## Mali Country Report (1mliea2021003) — Executive Summary and Selected Chapters ## Source details **Canonical URL:** [Mali Country Report (1mliea2021003) — Executive Summary and Selected Chapters](https://www.imf.org/-/media/files/publications/cr/2021/english/1mliea2021003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1mliea2021003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1mliea2021003.pdf.json) --- ### Context, shocks, and risks - Coup d’état on August 18, 2020 led to international disengagement and an ECOWAS economic blockade until appointment of a transitional government in October 2020. - Fund engagement suspended during the sanctions period; technical assistance continued and reengagement resumed after international recognition of the transitional government in early October. - COVID-19 pandemic compounded socio-political and long-standing security challenges; second wave in fall–winter 2020–21 peaked at over 100 daily cases (7-day moving average) in December 2020, with a death rate of 3.8 percent (Executive Summary) and 267 deaths among 5,969 registered cases as of December 17, 2020 (Annex II). - Main risks: - Continued political and social instability. - Uncertainty around pandemic trajectory. - Potential fiscal financing needs if regional markets tighten and donor support is subdued. ### IMF engagement, program status, and waivers - ECF program: three-year Extended Credit Facility; first review completed January 2020. - Pandemic support: - Rapid Credit Facility: 78.6 percent of quota, 1.2 percent of GDP, approved April 30, 2020. - Catastrophe Containment Relief Trust: first tranche 0.06 percent of GDP approved April 13, 2020; second tranche approved October 30, 2020. - Program performance: - All end‑December 2019 quantitative performance criteria met. - End‑June 2020 test date: three out of four end‑June PCs missed; two continuous PCs breached due to sanctions-related freeze of access to the Treasury Single Account. - Total missed debt service payments: US$57 million or 0.3 percent of GDP; 0.2 percent of GDP to external creditors and 0.1 percent of GDP to regional creditors; external arrears totaled 0.01 percent of GDP and were repaid immediately after sanctions lifted. - Staff supports waivers for non‑observance of program conditionality related to coup and pandemic disruptions. - Completion of second and third reviews will release SDR40 million (US$57 million, or 21.4 percent of quota), on‑lent to the government by BCEAO. ### Recent macroeconomic developments and outlook - Growth and poverty: - Real GDP growth estimated at around -2 percent in 2020 (versus around 5 percent averaged during past six years). - Downturn expected to increase extreme poverty incidence by over 850,000 people (World Bank estimate). - Inflation and prices: - Food prices (58½ percent of consumer basket) rose to 5 percent year-on-year as of November 2020. - Headline inflation moved into positive territory in 2020 after deflation in 2019; average inflation expected about 0.7 percent in 2020. - External sector: - Improved terms of trade in 2020 due to significantly higher gold prices and lower oil prices. - Current account deficit estimated to improve to 2 percent of GDP in 2020 from 4.8 percent in 2019. - Overall external position estimated as an overall surplus in 2020 despite drop in capital and financial flows. - Banking sector: - Strong capital buffers in WAEMU region at end-June 2020; adequate liquidity. - NPLs: 10.4 percent at end‑December 2019 to 10.7 percent at end‑September 2020; microfinance NPLs rose from around 7.1 percent at end‑December 2019 to 8.3 percent at end‑September 2020; microfinance accounts for about 5 percent of private credit. - Temporary regulatory forbearance on NPL classification and provisioning until end‑2020; recognition of losses and higher provisioning needs expected to strain credit availability. ### Key quantitative indicators (selected exact figures) - Real GDP growth (percent): 2017: 5.3; 2018: 4.7; 2019 (Prog.): 5.1; 2019 (Est.): 4.8; 2020 (Prog.): 5.0; 2020 (RCF Proj.): 0.9; 2020 (Proj.): -2.0; 2021 (Prog.): 5.0; 2021 (Proj.): 4.0; 2022 (Prog.): 5.0; 2022 (Proj.): 6.0. - Consumer price growth (average, percent): 2017: 1.8; 2018: 1.7; 2019 (Prog.): -0.4; 2019 (Est.): -2.9; 2020 (Prog.): 0.6; 2020 (RCF Proj.): 0.6; 2020 (Proj.): 0.7; 2021 (Prog.): 2.0; 2021 (Proj.): 1.5; 2022 (Prog.): 2.3; 2022 (Proj.): 2.0. - Public debt (central government, percent of GDP): 2017: 35.5; 2018: 36.1; 2019 (Prog.): 38.3; 2019 (Est.): 40.5; 2020 (Prog.): 39.0; 2020 (RCF Proj.): 44.6; 2020 (Proj.): 44.1; 2021 (Prog.): 39.5; 2021 (Proj.): 46.2; 2022 (Prog.): 39.7; 2022 (Proj.): 46.9. - Overall balance (central government, percent of GDP): 2017: -2.9; 2018: -4.7; 2019 (Prog.): -2.9; 2019 (Est.): -1.7; 2020 (Prog.): -3.5; 2020 (RCF Proj.): -6.2; 2020 (Proj.): -5.5; 2021 (Prog.): -3.3; 2021 (Proj.): -5.5; 2022 (Prog.): -3.0; 2022 (Proj.): -4.5. - Tax revenue (percent of GDP): 2017: 15.2; 2018: 11.9; 2019 (Prog.): 14.6; 2019 (Est.): 14.8; 2020 (Prog.): 15.5; 2020 (RCF Proj.): 13.3; 2020 (Proj.): 14.1; 2021 (Prog.): 15.7; 2021 (Proj.): 14.6; 2022 (Prog.): 15.9; 2022 (Proj.): 14.8. - Current account (percent of GDP): 2017: -7.3; 2018: -4.9; 2019 (Prog.): -4.8; 2019 (Est.): -4.8; 2020 (Prog.): -4.4; 2020 (RCF Proj.): -3.6; 2020 (Proj.): -2.0; 2021 (Prog.): -4.6; 2021 (Proj.): -2.4; 2022 (Prog.): -5.2; 2022 (Proj.): -2.9. ### Fiscal developments, recalibration, and trajectory - 2020 fiscal outturn and drivers: - Overall deficit for 2020 expected to widen from 3.5 percent of GDP target at first ECF review to 5.5 percent of GDP. - Supplementary 2020 budget targeted a deficit of 6.2 percent of GDP reported at time of RCF and second CCRT requests. - Deterioration driven by pandemic-related revenue decline, delays in sale of third telecom license, and pandemic spending; temporary disengagement of donors after the coup led to decline in grants and budget support. - Wage and SOE pressures: - Teacher salaries increased by some 33 percent in 2020. - Public wage bill expected to reach 7.1 percent of GDP in 2021 (2 percentage points above its level in 2019); public wage bill will absorb about half of tax revenue, well above WAEMU convergence criterion of 35 percent. - EDM subsidies about 0.3 percent of GDP traditionally budgeted yearly; structural deficit of EDM around 0.8 percent of GDP; arrears to suppliers: 1.2 percent of GDP in 2020 (CFAF 125 billion in November 2020). - Recalibrated program targets: - 2021 deficit: 5.5 percent of GDP. - 2022 deficit: 4.5 percent of GDP. - 2023 deficit: 3.5 percent of GDP. - 2024 target: WAEMU regional 3 percent of GDP ceiling. - Public debt projected to peak at about 47 percent of GDP in 2023; debt assessed at moderate risk of debt distress. ### Fiscal policy priorities and specific reform measures - Revenue mobilization (aim: about 1 percent of GDP in tax policy measures ahead of 2022 budget): - Options: modify excise taxes; widen tax base in e-trade, agriculture, informal sector; introduce a communications tax; reform property taxation (including taxation of undeveloped land). - Commitments and benchmarks: - Exhaustive review of tax spending by June 2021 (new structural benchmark). - Continuous structural benchmark: no granting of discretionary exemptions or making discretionary tax changes for remainder of program. - Strengthen controls over imported petroleum products, including color-tracing of fuel exempted from taxation (new structural benchmark). - Expenditure-side measures and SOE oversight: - Comprehensive study of compensation policies by June 2021 (new structural benchmark). - Audit of civil service and creation of a single comprehensive computerized database for local government civil service. - Establish a specialized oversight unit to monitor SOEs by end-2021 (new structural benchmark). - Increase control over procurement rules and practices of subsidized SOEs; require procurement consistent with Public Procurement Code (new structural benchmark). - Public financial management and digitalization: - Roll out expenditure commitment plans from 8 pilot ministries to remaining ministries during 2021; integrate plans into PRED and develop automatic approval of new expenditure commitments in 2022. - Expand TSA coverage to 50 institutions by end-2021 and remaining public institutions by mid-2022. - Finalize interconnectivity between AICE2, SIGTAS, ASYCUDA WORLD, SIGED before end‑September 2021 (new structural benchmark). - Transition to electronic payments by central government; operationalization expected by end‑June 2021 (delayed by pandemic). - Revenue administration and customs reforms (timing and prior actions): - Launch electronic payment of taxes for a selection of large firms in January 2021; extend to all large firms by end‑June 2021 (new structural benchmark) and to medium-size firms by January 2022. - ASYCUDA WORLD “Value” Module: transaction value applied to 45 products as prior action; full automatization by end‑April 2021. - Extend electronic acceptance of cargo manifests to all airlines; rollout to remaining airlines expected during 2021. ### Electricity sector (EDM-SA) reform and stabilization - Medium-term recovery plan agreed with World Bank to strengthen