## MALI — FIRST REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRangement (1mliea2020001)

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---

### Executive Board decision and disbursements
- Completion of the first review under a three-year Extended Credit Facility (ECF) arrangement enabled Mali to draw the equivalent of SDR 20 million (about US$27.63 million), bringing total disbursements under the arrangement to SDR 40 million (about US$55.26 million).
- The Board approved a waiver for the nonobservance of the quantitative performance criterion on the non-accumulation of domestic arrears.
- The three-year arrangement was approved on August 28, 2019 for SDR 140 million (about US$193.5 million), equivalent of 75 percent of Mali’s quota in the IMF.
- Date of staff statement: December 23, 2019.
- Staff supports: completion of the first review, the waiver on domestic arrears, modification of performance criteria, and the release of SDR 20 million (10.7 percent of quota).

### Recent economic developments, outlook, and risks
- 2019 performance and near-term outlook:
  - Real GDP expected to grow by 5.1 percent in 2019.
  - Inflation (average) for 2019: 0.4 percent; end-of-period inflation for 2019: 1.8 percent.
  - Growth of private credit accelerated in 2019.
  - Current account deficit expected to remain essentially flat at 4.8 percent of GDP in 2019.
  - Banking sector broadly stable; financial soundness indicators improved in first half of 2019.
- Key projections (annual percentage change / percent of GDP as presented):
  - Real GDP projections 2020–2024: 5.0, 5.1, 5.0, 5.0, 5.0.
  - Consumer price inflation (average) projections 2020–2024: -0.4, 0.6, 2.0, 2.3, 2.3.
  - Revenue (percent of GDP) projections 2019–2024: 19.9, 19.5, 20.5, 20.7, 20.9, 21.3, 21.7.
  - Overall balance (commitment basis) projections 2020–2024: -3.0, -2.9, -3.5, -3.3, -3.0, -3.0, -3.0 (percent of GDP).
  - Total public debt projections 2019–2024: 37.4, 38.3, 39.0, 39.5, 39.7, 39.7, 39.7 (percent of GDP).
  - Current account balance (including official transfers) projections 2019–2024: -5.6, -4.8, -4.4, -4.6, -5.2, -5.8, -6.5 (percent of GDP).
- Risks:
  - Downside risks dominate, with further deterioration of security conditions the most immediate and critical risk.
  - Agricultural output vulnerable to adverse weather.
  - High dependence on gold and cotton exports and fuel imports increases vulnerability to terms-of-trade shocks.
  - Possible future reductions in external support pose external financing risks.

### Program implementation, performance criteria, and shortfalls
- Implementation through end-September 2019:
  - Broadly satisfactory: five of six quantitative performance criteria (QPCs) were met.
  - Continuous zero-ceiling on the accumulation of domestic arrears was breached; domestic arrears of CFAF 36.9 billion (0.4 percent of GDP) accrued in Q3 2019.
  - Indicative target on priority social spending for end-September 2019 was missed by a small margin (CFAF 14 billion) but expected to be met by end-December 2019.
  - Four of seven structural benchmarks (SBs) for 2019 met; remaining SBs for end-December were well on track.
- Revenue performance and corrective actions:
  - At end-September 2019, authorities had collected 73 percent of the tax revenue target for 2019.
  - Tax administration measures: strengthened collection of tax arrears; increased audit coverage and VAT and PIT taxpayers’ monitoring; launched project for online payment of taxes.
  - Result: stock of tax arrears decreased by 20 percent between November 2018 and July 2019; issue-oriented audits represent 25 percent of audit program.
  - Customs administration achievements: reduced number of transit documents (T1) not validated or not registered in ASYCUDA; progress in modernizing organization and operating procedures.
  - A formal coordination framework for sharing information between tax and customs databases (end-December 2019 structural benchmark) was met at end-November 2019.
  - Non-tax revenue shortfall at end-September 2019 due to delays in the sale of the fourth telecommunications operating license.
- Liquidity and budget support:
  - Severe liquidity constraints through first three quarters of 2019 due to clearing a large float from 2018 (about 2 percent of GDP) and delays in disbursement of budget support.
  - The 2019 supplementary budget relied on exceptionally high external budget support (including a US$250 million World Bank allocation and a near-concessional loan from the Abu Dhabi Fund for Development for the same amount), but the bulk had not been disbursed by end-September 2019.
- Prior actions and benchmarks:
  - Clearance of the accrued domestic arrears (CFAF 36.9 billion) is a prior action for completion of the first review.
  - Authorities pursuing implementation of a single treasury account (TSA) and improved cash management (new SB for end-March 2020).
  - Structural benchmarks met: improving customs administration, finalizing specifications for online payment of taxes and levies, completing EDM’s performance contract, and operationalizing cooperation between tax and customs administrations (met ahead of schedule).

### 2020 fiscal framework and spending priorities
- Fiscal stance and targets:
  - Overall fiscal deficit for 2020 increased to 3.5 percent of GDP from the previously agreed 3 percent of GDP to prevent crowding out of social and development spending.
  - Objective: balance spending needs and available resources while increasing domestic revenue mobilization and seeking external support.
  - Authorities requested WAEMU Council of Ministers to relax the convergence criterion for the fiscal deficit; requested 2020 program ceiling on the overall fiscal deficit of 3.5 percent of GDP.
- Program status and 2019 fiscal outturn:
  - Program expected to be on track for end-December 2019.
  - Tax revenue collections on target to reach 14.6 percent of GDP for 2019, 0.1 percentage point higher than the program target.
  - Sale of the fourth telecommunications license delayed to 2020; shortfall to be offset by small tax overperformance and somewhat lower current spending than budgeted.
  - 2019 overall fiscal deficit on an accrual basis projected to comply with the WAEMU ceiling of 3 percent of GDP.
  - Authorities anticipate full disbursement by year-end of both the World Bank’s budget support and the Abu Dhabi loan.
- Protection of priority spending and safeguards:
  - If revenue underperforms, government may cancel or freeze approved spending under Article 29 of the 2020 budget law; priority social and capital spending to be protected if recourse necessary.
  - Fiscal space from proposed higher deficit to be allocated to social and development spending (food security, health and education in conflict areas, road maintenance and connectivity to underserved areas).
  - Authorities will provide quarterly data (in CFAF terms) on priority social and development spending.

### Revenue mobilization measures and expected yields
- 2020 revenue target: increase tax revenue-to-GDP ratio from 14.6 percent in 2019 to 15.5 percent in 2020.
- Measures: strengthen tax and customs administration, reduce opportunities for tax fraud, limit tax exemptions, tax non-profit entities engaged in normal business activities, deploy e-filing and online/mobile tax payment.
- Authorities to pass a supplementary budget in Q1 2020 to reflect fiscal framework.
- Expected yields from revenue measures (Percent of GDP excerpt):
  - Tax revenue yields: 1.1 (2020 Proposed Budget); 1.2 (2021 Prog.); 0.9 (2022 Rev. Prog.); 0.2 (2023).
  - Direct taxes: 0.4; 0.4; 0.4; 0.1.
  - Indirect taxes: 0.7; 0.8; 0.6; 0.0.
- Customs and petroleum issues:
  - New structural benchmarks to improve customs: limit special regimes to urgent/perishable goods and those coming through the airport (automatically excludes petroleum products) — benchmark for April 2020 (D24); apply transaction value throughout national territory — benchmark for end-March 2020.
  - Petroleum sector weaknesses: absence of physical and accounting controls in petroleum warehouses; two-thirds of fuel products granted clearance with no follow-up, generating underestimated and often uncollected tax arrears. Petroleum tax structure poorly implemented and not in compliance with WAEMU Directive 06/2011CM/UEMOA.
  - Staff to closely monitor petroleum tax performance and consider structural measures if underperformance persists.
- Capacity development:
  - TADAT mission in November 2019 to assess tax administration; authorities intend to develop a Medium-Term Revenue Strategy (MTRS) as successor to Revenue Mobilization Thematic Fund (RMTF) program expiring April 2020.
  - Formal coordination framework between tax (DGI) and customs (DGD) administrations in place (end-December 2019 structural benchmark); focus on effective information sharing.

