investment managers’ accountability and stewardship;
  - strengthen the social-economic impact of investment spending;
  - accrue and maintain existing infrastructure in the long term.
- Staff urged strengthening the institutional framework to identify, monitor, and manage fiscal risks arising from public-private partnerships (PPPs).

### Fuel pricing mechanism and oil sector indicators
- Mali imports all fuel consumption; imports increased from 650 million liters in 2007 to 1.5 billion liters in 2017.
- Malian fuel pricing policy focuses on retail price stabilization.
- Since September 2017 Mali implemented an automatic fuel pricing formula allowing a capped pass-through from international to domestic fuel prices: the formula caps adjustment at 3 percent.
- The formula has been applied seven times in the last twelve-months.
- Since implementation of the formula, international oil prices increased by 29 percent, while retail prices increased by only 3 percent.
- Consequences:
  - Increases in international prices and exemptions, combined with a formula that focuses on retail price stabilization, diminished revenues from fuel products.
  - Revenues from fuel products fell from 1.2 percent of GDP in 2015-16 to 0.9 percent of GDP in 2017.
  - Lower revenue collection continued in 2018 with only 0.3 percent of GDP (or CFAF 32.4 billion) collected during 2018:H1.
  - Given the large increase in international oil prices during that period (about 15 percent), a full implementation of the price formula would have increased collection by only CFAF 1–1.5 billion relative to the actual outcome.
- Staff suggested measures to reinforce the pricing mechanism, including:
  - updating the margins used in the formula based on the findings of the 2017 ONAP study;
  - making the fuel price commission and ONAP activities more autonomous to reinforce perception that price changes are determined by international prices;
  - reviewing the cost of various exemptions from fuel price taxation and considering streamlining, including in the revision of the mining code;
  - ensuring a candid revenue projection in the budget to benefit transparency and setting TIPP rates accordingly.
- Oil sector indicators and pricing observations (2012–17 and 2014–18 excerpts in source):
  - Crude Oil Price (CFAF / barrel, IMF/GAS): 2012: 51.4; 2013: 47.5; 2014: 30.0; 2015: 25.4; 2016: 31.2; 2017: 40.1.
  - Import volume (million tons): 2012: 1.1; 2013: 1.0; 2014: 1.0; 2015: 1.1; 2016: 1.4; 2017: 1.5.
  - Excise on Oil Products (billion CFAF, TOFE): 2012: 25.3; 2013: 22.3; 2014: 27.8; 2015: 93.1; 2016: 100.9; 2017: 84.7.
  - Percent of GDP (excise on oil products): 2012: 0.4; 2013: 0.3; 2014: 0.4; 2015: 1.2; 2016: 1.2; 2017: 0.9.

### Decentralization, transfers, and subnational finance
- Gradual decentralization is key to advancing the 2015 peace agreement.
- Central government transfers to local governments are projected to rise from 24.4 percent of budgetary revenue in 2017 to 25.3 percent in 2018, but remain 5 percentage points lower than level targeted in the peace agreement.
- The draft 2019 budget projects the transfer rate to reach 30.6 percent of government revenue.
- Transfers are accompanied by transfer of expenditure responsibilities to local authorities; government and donors work to strengthen local governments’ technical capacities and improve monitoring and control mechanisms.
- Staff urged authorities to:
  - expedite design of subnational taxation, including property taxation, to raise stable tax revenues at the subnational level as suggested by previous IMF TA;
  - fund social and pro-poor spending;
  - develop a framework for monitoring and managing contingent liabilities and additional likely fiscal risks arising from decentralization.

### Fiscal stance, buffers, and fiscal risk monitoring
- Staff supported the authorities’ fiscal stance for 2019 but underscored need to build fiscal buffers.
- Authorities plan ½ a percentage point of GDP increase in revenues per year over the medium term.
- Staff noted that a tighter fiscal stance after 2019 could help build adequate buffers given rising public debt and downside risks to tax revenue projections; authorities argued further tightening would dampen economic activity and delay infrastructure and social programs tied to the peace agreement.
- Staff agreed with authorities on need to improve monitoring of fiscal risks:
  - Authorities have developed forecasting instruments and multi-year budget management and plan to put in place a process of risk control.
  - Absence of an effective centralized database covering all activities, assets and liabilities of public enterprises hampers assessment of their budgetary risks.
  - Staff encouraged expedited implementation of the September 2018 IMF mission’s recommendations on fiscal risks, including development of a clear strategy to identify, document, and control key fiscal risks over time.

