## 1mliea2020002

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### Executive summary — context, program status, and request for Fund support
- Context:
  - First confirmed COVID-19 cases on March 24 and 293 cases (seventeen deaths) as of April 22, 2020.
  - Authorities took early containment measures in March and announced economic and social support measures in early April.
  - The first review under the ECF was completed on January 8, 2020.
  - Lower activity and the policy response open financing gaps of 2.9 and 3.1 percent of GDP (budget and BOP, respectively).
- Program performance:
  - Discussions under the second review are infeasible under pandemic-related restrictions; will resume when possible.
  - Preliminary data suggest end-2019 performance criteria have been met.
  - Progress made on structural reforms to strengthen revenue administration and public financial management.
- Request for Fund support:
  - Authorities request assistance under the Rapid Credit Facility (RCF) in the amount of SDR146,667,600 (78.6 percent of quota).
  - Request rephasing of access under the ECF arrangement.
  - Request that the RCF be disbursed as direct budget support.
  - Staff supports the requests; RCF will cover about forty percent of the 2020 financing gap and is expected to be catalytic.

### Impact of the pandemic, outlook, and risks
- Pre-COVID indicators:
  - Growth remained at 5 percent in 2019 (preliminary).
  - Inflation was negative through most of 2019 and in early 2020.
  - Current account deficit narrowed to 4.2 percent of GDP in 2019.
  - Public debt reached 40½ percent of GDP at end-2019, with external debt at 26.4 percent of GDP.
- Initial impact and containment:
  - Preventive measures: suspension of commercial flights (except cargo), closure of land borders, prohibition of gatherings of more than 50 people, closure of schools, night clubs and bars, crisis response unit and quarantine facilities, night curfew; lockdown in the capital being considered but not imposed as of April 22, 2020.
  - Sectors affected: hospitality, manufacturing (supply disruptions), exports (especially cotton), household incomes and consumption, investment; unemployment expected to rise.
- Outlook and projections:
  - Growth expected to slow to below 1 percent in 2020 (compared to 5.1 percent projected at first review).
  - Inflation outlook remains broadly unchanged.
  - Staff projects a BOP financing need of about 3.1 percent of GDP in 2020.
  - Current account deficit likely to narrow to around 3.6 percent of GDP in 2020 due to improvement in terms-of-trade (lower oil and higher gold prices).
  - Contraction of imports expected to exceed loss in export earnings and remittances; decline in FDI and private inflows will weigh on the financial account.
- Risks:
  - Downside: larger-than-expected pandemic impact, lockdowns, prolonged recovery, weather risks to rain-dependent agriculture, dependence on gold and cotton, deterioration in security and political instability.
  - Upside: good agricultural production insulated from containment and possible improvement in security if 2015 peace agreement implementation accelerates.

### Fiscal policies, financing needs, and key fiscal figures
- Fiscal outlook and financing needs:
  - 2020 fiscal deficit projected to widen from the 3.5 percent of GDP targeted at the first review to 6.2 percent of GDP.
  - Tax revenues expected to decline to 13.3 percent of GDP in 2020, 2.2 percentage points below program projections.
  - Non-tax revenues expected to fall short (notably delay in telecommunication license sale of 0.5 percent of GDP).
  - Higher grants expected to partially offset revenue decline (additional 0.5 percent of GDP).
  - Emergency budget spending estimated at 2.2 percent of GDP for 2020, accompanied by accelerated payments to the private sector.
  - A supplementary budget containing crisis measures and revised revenue outlook proposed at end-April, 2020; non-essential spending to be reprioritized.
- Text Table 2: Mali: Financing Needs, 2020, Percent of GDP — Prog./Proj./Diff.
  - Revenue: Prog. 16.8; Proj. 14.1; Diff. -2.7
  - Tax revenue: Prog. 15.5; Proj. 13.3; Diff. -2.2
  - Non-tax revenue: Prog. 1.3; Proj. 0.8; Diff. -0.5
  - Grants: Prog. 2.5; Proj. 3.0; Diff. 0.5
  - Budgetary expenditures: Prog. 22.9; Proj. 23.4; Diff. 0.5
  - Current: Prog. 13.6; Proj. 15.6; Diff. 2.0
  - Capital: Prog. 9.3; Proj. 7.8; Diff. -1.5
  - Overall balance (accrual): Prog. -3.5; Proj. -6.2; Diff. 2.7
  - Cash adj.: Prog. -0.1; Proj. 0.1; Diff. -0.2
  - Financing: Prog. 3.6; Proj. 6.1; Diff. 2.5
  - External financing: Prog. 1.2; Proj. 1.3; Diff. 0.1
  - Domestic financing: Prog. 2.4; Proj. 1.9; Diff. -0.5
  - Financing gap: Prog. 0.0; Proj. -2.9; Diff. -2.9
- Financing sources (preliminary, percent of GDP):
  - RCF (IMF): 1.1
  - World Bank Group: 0.3
  - BOAD (West African Dev. Bank): 0.1
  - G20 financing: 0.4
  - Residual financing gap: -1.0
- Memorandum: Nominal GDP (CFAF billion): 10,895; 10,427.

### Financing gap, proposed coverage, and uncertainties
- Financing gap and proposed coverage:
  - Financing gap estimated at 2.9 percent of GDP in 2020.
  - Proposed and committed sources:
    - Rapid Credit Facility (RCF): covers about forty percent of the gap.
    - World Bank: additional 0.3 percent of GDP in budgetary support relative to earlier commitments.
    - BOAD: concessional loan of CFAF 15 billion (about 0.1 percent of GDP) and debt service relief for part of 2020.
    - Authorities intend to request debt service suspension from official bilateral creditors.
    - Engagement with other donors to obtain grants and concessional financing to close remaining gap of around 1 percent of GDP.
- Uncertainties and downside risks:
  - Baseline assumes pandemic resolved during second half of 2020; longer and deeper impact would require more extensive fiscal measures and further deterioration of fiscal outlook.
  - Additional downside risk: contingent liabilities related to state-owned enterprises (especially electricity and water).
  - Recommended actions: establish a clear temporal horizon for crisis measures and prepare contingency plans if crisis is deeper than expected.
  - High risks if additional financing is not identified — investment plans may not be executed as projected.