### Governance, AML/CFT, anti-corruption, and inclusiveness
- Governance priorities:
  - Authorities’ commitment to improve governance and fight corruption is commended; strong implementation needed across fiscal, anti-money laundering, and anti-corruption frameworks.
  - A governance assessment mission welcomed to inform future reform priorities (scheduled early 2020).
- AML/CFT:
  - GIABA evaluation (November 2019) indicated low effectiveness of Mali’s AML/CFT regime; authorities intend to prepare an action plan to address weaknesses.
  - Finalizing the National Risk Assessment (ENR) for money laundering and terrorist financing (began October 2018 with World Bank support).
  - Development of a national AML/CFT strategy and implementation plan during the first quarter of 2020.
- Anti-corruption measures and public financial management:
  - Law against illicit enrichment enacted in 2014; authorities plan to expand civil servants subject to asset declarations (new SB for end-March 2020).
  - Strengthen Law’s implementation, verification, and sanctions for false or missing disclosures.
  - PEFA self-assessments every two years; first self-assessment began July 2019 for finalization by end-December 2019.
- Gender and social inclusion:
  - Create and formally organize 400 women’s cooperatives in the shea butter sector.
  - Capacity building in cooperative and financial management for 50,000 beneficiaries.
  - Launch a large-scale project with World Bank support to improve women's access to the labor market.

### EDM-SA (Energie du Mali) — financial situation and reform program
- Overview:
  - EDM-SA facing insolvency; revenues insufficient to cover operating expenses, financing costs, and investment needs.
- Causes:
  - Insufficient investment, poor management, charging electricity prices well below cost of generation, inadequate revenue and subsidies.
- Short-term measures and financing:
  - Short-term debt to commercial banks estimated at CFAF 85 billion at end-October 2019.
  - Government decided to use CFAF 50 billion from the Abu Dhabi loan and a further CFAF 35 billion budget allocation in 2020 to retire this debt.
  - The part financed from the Abu Dhabi loan is an on-lending operation recorded below the line in the fiscal accounts; EDM-SA expected to repay this amount on favorable terms.
  - Negotiations continue with commercial banks on improved terms on their loans to EDM.
- Long-term measures:
  - World Bank supporting investment plan to lower production and procurement costs by favoring solar generation and electricity imports over expensive hydrocarbon fuels.
  - Restructuring and reorganization plan supported by the World Bank aimed at allowing EDM-SA to find financial balance by 2025.
  - Plan includes elimination of annual state subsidy except transfers necessary to maintain social tariff for most vulnerable.
- Key statistics (exact figures):
  - EDM-SA’s debt (including arrears) estimated at CFAF 319 billion (3.1 percent of GDP) at end-June 2019.
  - Short-term debt to commercial banks: CFAF 85 billion at end-October 2019.
  - Government financing to retire short-term debt: CFAF 50 billion from the Abu Dhabi loan; CFAF 35 billion budget allocation in 2020.

### Program modalities, financing, and monitoring
- Modified QPCs and indicative targets proposed for end-June 2020 and new targets for end-December 2020; structural benchmarks proposed for 2020.
- Prior action for completion of first review: clearance of domestic arrears incurred during Q3 2019 (CFAF 36.9 billion).
- Program reported fully financed with projected support from development partners and the Fund.
- Next program test dates: end-December 2019 and end-June 2020.
- Completion of review will release a disbursement of SDR 20 million (10.7 percent of quota).
- Mali’s capacity to repay the Fund projected to remain adequate; Fund obligations peak in 2027 at 1.6 percent of government revenue or 0.4 percent of GDP.
- Mali has unrestricted access to pooled reserves of the BCEAO.
- Reporting and TMU:
  - Performance criteria and indicative targets are defined in the Technical Memorandum of Understanding (TMU), which specifies the nature and frequency of information and data to be provided for program monitoring.

### Key program risks and capacity building
- Main risks:
  - Underperformance of domestic revenue collections.
  - Potential further deterioration in the security environment.
  - Adverse weather conditions.
  - Terms-of-trade shocks.
- Mitigants:
  - Authorities’ commitment to program engagement and program design.
  - Staff emphasis on grants and concessional financing; regional financing potentially manageable for WAEMU external sustainability.
- Capacity development focus:
  - Improving revenue administration and cash management.
  - Recent and ongoing TA: extensive TA for tax administration and customs following contraction of revenue collections in 2018; TA in public financial management to continue.

*Source: IMF staff report — First Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of a Performance Criterion and Modification of Performance Criteria (December 23, 2019).*

### 27.63 million), bringing total disbursements under the arrangement to SDR 40 million

### MALI — FIRST REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT

### Executive Board decision and disbursements
- The Executive Board completed the first review of Mali’s program under a three-year arrangement under the Extended Credit Facility (ECF).
- Completion of the review enables Mali to draw the equivalent of SDR 20 million (about US$27.63 million), bringing total disbursements under the arrangement to SDR 40 million (about US$55.26 million).
- The Board approved a waiver for the nonobservance of the quantitative performance criterion on the non-accumulation of domestic arrears.
- The three-year arrangement was approved on August 28, 2019 for SDR 140 million (about US$193.5 million), equivalent of 75 percent of Mali’s quota in the IMF.
- Date of staff statement: December 23, 2019.

### Executive Board Assessment — major messages
- Progress: “Mali has made important progress in implementing the Fund-supported program despite daunting security challenges.”
- Priorities emphasized:
  - Safeguard social and developmental spending amid pressures from security outlays.
  - Maintain commitment to sound policies and reforms to achieve program objectives.
  - Strengthen revenue mobilization while protecting priority spending.
  - Strengthen public financial management, including:
    - Put the state electricity company on a sound financial footing.
    - Improve cash management to prevent reoccurrence of arrears.
    - Strengthen debt management.
  - Governance: commendation of authorities’ commitment to improve governance and fight corruption; strong implementation needed across fiscal, anti-money laundering, and anti-corruption frameworks.
  - A governance assessment is welcomed to inform future reform priorities.

### Executive summary — context and program focus
- Context:
  - Security and social conditions have deteriorated, especially in central and northern regions; implementation of the 2015 peace agreement is challenging.
  - Rising security spending is crowding out priority social and development spending.
  - The economy is largely concentrated in the South and has performed fairly well.
- Program objectives:
  - Support the authorities’ medium-term development strategy (CREDD 2019–23).
  - Maintain macroeconomic stability and foster higher, more inclusive, and durable growth.
- Program focus for the short term:
  - Increase revenue mobilization.
  - Strengthen cash management.
  - Improve governance.
  - Pursue financial restructuring of the state electricity company (EDM).
  - Prepare a governance assessment mission in early 2020.
- Staff support:
  - Staff supports completion of the first review, the waiver on domestic arrears, modification of performance criteria, and the release of SDR 20 million (10.7 percent of quota).

### Recent economic developments, outlook, and risks
- 2019 performance and projections:
  - Real GDP is expected to grow by 5.1 percent in 2019.
  - Inflation (average) for 2019: 0.4 percent; end-of-period inflation for 2019: 1.8 percent.
  - Growth of private credit accelerated in 2019.
  - The current account deficit is expected to remain essentially flat at 4.8 percent of GDP in 2019.
  - The banking sector remains broadly stable; financial soundness indicators improved in the first half of 2019.
- Key projections and medium-term dynamics (Text Table 1):
  - Real GDP projections: 2020–2024: 5.0, 5.1, 5.0, 5.0, 5.0 (annual percentage change).
  - Consumer price inflation (average) projections: 2020–2024: -0.4, 0.6, 2.0, 2.3, 2.3 (annual percentage change).
  - Revenue (percent of GDP) projections: 2019–2024: 19.9, 19.5, 20.5, 20.7, 20.9, 21.3, 21.7.
  - Overall balance (commitment basis) projections: 2020–2024: -3.0, -2.9, -3.5, -3.3, -3.0, -3.0, -3.0 (percent of GDP).
  - Total public debt projections: 2019–2024: 37.4, 38.3, 39.0, 39.5, 39.7, 39.7, 39.7 (percent of GDP).
  - Current account balance (including official transfers) projections: 2019–2024: -5.6, -4.8, -4.4, -4.6, -5.2, -5.8, -6.5 (percent of GDP).
- Risks:
  - Downside risks dominate: further deterioration of security conditions is the most immediate and critical risk.
  - Agricultural output vulnerable to adverse weather.
  - High dependence on gold and cotton exports and fuel imports increases vulnerability to terms-of-trade shocks.
  - Possible future reductions in external support pose external financing risks.