### Debt management and domestic borrowing
- DSA conducted in May 2018 indicates Mali continues to face a moderate risk of debt distress.
- Authorities continue to execute the 2018 external borrowing plan as agreed with staff.
- A major vulnerability is high maturity concentration of domestic debt: currently, over 60 percent of domestic debt will fall due in the next three years.
- Risks: a change in market conditions could require scaling down regional debt issuances and higher cost of borrowing could weaken debt sustainability and reduce fiscal space.
- Staff underscored need to improve debt institutional framework, including the Medium-Term Debt Strategy (MTDS), and the importance of concessional financing sources and domestic issuances at auction prices to mitigate rollover risk and higher debt burden costs.
- Staff urged early completion of Mali’s ongoing efforts to strengthen debt management and better interdepartmental coordination to support debt policy.

### Structural reforms, growth, and poverty reduction
- Mali has experienced sustained robust growth, but poverty and inequality remain high:
  - Poverty rate estimated at 50.9 percent in 2013.
  - Literacy gap: male literacy 43.3 percent, female literacy 24.6 percent.
  - About 84 percent of the population have access to primary education, 45 percent to secondary education, and only 7 percent to higher education; literacy rate 33.6 percent (World Bank).
  - Malnutrition: 28 percent of children are stunted.
- Achieving strong growth and reducing poverty requires addressing social, infrastructure, and governance gaps; capacity insufficient in roads, agricultural development, education, and health.
- Staff encouraged authorities to:
  - finalize medium-term development strategy (to form basis for a successor ECF-supported program);
  - support productivity growth and SMEs by improving business environment, physical infrastructure, human capital, basic public services, and financial inclusion;
  - develop a more targeted and sustainable social safety net;
  - gradually eliminate blanket subsidies and reorient spending to poverty-reducing outlays (education, health).

### Governance, anti-corruption, and public financial management (PFM)
- Mali assessed to have governance weaknesses and a high level of corruption; perception of corruption in the justice system.
- Laws to fight corruption and illicit enrichment (LAIE) passed in 2013 and 2015, but without noticeable increase in indictments or convictions.
- Serious lapses in PFM caused delays in ECF program reviews (mid-2014 and late 2017).
- Authorities working to expedite governance reforms, including LAIE and recommendations by the Office of the Auditor General (AG).
- Authorities committed to expand the Treasury Single Account (TSA) by closing non-active accounts and repatriating balances, while avoiding opening new accounts.
- Staff encouraged:
  - comprehensive assessment of governance vulnerabilities in context of a possible successor program;
  - consolidation of progress in implementing LAIE and publishing judiciary actions addressing economic and financial offenses identified by the Auditor General;
  - implementation of the AML/CFT framework, including in the context of the 2019 assessment against the FATF standard;
  - consolidation of improvements in PFM integrity and transparency.

### Program and other issues
- Capacity to repay the Fund is adequate; Mali has a good track record of timely payment of external debt obligations, including to the Fund.
- Total outstanding debt to the Fund is expected to peak in 2018 at SDR 227.5 million (121.9 percent of quota).
- Authorities have requested a successor ECF-supported program; negotiations tentatively planned for March 2019.
- Staff encouraged finalization of the authorities’ medium-term (2019–23) development strategy to form the basis for a successor ECF-supported program.
- Safeguards assessment of the BCEAO (April 2018) found:
  - central bank has maintained a strong control environment since 2013 assessment;
  - governance arrangements broadly appropriate;
  - audit arrangements strengthened;
  - IFRS adopted beginning with the 2015 financial statements;
  - 2016 external quality review found broad conformity with international standards;
  - BCEAO’s risk management framework (established 2014) is progressing well.