### Debt sustainability assessment and outlook
- Under the baseline fiscal outlook, Mali’s public debt remains sustainable.
- RCF disbursement will not have a material impact on debt sustainability and capacity to repay.
- Update of the DSA including COVID-19 impact: external and overall risk of public debt distress remain moderate.
- All public and publicly guaranteed external debt and total public debt ratios remain below corresponding thresholds under the baseline scenario.
- Overall debt dynamics remain sustainable, with some space to absorb shocks.

### Authorities’ commitments and transparency measures
- Authorities committed to returning to ECF program fiscal objectives when the pandemic subsides.
- Expect extra resources from international donors to preserve the economic fabric and enable significant reduction of fiscal deficit in 2021 and steady increase of tax-to-GDP ratio.
- Governance and transparency commitments:
  - Undertake and publish an independent and robust third-party audit of crisis spending in about a year’s time.
  - Report quarterly on spending of emergency funds.
  - Publish regularly on the government website documentation on large public procurement projects, ex-post validation of delivery, name of awarded companies and name of their beneficial owner(s).

### Fiscal and policy measures announced to combat COVID-19 (Box 1) — preliminary estimations
- Preventive containment measures: suspension of commercial flights (except cargo), closure of land borders, night curfew, suspension of public gatherings, prohibition of gatherings of more than 50 people, closure of schools, night clubs and bars, reorganization of civil servant working hours, retail markets open on reduced schedule, distribution of 20 million masks, crisis response unit and sensitization campaigns.
- Health sector support: strengthen testing capacities, expand quarantine and hospitalization facilities, planned bonuses to health workers.
- Social measures for poorest households: special fund for targeted income support; mass distribution of grains and food for livestock; supply of electricity and water free of charge for poorest consumers for April and May 2020; 3-month VAT exemption on electricity and water tariffs; 3-month exemption from customs duties on imports of basic food (rice and milk).
- Support to firms: SMEs-support guarantee fund of 0.2 percent of GDP; support to public electricity and water utilities; clearing budget arrears; tax deferral and relief; encourage commercial banks to restructure ailing firms’ debt.
- Preliminary quantitative estimates reported by Malian authorities (CFAF bn / Percent of GDP) are preserved in the source.

### Financial system stability and BCEAO liquidity measures
- Financial sector indicators:
  - Overall capital adequacy: 13½ percent in 2019.
  - Non-performing loans: 10½ percent at end-2019, about half provisioned.
  - Lending concentrated in manufacturing, real estate, hospitality, and wholesale and retail trade.
- BCEAO measures (announced March 21, March 23, March 27, 2020):
  - Increase total liquidity available to banks via weekly and monthly auctions.
  - Extend collateral framework to access central bank refinancing.
  - Framework with banking system to support firms with COVID-19 repayment difficulties.
  - Allocate CFAF 25 billion to the BOAD trust fund to increase concessional loans.
  - Special program for refinancing bank credits to SMEs; encourage electronic money usage; ensure adequate banknotes; maintain average refinancing rates near the 2.5 to 4 percent corridor floor; adopt full allotment at a fixed 2.5 percent interest rate.

### Access to IMF financing, capacity to repay, and safeguards
- Authorities request:
  - Disbursement equivalent to 78.6 percent of quota (SDR 146,667,600) under RCF, along with rephasing of the ECF arrangement.
  - Mali qualifies for a disbursement under the exogenous shock window.
  - Proposal to make ECF outstanding purchases of SDR 20 million available on August 31, 2020 and January 11, 2021 (as noted in source tables).
- Use of RCF: expected entire disbursement to be made to the authorities’ budget as foreign exchange and budget support.
- Capacity to repay and safeguards:
  - Including the RCF disbursement, total outstanding credit from the Fund would amount to SDR 398 million or 213.3 percent of quota.
  - Risks mitigated by low indebtedness, availability of concessional financing, and authorities’ commitment to ECF objectives.
  - Mali’s total debt service to the Fund is expected to peak in 2027 at SDR 80.7 million (3.1 percent of government revenue).
  - BCEAO safeguards: one outstanding recommendation from the 2018 safeguards assessment relating to strengthening the risk management function (in process); central bank maintains a strong control culture.

### Staff appraisal and policy recommendations
- Macroeconomic shock and outlook:
  - Mali is severely hit by COVID-19 alongside security and social challenges.
  - Growth expected to decline to below 1 percent in 2020 (from about 5 percent prior to the crisis).
  - Fiscal deficit widening by about 2.7 percentage points of GDP to an estimated 6.2 percent of GDP.
- Staff recommendations:
  - Ensure crisis measures are temporary and crisis-focused to safeguard the tax base and medium-term fiscal stability.
  - Enhance transparency (publication of expenditures and post-crisis audit).
  - Support for RCF assistance of SDR146,667,600 (78.6 percent of quota or 1.1 percent of GDP) and rephasing of ECF access; supplement recent CCRT debt service relief.
  - Stress importance of additional grants and concessional financing from international partners to fill remaining gaps and minimize pressures on public finances.
- Reiterated financing need estimates:
  - Fiscal financing need: around 2.9 percent of GDP.
  - External financing need: around 3.1 percent of GDP.