### Performance under the program — implementation and shortfalls
- Program implementation through end-September 2019:
  - Broadly satisfactory: five of six quantitative performance criteria were met.
  - The continuous zero-ceiling on the accumulation of domestic arrears was breached; domestic arrears of CFAF 36.9 billion (0.4 percent of GDP) accrued in Q3 2019.
  - The indicative target on priority social spending for end-September 2019 was missed by a small margin but expected to be met by end-December 2019.
  - Four of seven structural benchmarks for 2019 have been met; the remaining SBs for end-December were well on track.
- Revenue performance and corrective actions:
  - At end-September 2019, authorities had collected 73 percent of the tax revenue target for 2019.
  - Tax administration (DGI) measures:
    - Strengthened collection of tax arrears.
    - Increased audit coverage and VAT and PIT taxpayers’ monitoring.
    - Launched project for implementation of online payment of taxes.
    - Result: stock of tax arrears decreased by 20 percent between November 2018 and July 2019; issue-oriented audits represent 25 percent of audit program.
  - Customs administration (DGD) achievements:
    - Reduced number of transit documents (T1) not validated or not registered in ASYCUDA (structural benchmark for end-September 2019).
    - Progress in modernizing organization and operating procedures, with room for more improvement.
  - A formal coordination framework for sharing information between tax and customs databases (end-December 2019 structural benchmark) was met at end-November 2019.
  - Non-tax revenue shortfall at end-September 2019 due to delays in the sale of the fourth telecommunications operating license.
- Liquidity and budget support issues:
  - Severe liquidity constraints through first three quarters of 2019 due to clearing a large float from 2018 (about 2 percent of GDP) and delays in disbursement of budget support.
  - The 2019 supplementary budget relied on exceptionally high external budget support (including a US$250 million World Bank allocation and a near-concessional loan from the Abu Dhabi Fund for Development for the same amount), but the bulk had not been disbursed by end-September 2019.
- Prior actions and benchmarks:
  - Clearance of the accrued domestic arrears is a prior action for completion of the first review.
  - Authorities are pursuing implementation of a single treasury account (TSA) and improved cash management (new structural benchmark for end-March 2020).
  - Structural benchmarks met: improving customs administration, finalizing specifications for online payment of taxes and levies, completing EDM’s performance contract, and operationalizing cooperation between tax and customs administrations (met ahead of schedule).

### Policy discussions and program priorities
- 2020 fiscal framework:
  - The overall fiscal deficit for 2020 was increased to 3.5 percent of GDP, from the previously agreed 3 percent of GDP, to prevent crowding out of social and development spending.
  - Fiscal space for priority spending is to be created through ambitious but realistic revenue targets.
- Revenue mobilization:
  - Near-term focus: reduce opportunities for tax fraud; strengthen capacity of tax and customs administration; improve compliance in medium and large taxpayer segments.
  - These reforms are integral to strengthening fiscal governance and supporting growth-enhancing spending.
- Public financial management and EDM:
  - Main near-term priorities:
    - Put state electricity company (EDM) on a sound financial footing to reduce fiscal pressures and secure adequate supply of electricity.
    - Improve cash management to prevent reoccurrence of arrears.
    - Strengthen debt management.
  - A World Bank review to secure transparent and efficient security spending is considered critical.
- Governance and anticorruption:
  - Authorities’ commitment to improve governance and fight corruption is commended.
  - Strong implementation required across fiscal governance, anti-money laundering, and overall anti-corruption framework areas.
  - Forthcoming governance assessment to inform reform priorities.

*Source: IMF staff report — First Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of a Performance Criterion and Modification of Performance Criteria (December 23, 2019).*

### 9.      The program is expected to be on

### 1mliea2020001 - 9.      The program is expected to be on

### Program status and 2019 fiscal outturn
- Program expected to be on track for end-December 2019.
- Tax revenue collections are on target to reach 14.6 percent of GDP for 2019, 0.1 percentage point higher than the program target.
- Sale of the fourth telecommunications license delayed to 2020; shortfall to be offset by small tax overperformance and somewhat lower current spending than budgeted.
- 2019 overall fiscal deficit on an accrual basis is projected to comply with the WAEMU ceiling of 3 percent of GDP.
- Authorities anticipate full disbursement by year-end of both the World Bank’s budget support and the Abu Dhabi loan.

### 2020 fiscal framework
- Objective: balance spending needs and available resources while increasing domestic revenue mobilization and seeking external support.
- Authorities requested WAEMU Council of Ministers to relax the convergence criterion for the fiscal deficit; requested 2020 program ceiling on the overall fiscal deficit of 3.5 percent of GDP.
- Staff emphasized importance of grants and concessional financing and noted regional financing could be manageable for WAEMU external sustainability.

Key figures from Text Table 3 (Percent of GDP):
- Revenue and grants: Proj. 18.0; Proposed Budget 18.7; Prog. 18.7; Rev. Prog. 19.3
- Tax revenue: 14.6; 15.7; 15.8; 15.5
- Direct tax: 4.4; 4.8; 4.8; 4.8
- Indirect tax: 10.2; 10.9; 11.0; 10.7
- Non-tax revenue: 1.0; 0.9; 0.9; 1.3
- Grants: 2.4; 2.1; 2.0; 2.4
- Total Expenditure and net lending (commitment basis): 20.9; 21.7; 21.7; 22.8
- Current expenditure: 12.9; 13.1; 13.1; 13.5
- Capital expenditure: 8.1; 8.7; 8.7; 9.3
- Net lending: -0.1; -0.1; -0.1; -0.1
- Overall fiscal balance (commitment basis, incl. grants): -2.9; -3.0; -3.0; -3.5
- Adjustment to cash basis: -0.7; -0.2; -0.2; -0.1
- Overall fiscal balance (cash basis, incl. grants): -3.6; -3.1; -3.2; -3.6
- Financing: 3.6; 3.1; 3.2; 3.6
- External financing (net): 2.8; 1.0; 1.0; 1.2
- Domestic financing (net): 0.8; 2.1; 2.2; 2.4
- Memorandum item: Public debt: 38.3; 39.0; 38.0; 39.0

Policy and safeguards:
- If revenue underperforms, government may cancel or freeze approved spending under Article 29 of the 2020 budget law; priority social and capital spending to be protected if recourse necessary.
- Fiscal space from proposed higher deficit to be allocated to social and development spending (food security, health and education in conflict areas, road maintenance and connectivity to underserved areas).
- Authorities will provide quarterly data (in CFAF terms) on priority social and development spending.

Priority social and development spending (Percent of GDP):
- Priority social and development spending (2019 est.): 5.6; 2020 proj.: 0.9; 1.7; 3.4; 6.0
- Education: 3.4; 0.5; 1.0; 2.1; 3.5
- Health: 1.1; 0.2; 0.4; 0.7; 1.2
- Roads: 0.5; 0.1; 0.1; 0.3; 0.6
- Other: 0.6; 0.1; 0.2; 0.4; 0.7

### Revenue mobilization measures
- 2020 revenue target: increase tax revenue-to-GDP ratio from 14.6 percent in 2019 to 15.5 percent in 2020.
- Measures to strengthen revenue administration: structural benchmarks focusing on customs administration performance; tax policy measures including limitation of tax exemptions and taxation of non-profit entities engaging in normal business activities.
- Authorities to pass a supplementary budget in Q1 2020 to reflect fiscal framework.
- Close monitoring of pre-program agreement with private sector to reduce VAT rate on selected products and firms (came into effect in 2019).

Expected yields from revenue measures (Percent of GDP, 2020–23 excerpt):
- Tax revenue: 1.1 (2020 Proposed Budget); 1.2 (2021 Prog.); 0.9 (2022 Rev. Prog.); 0.2 (2023)
- Direct taxes: 0.4; 0.4; 0.4; 0.1
- Indirect taxes: 0.7; 0.8; 0.6; 0.0
- VAT and other indirect taxes detailed in Text Table 4.

Customs and petroleum issues:
- New structural benchmarks to improve customs: strictly limit application of special regimes to urgent and perishable goods and only those coming through the airport (automatically excludes petroleum products) — new structural benchmark for April 2020 (D24); apply transaction value throughout national territory — new structural benchmark for end-March 2020.
- Deployment of e-filing and online/mobile tax payment — new structural benchmark for end-June 2020.
- Authorities committed to improve cargo traceability and systematic follow-up of companies receiving tax exemptions.
- Petroleum sector: Fund TA found absence of physical and accounting controls in petroleum warehouses; two-thirds of fuel products granted clearance with no follow-up, generating underestimated and often uncollected tax arrears. Petroleum tax structure poorly implemented and not in compliance with WAEMU Directive 06/2011CM/UEMOA.
- Staff to closely monitor petroleum tax performance and consider structural measures if underperformance persists.