*Source: IMF staff report excerpt (cr18360).*

### 30.      The authorities made commendable strides in restoring macroeconomic stability and

### 30.      The authorities made commendable strides in restoring macroeconomic stability and setting in motion structural reforms under difficult circumstances and repeated adverse shocks

### Macroeconomic performance and challenges
- The economy has recovered from the contraction following the 2012 institutional and security crisis.
- Strong revenue performance helped increase public investment and pro-poor spending, while keeping the fiscal deficit in check.
- GDP growth has been robust, but meaningfully reducing poverty and inequality has remained a challenge.
- Structural reforms have improved transparency and governance, strengthened public financial management, and addressed financial sector weaknesses, but significant challenges remain.
- To build upon and sustain the progress achieved, sustained efforts are needed to increase the pace of reforms.

### Revenue performance and fiscal policy
- The ratio of tax revenue to GDP plummeted in 2018, prompting the authorities to identify remedial tax collection measures and cut spending given their commitment to the deficit target under the program.
- Looking ahead, steadfast implementation of tax policy and tax administration reforms will be essential to implement the government’s development priorities while preserving fiscal sustainability.
- Durable gains in tax revenue will need to come from:
  - strengthening tax and customs administration,
  - reducing exemptions,
  - improving the effectiveness of mining sector taxation and increasing revenues from petroleum products,
  - combatting evasion and fraud, and
  - broadening the tax base.

### 2019 draft budget and fiscal targets
- The 2019 draft budget provides an adequate basis for fiscal policy and reflects the authorities’ commitment to reaching the WAEMU fiscal deficit criterion of 3 percent of GDP in 2019.
- On the revenue side, the budget aims at correcting the 2018 revenue underperformance and bringing back revenue mobilization efforts in line with the strong performance of previous years.
- Tax revenue is expected to increase by 0.8 percent of GDP, as a result of broadening the tax base, reducing exemptions, combatting frauds, and reforms in tax administration.
- On the expenditure side, increased attention should be paid to the quality of expenditure.

### Risks and recommended fiscal buffers
- Risks are tilted to the downside.
- Fragile security conditions coupled with an uncertain external environment pose the greatest downside risks.
- If external budget support were reduced further, a continuation of the weak revenue performance of 2018 would lead to undesirable spending cuts and possibly accumulation of payment arrears.
- Agricultural output remains vulnerable to adverse weather conditions.
- High dependency on gold and cotton exports leaves Mali’s balance of payments vulnerable to international commodity price fluctuations.
- Staff encourages the authorities to build additional fiscal buffers to be better able to respond to these contingencies.

### Electricity sector and public enterprise reforms
- Strengthening the performance of the electricity sector will contribute to improving government finances and support growth.
- Government transfers to EDM have increased in 2018 and will remain significant in 2019, given EDM’s difficult financial situation.
- A recent decision by the authorities to improve management and appoint more independent board members to enhance governance is expected to reduce losses in the short run.
- The ongoing collaboration with the World Bank to address EDM debt and develop an ambitious investment plan for the electricity sector to reduce costs, are expected to improve the overall financial position of the company over the medium term.

### Public investment management
- Staff encouraged the authorities to strengthen the public investment management framework to help reduce infrastructure gaps.
- Progress has been made in implementing the 2017 IMF PIMA mission’s recommendation.
- Staff encourages the authorities to expedite implementation of a comprehensive action plan to:
  - raise public investment managers’ accountability and stewardship,
  - strengthen the social-economic impact of investment spending, and
  - accrue and maintain existing infrastructure in the long term.

*IMF Country Report excerpt*

### 36.      Staff recommend the completion of the tenth review under the ECF arrangement

### 36.      Staff recommend the completion of the tenth review under the ECF arrangement

### Recommendation
- Staff recommend the completion of the tenth review under the ECF arrangement based on broadly satisfactory performance and the authorities’ forward-looking policy commitments.
- Staff recommend granting a waiver of nonobservance of a performance criterion based on the corrective measures adopted by the authorities.

### Macroeconomic developments and outlook (highlights)
- Growth is projected to decelerate to 4.9 percent in 2018.
- CPI Inflation (percent annual change, y-o-y): inflation remains subdued, well below the WEAMU criterion (figure note).
- Real GDP (annual change): 2.3 (2013), 7.1 (2014), 6.2 (2015), 5.8 (2016), 5.4 (2017), 4.9 (2018 proj), 4.7 (2019 proj) — preserved from Table 1 line: "Real GDP2.37.16.25.85.35.45.04.94.75.04.94.84.84.8".
- Terms of trade (deterioration -): sequence includes -16.6, 5.5, 18.6, 15.5, -6.4, -1.3, -2.6, -4.9, 0.9, -3.1, -0.2, 1.1, 0.9, 0.7 (from Table 1).
- Balance of Payments (billions of CFAF) projections and components show an expected widening trade deficit over the medium term as gold exports decline and cotton exports grow slower (figure note).