### Appendix I — Letter of Intent: policy commitments, measures, and DSA findings (selected)
- Public-health and containment measures:
  - First two cases on March 24, 2020; 293 cases (17 deaths) as of April 22, 2020.
  - Containment: suspension of commercial flights (except cargo), closure of land borders, curfew, suspension of public gatherings, prohibition of gatherings of more than 50 people, closure of schools, night clubs and bars.
- Economic impact and macro outlook:
  - Supply disruptions, slowdown in hotels and restaurants, mining sector operating at reduced capacity or temporarily closed.
  - Growth revised down by 4.2 percentage points from previous DSA; real GDP growth projected at 0.9 percent in 2020 (DSA assumptions).
- Fiscal impact and financing needs:
  - Unanticipated COVID-related expenditure estimated at 2.2 percent of GDP.
  - Fiscal deficit expected to deteriorate to 6.2 percent of GDP from 3½ percent programmed.
  - Financing gap for 2020 projected at about 2.9 percent of GDP.
  - Balance of payment financing gap of 3.1 percent of GDP.
- Request for IMF support:
  - RCF assistance amount: equivalent to SDR 146,667,600 (about US$200 million or 78.6 percent of Mali’s quota).
  - RCF envisaged to be catalytic in mobilizing donor resources; authorities request disbursement to Treasury Single Account at BCEAO.
- DSA headline risk ratings (Joint Bank-Fund Staff, April 24, 2020):
  - Risk of external debt distress: Moderate
  - Overall risk of debt distress: Moderate
  - Under COVID-19 baseline, risk ratings remain Moderate; overall public debt dynamics remain sustainable with some space to absorb shocks.
- Selected DSA macro and fiscal assumptions (selected values):
  - Real GDP growth: 5.0 (2017), 5.2 (2018), 5.1 (2019), 0.9 (2020), 4.0 (2021), 6.0 (2022), 5.0 (2023–2025).
  - Government revenues (excluding grants, percent of GDP): 18.4 (2017), 14.4 (2018), 19.5 (2019), 17.9 (2020), 19.4 (2021), 18.5 (2022).
  - Public sector debt (percent of GDP): 36.0 (2017), 37.7 (2018), 40.4 (2019), 44.7 (2020), 45.1 (2021), 44.9 (2022).
- Policy implications and recommended focus:
  - Maintain macroeconomic stability while protecting social and investment spending and meeting growing security spending and development needs.
  - Continue mobilizing domestic revenue and implement reforms to maintain sustainable debt levels.
  - Strengthen debt management capacity and diversify the export base.
  - Ensure COVID-related expenditures are temporary, targeted, transparently reported and audited.

*Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA), April 24, 2020.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The COVID-19 pandemic has added to Mali’s significant security and social challenges.
- First confirmed COVID-19 cases on March 24 and 293 cases (seventeen deaths) as of April 22, 2020.
- Authorities took early containment measures in March and announced a package of economic and social support measures in early April.
- Lower economic activity and the policy response will exert significant pressures on the budget and the balance of payments, opening financing gaps of 2.9 and 3.1 percent of GDP, respectively.
- The first review under the ECF was completed on January 8, 2020.

### Program performance and Fund support request
- Program performance:
  - Discussions under the second review (to assess end-2019 performance and recalibrate the program) are infeasible under current pandemic-related restrictions, severity of the shock and uncertainty around the outlook, and will be resumed when possible.
  - Preliminary data suggest that the end-2019 performance criteria have been met.
  - Progress was made under structural reforms to strengthen revenue administration and public financial management.
- Request for Fund support:
  - Authorities request assistance under the Rapid Credit Facility (RCF) in the amount of SDR146,667,600 (78.6 percent of quota).
  - They request rephasing of access under the ECF arrangement.
  - Authorities request that the RCF be disbursed as direct budget support.
  - Staff supports these requests and welcomes commitments to safeguard transparency and accountability in the use of emergency funds.
  - The RCF will cover about forty percent of the financing gap in 2020 and is expected to play a catalytic role.
  - Authorities are actively engaged with other donors, including the World Bank, to cover the remaining financing needs.

### Impact of the pandemic, outlook and risks
- Pre-COVID developments:
  - Preliminary data suggest growth remained at 5 percent in 2019.
  - Inflation was negative through most of 2019 and in early 2020.
  - Current account deficit narrowed to 4.2 percent of GDP in 2019.
  - Public debt reached 40½ percent of GDP at end-2019, with external debt at 26.4 percent of GDP.
- Initial impact and response:
  - Government introduced preventive containment measures in mid-March: suspension of commercial flights from affected countries (except cargo flights), closure of land borders, suspension of public gatherings, prohibition of gatherings of more than 50 people, closure of schools, night clubs and bars; crisis response unit and quarantine facilities set up; night curfew established; lockdown in the capital being considered but not imposed as of April 22, 2020.
  - Announced comprehensive measures to support the economy and the most vulnerable segments of society (Box 1).
  - Hospitality industries (hotels, restaurants, transport) affected; downsizing in workforce without unemployment insurance; external supply shocks slowing imports of manufacturing inputs; collapse in external demand dampening exports (especially cotton); household income and consumption will fall; business activity and investment will retrench; unemployment will rise.
- Outlook:
  - Growth is expected to slow to below 1 percent in 2020, compared to 5.1 percent projected at the time of the first review of the ECF.
  - Inflation outlook remains broadly unchanged.
  - Staff projects a deterioration in the overall balance of payment position in 2020, creating a BOP financing need of about 3.1 percent of GDP.
  - Current account deficit likely to narrow to around 3.6 percent of GDP in 2020 due to a large improvement in terms-of-trade (lower oil and higher gold prices).
  - Contraction of imports due to lower energy bill, trade disruptions and lower domestic demand is expected to be larger than the loss in export earnings and lower remittances.
  - Decline in FDI and other private inflows will weigh on the financial account; deterioration in the financial account will more than offset improvement in the current account.
- Risks:
  - Downside risks dominate: larger-than-expected impact of the pandemic, need for lockdowns or quarantines, prolonged impact affecting recovery, weather-related risks to rain-dependent agriculture, high dependence on gold and cotton exports, deterioration in security situation and political instability.
  - Upside risks: good agricultural production insulated from containment measures and possible improvement in security conditions if implementation of the 2015 peace agreement accelerates.