EDM-SA and eliminate government subsidies over the medium term (MEFP¶19). - Key elements: - Improve generation mix toward low-cost production and energy imports; avoid diesel-based emergency contracts. - Clear recent arrears according to renegotiated schedule; if needed, include in budget to ensure uninterrupted supply. - Increase revenue and reduce structural deficit; arrears to suppliers were 1.2 percent of GDP in 2020. - Performance contract signed November 2019; monitoring and implementation have lagged, government committed to redoubling efforts. ### Governance, anti-corruption, and transparency measures - Anti-corruption reforms include broadening mandatory asset declaration applicability to politically exposed persons, senior civil service and armed forces officials, members of parliament, and managers of public enterprises; revised legislation expected approved by government by end‑March 2021 (delayed structural benchmark) and by parliament by end‑2021. - Compliance with mandatory asset declaration dropped to 8 percent as of December 12, 2020 (from 23 percent at end‑2019 and 50 percent at end‑2018). - Transparency commitments: - Publish monthly COVID‑19 expenditure reports (publication started in November 2020). - Independent audit of COVID‑19 related expenditure by BVG to be published by end‑July 2021 (new structural benchmark). - Publish documentation on large public procurement contracts, including beneficial ownership, by end‑May 2021 (new structural benchmark). - AML/CFT: - GIABA mutual evaluation (November 2019) noted low effectiveness; action plan prepared and authorities committed to approving it without delay. - Actions underway: amend Criminal Code for terrorism financing offence; establish asset management agency for confiscated assets; national AML/CFT risk assessment ongoing (started October 2018). ### Vaccination plan and fiscal adjustor - National vaccination plan envisages rollout of about 8.4 million doses under COVAX starting April 2021 to cover about 20 percent of the population (around 40 percent of population above age 15). - Priority groups: medical workers 4 percent of population; people over 60 years 6 percent of population; those with underlying conditions 10 percent of population. - Mali opted for AstraZeneca vaccine. - Vaccination cost (excluding logistics and equipment): around USD 78 million (CFAF 39 billion) or 0.4 percent of GDP; one-fifth financed by GAVI and the World Bank. - ECF program includes an adjustor for vaccination costs up to 0.3 percent of GDP to limit fiscal risks (TMU¶18). ### Alternative adverse scenario: protracted pandemic in 2021 - Assumptions and impacts: - Slower growth in 2021 with permanent output losses; private consumption and investment contract further. - Lower tax revenues at 13.9 percent of GDP vs 14.4 percent of GDP in baseline in 2021. - Fiscal deficit assumed to increase to 6 percent in 2021 (baseline 5.5 percent). - Public debt to GDP ratio will rise to almost 49 percent of GDP in 2021 and remain above 49 percent into 2023 before declining. - External position: lower volumes of cotton and gold exports, remittances and travel; lower imports of petroleum and other goods. - Policy options if adverse scenario materializes: - Continue accommodating health spending and emergency lifelines for vulnerable groups. - Expenditure prioritization, limit growth in public wage bill, consider hiring freezes. - Accelerate tax and customs administration reforms; speed up adoption of tax policy measures easier to implement (communications tax, excise tax reforms, reducing tax exemptions). - Accelerate TSA implementation and prioritize digitalization of tax filing/payments and automatic data exchange. - Seek additional external concessional financing, further issuances on regional market, or Fund financial support. ### Debt sustainability and financing - Debt sustainability: - Public debt projected to peak at about 47 percent of GDP in 2023; debt remains at moderate risk of debt distress. - End‑2019 public debt: 40.5 percent of GDP; external debt CFAF 2,682 billion (26.4 percent of GDP); domestic debt 14.0 percent of GDP in 2019. - Average effective rate: domestic debt 5.8 percent; external debt 1.4 percent. - Contingent liabilities and stress testing: - SOE contingent liability shock revised to 5 percent of GDP (up from default 2 percent). - PPP component calibrated at 1.3 percent of GDP; financial sector shock at default 5 percent of GDP; total contingent liabilities for stress test estimated at 11.3 percent of GDP. - Financing mix and near‑term financing: - Higher deficits financed through increased access to domestic and regional (WAEMU) financial markets, with attendant risks of higher debt servicing costs and financing availability. - Upside risk: additional external concessional budget support under consideration by donors. - With projected support from development partners and the Fund, program fully financed for next twelve months. - Debt relief and suspension measures: - CCRT relief: CFAF 11.5 billion (about 0.12 percent of GDP) for April 2020–April 2021; 3rd and 4th tranches expected CFAF 12.2 billion (about 0.12 percent of GDP) for April 2021–April 2022. - DSSI: requested around 0.25 percent of GDP for May–December 2020; 0.07 percent of GDP effectively suspended as of December 2020; extension requested for January–June 2021 with expected reduction 0.23 percent of GDP and agreement on 0.05 percent of GDP. ### Monitoring, reporting, and program implementation mechanics - Performance criteria, adjustors and reporting: - Key continuous PCs: non-accumulation of domestic and external payment arrears (temporarily rephased for operational reasons and sanctions). - Ceiling on Net Domestic Financing adjusted upward if external budget support falls short up to maximum CFAF 144 billion; ceiling on overall fiscal deficit adjusted upward by shortfall in budget support up to CFAF 45 billion; ceiling adjusted for unbudgeted COVID vaccination spending up to CFAF 30 billion. - Reporting requirements: frequent reporting across real sector, public finance, monetary, balance of payments, and external debt datasets with specified frequencies and deadlines (e.g., central government TOFE monthly, month‑end + 4 weeks provisional). - Structural benchmark implementation summary: - Four of ten SBs covered by second and third reviews met on time; three implemented with delay; three remain outstanding but expected soon. - Specific prior actions met: operationalization of two tax centers in Bamako. - Program financing and capacity to repay: - Total outstanding Fund credit in 2020: SDR383.2 million or 205.3 percent of quota. - Mali’s obligations to the Fund will peak in 2027 at 3.2 percent of government revenue or 0.6 percent of GDP. ### Selected high-frequency and sectoral indicators (high-level points) - Mobility and activity: mobility to shops and public transport fell with outbreak then picked up by end‑2020; NO2 levels fell in 2020 indicating lower activity. - Gold sector: gold made up over 80 percent of total exports in 2020; gold price surge improved terms of trade in 2020. - External financing requirements (Table 11, Billions of CFAF): Financing need by year: 2019: 852; 2020: 436; 2021: 670; 2022: 855; 2023: 991. - Banking indicators (selected): series of gross NPLs examples include 15.6, 16.7, 16.8, 13.5, 11.8, 10.4, 10.2, 10.7 (across years); provisioning and regulatory capital ratios series provided in chapter tables. *International Monetary Fund staff summary based on the ECF program reviews and MEFP references provided in the source content.* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - A coup d’état on August 18, 2020 led to international disengagement with Mali and an economic blockade by ECOWAS until the appointment of a transitional government in October. - Fund engagement was put on hold during this period, delaying resumption of discussions under the 2nd and 3rd reviews of the ECF. - The transitional government, to be in place for 18 months until general elections, announced full adherence to international obligations and commitments of the previous government, including the reform agenda under the ECF. - The socio-political crisis compounded challenges from the COVID-19 pandemic and a long-standing security situation. - Pandemic specifics: - Second wave in fall-winter 2020-21 peaked at over 100 daily cases (based on a 7-day moving average) in December 2020, with a death rate of 3.8 percent. - National vaccination plan envisages rollout under COVAX starting in April 2021 to cover 20 percent of the population (around 40 percent of population above the age of 15). - Security remains volatile with high incidence of terrorist attacks in northern and central regions, causing displacement and constraining policymaking. ### IMF engagement and recent actions - First review under the IMF’s three-year Extended Credit Facility (ECF) completed in January 2020. - IMF support during the pandemic: - COVID-19 emergency support under the Rapid Credit Facility (78.6 percent of quota, 1.2 percent of GDP), approved on April 30, 2020. - First tranche of debt service relief under the Catastrophe Containment Relief Trust (0.06 percent of GDP) approved on April 13, 2020; second