### Fiscal developments and projections (highlights)
- Total revenue and grants (percent of GDP): revenue and grants have increased since 2012 (figure note).
- Central government finance (Table 1 / Table 3 key lines, percent of GDP where indicated):
  - Revenue: 14.5 (2013), 14.9 (2014), 16.4 (2015), 16.7 (2016), 18.3 (2017), 18.4 (2018), 19.4 (2019 prog) — preserved from Table 1 line "Revenue14.514.916.416.718.318.419.417.9...".
  - Grants: 2.8 (2013), 2.2 (2014), 2.7 (2015), 1.6 (2016), 2.3 (2017), 1.6 (2018), 1.2 (2019 prog).
  - Total expenditure and net lending (percent of GDP): 19.8 (2013), 20.0 (2014), 20.9 (2015), 22.3 (2016), 24.0 (2017), 22.9 (2018), 23.9 (2019 prog).
  - Overall balance (payment order basis, including grants): -2.4 (2013), -2.9 (2014), -1.8 (2015), -3.9 (2016), -3.5 (2017), -2.9 (2018), -3.3 (2019 prog).
  - Overall balance (cash basis, including grants): -2.4 (2013), -2.4 (2014), -3.2 (2015), -3.9 (2016), -3.4 (2017), -2.6 (2018), -3.6 (2019 prog).
  - Basic fiscal balance (WAEMU def.): -0.7 (2013), -1.2 (2014), 0.5 (2015), -1.9 (2016), -1.1 (2017), -0.9 (2018), -1.3 (2019 prog).
- Fiscal composition (Table 3, selected 2018 figures, billions CFAF):
  - Revenue and grants (2018 Rev./Est./Prog. columns as presented): Total revenue 1,620.4; Grants 144.1; Total expenditure and net lending (payment orders basis) 2,130.2; Budgetary expenditure 1,753.0; Current expenditure 1,013.0; Capital expenditure 740.0.
- Table 5 (percent of GDP) reiterates:
  - Tax revenue: 12.3 (2013), 12.6 (2014), 14.0 (2015), 14.9 (2016), 15.3 (2017), 15.2 (2018), 15.8 (2019 prog).
  - Capital expenditure: 6.0 (2013), 6.5 (2014), 7.3 (2015), 8.9 (2016), 9.9 (2017), 8.8 (2018), 9.5 (2019 prog).

### External sector and balance of payments (highlights)
- Current external balance (including official transfers, percent of GDP): -2.9 (2013), -4.7 (2014), -5.3 (2015), -7.2 (2016), -8.1 (2017), -5.9 (2018), -6.5 (2019).
- Trade balance (percent of GDP): -1.9 (2013), -3.5 (2014), -3.6 (2015), -4.1 (2016), -5.8 (2017), -4.0 (2018), -3.9 (2019).
- Exports and imports (billions of CFAF, Table 6 sample lines):
  - Exports, f.o.b.: 1,419.5 (2013), 1,374.4 (2014), 1,606.8 (2015), 1,675.9 (2016), 1,803.2 (2017), 1,779.8 (2018).
  - Imports, f.o.b.: -1,546.1 (2013), -1,625.4 (2014), -1,888.1 (2015), -2,018.0 (2016), -2,313.1 (2017), -2,138.5 (2018).
- Key external financing components (Table 6):
  - Capital account (net) and project grants contribute to external financing; HIPC Initiative assistance and IMF (net) shown in financing memorandum lines (e.g., "HIPC Initiative assistance 25.6, 14.9, 16.8 ..." and "IMF (net) 18.8, 4.3, 1.9 ...").