### Fiscal policies
- Fiscal outlook and financing needs:
  - Staff projects the 2020 fiscal deficit to widen from the 3.5 percent of GDP targeted at the first review of the program to 6.2 percent of GDP.
  - Tax revenues expected to decline to 13.3 percent of GDP in 2020, 2.2 percentage points below program projections.
  - Non-tax revenues expected to fall short, notably due to likely delays in the sale of a telecommunication license (0.5 percent of GDP).
  - Higher grants expected to partially offset revenue decline (additional 0.5 percent of GDP).
  - Emergency budget spending to contain the outbreak and mitigate economic and social impact is estimated at 2.2 percent of GDP for 2020, accompanied by accelerated payments to the private sector.
  - To offset revenue losses and higher spending needs, non-essential spending will be reprioritized; a supplementary budget containing the crisis measures and a revised revenue outlook will be proposed at end-April, 2020.
- Key fiscal figures (Text Table 2: Mali: Financing Needs, 2020, Percent of GDP):
  - Revenue: Prog. 16.8; Proj. 14.1; Diff. -2.7
  - Tax revenue: Prog. 15.5; Proj. 13.3; Diff. -2.2
  - Non-tax revenue: Prog. 1.3; Proj. 0.8; Diff. -0.5
  - Grants: Prog. 2.5; Proj. 3.0; Diff. 0.5
  - Budgetary expenditures: Prog. 22.9; Proj. 23.4; Diff. 0.5
  - Current: Prog. 13.6; Proj. 15.6; Diff. 2.0
  - Capital: Prog. 9.3; Proj. 7.8; Diff. -1.5
  - Overall balance (accrual): Prog. -3.5; Proj. -6.2; Diff. 2.7
  - Cash adj.: Prog. -0.1; Proj. 0.1; Diff. -0.2
  - Financing: Prog. 3.6; Proj. 6.1; Diff. 2.5
  - External financing: Prog. 1.2; Proj. 1.3; Diff. 0.1
  - Domestic financing: Prog. 2.4; Proj. 1.9; Diff. -0.5
  - Financing gap: Prog. 0.0; Proj. -2.9; Diff. -2.9
  - Financing sources (preliminary):
    - RCF (IMF): 1.1
    - World Bank Group: 0.3
    - BOAD (West African Dev. Bank): 0.1
    - G20 financing: 0.4
    - Residual financing gap: -1.0
  - Memorandum item: Nominal GDP (CFAF billion): 10,895 10,427

### Policy priorities and considerations
- Near-term priority: contain humanitarian and economic fallout while maintaining macroeconomic stability.
- The authorities remain committed to the objectives of the ECF arrangement and to an early return to the program targets once crisis-related priorities subside.
- Staff encourages authorities to reach understanding with WAEMU authorities on a temporary deviation from the fiscal deficit convergence criterion.
- Emergency financing (RCF and donor support) and reprioritization of spending are central to filling the 2020 financing gaps.

*Source: IMF staff Executive Summary, April 24, 2020.*

### 10.      The larger fiscal deficit will open a financing gap estimated at 2.9 percent of GDP in

### 10.      The larger fiscal deficit will open a financing gap estimated at 2.9 percent of GDP in

### Financing gap and proposed coverage
- The larger fiscal deficit will open a financing gap estimated at 2.9 percent of GDP in 2020 (Text Table 2).
- Proposed and committed sources to finance the gap:
  - Rapid Credit Facility (RCF): covers about forty percent of the gap.
  - World Bank: an additional 0.3 percent of GDP in budgetary support relative to earlier commitments.
  - West African Development Bank (BOAD): concessional loan of CFAF 15 billion to Mali (about 0.1 percent of GDP) and debt service relief for part of 2020.
  - Authorities intend to request debt service suspension from official bilateral creditors.
  - Authorities are actively engaged with other international donors to obtain grants and concessional financing to close the remaining gap of around 1 percent of GDP.

### Debt sustainability assessment and outlook
- Under the baseline fiscal outlook, Mali’s public debt remains sustainable.
- The RCF disbursement will not have a material impact on Mali’s debt sustainability and capacity to repay the Fund.
- Based on an update of the DSA that includes the macroeconomic impact of the COVID-19, Mali’s external and overall risk of public debt distress remain moderate.
- All public and publicly guaranteed external debt and total public debt ratios remain below their corresponding thresholds under the baseline scenario (see the DSA Update Annex).
- Overall debt dynamics remain sustainable, with some space to absorb shocks.

### Uncertainties and downside risks for 2020–21 fiscal outlook
- The fiscal outlook for 2020-21 remains highly uncertain; current projections assume the pandemic outbreak will be resolved during the second half of 2020.
- A longer and deeper impact of the pandemic will:
  - Require more extensive fiscal measures.
  - Result in further deterioration of the fiscal outlook, with delayed or partial recovery of the tax base.
- Additional downside risk: potential realization of contingent liabilities related to state-owned enterprises (especially electricity and water).
- To minimize risks, recommended actions include:
  - Establishing a clear temporal horizon for crisis measures.
  - Preparing contingency plans if the crisis is deeper than expected.
- Risks surrounding financing of the remaining gap are high — if additional financing (through grants or concessional loans) is not identified, investment plans will not be executed as projected in the baseline.

### Authorities’ commitments and transparency measures
- Authorities committed to returning to the ECF program fiscal objectives when the pandemic’s effects have abated.
- Authorities expect extra resources from international donors to preserve the economic fabric, allow quick recovery, enable a significant reduction of the fiscal deficit in 2021, and a steady increase of the tax-to -GDP ratio.
- Commitments to governance and fiscal transparency:
  - Undertake and publish an independent and robust third-party audit of crisis spending in about a year’s time.
  - Report quarterly on the spending of the emergency funds.
  - Publish regularly on its website documentation on large public procurement projects, together with ex-post validation of delivery, the name of awarded companies and the name of their beneficial owner(s).

### Fiscal and policy measures announced to combat COVID-19 (Box 1, preliminary estimation)
- Preventive containment measures: suspension of commercial flights (except cargo), closure of land borders, night curfew, suspension of public gatherings, prohibition of gatherings of more than 50 people, closure of schools, night clubs and bars, reorganization of civil servant working hours, retail markets open on reduced schedule, distribution of 20 million masks, crisis response unit and sensitization campaigns.
- Health sector support: strengthen testing capacities, expand quarantine and hospitalization facilities, planned support to the health sector (including bonuses to health workers).
- Social measures for poorest households: special fund to provide targeted income support; mass distribution of grains and food for livestock; supply of electricity and water free of charge for poorest consumers for the months of April and May 2020 (increasing subsidies to state-owned suppliers); 3-month exemption from VAT on electricity and water tariffs; 3-month exemption from customs duties on imports of basic food (rice and milk).
- Support to firms: SMEs-support guarantee fund of 0.2 percent of GDP; support to public electricity and water utilities; clearing budget arrears accumulated during the year; granting tax deferral and relief; encouraging commercial banks to restructure ailing firms’ debt.
- Preliminary quantitative estimates (CFAF bn / Percent of GDP) reported by Malian authorities for Mali: Policy Measures to Combat Crisis (preliminary estimation). [Detailed table entries in source text preserved there.]