tranche approved on October 30, 2020 after reengagement. - ECF reengagement resumed after international recognition of the transitional government in early October; technical assistance continued throughout. ### Program performance - Performance under the second review: all end-December 2019 performance criteria (PCs) met. - Performance at end-June 2020 (test date for the third review) was mixed: - Impact of the pandemic and required policy response made program targets inconsistent with macroeconomic context and/or infeasible. - Two continuous PCs were not met due to post-coup sanctions that froze authorities’ access to the treasury account. - Structural reforms progressed steadily but at a slower pace than programmed. ### Key policies and program recalibration - Program recalibrated to the new macroeconomic and policy environment while maintaining objectives of fiscal sustainability and advancing structural reforms to support: - Revenue mobilization. - More efficient use of public resources. - Stronger governance. - Specific changes include: - (i) Temporary loosening of fiscal targets in light of the deterioration in the macroeconomic outlook. - (ii) Preparing the stage for a higher quality fiscal consolidation starting in 2022, including by preparing tax policy measures and addressing pressure points from wage setting and SOE performance. - (iii) Deepening governance reforms. ### Key risks - Main risks: - Continued political and social instability. - Uncertainty surrounding the path of the pandemic. - Potential fiscal financing needs if regional markets tighten and donor support is subdued. - Staff prepared an alternative adverse scenario that assumes a major COVID-19 outbreak in early 2021 causing slower growth (see Annex III). ### Recent economic developments and outlook (selected findings) - 2020 growth and poverty: - Real GDP growth estimated to have declined to around -2 percent in 2020 (versus around 5 percent averaged during the past six years). - Downturn expected to increase extreme poverty incidence in Mali by over 850,000 people (World Bank estimates). - Inflation and prices: - Food prices (58½ percent of the consumer basket) rose to 5 percent year-on-year as of November 2020. - Headline inflation moved into positive territory in 2020 after deflation in 2019. - External sector: - Improved terms of trade in 2020 due to significantly higher gold prices and lower oil prices. - Current account deficit estimated to improve to 2 percent of GDP in 2020 from 4.8 percent in 2019. - Despite a drop in capital and financial flows, flows remained sufficient to cover the smaller current account deficit, resulting in an estimated overall surplus for the external position in 2020. - Banking sector: - Stable at pandemic onset with among the strongest capital buffers in the WAEMU region at end-June 2020 and overall adequate liquidity. - Asset quality relatively weak; NPLs slightly deteriorated from 10.4 percent at end-December 2019 to 10.7 percent at end-September 2020. - Temporary regulatory forbearance on NPL classification and provisioning until end-2020 may have contained immediate impact; recognition of losses and higher provisioning needs expected to strain credit availability. - Microfinance institutions’ NPLs rose from around 7.1 percent at end-December 2019 to 8.3 percent at end-September 2020; these institutions account for about 5 percent of private credit. - Outlook: - Baseline: growth expected to pick up to 4 percent in 2021 and to settle around 5 percent medium-term potential. - Headline inflation projected to gradually recover to BCEAO target of 2±1 percent. - Current account expected to widen with stronger domestic demand and a projected slower growth in volume of gold production/exports (about 80 percent of total exports), though terms of trade remain notably above historical levels. - Downside risks dominate given political instability, pandemic uncertainty, and potential fiscal financing pressures. ### Key quantitative indicators (Text Table 1, Selected entries) - Real GDP growth (percent): 2017: 5.3; 2018: 4.7; 2019 (Prog.): 5.1; 2019 (Est.): 4.8; 2020 (Prog.): 5.0; 2020 (RCF Proj.): 0.9; 2020 (Proj.): -2.0; 2021 (Prog.): 5.0; 2021 (Proj.): 4.0; 2022 (Prog.): 5.0; 2022 (Proj.): 6.0. - Consumer price growth (average, percent): 2017: 1.8; 2018: 1.7; 2019 (Prog.): -0.4; 2019 (Est.): -2.9; 2020 (Prog.): 0.6; 2020 (RCF Proj.): 0.6; 2020 (Proj.): 0.7; 2021 (Prog.): 2.0; 2021 (Proj.): 1.5; 2022 (Prog.): 2.3; 2022 (Proj.): 2.0. - Public debt (central government, percent of GDP): 2017: 35.5; 2018: 36.1; 2019 (Prog.): 38.3; 2019 (Est.): 40.5; 2020 (Prog.): 39.0; 2020 (RCF Proj.): 44.6; 2020 (Proj.): 44.1; 2021 (Prog.): 39.5; 2021 (Proj.): 46.2; 2022 (Prog.): 39.7; 2022 (Proj.): 46.9. - Overall balance (central government, percent of GDP): 2017: -2.9; 2018: -4.7; 2019 (Prog.): -2.9; 2019 (Est.): -1.7; 2020 (Prog.): -3.5; 2020 (RCF Proj.): -6.2; 2020 (Proj.): -5.5; 2021 (Prog.): -3.3; 2021 (Proj.): -5.5; 2022 (Prog.): -3.0; 2022 (Proj.): -4.5. - Tax revenue (percent of GDP): 2017: 15.2; 2018: 11.9; 2019 (Prog.): 14.6; 2019 (Est.): 14.8; 2020 (Prog.): 15.5; 2020 (RCF Proj.): 13.3; 2020 (Proj.): 14.1; 2021 (Prog.): 15.7; 2021 (Proj.): 14.6; 2022 (Prog.): 15.9; 2022 (Proj.): 14.8. - Other revenues and grants (percent of GDP): 2017: 4.9; 2018: 3.7; 2019 (Prog.): 7.3; 2019 (Est.): 6.7; 2020 (Prog.): 7.4; 2020 (RCF Proj.): 7.6; 2020 (Proj.): 5.9; 2021 (Prog.): 7.0; 2021 (Proj.): 7.1; 2022 (Prog.): 7.1; 2022 (Proj.): 4.7. - Expenditure (percent of GDP): 2017: 22.9; 2018: 20.3; 2019 (Prog.): 24.8; 2019 (Est.): 23.1; 2020 (Prog.): 26.4; 2020 (RCF Proj.): 27.1; 2020 (Proj.): 25.5; 2021 (Prog.): 25.9; 2021 (Proj.): 27.1; 2022 (Prog.): 26.0; 2022 (Proj.): 25.7. - Current account (percent of GDP): 2017: -7.3; 2018: -4.9; 2019 (Prog.): -4.8; 2019 (Est.): -4.8; 2020 (Prog.): -4.4; 2020 (RCF Proj.): -3.6; 2020 (Proj.): -2.0; 2021 (Prog.): -4.6; 2021 (Proj.): -2.4; 2022 (Prog.): -5.2; 2022 (Proj.): -2.9. *Source: EXECUTIVE SUMMARY, Mali Country Report (February 8, 2021).* ### 11. Fiscal performance was relatively strong in 2019, while deviations in 2020 reflect the ### 11. Fiscal performance was relatively strong in 2019, while deviations in 2020 reflect the ### Fiscal outturns and performance criteria (PCs) - End-December 2019 (second review) - All end-December quantitative performance criteria (PCs) were met. - Overall deficit narrowed to 1.7 percent of GDP in 2019, compared to the 3 percent of GDP ceiling under the program. - Revenue administration efforts recovered most of the 2018 revenue shortfall, slightly exceeding program targets. - Delayed budgetary support restrained capital spending and contributed to a lower deficit than targeted; priority social and development spending increased versus 2018 but fell short of the indicative target for 2019. - End-June 2020 (third review) - Three out of four end-June PCs were missed, with one only marginally missed. - Tax revenues came below target due to the pandemic, temporary tax relief and deferral measures adopted in mid-April, and limited enforcement capacity under pandemic conditions. - End-June indicative floor on priority spending was exceeded by a wide margin due to pandemic-related health sector spending. - Government reinined non-priority spending, resulting in a de minimis underperformance under the ceiling on the overall fiscal deficit. - Authorities sought additional financing in H1 2020 not foreseen in the program, including from the IMF emergency window, resulting in a breach of the end-June 2020 ceiling on net domestic financing. - Performance criterion on new external borrowing was met due to limited new disbursements. - Continuous PCs and arrears - Breaches to the two continuous PCs—on non-accumulation of domestic payment arrears and external payment arrears—emerged from the sanctions-related freeze in access to the Treasury Single Account in September-October 2020. - Total missed debt service payments amounted to US$57 million or 0.3 percent of GDP, of which 0.2 percent to external creditors and 0.1 percent to regional creditors. - Only 0.01 percent of GDP represented external arrears; the authorities repaid total external payment arrears—reported at 0.01 percent of GDP—immediately following removal of sanctions in early October 2020. - Domestic payment arrears—reported at 0.2 percent of GDP at end-October 2020—were cleared during November 2020. - No domestic or external payment arrears were reported at the end of other months in 2020. ### Structural reform implementation - Overall progress - Four of ten structural benchmarks (SBs) covered by the second and third reviews were met on time. - Three additional SBs were implemented with delay. - Three SBs remain outstanding but are expected to be implemented soon. - Revenue administration benchmarks (six of seven implemented) - Implemented measures included: - Formalizing collaboration and information-sharing among revenue collection agencies. - Automating procedures for import exemption regimes. - Preparing for application of transaction import values at customs (implemented with delay). - Preparing an action plan for tax payments through mobile banking. - Limiting expedited customs clearance procedures (D24) to