Capacity development and diagnostics:
- TADAT mission in November 2019 to assess tax administration; authorities intend to develop a Medium-Term Revenue Strategy (MTRS) as successor to Revenue Mobilization Thematic Fund (RMTF) program expiring April 2020.
- Formal coordination framework between tax (DGI) and customs (DGD) administrations in place (end-December 2019 structural benchmark); focus on effective information sharing.

### Governance, inclusiveness, and business environment
- Key challenges: governance problems and corruption, poor contract enforcement, tax disputes, lack of infrastructure, poor access to banking services, competition from informal economy.
- Authorities working to implement 2017 Public Investment Management Assessment recommendations and strengthen PPP framework following WAEMU adoption.
- New legal framework for tax disputes and acceleration of mobile banking for public services (MEFP ¶28-32).

Anti-corruption and AML/CFT:
- Law against illicit enrichment enacted in 2014; authorities plan to expand civil servants subject to asset declarations (new structural benchmark for end-March 2020).
- Need to strengthen Law’s implementation, verification, and sanctions for false or missing disclosures.
- GIABA evaluation (November 2019) indicated low effectiveness of Mali’s AML/CFT regime; authorities intend to prepare an action plan to address weaknesses.

Electricity and EDM-SA:
- Measures to improve EDM-SA: management replacement, increased supervision, higher industrial tariffs, performance contract between government and EDM-SA (structural benchmark end-November 2019).
- Progress securing lower-cost regional electricity imports.
- Authorities plan to use part of Abu Dhabi Fund for Development loan proceeds to restructure EDM-SA short-term financial debt and seek haircut from commercial banks (0.9 percent of GDP).
- Staff encouraged expedited implementation of reforms agreed with World Bank.

Rural poverty and agriculture:
- Agriculture accounts for about one-third of GDP and four-fifths of employment.
- Challenges: climate change, rapid population growth, declining soil fertility, need for diversification and off-farm food economy development (especially to benefit women).
- Authorities promoting agricultural reforms and rationalizing subsidies for inputs; targeted government support for farmers, including female shea butter farmers, recommended (MEFP ¶33).

### Program modalities and financing
- Modified quantitative performance criteria (QPCs) and indicative targets (IT) proposed for end-June 2020 and new targets for end-December 2020; structural benchmarks proposed for 2020.
- Prior action for completion of first review: clearance of domestic arrears incurred during Q3 2019 (CFAF 36.9 billion).
- Program reported fully financed with projected support from development partners and the Fund.
- Next program test dates: end-December 2019 and end-June 2020.
- Completion of review will release a disbursement of SDR 20 million (10.7 percent of quota).
- Mali’s capacity to repay the Fund projected to remain adequate; Fund obligations peak in 2027 at 1.6 percent of government revenue or 0.4 percent of GDP.
- Mali has unrestricted access to pooled reserves of the BCEAO.

*Source: Malian authorities; IMF staff calculations.*

### 24.      The authorities’ commitment to program engagement with the Fund along with its

### 1mliea2020001 - 24.      The authorities’ commitment to program engagement with the Fund along with its

### Program risks and mitigation
- Authorities’ commitment to program engagement with the Fund and program design mitigate risks to the program.
- Main fiscal risks:
  - Possibility of underperformance of domestic revenue collections.
- Other risks:
  - Potential further deterioration in the security environment.
  - Adverse weather conditions.
  - Terms of trade shocks.

### Capacity building and technical assistance
- Focus areas:
  - Improving revenue administration.
  - Cash management.
- Recent and ongoing support:
  - Mali has received extensive TA for tax administration and customs following the contraction of revenue collections in 2018.
  - TA has also been provided in public financial management.
  - TA efforts will continue in these areas in the coming period.

### Safeguards assessment of the BCEAO
- Last safeguards assessment completed in 2018 found:
  - The central bank had maintained a strong control environment.
  - Audit arrangements were in broad conformity with international standards.
  - The financial statements were prepared in accordance with International Financial Reporting Standards (IFRS).
- Follow-up actions:
  - BCEAO enhanced the oversight role of its audit committee.
  - Progress is being made to strengthen its risk management function in line with the recommendations of the assessment.
  - The central bank’s financial statements continue to be published on a timely basis.

### Staff appraisal — program performance and macroeconomic outlook
- Security and stability:
  - The security situation in Mali remains highly challenging.
  - Continuous attacks by rebel groups in the North and Center regions have compounded fragile conditions.
- Program performance:
  - Five of six QPCs for end-September 2019 were met.
  - Breach of the zero-ceiling on the accumulation of domestic arrears at end-September 2019 is expected to be temporary; these arrears should be cleared prior to the Board meeting, with corrective steps taken to ensure that domestic arrears do not recur.
  - The IT on priority social spending was temporarily missed by a small margin but is expected to be met for the full year.
  - Four of seven SBs for 2019 have been met; good progress has already been made on the remaining three end-December 2019 SBs.
- Economic outlook and risks:
  - Growth rate is estimated at about 5 percent per year.
  - Inflation is expected to continue to remain below the WAEMU ceiling.
  - The stable current account deficit is expected to be fully financed by official and private inflows.
  - Downside risks: possible further deterioration of the security situation; potential shocks to the terms of trade (the price of gold, cotton, and fuels); adverse weather conditions.

### Fiscal policy, revenue, and spending
- Fiscal framework:
  - Staff view: proposed fiscal framework strikes an appropriate balance between spending needs and available resources.
  - Small relaxation of the overall deficit target for 2020 from 3 to 3.5 percent of GDP is justified by the need to increase priority social and development spending given the precarious security situation and its increasing costs.
  - The wider deficit can be financed without adverse repercussions for regional financial stability, but authorities need to be mindful of addressing short-term rollover risks and lengthening the maturity of the debt.
- Revenue mobilization:
  - The 2020 budget is based on an ambitious but realistic revenue target.
  - Significant progress has been made in restoring revenue collections in 2019 and further progress is expected in 2020.
  - Staff urges authorities to continue to pursue revenue administration reform in line with TA recommendations and the outcome of the TADAT review.
  - Staff encourages the authorities to adopt a medium-term revenue strategy.
- Spending efficiency:
  - Staff concurs that greater spending efficiency is needed given limited domestic and external resources.
  - Authorities’ intentions welcomed: rationalize subsidies, strengthen project selection and execution, and improve overall cash management to avoid recurrence of domestic arrears.
  - Cooperation with the World Bank on securing transparent and efficient security spending is critical.

### State-owned enterprises, private sector, and agriculture
- Electricity sector (EDM-SA):
  - Staff supports the authorities’ reform strategy for the state-owned electricity company.
  - Putting EDM-SA on a sound financial footing is instrumental to reducing fiscal pressures and securing an adequate supply of electricity.
  - Welcomed measures: increase in tariffs to industrial customers and finalization of the performance contract between the government and EDM-SA.
  - Continued efforts needed to lower costs through changes to the energy mix and financial restructuring.
- Private sector development:
  - Staff welcomes efforts to create conditions for a stronger private sector.
  - Well-designed and implemented PPPs can help close infrastructure gaps.
  - Mobile banking has potential to foster inclusive economic growth and expand the formal economy.
- Agriculture and climate:
  - Agriculture is a mainstay of the Malian economy but faces the potentially adverse impact of climate change.
  - Targeted and timely government support for farmers to increase agricultural yields is critical for raising output and reducing the gender gap.

### Governance, AML/CFT, and anti-corruption
- Authorities’ commitment to improving governance and fighting corruption is commendable.
- Planned governance assessment will inform future reform plans.
- In the interim:
  - Authorities have agreed to upgrade the law against illicit enrichment.
  - Staff urges expeditious implementation of the forthcoming action plan to address AML/CFT deficiencies identified by the recent GIABA assessment.
  - Reforms to improve fiscal governance in revenue administration, tax policy, and cash management will be critical for transparency and reducing vulnerabilities to corruption.

### Financing and program review
- Staff supports the Malian authorities’ request for:
  - Completion of the first review under the ECF arrangement, including a waiver for the non-observance of the performance criterion on non-accumulation of domestic arrears.
  - Release of the second disbursement under the arrangement in the amount of SDR 20 million (10.7 percent of quota).