### Financial system stability and liquidity measures
- Financial system status:
  - Banking sector capital adequacy: overall capital adequacy of 13½ percent in 2019.
  - Non-performing loans: 10½ percent at end-2019, of which about half are provisioned.
  - Sectoral concentration: lending concentrated in manufacturing, real estate, hospitality, and wholesale and retail trade.
- BCEAO measures to preserve financial stability and provide liquidity (announced March 21, March 23, March 27, 2020):
  - Increase total liquidity available to banks by weekly and monthly auctions.
  - Extend collateral framework to access central bank refinancing.
  - Set up a framework with the banking system to support firms with COVID-19 repayment difficulties.
  - Allocate CFAF 25 billion to the BOAD trust fund to increase concessional loans to eligible countries.
  - Communicate special program for refinancing bank credits granted to SMEs.
  - Initiate negotiations with firms issuing electronic money to encourage usage.
  - Ensure adequate provision of banknotes for satisfactory ATM operation.
  - Maintain average refinancing rates relatively close to the floor of the 2.5 to 4 percent monetary policy corridor.
  - Adopt a full allotment strategy at a fixed 2.5 percent interest rate.

### Access to IMF financing and capacity to repay
- Authorities request:
  - Disbursement equivalent to 78.6 percent of quota (SDR 146,667,600) under RCF following the COVID-19 pandemic shock, along with rephasing of the ECF arrangement (Annex I).
  - Mali qualifies for a disbursement under the exogenous shock window.
  - Proposal to make ECF outstanding purchase under the second review of SDR 20 million (10.7 percent of quota) available on August 31, 2020, and the outstanding purchase under the third review in the same amount available on January 11, 2021 (Table 8).
- Use of RCF disbursement: expected that the entire disbursement will be made to the authorities’ budget to support the emergency policy response and provide foreign exchange support.
- Capacity to repay and safeguards:
  - Including the RCF disbursement, total outstanding credit from the Fund would amount to SDR 398 million or 213.3 percent of quota.
  - Risks mitigated by low indebtedness, availability of concessional financing from other creditors, and authorities’ commitment to the ECF objectives.
  - Mali’s total debt service to the Fund is expected to peak in 2027 at SDR 80.7 million (3.1 percent of government revenue).
  - Mali has a good track record in servicing debt to the Fund.
  - BCEAO has one outstanding recommendation from the 2018 safeguards assessment relating to strengthening the risk management function (in process); the central bank has maintained a strong control culture.

### Staff appraisal and policy recommendations
- Macroeconomic shock and outlook:
  - Mali severely hit by COVID-19 alongside security and social challenges.
  - Growth expected to decline to below 1 percent in 2020, compared to about 5 percent expected prior to the crisis.
  - Widening of the fiscal deficit by about 2.7 percentage points of GDP to an estimated 6.2 percent of GDP.
- Staff support and recommendations:
  - Staff welcomes proactive measures to contain and mitigate the pandemic and encourages ensuring measures are temporary and crisis-focused to safeguard the tax base and medium-term fiscal stability.
  - Staff welcomes commitments to transparency (enhanced publication of expenditures and post-crisis audit).
  - Staff supports authorities’ request for financial assistance under the RCF in the amount of SDR146,667,600 (78.6 percent of quota or 1.1 percent of GDP) and rephasing of ECF access, supplementing recent debt service relief under the Catastrophe Containment and Relief Trust.
  - Staff underscores the importance of support from other international financing institutions and bilateral partners for additional grants and concessional financing to fill the remaining gap and minimize pressures on public finances.
- Financing need estimates reiterated:
  - Fiscal financing need: around 2.9 percent of GDP.
  - External financing need: around 3.1 percent of GDP.

*Source: MALI — INTERNATIONAL MONETARY FUND.*

### 23.      The authorities remain committed to the objectives of the ECF program. While the crisis

### 23. The authorities remain committed to the objectives of the ECF program.

### Commitment and near-term priorities
- "The authorities remain committed to the objectives of the ECF program. While the crisis would set back authorities’ efforts to contain the fiscal deficit to regional WAEMU limits and implement structural reforms within the agreed timeframe, they remain fully committed to reverting to these objectives once near-term priorities to combat the crisis have been resolved. Discussions on the second review of the program are expected to resume at that point."

### Fiscal and structural implications
- The crisis is expected to:
  - Set back efforts to contain the fiscal deficit to regional WAEMU limits.
  - Delay implementation of structural reforms within the agreed timeframe.
- The authorities remain fully committed to reverting to ECF objectives once near-term crisis priorities are resolved.
- Discussions on the second review of the program are expected to resume after near-term priorities are addressed.