urgent and perishable goods and only at the airport customs (implemented with delay). - Operationalization of two tax centers for medium-sized businesses finalized as a prior action. - Outstanding SB: electronic transmission of airline cargo manifests implemented in major airlines (covering more than 85 percent of total cargo); rollout to remaining airlines expected during 2021. - Ongoing reforms to enable widespread electronic tax filing and tax payments. - Public financial management (PFM) - Delay in meeting the structural benchmark on enabling electronic payments by the Treasury resolved by the transitional government; reforms expected completed by end-June 2021. - Introduced new public accounting software; piloted expenditure commitment plans in eight ministries; continued consolidating the Treasury Single Account. - Governance - Revision of the Law on the Prevention and Suppression of Illicit Enrichment stalled, missing the end-March 2020 structural benchmark. ### Pandemic, coup, financing, and fiscal trajectory - 2020 fiscal developments - Overall deficit for 2020 expected to widen from the 3.5 percent of GDP target at the first ECF review to 5.5 percent of GDP. - Deterioration drivers: pandemic-related decline in revenues, delays in sale of third telecommunication license, expenditure measures to combat the pandemic. - Supplementary 2020 budget targeted a deficit of 6.2 percent of GDP reported at the time of the RCF and second CCRT requests. - Temporary disengagement of international and regional partners after the coup led to significant decline in grants and budget support; authorities tightened fiscal stance through non-priority investment cuts. - Authorities targeted a 5½ percent of GDP deficit for 2020; end-December 2020 program targets modified via a stand-alone Board decision. - Wage and employment pressures - Teacher salaries increased by some 33 percent in 2020, placing them among the highest in the public salary grid. - Public employment increases initiated for 2020-2022 driven by higher security needs and an agreement to increase youth employment following an increase in retirement age under 2019 pension and labor code reforms. - Public wage bill expected to reach 7.1 percent of GDP in 2021 (2 percentage points above its level in 2019). - Public wage bill will absorb about half of tax revenue far above the convergence criterion in the WAEMU that limits it to 35 percent. - SOE pressures and revenue outlook - Recognition of higher past subsidies to the cotton company and additional transfers to the electricity company required in 2020 will continue to pressure fiscal position. - Revenue envelope expected to expand slower than initially estimated under the program with more conservative assumptions on yield of revenue administration reforms. - Recalibrated program trajectory - Program targets unchanged deficit in 2021 of 5.5 percent of GDP to allow needed investment and priority spending for recovery. - Authorities committed to narrowing deficit to 4.5 of GDP in 2022 and 3.5 percent in 2023, before reaching the regional 3 percent target in 2024. - Public debt projected to peak at about 47 percent of GDP in 2023; debt assessed to remain at moderate risk of debt distress. - Higher deficits will be financed through increased access to domestic and regional (WAEMU) financial markets, with attendant risks of higher debt servicing costs and financing availability; additional external concessional budget support represents upside risk. ### Fiscal policy priorities and measures (policy recommendations and planned reforms) - Revenue mobilization (anchor for adjustment) - Prepare tax policy measures yielding around 1 percent of GDP ahead of the 2022 budget from options including: - Modifying excise taxes. - Widening tax base in e-trade, agriculture, informal sector. - Introducing a communications tax. - Reforming property taxation, including taxation of undeveloped land (MEFP¶7). - Commitments and benchmarks: - Exhaustive review of tax spending by June 2021 to streamline exemptions (new structural benchmark). - Continuous structural benchmark: no granting of discretionary exemptions or making discretionary tax changes for remainder of program. - Strengthen controls over imported petroleum products, including color-tracing of fuel exempted from taxation (new structural benchmark). - Strengthen controls over equipment qualifying for tax exemptions (especially in mining companies). - Expenditure-side measures - Forestall unsustainable wage bill pressures via: - Comprehensive study of compensation policies supported by international partners (new structural benchmark). - Audit of civil service to reconfirm staffing levels and identify ghost workers. - Create a single comprehensive computerized database for the local government civil service (MEFP¶8). - Improve monitoring of risks from public enterprises: - Set up a specialized oversight unit to monitor SOEs (new structural benchmark). - Increase control over procurement rules and practices of subsidized SOEs; require procurement be consistent with general public procurement framework (new structural benchmark). - Short-term commitment to allocate above-budget revenues to additional transfers to avoid supplier arrears at electricity company EDM; subsidies to EDM about 0.3 percent of GDP traditionally budgeted yearly; structural deficit of EDM around 0.8 percent of GDP. - Public financial management reforms (critical) - Strengthen commitment controls to manage budgetary float and arrears; roll out expenditure commitment plans from 8 ministries to remaining ministries during 2021; integrate plans into PRED through a commitment plan management module; use plans to develop budget execution ceilings and automatic approval of new expenditure commitments in 2022. - Strengthen oversight and data availability for public entities outside central government; require EPN consolidated accounts to be published biannually starting December 2021. - Integrate public accounts into the Treasury Single Account (TSA): plan to expand TSA coverage to 50 institutions by end-2021 and remaining public institutions by mid-2022; about 90 percent of 125 public entities still maintain accounts outside TSA. - Automatic data sharing between the Treasury and revenue agencies: finalize interconnectivity between AICE2, SIGTAS, ASYCUDA WORLD, SIGED before end-September 2021 (new structural benchmark). - Transition to electronic payments by central government, including all wages and salaries; development and operationalization delayed by pandemic, expected finalized by end-June 2021; electronic payment of wages to security forces not yet planned. - Address other PFM weaknesses: strengthen investment project management, public procurement, internal controls, and public-private partnership framework (MEFP¶16-17). - Digitalize all public administration procedures and services; planned governance assessment mission to review budget execution and public procedures (procurement contracts, mortgage, land, property registries). - Revenue administration and customs reforms (implementation timeline) - Launch electronic payment of taxes for a selection of large firms in January 2021; extend to all large firms by mid-2021 (new structural benchmark) and to medium-size firms by January 2022 (MEFP¶12). - Allow all banks, by end-2021, to develop e-payment platforms; payment of some taxes through mobile banking enabled before September 2021. - Strengthen monitoring of large and medium taxpayers; operationalize two new tax centers in Bamako (delayed SB implemented as prior action). - Modernize VAT credit refund procedures and audit VAT refunds granted in recent years. - Customs reforms: - Application of transaction value in collection of customs duties: initial module implemented for 45 products as prior action; full automatization by end-April 2021. - Extend electronic acceptance of cargo manifests to all airlines. - Reform the Customs Code (MEFP¶13). ### Fiscal projections, risks, and financing considerations - Program fiscal path and targets - 2020 deficit: targeted 5.5 percent of GDP (revised from 3.5 percent target at first review); supplementary 2020 budget had targeted 6.2 percent of GDP. - 2021 target: 5.5 percent of GDP. - 2022 target: 4.5 percent of GDP. - 2023 target: 3.5 percent of GDP. - 2024 target: WAEMU regional 3 percent of GDP ceiling. - Debt dynamics - Public debt projected to peak at about 47 percent of GDP in 2023. - Debt remains at moderate risk of debt distress (see Debt Sustainability Analysis). - Financing mix and risks - Higher deficits financed through increased access to domestic and regional (WAEMU) financial markets. - Reliance on regional markets carries risks of higher debt servicing costs and financing availability given potential tightening across WAEMU. - Upside risk: additional external concessional budget support under consideration by donors. - 2021 assumed reduction in external financing though additional budget support being considered. _International Monetary Fund staff summary based on the ECF program reviews and MEFP references provided in the source content._ ### 19. A reliable electricity supply provided by a financially sound and well-run electricity ### 19. A reliable