### Box 1 — Implementation of the 2015 Peace Agreement (APRM)
- Overview:
  - APRM signed in May 2015 between the government and some rebel groups from the North to restore peace, social cohesion and stability.
  - Progress in implementing the APRM has been uneven.
- Political and administrative reforms:
  - New electoral code adopted in 2016; revised Local Authorities Act (LAA) in 2017 to pave the way to regional assemblies’ elections by direct universal suffrage; insecurity and legal divergences have prevented these elections.
  - Installation of interim authorities in regions faces significant delays.
  - General amnesty law enacted in July 2019.
  - Creation of a second chamber in Parliament and a Court of Accounts (in line with WAEMU’s directives) are pending a Constitutional review.
- Defense and security:
  - A decree clarifying the modalities for setting former rebels’ grades was recently adopted, which should help accelerate integration of about 1,840 former rebels into a unified and inclusive army through the ongoing DDR process.
  - Formation of mixed patrol units in some regions (Timbuktu and Gao); such mixed patrol units are not present in Kidal yet.
  - The law creating the territorial police has not yet been adopted.
- Socio-economic development and decentralization:
  - The 2018-008 Act creating the sustainable development fund (FDD) for financing development projects and programs in the Northern regions was adopted in February 2018.
  - Implementation texts adopted in June 2018; manual of administrative, financial and accounting procedures is under preparation.
  - Resources should accrue to the FDD through various taxes (on tobacco, airline tickets, tourism vehicles, and exit duties on cotton).
  - Pending operationalization of the FDD, emergency projects were executed in 2017 and 2018 in the North with advance payments from the budget (0.1 percent of GDP).
  - Fiscal decentralization is proceeding with IMF and World Bank technical assistance, including strengthening budget execution capacities and audit and control mechanisms in the regions.
  - Principle of local authorities’ ability to set rates of some taxes, fees, and levies and introduce new taxes was enacted in the revised LAA but may need assertion in the Constitution for consistency.
  - Provision requesting allocation of a share of natural resources revenue to regions may also need constitutional assertion.
  - Government started transferring resources to regions, though not yet up to the 30 percent set in the APRM (19.7 percent in 2018 and 21.7 percent in 2019).
  - A decree clarifying responsibilities to be transferred to the regions, including education and health services, was enacted in March 2018.

*IMF staff report excerpt.*

### Box 2. The Financial Situation of EDM-SA

### Box 2. The Financial Situation of EDM-SA

### Overview
- The Malian electricity company (EDM-SA) is facing insolvency.
- EDM-SA’s revenues are insufficient to cover its operating expenses, financing costs, and investment needs.

### Causes of the financial situation
- Insufficient investment.
- Poor management.
- Long-standing practice of charging electricity prices well below the cost of generation.
- Inadequate revenue and subsidies have forced the company to borrow from suppliers and banks.

### Short-term measures and urgent actions
- The government is implementing a two-pronged strategy to strengthen EDM-SA’s financial position, efficiency, and investment, with technical and financial support of the World Bank.
- Short-run components:
  - Streamlining tariffs.
  - Reducing operational costs.
  - Addressing EDM-SA’s short-term debt and arrears.
- EDM-SA’s short-term debt to commercial banks urgently needs to be restructured to prevent default.
  - This short-term debt amounted to an estimated CFAF 85 billion at end-October 2019.
- The government has decided to use CFAF 50 billion from the Abu Dhabi loan and a further CFAF 35 billion budget allocation in 2020 to retire this debt.
  - The part financed from the Abu Dhabi loan is an on-lending operation recorded below the line in the fiscal accounts as EDM-SA will be expected to repay this amount, albeit on favorable terms.
- Negotiations continue with the commercial banks on improved terms on their loans to EDM.

### Long-term measures and investment strategy
- The World Bank is supporting the investment plan for the electricity sector with a view to lowering EDM-SA production and procurement costs by favoring solar generation and electricity imports over the use of expensive hydrocarbon fuels in electricity generation.

### Key statistics
- EDM-SA’s debt (including arrears) was estimated at CFAF 319 billion (3.1 percent of GDP) at end-June 2019.
- Short-term debt to commercial banks: CFAF 85 billion at end-October 2019.
- Government financing to retire short-term debt:
  - CFAF 50 billion from the Abu Dhabi loan.
  - CFAF 35 billion budget allocation in 2020.

*Source: Box 2. The Financial Situation of EDM-SA (extracted from the provided IMF content).*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Context and principal requests
- Letter dated Bamako, December 20, 2019, from the Government of Mali to the IMF Managing Director.
- Government requests:
  - A relaxation of the ceiling on the overall fiscal deficit in the program for 2020 from 3 percent of GDP to 3.5 percent of GDP to accommodate higher security and development spending.
  - A waiver for the non-observance of the QPC for domestic arrears.
  - Modification of QPCs for end-June 2020.
  - Completion of the first review under the ECF arrangement and the second disbursement of SDR 20 million (10.7 percent of quota).
- Rationale: unprecedented security deterioration with weekly terrorist attacks, requiring increased military and security spending and reinforced State presence in the Center and North of the country.

### Economic outlook and budget projections (2019–2020)
- 2019 projections:
  - Real GDP growth: 5.1 percent.
  - Tertiary sector projected at 5.3 percent in 2019 (compared to 4.8 percent in 2018).
  - Construction sector projected at 5.5 percent in 2019 (compared to 0.2 percent in 2018).
  - Inflation expected to "turn slightly negative" due to food price deflation.
  - Tax revenue expected: 14.6 percent of GDP in 2019 (compared to 11.9 percent in 2018).
  - Overall fiscal balance (commitment basis): 2.9 percent of GDP in 2019.
  - Budget support increases in 2019: World Bank ($250 million) and Abu Dhabi Fund for Development ($250 million).
- 2020 projections:
  - Real GDP growth: 5 percent.
  - Inflation: expected to remain very low.
  - Tax revenue expected: 15.5 percent of GDP in 2020 through reforms in DGI and DGD.
  - Overall budget balance (commitment basis): 3.5% of GDP in 2020.
  - Balance of payments: expected to remain slightly positive driven by a strong increase in gold exports.
- Revenue technical note:
  - Latest tax revenue projections for 2020 agreed with IMF staff suggest collections will be about 0.3 percent of GDP lower than in the proposed 2020 budget.
  - Revenue from issuance of the fourth telecommunications license expected to yield 0.5 percent of GDP, more than offsetting the shortfall.

### Program performance to date (end-September 2019 / 2019)
- Quantitative performance criteria (QPC):
  - All but one QPC for end-September 2019 were met.
  - Zero-ceiling on non-accumulation of domestic arrears was breached by CFAF 36.9 billion (0.4 percent of GDP) in Q3 2019.
  - The arrears breach attributed to a very tight liquidity situation from a high float carried over from 2018 and delayed release of external budget support loans.
- Indicative target (IT):
  - Priority social spending target missed by CFAF 14 billion.
- Structural benchmarks (SB):
  - Four of seven SBs for 2019 met in a timely fashion; three others expected to be met within the initial timeframe.

### Governance, debt, and sectoral priorities
- Program aims:
  - Preserve macroeconomic stability and debt sustainability.
  - Consolidate foundations for accelerated, sustainable, and inclusive growth and job creation consistent with CREDD 2019–23.
- Key policy priorities:
  - Improve effectiveness of tax and customs administration.
  - Contain overall budget deficit while protecting priority expenditures and improving efficiency and execution of public spending.
  - Pursue sustainable debt policy.
  - Strengthen financial position of EDM-SA (Energie du Mali).
  - Improve business climate and economic diversification.
  - Promote good governance and anti-corruption efforts, including implementation of the United Nations Convention Against Corruption and strengthening the law on prevention of illicit enrichment.
- Government engagement:
  - Working closely with World Bank and IMF on EDM reforms.
  - Awaiting IMF governance assessment scheduled for early 2020.