### Key macroeconomic and fiscal indicators (selected)
- Revenue: 18.4, 14.4, 19.5, 19.5, 20.5, 17.9, 20.7, 19.4, 18.5, 18.7, 18.8, 18.9 (percent of GDP)
- of which: Tax revenue: 15.2, 11.9, 14.6, 14.7, 15.5, 13.3, 15.7, 13.8, 14.0, 14.1, 14.2, 14.3 (percent of GDP)
- Grants: 1.6, 1.2, 2.4, 1.9, 2.5, 3.0, 2.0, 2.0, 2.1, 2.0, 2.0, 1.9 (percent of GDP)
- Total expenditure and net lending: 22.9, 20.4, 24.8, 23.1, 26.4, 27.1, 25.9, 24.4, 23.6, 23.6, 23.8, 23.7 (percent of GDP)
- Overall balance (commitment basis, including grants): -2.9, -4.8, -2.9, -1.7, -3.5, -6.2, -3.3, -3.0, -3.0, -3.0, -3.0, -3.0 (percent of GDP)
- Overall balance (cash basis, including grants): -2.6, -3.9, -3.6, -2.6, -3.6, -6.1, -3.2, -2.9, -2.9, -2.9, -2.9, -2.9 (percent of GDP)
- Current account balance, including official transfers: -7.3, -4.9, -4.8, -4.2, -4.4, -3.6, -4.6, -3.8, -5.4, -6.5, -6.7, -7.2 (percent of GDP)
- Current account balance, excluding official transfers: -12.1, -9.3, -9.4, -9.0, -8.5, -7.1, -8.5, -8.0, -9.4, -10.1, -10.5, -10.8 (percent of GDP)
- Exports of goods and services: 22.5, 24.7, 23.6, 24.6, 24.0, 24.4, 23.0, 25.4, 24.5, 24.2, 23.9, 23.6 (percent of GDP)
- Imports of goods and services: 36.2, 35.8, 34.6, 35.2, 34.0, 31.5, 32.9, 33.1, 33.3, 33.1, 32.8, 32.4 (percent of GDP)
- Overall balance of payments: -0.5, 1.1, -0.3, -0.5, 0.1, -3.7, -0.2, 0.2, -2.3, -2.8, -2.8, -3.4 (percent of GDP)
- External and Domestic public debt (end period): 36.0, 37.7, 38.3, 40.4, 39.0, 44.6, 39.5, 45.0, 44.8, 44.7, 44.8, 44.7 (percent of GDP)
- External public debt (end period): 25.0, 24.9, 26.3, 26.4, 26.1, 30.1, 25.7, 29.7, 28.1, 26.6, 25.3, 24.4 (percent of GDP)
- Domestic public debt (end period): 11.0, 12.8, 12.0, 14.0, 12.9, 14.5, 13.8, 15.3, 16.7, 18.1, 19.5, 20.3 (percent of GDP)
- Debt service: 6.3, 5.2, 4.8, 5.1, 5.6, 7.2, 5.9, 7.4, 8.6, 8.7, 9.6, 9.4 (percent)
- Nominal GDP (CFAF billions): 8,922, 9,426, 10,214, 10,154, 10,917, 10,427, 11,732, 11,030, 11,929, 12,776, 13,683, 14,654
- Gold Price (US$/fine ounce London fix): 1257, 1269, 1400, 1392, 1531, 1640, 1558, 1667, 1684, 1703, 1721, 1739
- Petroleum price (crude spot) (US$/bbl): 53, 68, 62, 61, 58, 36, 55, 38, 41, 43, 45, 46

### Balance of payments (selected levels, Billions of CFAF)
- Current account balance excluding official transfers: -1,079; -879; -958; -916; -930; -744; -994; -881; -1,125; -1,287; -1,433; -1,588
- Current account balance including official transfers: -650; -465; -490; -426; -484; -376; -544; -416; -648; -827; -920; -1,055
- Trade balance: -415; -213; -256; -207; -204; 136; -268; 100; -1; -25; -17; -17
- Exports, f.o.b.: 1,686; 1,991; 2,073; 2,159; 2,258; 2,522; 2,523; 2,591; 2,738; 2,901; 3,065; 3,829
- Imports, f.o.b.: -2,101; -2,204; -2,329; -2,366; -2,463; -2,116; -2,584; -2,379; -2,592; -2,763; -2,918; -3,082
- Services (net): -808; -840; -864; -871; -889; -878; -901; -948; -1,041; -1,119; -1,198; -1,282
- Transfers (net): 864; 871; 940; 961; 925; 693; 943; 775; 765; 715; 721; 676
- Capital and financial account: 698; 544; 512; 637; 490; -125; 204; 373; 714; 745; 325; 57

### Financing and external support (selected)
- Central government fiscal gap (level): -2,980 (Billions of CFAF)
- Amortization due on public debt (Billions of CFAF): -70, -72, -99, -91, -122, -122, -99, -99, -163, -164, -168, -133
- Proposed RCF-supported arrangement (Memorandum / financing): 117 (Billions of CFAF)
- Prospective financing from CCRT (Memorandum / financing): 6131 (as listed in table)
- Additional donors' financing (Memorandum / financing): 199 (Billions of CFAF)

*Sources: Ministry of Economy and Finance; and IMF staff estimates and projections.*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent (Bamako, April 24, 2020)

### Public-health and containment measures
- First two COVID-19 cases confirmed on March 24, 2020, increasing to 293 (seventeen deaths) as of April 22, 2020.
- Containment measures implemented: suspension of commercial flights (except cargo flights); closure of land borders; establishment of a curfew; suspension of all public gatherings; prohibition of social, sports, cultural and political gatherings of more than 50 people; closure of schools, night clubs and bars.
- Government prepared a comprehensive response plan to prevent spread of COVID-19 and strengthen medical care capacity in cooperation with WHO and the World Bank.

### Economic impact and near-term macroeconomic outlook
- COVID-19 containment and global spillovers are leading to a major reduction in economic activity, with specific impacts noted:
  - Disruption of supply of goods and key imported inputs to the manufacturing sector and upward risks for prices of basic goods.
  - Major slowdown in hotels and restaurants, closures and temporary leave for much of the workforce.
  - Mining sector activity at risk, with some companies operating at reduced capacity or temporarily closing.
- Growth expectation: “we anticipate a significant slowdown in growth this year.”
- Growth in the macro framework revised down by 4.2 percentage points from previous DSA.

### Fiscal impact and financing needs
- Unanticipated COVID-related expenditure estimated at 2.2 percent of GDP (health response plan, support to the most vulnerable, accelerated clearance of domestic spending float).
- Fiscal deficit expected to deteriorate to 6.2 percent of GDP—compared to 3½ percent of GDP programmed before the crisis.
- Financing gap for 2020 projected at about 2.9 percent of GDP for 2020.
- External account: decline in gold and cotton exports, remittances and foreign direct investment will open a balance of payment financing gap of 3.1 percent of GDP.
- The Government requests that IMF RCF funds be disbursed as direct budget support to the Treasury Single Account at the Central Bank (BCEAO). The BCEAO’s latest safeguards assessment was finalized in 2018 and remains valid.