electricity supply provided by a financially sound and well-run electricity company is critical for improving the business climate ### Electricity sector reform and financial stabilization - Medium-term recovery plan for the electricity sector agreed with the World Bank aims to strengthen the financial position of the state-owned company (EDM-SA) and eliminate government subsidies over the medium term (MEFP¶19). - Plan focus areas: - Improving the power generation mix by increasing reliance on low cost production and energy imports. - Moving away from diesel-fuel–based and expensive emergency production contracts. - Ensuring recent arrears accumulated by EDM vis‑à‑vis Côte D’Ivoire electricity suppliers are cleared according to the recently renegotiated schedule and, if needed, added in the budget to ensure uninterrupted electricity supply. - Increasing revenue while bringing the structural deficit down and reducing arrears to suppliers (1.2 percent of GDP in 2020). - Government and EDM-SA signed a performance contract in November 2019; monitoring and implementation have lagged, partly due to COVID-19 and recent political events, but the government is committed to redoubling efforts (MEFP¶19). ### Key statistics (electricity) - Arrears to suppliers: 1.2 percent of GDP in 2020. - Performance contract signed: November 2019. ### Policy implications and recommendations - Prioritize shifting generation toward lower-cost sources and imports to reduce costs and outages. - Clear arrears per renegotiated schedule; if necessary, include them in the budget to preserve uninterrupted supply. - Strengthen monitoring and implementation of the EDM-SA performance contract. ### Governance, anti-corruption, and rule of law - Anti-corruption reforms (MEFP¶24-26) include broadening mandatory asset declaration applicability to politically exposed persons, senior civil service and armed forces officials, members of parliament, and managers of public enterprises. - Revised legislation expected to be approved by the government by end‑March 2021 (delayed structural benchmark) and by parliament by end‑2021. - Compliance with mandatory asset declaration has dropped to 8 percent as of December 12, 2020, from 23 percent at end‑2019 and 50 percent at end‑2018. - Authorities have set up a call center for reporting illicit enrichment, corruption, and fraud to OCLEI, and will continue promoting coordination among control bodies and the Ministry of Justice. - Code of criminal procedures will be modified to introduce automatic referral of corruption cases by the prosecutor and to create a specialized economic and financial prosecution service. ### AML/CFT weaknesses and actions - GIABA mutual evaluation (November 2019) noted low effectiveness of Mali’s AML/CFT regime; key weaknesses include: - Criminalization of terrorism financing offences. - Capacity building needs in the Financial Intelligence Unit and investigative agencies. - Formalization of AML/CFT supervision of non-financial institutions. - Powers to confiscate proceeds from criminal offences. - Challenges: lack of state control over northern and southern territories where terrorist groups dominate; some gold mines may be used for terrorism financing; prevalence of cash transactions limits preventive measures. - Authorities committed to approving without delay the action plan drafted in response to the mutual evaluation report (MEFP ¶27). - Actions under way: - Amending the Criminal Code to correct deficiencies in the terrorism financing offence. - Establishing an asset management agency for confiscated assets. - AML/CFT national risk assessment (started October 2018 with World Bank support) delayed by COVID‑19 but underway. ### Transparency and pandemic spending - Authorities committed, in their letter of intent for the Rapid Credit Facility, to publish information on COVID‑19 spending and related procurement contracts, and to commission an audit of spending in about a year since the start of the pandemic. - Monthly publication on COVID‑19 expenditure reports started in November (prior action; met). - Independent audit of COVID‑19 related expenditure by the Office of the Auditor General (BVG) to be published by end‑July 2021 (MEFP¶22; new structural benchmark). - Authorities to publish, by end‑May 2021, documentation on large public procurement contracts, including beneficial ownership information of awarded entities (new structural benchmark). - LEG rapid technical assistance will be provided to help the authorities publish beneficial ownership information. ### Fiscal transparency and data publication - Transitional authorities requested a Governance Assessment expected in spring 2021, which will include a Fiscal Transparency Evaluation (FTE) using the “fiscal reporting” pillar methodology and identify digitalization reform needs in procurement, mortgage, land, and property registries. - Government committed to increasing fiscal data transparency: - Starting in March 2021, regular publication of information on domestic and external public debt and loan guarantees (MEFP¶18). - Publication of consolidated accounts of public institutions outside central government. ### Banking sector reforms - National reforms focus on removing non‑operating fixed assets from bank balance sheets (mainly land or residential buildings not exploited by credit institutions). - Such assets stood at over 13 percent of banks’ equity in June 2020 (prudential norm: 15 percent). - Authorities intend to establish in early 2021 an independent unit to manage fixed assets, capitalized by banks and other private investors (MEFP¶29). - Note: banking system supervised by regional WAEMU central bank; performance and reforms discussed in regional Article IV consultations. ### Program issues, monitoring, and waivers - Staff supports requested waivers for non‑observance of program conditionality and target recalibrations due to coup-related sanctions and the pandemic: - Waiver for continuous zero ceiling on external payment arrears: sanctions cut access to the Treasury Single Account; arrears were settled soon after sanctions lifted. - Waiver for continuous zero ceiling on domestic payment arrears: arrears accumulated in October 2020 due to lack of TSA access and were repaid in November 2020. - Waiver for floor on net tax revenue at end‑June 2020: revenue hit by COVID‑19 and policy measures; staff supports waiver given recovery efforts and revenue administration reforms. - Waiver for ceiling on overall fiscal deficit at end‑June 2020: de minimis breach; staff supports waiver given corrective actions. - Waiver for ceiling on net domestic financing at end‑June 2020: higher deficits required additional financing, including IMF RCF financing in April 2020 and special COVID bonds; staff supports waiver given measures to limit the fiscal deficit going forward and set it on a gradual path to meeting the regional 3 percent of GDP target in 2024. ### Program recalibration, financing, and monitoring - Program recalibrated to revised macroeconomic framework: - Performance criteria and indicative targets for end‑June 2021 and end‑December 2021 proposed in line with the new fiscal program; outstanding structural benchmarks rephased and new ones proposed for 2021. - Three prior actions for completion of the second and third reviews agreed and implemented. - Staff proposes temporarily downgrading continuous QPC on domestic supplier arrears to a continuous indicative target until expenditure commitment control mechanisms are in place. - With projected support from development partners and the Fund, the program is fully financed for the next twelve months. - Completion of the second and third reviews will release a disbursement of SDR40 million (US$57 million, or 21.4 percent of quota), on‑lent to the government by BCEAO. - Mali’s capacity to repay the Fund remains adequate: - Obligations to the Fund will peak in 2027 at 3.2 percent of government revenue or 0.6 percent of GDP. - Total outstanding Fund credit in 2020: SDR383.2 million or 205.3 percent of quota. - BCEAO safeguards assessment: one outstanding recommendation from 2018 related to strengthening the risk management function; central bank has maintained a strong control culture. ### Program risks, policy tradeoffs, and staff appraisal - Main implementation risks: continued political instability, macroeconomic uncertainty from the pandemic, and potential financing risks if regional markets tighten. - Mitigating measures: close monitoring of revenue developments and financing availability to restrain expenditure commitments while preserving priority spending (MEFP¶10; TMU¶19); potential additional measures include speeding up tax policy adoption or freezing hiring (Annex III). - Staff appraisal highlights: - Transitional authorities face a challenging environment with security concerns, a second wave of the pandemic, external financing constraints post‑coup, wage pressures, and poor public enterprise performance. - Temporary loosening of fiscal targets is appropriate to support near‑term recovery, with attention to sustainability and financing risks. - Staff supports collaboration with the World Bank to accelerate efficient social assistance targeting and cash transfers to vulnerable households. - Returning to the WAEMU 3 percent of GDP deficit ceiling by 2024 is essential; fiscal consolidation should start in 2022 and focus on mobilizing revenues through tax reform while protecting the vulnerable. - Reforms in revenue administration and public financial management—digitalization, tax e‑filing and e‑payments, data interconnectivity, automatic valuation of imports—are central to fiscal sustainability and governance. - Strengthening anti‑corruption legal and institutional frameworks and reducing impunity are critical; authorities must bring reforms to completion, enforce rule of law, and combat impunity. - Publication of COVID spending information and commissioning of the pandemic spending audit signal commitment to transparency and accountability of crisis spending. *Source: IMF staff report excerpt (1mliea2021003).