### Tax administration and customs — main measures and commitments
- Overall objective: address underperformance of tax and customs administrations following the 2018 revenue shortfall; implement IMF technical assistance recommendations and internal audit findings.
- Immediate and ongoing administrative measures (DGI and DGD cooperation emphasized):
  - Extended audits in response to the 2018 revenue shortfall; targeted inspections identified 574 taxpayers as of November 23, 2019:
    - 316 of these taxpayers received notifications totaling CFAF 1.8 billion.
    - CFAF 586 million confirmed following responses processed.
  - Strengthen monitoring of tax declarations with attention to wages (ITS) and VAT; cross-checking with INPS and other agencies.
  - Improve audits:
    - Increase proportion of spot audits for VAT and ITS.
    - Ratio of spot audits in tax audit program is 53 percent.
    - Number of taxpayers scheduled for tax audits: 1,814 (574 subject to spot audits; 1,241 to document-based audits (CSP) and general audits of accounting (VGC)).
    - Tax audit performance target: 598 taxpayers (316 spot audits; 282 CSP and VGC).
    - For 2020, ratio of spot audits expected to be at least 50 percent of the tax audit program.
  - Collection and settlement of tax arrears:
    - Establish a central structure for collection actions, including a special unit for distressed taxpayers, enforcement support (seizure sale, seizure of property by customs), payment timetables, and tracking units in all revenue structures; establishment expected by December 31, 2019.
    - Widespread use of the SIGTAS collection module by end-2019.
    - Establish and operationalize a commission for writing off irrecoverable claims by end-December 2020.
  - Information systems and data quality:
    - Streamline and upgrade taxpayer database, deactivate inactive/dormant TINs, make SIGTAS the only reference source accessible across Ministry departments.
    - Promote use of verification, in dispute, and tracking of exemptions modules in SIGTAS.
    - Acquisition of software for production of performance indicators expected by end-June 2020.
  - Remote electronic procedures:
    - Widespread use of electronic procedures (online filing and online payments) for all businesses subject to VAT.
    - Specifications for operational implementation of online payments approved in October 2019.
    - Modify Tax Procedure Handbook to make online services mandatory for companies subject to VAT (April 2020 session of the National Assembly).
    - Implementation schedule: Directorate for Large Businesses (DGE) in 2020; tax centers for medium-sized businesses (CIME) from January 2021.
  - Strengthening tax discipline:
    - Finalize new plan to strengthen tax discipline with implementation scheduled by end-2019; supported by indicators automatically drawn from SIGTAS (indicator tables produced for June–September 2019).
  - Tax administration–customs cooperation:
    - Formal and expanded collaboration framework among DGI, DGD, Treasury, DGMP-DSP, DGCCC, DGB, INPS, and CAISFF finalized and operationalized in July 2019; detailed report on data use due by November 30, 2019.

### Specific reforms to modernize the General Directorate of Taxation (DGI)
- Human resources management:
  - Adapt staff to new DGI organization, clarify personnel objectives, recruit and redeploy administrative staff.
  - Assignments to the DGE (15) and Directorate for Medium-Sized Businesses DME (12) already took place in 2019.
  - 2019 training plan implemented: 602 agents trained to date; 2020 training plan being prepared.
- Incentive system:
  - Develop incentive system based on performance evaluations; study initiated with conclusions expected by December 31, 2019.
- Results-based management:
  - Promote results-based and participatory management, strengthen internal control; strategic and work plans developed; internal control reports for Q1 and Q2 2019 approved.
- Research and automation:
  - Restructure research unit; replace manual invoice cross-checking with automated use of supplier and customer electronic records; amend Tax Procedure Handbook (April 2020 National Assembly session).
- Operationalization of new structures:
  - Establish tax centers for medium-sized businesses in Bamako (two centers) by June 2020 and in Kati (one center) by 2021.
  - Revision of texts on DGI organization and operationalization of Joint Pre-Litigation Commission for Tax Conciliation by end-2019 (inter-ministerial meeting held June 14, 2019).

*Source: Appendix I. Letter of Intent (Mali), Memorandum of Economic and Financial Policies and attachments, as presented to the IMF.*

### 9.      The government is planning to strengthen the organizational and functional

### 9.      The government is planning to strengthen the organizational and functional structure of customs, and also to rectify deficient procedures.

### Customs reform and modernization
- New Customs Code
  - Draft Customs Code Act submitted to the National Assembly; expected adoption by June 30, 2020.
  - All regulations (decrees, orders, instructions) resulting from the new Customs Code to be implemented by end-September 2020.
- Organizational and functional structure of the DGD
  - Review of decrees 2012-146/P-RM and 2012-148/P-RM to reduce fragmentation and duplication and recruit personnel specialized in planning, information technology, and auditing.
  - Adoption of new decrees planned for end-2019 with operationalization expected in the first quarter of 2020.
- SIGMAT interconnection and ASYCUDA WORLD
  - Installation work started in September 2019 per ECOWAS timetable.
  - Integration of the SIGMAT transit module into ASYCUDA WORLD.
  - Interconnection with Senegal effective at end-March 2020, followed by Côte d'Ivoire and other countries (Benin, Burkina Faso, Guinea, Niger, and Togo).
- Transaction value and ASYCUDA WORLD Value module
  - Deploy actions for strictly rule-based application of transaction value nationwide as of March 31, 2020.
  - Operationalization of the Value module of ASYCUDA WORLD scheduled for March 31, 2020.
- Monitoring commitments and direct collections
  - Systematic cessation of issuing duties and fees at the end of the calendar month and cessation of collections after five (5) business days from the cessation of issues.
  - Consolidate processing of direct collections by restricting procedure to goods exclusively listed in the regulation.
  - Direct collections authorized only at the Airport Office from April 1, 2020; new order to operationalize.
  - Blocking of operations for operators who have not cleared their D24 effective since November 11, 2019.
  - Quarterly report on monitoring of direct collections by product compiled.
- Automation and electronic procedures
  - Automation of procedures for control of suspensive regimes scheduled for December 31, 2019.
  - Electronic acceptance of air waybills (AWB) in ASYCUDA WORLD scheduled for December 31, 2019.
- Risk-based and physical controls
  - Risk-based approach implemented for customs control of cargo and exemption requests.
  - Automated risk management for all operational departments; work underway to improve reliability and computerize litigation.
  - DRAR staff strengthened in second half of 2019 (five IT staff).
  - Use of scanners at strategic locations to allow agents to scan goods; suspect goods subject to escort and mandatory physical checks.
- Import Inspection Program (PVI) and CET
  - Make Technical Assessment Center (CET) operational before December 31, 2019.
  - Expand training for all DGD personnel with emphasis on a critical mass of inspectors; assignment of officers to CET expected by December 31.
- Petroleum products measures
  - Introduce marking of exempt petroleum products; detailed action plan planned for the second half of 2020.
  - Conduct simulation of changeover of valuation from weight to volume of petroleum products by December 31, 2019.
- Anti-smuggling and base camps
  - Continued deployment of base camps to combat fraud, in particular smuggling.
  - Four base camps operational since November 2019 for four months in Sienso, Diema, Bancoumana, and Kadiolo.
- Common External Tariff (CET)
  - Commit to justifying or remedying discrepancies from analysis of goods whose tariffs do not correspond to WAEMU CET by December 31, 2019.

### Fiscal policy measures and tax administration
- VAT withholding
  - Government intends to abolish the VAT withholding practice as soon as possible.
  - Transitional measures include a public information campaign and mandatory use of remote electronic services by all taxpayers subject to the VAT to enable automatic use of the VAT Annex 1.1.
- Fuel taxation and pricing
  - Improve fuel tax revenues by more systematic application of automatic mechanism for setting fuel prices at the pump within the margin of 3 percent.
  - In case of steep international fuel price increases, compensatory measures (including spending cuts, except priority spending in education and health) will be used to reduce impact on total revenues.
  - Re-examine fuel margins and streamline tax exemptions, including those granted to mining companies.
- New Mining Code
  - New Code under discussion in the National Assembly will rationalize exemptions and limit tax benefits to suppliers directly related to mining activities.
  - Government committed to adopting implementing texts as soon as the new Code is passed.
- Expanding the tax base
  - Property taxation: introduce new tax on developed and undeveloped land to replace current property tax by 2021; improve recording of property and real estate titles in SITFI database accessible by DGI staff.
  - Mobile banking services: enable payment of certain taxes through mobile banking by end-2020; action plan expected by end-June 2020.
  - Nongovernmental associations and organizations: revise provisions of the General Tax Code to tax income of “non-profit” associations and NGOs providing services or work under same conditions as for-profit businesses; some provisions in fiscal annex of 2020 Budget Law.
- Selected VAT measures
  - Pre-program agreement with private sector effective October 1, 2019 to reduce VAT rate on selected products and enterprises from 18 percent to 9 percent.
  - Authorities’ initial estimates suggest negligible revenue impact; government to provide data on sales and VAT of targeted products by mid-January 2020.
  - Government commits to identifying needed offsetting measures based on final loss estimates agreed with staff.
  - Commitment to refrain from discriminatory practices in tax policy and administration.