### Request for IMF support and expected role
- Government requests immediate financial assistance under the Rapid Credit Facility (RCF) and rephasing of access under the Extended Credit Facility (ECF).
- RCF assistance amount: equivalent to SDR 146,667,600, which corresponds to about US$200 million or 78.6 percent of Mali’s quota with the Fund.
- Role of IMF support: ease urgent balance of payment needs, relieve pressure on fiscal position, provide fiscal space to fight virus spread, support economic activity, meet needs of most vulnerable (including replenishing food security stock).
- RCF envisaged to cover only part of the projected financing gap and is expected to be catalytic in mobilizing resources from other donors. Authorities are proactively engaging development partners to mobilize budget grants.

### Policy commitments and governance measures
- Continued commitment to ECF objectives: maintaining macroeconomic stability, strengthening fiscal discipline, fostering strong and inclusive growth.
- Priorities and reforms:
  - Accelerate digitalization and modernization of tax and customs administration to ensure business continuity in collections.
  - Continue improving electricity supply.
  - Battle corruption and improve governance and effectiveness of the AML/CFT framework, including broadening the list of officials subject to mandatory declaration of assets and establishing a sound verification system in line with international best practices.
  - Seek resumption of technical assistance to support revenue administration and public financial management reforms.
- Fiscal safeguards and transparency:
  - Incorporate all COVID-related spending into a supplementary 2020 budget in due time and continue publishing information on revenue and expenditure performance.
  - Create a special fund to receive contributions from private sector and citizens; execution in line with budgetary and accounting procedures under the law.
  - Commit to report quarterly on spending of these funds and to commission an independent and robust third-party audit of this spending in about a year’s time and publish its results.
  - Publish on the government website documentation on large public procurement projects, with ex-post validation of delivery, name of awarded companies and name of their beneficial owner(s).
- Policy restrictions: commit not to introduce exchange and trade restrictions, and other measures or policies that would compound balance of payments difficulties, beyond measures necessary to confront the COVID-related health, social and economic crisis.
- Commitment to consult the IMF prior to adoption of any further measures and to provide Fund staff with all data and information necessary to evaluate policies, including management of funds secured to combat COVID-19.
- Government authorizes the IMF to publish the letter and the forthcoming staff report for the RCF request.

### Security context and fiscal pressures
- COVID-19 crisis compounds an unprecedented security crisis: spiral of terrorist attacks and intercommunal clashes with substantial humanitarian needs.
- Government has been allocating increasing budget resources to military and security spending, including ongoing recruitment of 12,500 additional soldiers, at the expense of social and development spending.
- National inclusive dialogue held in late December 2019 with recommendations to restore peace and to hold legislative elections (twice postponed).

### Debt sustainability analysis (summary findings)
- Joint Bank-Fund Staff Debt Sustainability Analysis (April 24, 2020) headline risk ratings:
  - Risk of external debt distress: Moderate
  - Overall risk of debt distress: Moderate
- Granularity in risk rating: Some space to absorb shocks.
- Application of judgement: Yes — a customized scenario was used to take account of security challenges and sensitivity to small changes in financing terms.
- Macroeconomic projections: Growth revised down by 4.2 percentage points from previous DSA.
- Financing strategy:
  - External: IMF RCF/World Bank IDA/BAD BOAD/other donors
  - Domestic: Bonds/Bills issuances
- Realism tools flagged: Yes, pessimistic growth in 2020 despite massive fiscal stimulus.
- Mechanical risk ratings:
  - Mechanical risk rating under the external DSA: Low
  - Mechanical risk rating under the public DSA: Low
- Under the COVID-19 baseline, Mali’s risk of external and total public debt distress remains moderate—unchanged from the previous analysis. Overall public debt dynamics remain sustainable with some space to absorb shocks.
- A large share of fiscal and external financing needs is expected to be covered by concessional multilateral and bilateral creditor loans.
- All projected external debt burden indicators remain below their thresholds under the baseline.
- Judgment applied: under an extreme shock to exports combined with a customized scenario that incorporates 2 percentage points of GDP larger fiscal deficits, the ratio of external debt service to exports exceeds its threshold.

### Selected quantitative indicators and assumptions (as presented in the DSA)
- Macroeconomic and fiscal assumptions highlighted:
  - Real GDP growth (in percent) projected: 5.0 (2017), 5.2 (2018), 5.1 (2019), 0.9 (2020), 4.0 (2021), 6.0 (2022), 5.0 (2023–2025), 5.0 (2030), 5.0 (2040).
  - Government revenues (excluding grants, in percent of GDP): 18.4 (2017), 14.4 (2018), 19.5 (2019), 17.9 (2020), 19.4 (2021), 18.5 (2022).
  - Gross external financing need (Million of U.S. dollars): 691.2 (2017), 485.0 (2018), 584.7 (2019), 709.1 (2020), 639.1 (2021), 1043.2 (2022), 1331.5 (2023), 1473.8 (2024), 1605.6 (2025), 4725.0 (2030).
- Selected DSA sustainability indicators (PV and ratios):
  - PV of PPG external debt-to-GDP ratio series (selected values shown): 17.9, 20.8, 20.4, 19.2, 18.1, 17.1, 16.7, 14.0, 9.5 (as presented in the DSA table).
  - PV of PPG external debt-to-exports ratio: 72.9, 85.1, 80.4, 78.1, 74.8, 71.7, 71.1, 70.1 (as presented).
  - PPG debt service-to-exports ratio (selected values shown): 4.6, 3.7, 5.2, 6.6, 6.9, 7.2, 6.9, 6.7, 5.3, 6.2.
  - PPG debt service-to-revenue ratio (selected values shown): 5.6, 6.3, 6.6, 9.1, 9.0, 9.6, 9.0, 8.5, 6.6, 6.2.
- Nominal dollar GDP (Million of US dollars) series (selected values shown): 15,360; 16,978; 17,331; 17,717; 18,933; 20,574; 22,093; 23,708; 25,191; 35,852; 79,643 (as presented).
- Grant element of new public sector borrowing (in percent) series (selected values shown): 32.7, 37.8, 40.6, 41.1, 40.3, 39.3, 35.4 (as presented).
- Government public sector debt indicators (selected values shown):
  - Public sector debt (in percent of GDP): 36.0 (2017), 37.7 (2018), 40.4 (2019), 44.7 (2020), 45.1 (2021), 44.9 (2022), 44.8 (2023–2025), 44.6 (2030), 41.3 (2040).
  - Primary deficit (in percent of GDP): 2.0 (2017), 3.9 (2018), 0.7 (2019), 5.0 (2020), 1.7 (2021), 1.6 (2022).
  - Revenue and grants (in percent of GDP): 20.1 (2017), 15.7 (2018), 21.4 (2019), 20.9 (2020), 21.4 (2021), 20.6 (2022).