### Monetary and financial sector (highlights)
- Broad money (M2) growth (Table 7): annual contribution to growth of broad money reported as 7.4 (2013), 7.1 (2014), 13.2 (2015), 7.3 (2016), 7.8 (2017), 7.9 (2018), 16.2 (2019 proj).
- Credit to the economy (billions of CFAF; Table 7): 1,228 (2013), 1,458 (2014), 1,747 (2015), 2,054 (2016), 2,335 (2017), 2,205 (2018).
- Financial soundness indicators (Table 8, selected lines):
  - Non-performing loans to total loans: 25.4 (2009), 22.1 (2010), 18.0 (2011), 21.0 (2012), 19.3 (2013), 15.9 (2014), 14.5 (2015), 15.4 (2016), 16.6 (2017), 17.3 (2018), 17.6 (2018 entries) — preserved as in table.
  - Return on assets (ROA) and Return on equity (ROE) series provided in table (e.g., ROA 0.6, 1.4, 1.7, 1.3...).

### Program financing and ECF disbursements
- Schedule of disbursements under the ECF arrangement (Table 9) lists tranches and dates; notable entries:
  - SDR 6 million (3.2 percent of quota) — December 18, 2013.
  - SDR 31.65 million (17.0 percent of quota) — May 1, 2018 and SDR 31.65 million (17.0 percent of quota) — November 1, 2018 (completion of the ninth and tenth reviews respectively).
  - Total for ECF arrangement: 100.0 (percent of quota).

### Performance criteria, indicators, and program status (2018 summary)
- Selected program targets and status (Table 11, June/September 2018 indicators):
  - Ceiling on net domestic bank and market financing of the government: Prog. 389; Adj. 336; Target 105; Est. Status Met 467.
  - Cumulative increase in external payments arrears (ceiling): Prog. 0; Adj. 0; Target 0; Est. Status Met 0.
  - New external debt contracted or guaranteed by the government, in PV terms (cumulative ceiling from June 2015): Prog. 557; Adj. 441; Target Met 557.
  - Gross tax revenue (floor): Prog. 775; Adj. 659; Not met; Est. 1,146.
  - Indicative targets: Basic fiscal balance (floor) Prog. -155; Adj. -155; Est. 51 Met; Priority poverty-reducing expenditure (floor) Prog. 142; Adj. 147; Est. 341 Met.
  - Memorandum: External budgetary support 117 (June), 54 (September) (as presented).

### Structural benchmarks (Table 13, proposed for 2018; implementation status excerpts)
- Assess implementation of recommendations of the 2017 report on compliance of PRED and AICE with new budgeting and accounting processes:
  - Implementation Deadline: May 28; Status: Met; Macroeconomic justification: Ensure the monitoring and evaluation of program performance starting in December 2018.
- Continue implementation of oil product pricing formula to reflect cost changes within a margin of 3 percent per month:
  - Implementation Deadline: Continuous; Status: Not met; Macroeconomic justification: Adequately price oil products and protect revenue derived from their taxation.
- Develop a strategy to reduce non-collateralized NPLs in the banking system:
  - Implementation Deadline: June 30; Status: Not met (expected to be implemented in December); Macroeconomic justification: Strengthen the banking system.
- Achieve a transmission rate of 35 percent of asset declarations to the Supreme Court for government officials:
  - Implementation Deadline: June 30; Status: Met (transmission rate exceeded 40 percent); Macroeconomic justification: Promote good governance.
- Transfer 50 percent of public institution (EPAs) funds from commercial banks to the BCEAO relative to end-2017 deposits:
  - Implementation Deadline: June 30; Status: Not met; Macroeconomic justification: Strengthen public financial management.
- Other structural benchmarks listed in Table 13 continue (table contains additional measures and deadlines).

_Italic: Source — IMF Country Report content unit "36.      Staff recommend the completion of the tenth review under the ECF arrangement" (cr18360) as provided._

### 12.5 million to CFAF 100 million, except for small

### cr18360 - 12.5 million to CFAF 100 million, except for small

### Program status and recent developments
- The government requests completion of the tenth review, a waiver of nonobservance for the performance criterion, and disbursement of the final tranche in the amount of SDR 31.65 million.
- Real GDP growth is estimated at 4.9 percent in 2018.
- Inflation is reported as moderate at around 2 percent.
- The fiscal deficit is estimated at 3.3 percent of GDP and the authorities are committed to respecting the WAEMU convergence criterion limiting the budget deficit to 3 percent of GDP.
- The current account deficit worsened in 2018 and amounted to around 7.4 percent of GDP.
- All quantitative performance criteria at end-2018, except one, have been met. The unmet performance criterion concerns the floor on gross tax revenue.
- Out of ten structural benchmarks expected under the tenth review, four were fully implemented at October 31, 2018.
- Security conditions and pre-election uncertainty negatively affected revenues; corrective administrative measures and cuts to non-priority public spending were adopted to prevent accumulation of domestic payment arrears while sparing priority and social spending as well as investment spending on ongoing and productive projects.