### Controlling overall budget balance and expenditure management
- 2019 and 2020 budgets
  - Supplementary 2019 budget law submitted and adopted by Parliament on October 5, 2019; meets performance criteria and spending level under ECF macro framework.
  - 2020 budget law submitted on September 26, 2019; to be adopted no later than December 31, 2019 or in accordance with Article 57 of Law No. 2013–28.
- Priority spending and social expenditures
  - Commit to maintain original targets for investment and priority expenditures, notably education and health.
  - Emergency budget plan and expenditure prioritization to accompany 2020 budget law to guarantee compliance with WAEMU convergence criteria.
  - Level of social spending and priority development for 2020 set at about CFAF 651 billion (6 percent of GDP).
- Regulatory and transparency measures
  - If revenue underperforms, freeze and/or cancel budget appropriations per Article 29 of 2020 budget law while preserving social and priority expenditures, especially investments.
  - If revenue overperforms, government to consult with the IMF on use of available resources.
  - Streamline budget transfers and grants to improve transparency and predictability, notably for recipients in the agricultural sector.
- Investment selection and PIMA recommendations
  - Follow recommendations of 2017 PIMA to maximize fiscal efficiency and impact on real economy and potential output growth.
  - Improve ex ante project assessment, regular technical review, and legal framework for PPPs to mitigate contingent liability risks.
  - Prepare market price list of standard costs for transportation infrastructure, public works, and agricultural irrigation facilities for implementation by end-September 2020.
- Arrears and cash management
  - Government has cleared all payment arrears accrued in 2018.
  - Commitment not to accumulate domestic payment arrears and not to exceed the mechanical ceiling on the float.
  - Continue consolidation of the Treasury Single Account (TSA).
  - Develop AICE2 computer accounting system module interconnected with WAEMU banking system to automate transactions; implementation planned for end-March 2020.
  - Expand TSA coverage to include deposits of 50 national public institutions by end-2020; remaining institutions integrated subsequently.
  - Introduce commitment plans aligned with cash flow forecasts in 10 largest ministries during 2021 budget implementation, with IMF technical assistance, and extend to rest of government the following year.

### Conducting a sustainable debt policy
- Debt sustainability commitment
  - Continue to conduct debt policy consistent with maintaining debt sustainability.
- External borrowing ceilings
  - For 2019, ceiling for external borrowing contracted or guaranteed by the government equal to CFAF 329 billion in present value terms.
  - For 2020, ceiling set at CFAF 526 billion in present value terms.
- Reducing domestic refinancing risk
  - Favor long-term concessional external loans and accelerate implementation of short- and medium-term debt management strategy.

### Strengthening the financial position of EDM-SA
- Financial viability and restructuring
  - Implement restructuring and reorganization plan supported by the World Bank aimed at allowing EDM-SA to find financial balance by 2025.
  - Plan includes elimination of annual state subsidy except transfers necessary to maintain social tariff for the most vulnerable.
- Debt portfolio and short-term bank debt
  - Short-term debt vis-à-vis local commercial banks estimated at around CFAF 85 billion as of October 31, 2019.
  - Government plans assistance for restructuring short-term debt vis-à-vis Malian commercial banks; financial operation expected by end-December 2019.
  - Renegotiation of terms with commercial banks and refinancing to access loans on more advantageous terms.
  - Assistance backed by performance contract signed on November 18, 2019; contract to specify terms for takeover/renegotiation of bank debt, gradual reduction in implicit subsidy for petroleum products, EDM-SA cash plan, and priority investments.

### Strengthening the business environment and investment framework
- Investment Code and SEZs
  - New Investment Code draft submitted; consultations underway for adoption by June 2020 to promote private sector development and streamline tax/customs exemptions.
  - Consultations on draft law on Special Economic Zones (SEZ) ongoing; adoption by Council of Ministers planned in first quarter of 2020.
- Public-private partnerships (PPPs)
  - Commit to revise current PPP law in consultation with IMF staff after WAEMU Council of Ministers adopts PPP management strategy and implementation methods in 2020; revised PPP law expected to be adopted in 2021.
  - PACEM project to assist operationalization of PPP Unit and support PPP activities.
- Non-operating fixed assets and bank balance sheets
  - Plan to assist financial system in removing non-operating assets from banks’ balance sheets to ensure compliance with Union prudential policy.
  - Study launched on October 21, 2019 with final report expected by end-December 2019; consideration of transferable securities without voting rights for property company shares.
- Mobile banking sector development
  - Leverage mobile banking to offer administrative services (e.g., payment of certain taxes), enhance access to basic banking services, reduce fraud risk, shrink informal sector, and promote payment systems for SMEs.
  - Consultations with stakeholders currently ongoing.

*IMF staff summary of government commitments and timelines contained in the referenced chapter.*

### 33.      Reducing gender inequality. The government plans to boost its efforts aimed at

### 33. Reducing gender inequality

### Gender measures
- Create and formally organize 400 women’s cooperatives in the shea butter sector.
- Capacity building in cooperative and financial management for 50,000 beneficiaries.
- Launch a large-scale project with the support of the World Bank to improve women's access to the labor market.

### Public financial management and governance reforms
- Self-assessments based on the 2016 Public Expenditure and Financial Accountability (PEFA) framework will be performed every two years by the Public Financial Management Self-Assessment team established pursuant to Decision No. 2018-0065/MEF-SG.
  - The first self-assessment began in July 2019 for finalization by end-December 2019.
- Program Budget: All tools required for budget-program management are operational, including monitoring and evaluation tools.
- Risk mapping: will cover 31 departments, with 4 planned by end-2019.
- Accrual-based accounting: steering committee set up; since 2018, accounting units (Kayes, Sikasso, Mopti) have produced financial statements; preparation of the opening balance sheet is ongoing through commissions (inventory, valuation, and valuation of state property).
- Procurement system evaluation (MAPS): terms of reference shared with technical and financial partners; start of evaluation planned for the first quarter of 2020, with finalization expected by June 30, 2020.
- Reform of the Finance Inspectorate: draft texts transmitted to the General Secretariat of the government in November 2019.

### Judicial and oversight reforms
- Revision of the Procedural Manuals of the Accounts Section of the Supreme Court: four volumes validated by the Steering Committee set up by the WAEMU Court of Accounts; final validation by the conference of Heads of State and Government of WAEMU member countries expected by end-December 2019.
- Public-private partnerships (PPP): revision of PPP law to establish an incentive system for project performance and strengthen the institutional framework to assess and manage fiscal risks associated with PPPs.
- Coordination among auditing, inspection, and control bodies:
  - Two consultation frameworks set up between the Ministry of Justice and control/auditing/inspection bodies; and between the Ministry of Justice and OCLEI, the Office of the Auditor General (BVG), and the Economic Center.

### Anti-corruption measures
- Criminal Code review: accelerate legal work to criminalize corruption offences in line with the United Nations Convention against Corruption (UNCAC).
- Commission for the Identification and Correction of Difficulties and Deficiencies of Law No. 2014-015 to submit its final report no later than December 31, 2019; government approval of the Law by March 2020.
- Asset declaration system:
  - Ensure compliance of public officials to declare and update asset declarations within the deadline.
  - Ministers to ensure persons under their purview file or update declarations; failures to declare will be reported to the Prime Minister (subject to confidentiality).
  - Public information campaigns and a website to provide information on procedure, statistics on number of declarations, proposed sanctions, and information concerning persons subject to reporting.
- Improve administration and dispensing of justice for economic and financial offenses:
  - Introduce direct referrals to the Prosecutor General by audit authorities and incorporate systematic referral procedures by end-2020.
  - Create a specialized economic and financial prosecution service with national jurisdiction operating under the Bamako Court of Appeals.

### AML/CFT and diagnostic work
- Finalizing the National Risk Assessment (ENR) for money laundering and terrorist financing (began October 2018 with World Bank support).
- Peer Review (Mutual Evaluation) final report approved by the 21st meeting of the Ministerial Committee of GIABA on November 16, 2019.
- Commit to developing a national AML/CFT strategy and implementation plan during the first quarter of 2020 to address shortcomings identified by the ENR and the peer review.
- Note of IMF diagnostic mission planned for 2020 to perform a detailed diagnostic analysis of governance problems, including public finance and AML/CFT; publication of a final report to help sequence and prioritize measures.

### Statistical improvements
- Rebasing of national accounts, quarterly accounts, and short-term indicators:
  - Complete the work necessary for changing the base year of national accounts no later than end-2019 for the first current year of 2020.
  - Begin dissemination of quarterly accounts at the end of 2019.
  - Introduce new short-term indicators no later than the end of the first quarter of 2020.