### Policy implications and recommended focus
- Maintain macroeconomic stability while protecting social and investment spending and meeting growing security spending and development needs.
- Continue mobilizing domestic revenue and implement reforms to maintain sustainable debt levels.
- Strengthen debt management capacity and deepen structural reforms to diversify the export base.
- Ensure COVID-related expenditures are temporary, targeted, and transparently reported and audited to safeguard public finances and the integrity of the tax base.

*Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA), April 24, 2020. Source: Appendix I. Letter of Intent (1mliea2020002).*

### 3.5 percent of GDP projected prior to the crisis to 6.2 percent of GDP in 2020. Furthermore, the

### 1mliea2020002 - 3.5 percent of GDP projected prior to the crisis to 6.2 percent of GDP in 2020. Furthermore, the

### Macroeconomic impact and financing needs
- Government fiscal deficit projected to rise from "3.5 percent of GDP projected prior to the crisis to 6.2 percent of GDP in 2020."
- Balance of payments financing gap estimated at 3.1 percent of GDP due to decline in gold and cotton exports, migrant remittances and foreign direct investment.
- Emergency financing requests:
  - Urgent disbursement under the Rapid Credit Facility (RCF) amounting to SDR146,7 million, equivalent to 78.6 percent of quota.
  - Debt service relief obtained under the Catastrophe Containment and Relief Trust (CCRT) on April 13, 2020.
  - Request for a rephasing of access under the current Extended Credit Facility (ECF) arrangement.
- Purpose of RCF disbursement: catalyze financial assistance from other donors and provide fiscal space to fight the pandemic and mitigate economic disruptions caused by social and travel restrictions.

### Impacts of the COVID-19 pandemic on activity and health
- Timeline and epidemiology:
  - First two cases recorded on March 24, 2020.
  - Cases increased to 293 with 17 fatalities as of April 22, 2020.
- Containment measures implemented: suspension of commercial flights, closure of land borders, nightly curfew.
- Sectoral effects:
  - Manufacturing: disrupted supply of goods.
  - Hotels and restaurants: significant activity slowdown.
  - Mining sector: major driver of growth and tax revenues; facing serious risk of slowdown with some companies operating at reduced capacity or closing temporarily.
- Growth outlook revision:
  - Prior projection: growth of 5 percent in 2020.
  - Revised projection: real GDP growth now expected to decline to 0.9 percent.

### The Pandemic Riposte Plan (policy response and social measures)
- Health sector measures:
  - Collaboration with WHO and the World Bank to strengthen health capacities.
  - Substantial increase in health expenditures for testing capacities, health sensitization campaigns, and upgrading quarantine and hospitalization infrastructures.
- Social protection and business support measures:
  - Emergency food aid and direct monetary transfers to poor households.
  - Payment of electricity and water bills for two months for consumers of the social tariff bracket.
  - Waiver of VAT on electricity and water bills for three months for all consumers.
  - Tax rebates for affected economic sectors such as transport, travel and hospitality.
  - Treasury to accelerate clearance of payment obligations to ease liquidity constraints of enterprises.
- Fiscal management measures:
  - Suspension or reduction of non-essential expenditures, including capital outlays outside the health sector, to accommodate increased spending.
  - Creation of a special fund to receive contributions from the private sector and citizens; fund to be run in line with budgetary and accounting procedures.
  - Authorities engaged with the donor community to fill the financing gap.
- Financial sector measures:
  - Increase resources of the Guarantee Fund to facilitate bank credit to enterprises and SMEs in affected sectors.
  - Regional central bank (BCEAO) measures: increase liquidity to banks on preferential terms; develop support mechanisms to SMEs via a dedicated refinancing instrument; postpone deadlines for loan repayment in collaboration with banks; extend availability of digital means of payment while reducing their cost.
- Transparency and accountability:
  - All COVID-19 spending will be subjected to quarterly reporting and to an independent and comprehensive audit.
  - Authorities will publish regularly on the Government’s website documentation on public procurement projects, ex-post validation of delivery, and names of companies and beneficiaries.
- Conditionality of measures:
  - New spending measures will be temporary and aimed to address specific needs induced by the crisis.

### ECF program status and post-pandemic policy priorities
- Authorities remain committed to the ECF-supported program and advancing the development agenda once the health crisis abates.
- Second review under the ECF could not take place in a timely manner given current circumstances, but preliminary data point to:
  - Reaching of performance criteria.
  - Notable progress on structural reforms, including in public financial management.
- Priority reforms to be accelerated:
  - Digitization and modernization of the tax and customs administrations to ensure continuity of tax collection.
  - Energy sector efficiency improvements.
  - Advancing the fight against corruption.
  - Improving the AML/CFT framework.

### Conclusion and request to IMF Directors
- Malian authorities face urgent fiscal and balance of payments needs to strengthen health system capacities and cope with severe economic disruptions.
- Authorities remain determined to pursue WAEMU convergence criteria and implement structural reforms to achieve higher, more sustained and inclusive economic growth.
- Request: approval of emergency financing under the RCF and rephasing of access under the ECF in view of increased financing needs and the authorities’ commitment to macroeconomic stability and the development agenda.

*Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1mliea2020002.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1mliea2020002.pdf_