* ### 35. Staff supports the completion of the second and third reviews on the basis of reforms ### 35. Staff supports the completion of the second and third reviews on the basis of reforms ### Program support, risks, and safeguards - Staff supports completion of the second and third reviews on the basis of reforms undertaken in the context of the reviews and policy commitments going forward. - The attached Memorandum of Economic and Financial Policies and Letter of Intent present the authorities’ policies for achieving the program objectives. - Significant implementation risks may emerge from continued political, social and security instability. - The authorities’ commitment to the reforms—as demonstrated through the pandemic and the socio-political crisis—and the monitoring safeguards will help mitigate the risks. - Increased donor support, catalyzed by the ECF, could create additional buffers. ### High-frequency indicators and short-term activity (Figure 1) - Mobility: With the COVID outbreak and containment measures, visits to grocery shops, restaurants and the use of public transport fell, but picked up by the end of the year (Google mobility index, change relative to pre-pandemic value, percent). - NO2 levels: Lower NO2 levels suggest slowdown in economic activity in 2020 (NO2 (Nitrogen Dioxide) Levels, parts per billion, seasonally adjusted). - International flights: International flights collapsed since April, but have picked up since to almost pre-pandemic level in December 2020 (International Flights per day, 7-day moving average). - Gold sector: After accelerating in Q2, growth in gold sector fell in Q3 and Q4, suggesting overall slowdown in gold sector in 2020 (Gold Production, yoy percent change, 4 months ma). - Industrial production: Industrial production growth has been generally volatile, but seems to continue slowing down after solid growth in Q1 (Industrial production index, yoy percent change). - Credit and deposits: Some acceleration in private credit and deposit growth in Q3 was cut short by the sanctions in place in September (Credit and deposit growth, yoy change, in percent). ### Real sector developments and projections (Figure 2) - 2020 GDP: GDP growth will drop in 2020 but it is expected to pick up next year and to stabilize around its potential over the medium term. - Comparative contraction: The pandemic and the political instability are projected to cause a contraction of Mali’s GDP that will likely be larger than that of the WAEMU average. - Primary sector: The primary sector is estimated to have contracted significantly in 2020, but is expected to recover in 2021. - Demand drivers: After an estimated contraction in 2020, private consumption is projected to drive the recovery as fiscal consolidation starts in 2022. - Output gap and inflation: - Output gap is estimated to be negative and expected to close gradually over the medium term. - Inflation has returned into a positive territory driven mainly by food prices (Consumer Price Index: Headline, Food, Energy, Core, percent, yoy). ### External sector developments and projections (Figure 3) - Current account: The current account balance improved significantly in 2020, but will widen again over the medium term. - Terms-of-trade linkage: Widening over the medium term is in line with developments in the terms-of-trade. - Gold exports: Exports of gold have increased significantly over the years, and made up over 80 percent of total goods exports in 2020 as international prices for gold soared. - Import composition: The composition of imports remains broadly stable (Petroleum products, Foodstuffs, Machines and vehicles, Construction materials, Other). - Balance of payments: The overall balance of payments is estimated to be positive in 2020 as current account deficit narrowed but will deteriorate over the medium term. - REER: The REER has appreciated during 2020, reflecting mainly nominal appreciation and strengthening euro. - Selected projections and levels (from Table 4a / 4b, CFAF billion and percent of GDP): - Current account balance (excluding official transfers) projections include: -744, -437, -994, -616, -783, -916, -1053, -1215 (values appear across years and scenarios in Table 4a). - Exports, f.o.b. examples: 1686, 1991, 2073, 2190, 2258, 2252, 2424, 2316, 2458, 2519, 2549, 2594, 2665. - Imports, f.o.b. examples: -2101, -2204, -2329, -2431, -2463, -2116, -2120, -2584, -2322, -2507, -2647, -2803, -2987. - Terms of trade and commodity prices: Terms of Trade and Gold, USD per troy ounce (LHS) series shown in projections. ### Fiscal sector developments and projections (Figure 4) - Fiscal balance near term: The fiscal balance is expected to deteriorate in the near term, while recovering to WAEMU targets over the medium term. - Public debt: Total public debt is projected to increase but remain at moderate risk of debt distress. - Revenues and spending: - Tax revenues are expected to fall in 2020 both due to lower economic activity and tax support measures. - Spending is on the rise as the authorities implement COVID-19 support measures and wage increases. - External budget support and financing: - External budget support is projected to sharply contract in 2021 and resume over the medium term. - In the near term the authorities will likely rely more on domestic market to finance increasing budget needs. - Fiscal aggregates and trajectories (percent of GDP charts shown): - Total revenue and grants, total expenditure, overall fiscal balance series across 2011–2025. - Public debt composition (Domestic debt, External debt, Total Public Debt) across 2011–2025. - Tax revenue composition (Direct tax, VAT, Excises on petroleum prod., Import duties, Other indirect tax) across 2011–2025. - Government spending components (Wages and salaries, Goods and services, Transfer and subsidies, Interest, Capital spending) across 2011–2025. - External public grants and loans (project loans, project grants, budget support loans, budget support grants) in CFAF Billion, gross disbursements. ### Monetary sector and banking (Figure 5, Tables 5–6) - Credit and deposits: - Credit growth accelerated in Q3 in both corporate and consumer segments after a slowdown in Q2. - Deposit growth picked up since the beginning of the year, likely supporting credit growth. - BCEAO policy actions: - To mitigate the impact of the pandemic, the BCEAO reduced the policy rate and introduced measures to support banks’ liquidity. - These measures led to a more accommodative monetary policy stance. - Temporary forbearance on loan classification likely kept banks’ asset quality broadly stable. - Financial conditions indicators: Real Effective Exchange Rate gap, Real Interest Rate Gap, Financial Conditions Index (index weights 50/50) indicate a move toward a more accommodative stance (Loosening vs Tightening). - Banking soundness (selected indicators, percent): - Gross NPLs to total loans examples: 15.6, 16.7, 16.8, 13.5, 11.8, 10.4, 10.2, 10.7 (series across years). - Provisioning rate examples: 56.4, 57.8, 59.8, 50.5, 46.7, 53.5, 57.5, 58.5. - Regulatory capital to risk weighted assets examples: 15.9, 15.4, 12.7, 13.2, 13.5, 13.9, 13.6. - Credit to the economy (CFAF billion and growth series) and Money supply (M2) levels and growth (Table 5). - Monetary aggregates and components (Table 5, CFAF billion): - Net Foreign Assets examples: 243, 214, 311, 486, 578, 533, 508, 739. - Credit to the economy examples: 2197, 2315, 2426, 2574, 2480, 2728, 2547, 2571. - Money supply (M2) examples: 2311, 2410, 2752, 3026, 3000, 3364, 3099, 3450. ### External financing needs and public financing (Tables 3, 4a/4b, 11) - External financing requirements (Table 11, Billions of CFAF): - Financing need by year: 2019: 852; 2020: 436; 2021: 670; 2022: 855; 2023: 991. - Components (selected): - Current account balance (excl. official transfers): 2019: 945; 2020: 437; 2021: 616; 2022: 783; 2023: 916. - Private capital and financial flows: -184, -107, -83, -97, -104 (2019–2023). - Amortization of public loans (excl. IMF): 91, 107, 137, 169, 179 (2019–2023). - Financing sources (selected): - Official loans: 377, 157, 192, 393, 420 (2019–2023). - Official transfers: 586, 318, 520, 552, 579 (2019–2023). - Project grants: 79, 75, 156, 101, 109 (2019–2023). - Portfolio investment public, net: 153, 122, 103, 112, 120 (2019–2023). - NFA central bank: -264, -161, -145, -202, -128 (2019–2023). ### Key