### Program monitoring and timing
- Reviews and monitoring:
  - Second, third, and fourth reviews based on end-December 2019, end-June 2020, and end-December 2020 performance criteria and indicative targets.
  - Performance criteria and indicative targets are defined in the Technical Memorandum of Understanding (TMU), which specifies the nature and frequency of information and data to be provided for program monitoring.
- Key dates and deadlines referenced:
  - July 2019 (start of first PEFA self-assessment) — finalization by end-December 2019.
  - November 2019 (transmission of Finance Inspectorate draft texts).
  - November 16, 2019 (GIABA ministerial committee approval of peer review final report).
  - December 31, 2019 (deadline for Commission final report; expected validation of Supreme Court manuals by WAEMU Heads of State; approval by Parliament of a 2020 budget law that complies with program parameters is listed with this deadline).
  - March 2020 (government approval of revised Law No. 2014-015 targeted).
  - First quarter of 2020 (start of procurement system evaluation; development of AML/CFT strategy and implementation plan; new short-term indicators to be introduced by end of the quarter).
  - April 1, 2020 and June 30, 2020 (various structural benchmark implementation deadlines listed in the TMU).

*Source: Excerpt from IMF staff report (Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding).*

### 11.      Guaranteed debt. A government debt guarantee means an explicit legal obligation to

### 1mliea2020001 - 11.      Guaranteed debt. A government debt guarantee means an explicit legal obligation to

### Definitions and debt treatment
- Guaranteed debt: an explicit legal obligation to service a debt in the event of nonpayment by the borrower (through payment in cash or in kind).
- Concessional debt and present value:
  - A debt is considered concessional if it includes a grant element of at least 35 percent.
  - The present value of the debt is calculated on the date on which it is contracted by discounting the future stream of payments of debt service due on this debt using a discount rate of five percent.
- External debt:
  - Defined as a debt denominated, or requiring payment, in a currency other than the CFA franc.
  - This definition also applies to the debts contracted between WAEMU member countries.
- External debt performance criterion:
  - The ceiling on the contracting or guaranteeing of new external debt applies to present value of all new external debt.
  - Special provision: the performance criterion shall not apply to import-related, short-term external loans (with maturities of less than one year).
- Reporting requirement: the government shall immediately report to the IMF staff any new external loans it contracts or guarantees, stating the conditions of these loans.

### Fiscal targets, adjusters, and reporting
- Overall fiscal deficit (commitment basis): difference between total budgetary resources and total spending and net lending as recorded in the TOFE.
- Adjustment to deficit ceiling:
  - The ceiling on the overall fiscal deficit (commitment basis) will be adjusted upward to the extent that budget support grants fall short of program projections up to a maximum of CFAF 45 billion.
- Net tax revenue (TOFE definition): includes all tax revenue in the national budget, after deducting the tax refunds generated during the year, in particular VAT credits.
- Adjustment to net tax revenue floor: will be adjusted downward (upward) to the extent that tax refunds exceed (fall short of) the projected amount.
- Indicative target: specified for end-September 2019 and end-December 2019 (table referenced).
- Priority social spending:
  - For 2019: sum of expenditure in 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.
  - For 2020 and thereafter: priority social spending also includes priority development spending, such as on-roads.

### Program performance, structural benchmarks, and arrears
- Performance under the ECF-supported program: broadly satisfactory.
- Performance criteria at end-September 2019: all met except the ceiling on domestic arrears.
  - Domestic arrears criterion exceeded in Q3 due to cash flow constraints from settlement of very high arrears generated in 2018 and delays in disbursement of external budgetary loans.
  - Authorities request a waiver for nonobservance of this criterion.
- Structural benchmarks: four out of seven met; the remaining three linked to next review are expected to be implemented within the initial timeframe.

### Macroeconomic developments and outlook
- Growth and inflation:
  - Real GDP growth: 4.7 percent in 2018; projected 5.1 percent in 2019.
  - Inflation: expected to be somewhat negative in 2019 due mainly to domestic supply conditions; projected 0.6 percent in 2020.
  - Real GDP growth projection for 2020: 5 percent.
- Overall fiscal balance: should stand at -2.9 percent of GDP in 2019.
- Balance of payments: expected to remain positive owing to a sharp increase in exports, and the capital and financial accounts.

### Fiscal policy and revenue mobilization measures
- Tax revenue mobilization:
  - Tax revenues: 14.6 percent of GDP in 2019 versus 11.9 percent of GDP in 2018.
  - A comprehensive plan to address tax noncompliance to include controls, crosschecking of information with customs, Treasury and other agencies, and setting up a central management entity for collection activities.
  - Generalize use of online procedures (e-filing and e-payment) to all companies subject to the VAT.
- Customs and valuation:
  - New customs code submitted to the National Assembly and expected to be adopted in the first semester of 2020.
  - Interconnection of data systems to manage goods in transit with Senegal customs effective end of March 2020, followed by Côte d'Ivoire and other countries (Benin, Burkina Faso, Guinea, Niger and Togo).
  - Measures (structural, technical and IT) for rigorous application of transaction valuation throughout the country as of March 31, 2020 through an action plan.
- Tax policy actions:
  - Preserve fiscal revenue on petroleum products by rigorously implementing the domestic pricing mechanism for petroleum products.
  - Institute a new property tax on developed and undeveloped land by 2021.
  - Improve registration of land and property titles in SITFI.
  - Review provisions of the General Tax Code to tax income of NGOs operating under the same conditions as for-profit companies.
  - Promote payment of certain taxes through mobile banking services by the end of 2020 to add many taxpayers from the informal sector to the tax base.
- Expenditure efficiency and management:
  - Continue improving expenditure management while protecting social and priority spending, including investments in the 2019 supplementary budget and the 2020 budget.
  - Improve medium-term transparency and predictability of budget transfers and grants, particularly in agriculture.
  - Strengthen selection and execution of investment projects based on 2017 PIMA recommendations; improve ex-ante evaluation, regular technical review, and strengthen legal framework for PPPs to mitigate fiscal risks.
- Cash management:
  - Continue to improve cash management and control of budget execution.
  - All payment arrears from 2018 have been cleared; authorities committed to control the level of “float” and avoid recurrence of arrears.
  - Consolidation of the Treasury Single Account (TSA) to be pursued and its coverage expanded to include deposits from 50 national public institutions by the end of 2020, with remaining institutions integrated in subsequent years.

### Financial sector, public enterprises, and governance reforms
- Financial sector:
  - Deepen the financial sector; capitalize on mobile banking to offer administrative services such as payment of certain taxes and promote access to basic banking services.
  - Support removal of non-operating fixed assets from banks’ balance sheets to ensure compliance with WAEMU prudential norms.
- Energie du Mali (EDM-SA):
  - Restructuring plan with World Bank support aims to stabilize the company by 2025, including restructuring and refinancing of bank debt on more favorable terms.
  - Actions intended to help government gradually eliminate subsidies to EDM-SA in the medium term, except transfers necessary to maintain the social tariff.
- Investment and industrial policy:
  - Draft a new Investment Code to streamline tax and customs exemptions.
  - Draft law on special economic zones to make the industrial sector more competitive.
- Gender and social programs:
  - Support creation and formalization of 400 women's cooperatives.
  - Capacity building in cooperative and financial management for 50,000 beneficiaries to increase access to finance.
- Governance and anti-corruption:
  - Revise Law on illicit enrichment to make it more effective and inclusive.
  - Conduct awareness campaigns to ensure compliance with asset declaration rules and design a website to provide information on asset declaration procedures, number of declarations, and sanctions.
  - Governance diagnostic mission of the Fund scheduled in early 2020; authorities will consider its recommendations.
- AML/CFT:
  - Finalization of the National Risk Assessment (ENR) underway.
  - Peer Review (Mutual Evaluation) final report approved by the 21st meeting of the Ministerial Committee of GIABA on November 16, 2019.
  - Development and implementation of the national AML / CFT strategy expected during the first quarter of 2020.

### Program request and conclusion
- Authorities’ request:
  - Waiver of nonobservance of the performance criterion on non-accumulation of domestic arrears.
  - Increase of the fiscal deficit ceiling for 2020 under the program from 3 percent to 3.5 percent of GDP to raise social and development expenditures in regions affected by insecurity; request made in the context of WAEMU discussions to adjust the convergence criterion on the fiscal deficit for member countries facing security risks.
- Conclusion: Malian authorities commit to pursuing sound policies and reforms to preserve macroeconomic stability and consolidate foundations for strong and inclusive growth; request completion of the first review under the ECF arrangement and approval of the waiver.

*Source: 1mliea2020001 - 11. Guaranteed debt. A government debt guarantee means an explicit legal obligation to (PDF).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1mliea2020001.pdf_