### Fiscal policy, public financial management, and public investment
- The authorities plan to give preference to grants and concessional financing, using the regional financial market prudently; recourse to non-concessional financing is an option of last resort for priority projects with guaranteed economic return.
- The government intends to preserve fiscal space to support public investment and will undertake reforms to improve the selection, assessment, and execution of public investments.
- Reforms will aim to reduce the efficiency gap identified in the August 2017 Public Investment Management Assessment (PIMA) by reducing expenditures that do not directly contribute to fixed capital formation and improving project performance.
- The government will strengthen the regulatory framework and public financial management, including budget preparation, execution, monitoring, audit, fiscal transparency, internal and external audit, cash management, budgetary and financial forecasting instruments, and processes for controlling fiscal risks.
- PFM instruments recently developed for establishing multiyear fiscal targets and spending plans, as well as processes for managing fiscal risks, will be implemented steadfastly.

### Tax policy and revenue mobilization
- The government plans to increase tax revenues by 0.5 percentage points of GDP a year over the medium term.
- Reform measures include:
  - broaden the tax base and reduce exemptions;
  - intensify the collection and processing of information;
  - transform the culture of the revenue collecting units;
  - strengthen efforts to improve tax compliance;
  - improve tax efficiency in the mining sector, particularly by adopting the revised mining code and measures to mitigate vulnerabilities related to aggressive tax optimization;
  - optimize tax revenue from petroleum products.
- With Fund technical assistance, measures will deepen tax policy and tax administration reforms, enhance joint brigades between tax and customs administrations to combat fraud and smuggling, step up collection of tax arrears, and implement strict follow-up of performance indicators by revenue collecting agencies.

### Governance, anti-corruption, and transparency
- The government is strengthening measures to promote good governance and combat corruption.
- It is determined to continue implementing Law n°2014-015 of May 27, 2014 on the prevention and repression of illicit enrichment, and to accelerate legal work to review this Law, including increasing the base of subject entities.
- The authorities undertake to accelerate implementation of the recommendations of the Auditor General’s Office to ensure proper use of public resources.
- An assessment of governance vulnerabilities could be undertaken in the context of a new three-year ECF-supported program to help prioritize reforms.
- Asset declaration goals: achieve a transmission rate of 50 percent of asset declarations to the Supreme Court for government officials explicitly mentioned in the law against illicit enrichment; reported outcome: transmission rate exceeded 60 percent as of October 31.

### Energy sector and financial position of EDM
- The financial situation of the public electricity utility (EDM) remains fragile due to ill-adapted and costly infrastructure, technical losses, application of rates below production cost, and a high debt level.
- The government, with World Bank support, is taking steps to strengthen EDM’s financial situation and stop accumulation of arrears.
- Investments to reverse the energy mix in favor of renewable sources and a possible adjustment of electricity pricing are being considered to lower production costs and improve EDM’s financial situation.

### Structural reform priorities and future program intentions
- The government reaffirms commitment to continuing the reform agenda to maintain economic stability, ensure fiscal stability, continue decentralization/deconcentration, support financial sector development, strengthen the fight against corruption, improve good governance, improve energy sector efficiency, and foster economic diversification and inclusive growth.
- The government is finalizing its new development strategy for the period 2019-2023 to serve as the basis for a request for a new three-year Extended Credit Facility (ECF) arrangement in the first quarter of 2019.
- Authorities will continue to pursue reforms to improve the business climate, infrastructure, human capital, and the financial situation of the electricity company (EDM).
- The authorities seek Directors’ support for completion of the tenth and last review under the Arrangement and approval of the request for a waiver of nonobservance of the performance criterion on gross tax revenue.

*Source: Letter of Intent, Bamako, November 19, 2018; Statement by Mr. Mohamed-Lemine Raghani and Mr. Oumar Diakite, December 10, 2018.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18360.pdf_