datasets, tables and projections included - Figures and tables across the chapter include: - Figure 1: High-Frequency Indicators (mobility, NO2, flights, gold, industrial production, credit/deposits). - Figure 2: Real Sector Developments (GDP growth, sectoral contributions, output gap, inflation). - Figure 3: External Sector Developments (current account, balance of payments, REER, commodity prices, composition of exports/imports). - Figure 4: Fiscal Sector Developments (fiscal balance, public debt, tax revenue composition, government spending, external grants/loans). - Figure 5: Monetary Sector Developments (deposit and credit growth, BCEAO liquidity and rates, financial conditions, NPLs). - Table series: Selected Economic and Financial Indicators, Consolidated Fiscal Transactions, Gross Fiscal Financing Needs, Balance of Payments (CFAF billion and percent of GDP), Monetary Survey, Financial Soundness Indicators, Quantitative Performance Criteria, Structural Benchmarks, Schedule of Disbursements Under ECF, Indicators of Capacity to Repay, External Financing Requirements. *Source: 1mliea2021003 - 35. Staff supports the completion of the second and third reviews on the basis of reforms* ### Annex I. Mali August 2020 Coup D’Etat ### Annex I. Mali August 2020 Coup D’Etat ### Timeline of the Coup - August 18, 2020: a bloodless military coup ousted the president and led to the fall of the government and parliament; high-level officials arrested (including President Keïta, Prime Minister Cissé and the President of the National Assembly) and later freed. - While under arrest, President Keïta resigned and dissolved the government and the National Assembly. - The coup was unanimously condemned by ECOWAS, AU, UN, EU, OIF, France, US. - Post-coup sanctions and blockade imposed pending return to civilian-led transition in line with ECOWAS protocol: - Full blockade of land and air transport between Mali and 15 ECOWAS countries. - All trade flows with ECOWAS countries blocked (excluding imports of basic food, medicine, fuel and electricity). - Economic and financial flows cut off de facto authorities from the Treasury Single Account at the regional central bank (BCEAO) and from central bank facilities. - Transition arrangements: - Military junta (CNSP) agreed to an 18 months transition to general elections. - Civilian President and Prime Minister appointed on September 21 (sworn in on September 25) and September 27, respectively. - Transition Charter adopted; Vice-Presidency created and held by the leader of the CNSP, charged with defense and security reforms. - 25-member government appointed on October 5; 4 portfolios (security, defense, territorial administration and decentralization, national reconciliation) allotted to the military. - October 6: ECOWAS recognized the transition government, lifted sanctions and called for support to Mali; ECOWAS urged dissolution of the CNSP and adherence to human rights and due legal process. - Arrested officials released on October 7. - Establishment of the National Council of the Transition (legislative body) is pending. ### The Coup in Context - Mali’s coup history: - The August 2020 coup was the seventh (fourth successful) coup in Mali since independence in 1960 and the third since 2012. - 2012: previous successful coup led to election of President Keïta in 2013 (re-elected in 2018). - Immediate catalysts (June 2020 mass protests led by Imam Mahmoud Dicko): - Perception that long-delayed parliamentary elections were rigged by the Constitutional Court in favor of the ruling coalition. - Demands for dissolution of the new parliament and Constitutional Court and for President Keïta’s resignation. - Months-long teacher protests for salary increases and the kidnapping of the opposition leader ahead of legislative elections. - Deeper systemic fragilities cited as causes: - Eroding national cohesion, including pressure for more autonomy by Tuareg movements in the north. - Continued deterioration in the security situation during 2017–20—despite support from France, the UN, US, EU and Sahel neighbors—creating a spiral of violence, intercommunal clashes, displacement of thousands, and large swaths of the north and center outside government control and basic public services. - Poor governance and weak state capacity; perceived limited progress in tackling poor governance and limited capacity to deliver basic public services fueling dissatisfaction. ### COVID-19 Update (Annex II) - Epidemiological status: - 5,969 registered cases (267 deaths) as of December 17, 2020. - First wave (March–August 2020): spread relatively slow; possible factors: young population, low airline connectivity, early containment measures; testing capacity likely low leading to underestimation. - Second wave (November–December 2020): infections accelerated, reaching over 100 new daily cases in December (highest since onset); rate of positive results peaked at 7.03 percent against 3.4 percent in early November. - Mali was among five countries on the continent where death rate from COVID-19 was above 5 percent but declined to around 4 percent although daily deaths picked up with resurgence. - Contributing factors to acceleration: limited healthcare system capacity, difficulty enforcing social distancing given high informality and crowded urban settlements. - Informality: 80 percent of the urban population. - Government containment measures (from December 1, 2020 and earlier): - Stricter application of preventive measures in public places (mandatory masks, physical distancing). - Mass-testing in public places, systematic contact tracing, stricter controls of testing evidence at air and land borders. - Awareness campaigns; improvements in medical care capacity (human resources, medicines, respirators, testing kits). - Extended teleworking and rotation for private sector companies with more than 50 persons. - Extended schools and universities closure until January 25, 2021. ### Social and Economic Impact of COVID-19 - Pre-crisis poverty and human development: - 8.2 million extreme poor in Mali before the crisis (42 percent of the population). - Mali ranked 22nd lowest in terms of income per capita and in the bottom ten in human development. - Projected poverty impact: - World Bank estimates: economic contraction in 2020 would lead to an increase in the number of the poor of at least 850,000 people. - FAO projected 1.3 million people in severe acute food insecurity in June–August 2020, with an additional 280,000 due to the pandemic. - Vulnerabilities: - High informality and employment vulnerability imply informal workers are likely most affected due to job insecurity, loss of earnings and lack of social protection. ### Policy Response: Fiscal, Monetary and Prudential Measures - Fiscal package announced April 10, 2020: - Totaled about 2 percent of GDP in spending measures, along with tax relief measures estimated in the revised budget at 0.6 percent of GDP. - Components included: emergency health plan and purchase of medical supplies (0.5 percent of GDP), support to vulnerable households (1.2 percent of GDP), and support to firms (0.5 percent of GDP). - Key fiscal measures (Annex Box 1): - Cash transfers to vulnerable households: one-time cash transfer of CFAF90,000 to poor households; estimated cost 1 percent of GDP with 0.3 percent of GDP expected to be disbursed in the first round to households registered in the unified social registry; authorities considering modalities for remaining 0.7 percent of GDP. - Food distribution: distribution of cereals and food for livestock to directly support about 700,000 people between May and September 2020. - Utility bill assistance: water and electricity bills suspended for April and May for households covered by the social tranche; authorities to compensate EDM-SA and SOMAGEP. - Temporary tax exemptions (April–June): import duties on rice and milk; VAT on electricity and water bills for all consumers. - Price controls: ceilings on rice, bread, sugar, oil, milk until end-2020. - SME guarantee fund: capital increase through transfer of 0.2 percent of GDP (CFAF 20 billion); higher coverage ratio of 80 percent and reduced guarantee fee (50 percent of 2–2.5 percent); guarantees limited to approved amount. - Temporary suspension of simplified income tax and property tax for firms during May–December; 50 percent reduction in penalties on tax arrears for audited firms. - Deferral of first quarter tax installment payments due by March 31 to May 31 for several smaller taxes. - Subsidies to EDM and SOMAGEP: draft revised budget includes CFAF 7 billion to cover utility bill waivers and CFAF 32 billion as additional subsidies for investment and operational costs. - Monetary and financial measures by BCEAO: - Weekly monetary auctions moved to fixed rate-variable allotment mechanism allowing banks to borrow any desired amount at fixed rate of 2.5 percent (de facto lowering by about 25bp relative to early March); collateral rules limit amounts (central bank cannot hold country bonds as collateral in excess of 35 percent of the government revenues of the previous year). - Pool of acceptable collateral widened to include loans to highly rated private companies (1,700 firms rated A) and government-guaranteed loans to limited enterprises rated B, using 10 percent haircut as for sovereigns. - Servicing of bank loans by firms suspended for 3 months without affecting credit quality, on agreement by the bank (BCEAO as mediator). - Reduction in policy rates: June 22 Monetary Policy Committee cut ceiling and floor of monetary policy corridor by 50 basis points, to 4 and 2 percent respectively. - December 2020: BCEAO instructed WAEMU banks to refrain from distributing dividends to strengthen capital buffers. - Regional fiscal rule suspension: - April 27: WAEMU Heads of states declared temporary suspension of WAEMU growth and stability Pact (six convergence criteria) including the 3 percent of GDP fiscal deficit rule to allow higher overall fiscal deficits and donor support. ### Implementation, Execution and International Support - Implementation and execution: - Preliminary estimates: 95 percent of planned COVID-19-related spending implemented in 2020. - Specific execution rates: - Support to electricity and water SOEs and food distribution plans: fully executed. - COVID prevention and medical support spending: 74 percent execution. - Household income support: 100 percent of funds transferred to the social program administering cash transfers, but support expected to reach households in 2021 as beneficiaries still being identified (Unified Social Registry covers only 10 percent of the population). - Further COVID-19 spending allocations budgeted for 2021 at a lower scale. - International financial support (amounts and shares of GDP): - IMF through Rapid Credit Facility: about 1.2 percent of GDP and two rounds of debt service relief under the Catastrophe Containment and Relief Trust of about CFAF11.5 billion (0.1 percent of GDP). - World Bank: US$25.7 million (0.1 percent of GDP) to strengthen public health preparedness. - African Development Bank: US$49.2 million (0.3 percent of GDP). - European Union: EUR 33 million, CFAF 21.6 billion (0.2 percent of GDP) via accelerated grant disbursement. - West African Development Bank: CFAF 28 billion (0.3 percent of GDP). - G20 Debt Service Suspension Initiative (DSSI): requested around 0.25 percent of GDP to defer debt service to Paris Club and other bilateral creditors during May–December 2020, but only 0.07 percent of GDP in debt service effectively suspended as of December; extension launched for January–June 2021. *Source: Annex I and Annex II, "Mali August 2020 Coup D’Etat" (content unit 1mliea2021003).* ### 7. The government elaborated a national plan for introducing the COVID-19 vaccine. The ### 1mliea2021003 - 7. The government elaborated a national plan for introducing the COVID-19 vaccine. The ### National COVID-19 vaccination plan and coverage - The plan envisages the rollout of about 8.4 million doses of vaccine under the COVAX initiative starting in April 2021. - This will cover about 20 percent of the population or about 40 percent of the population over 15 years of age. - Priority groups and their shares of the population: - Medical workers: 4 percent of the population. - People over 60 years of age: 6 percent of the population. - Those with underlying health conditions: 10 percent of the population. - Mali opted for using the AstraZeneca COVID-19 vaccine that does not need to be stored at ultra-cold temperatures. - Rollout challenges noted: - Logistics (including freezers and other necessary equipment). - Rollout in the northern and central regions due to insecurity. ### Vaccination costs and financing - The cost of vaccination—excluding logistics and purchase of the necessary equipment (e.g. freezers)—is estimated at around USD 78 million (CFAF 39 billion) or 0.4 percent of GDP. - Financing breakdown: - A fifth of the USD 78 million cost will be financed by the Global Alliance for Vaccines and Immunization (GAVI) and the World Bank. - Programmatic fiscal adjustor: - The ECF program now includes an adjustor for vaccination costs up to 0.3 percent of GDP, to limit fiscal risks (TMU¶18). - Note: "To achieve higher levels of immunization, the cost will be respectively higher." ### Alternative adverse scenario: Protracted pandemic in 2021 — key assumptions and impacts - Scenario overview: - Assumes slower growth in 2021 and a more protracted recovery due to scarring from the second wave of COVID-19, with some permanent output losses. - Real sector assumptions: - Private consumption and investment will contract further relative to baseline. - Slower recovery in the services and primary sectors. - Government accounts assumptions: - Lower tax revenues at 13.9 percent of GDP vs 14.4 percent of GDP in the baseline in 2021. - Higher spending related to COVID in 2021 relative to baseline. - A more gradual path to the WAEMU deficit ceiling of 3 percent of GDP. - An increase in public debt to over 49 percent of GDP in 2021. - External position assumptions: - Lower volume of cotton and gold exports in 2021 relative to the baseline. - Lower remittances in 2021 relative to the baseline. - Lower volume in international travel in 2021 relative to the baseline. - Lower volume of other exports in 2021 relative to the baseline. - Lower volume of petroleum and other imports in 2021 relative to the baseline. - Projected fiscal and debt outcomes under the adverse scenario: - Fiscal deficit assumed to increase to 6 percent compared to 5.5 percent in 2021 in the baseline scenario. - Public debt to GDP ratio will rise to almost 49 percent of GDP in 2021 and will continue to rise to above 49 percent in 2023 before declining afterward but will remain higher than in the baseline. ### Policy responses and options if adverse scenario materializes - Fiscal policy priorities: - Continue accommodating health care needs to save lives and provide emergency lifelines to protect the most vulnerable. - Adapt fiscal policy to protect people, support demand and facilitate recovery. - Expenditure-side options: - Prioritization of current and capital spending as an emergency policy measure to create fiscal space, undertaken on a transparent basis and aiming to minimize negative impact on long-term growth. - Consider limiting growth in the public wage bill, including through reduced hiring relative to current plans. - Revenue-side options: - Continue tax and customs administration reforms; prioritize and deepen reforms more likely to close existing loopholes (e.g., those related to the taxation of fuels). - Speed up adoption of tax policy measures that are easier to introduce or are at a more advanced stage of preparation, such as the introduction of a communication tax, reforming excise taxes or reducing tax exemptions, as outlined in the MEFP. - Structural reforms: - Accelerate implementation of the Treasury Single Account to mobilize available idle resources. - Prioritize reforms that can be implemented relatively quickly and promote contactless procedures, such as digitalization of tax filing and payments and the automatic exchange of information across different directorates. - Donor and financing options: - Consider options to raise additional financing, including external concessional financing from international partners, further issuances on the regional market, or Fund financial support. - Keeping the current IMF financing arrangement on track could boost confidence and support rapid government response if downside risks materialize. ### Fiscal context, recent performance, and outlook (selected figures) - 2020 projections and outcomes: - Real GDP growth projected at -2 percent in 2020. - Average inflation expected to reach about 0.7 percent. - Tax revenues projected at 14.1 percent of GDP (2020). - 2020 budget deficit revised from 3.5 percent of GDP to 6.2 percent of GDP; the government expects a budget deficit of about 5.5 percent of GDP for 2020 given implementation constraints. - Expenditures related to COVID-19 as of November 30, 2020: CFAF 129 billion executed (average execution rate of 61 percent). - Measures to support the economy: CFAF 52 billion fully implemented. - Improvement of medical care: CFAF 24 billion executed out of a projected CFAF 40 billion. - Cash transfer program for vulnerable households: CFAF 54 billion spent out of a projected CFAF 122 billion (1.2 percent of GDP); government commits to carry out the remainder of CFAF 67 billion in fiscal year 2020. - Fiscal policy projections for 2021–2024: - Fiscal deficit projected at 5.5 percent of GDP in 2021. - Deficit path: 4.5 percent in 2022, 3.5 percent in 2023 and 3 percent in 2024 (aiming to return to the WAEMU ceiling by 2024). - Policy objective: preserve quality of fiscal policies while safeguarding priority development and social spending, containing wage bill pressure, improving performance of public enterprises, and gradually and sustainably increasing tax revenues. - Longer-run outlook (program growth and inflation): - In 2021, real GDP growth projected at 4 to 5 percent. - Inflation in 2021 expected to remain within the regional ceiling of 3.0 percent. - Current account deficit expected to gradually widen over the medium term as the terms of trade deteriorate. *Source: IMF staff report content from 1mliea2021003 (quoted text provided).* ### 6. The government has prepared the 2021 budget law that is consistent with the agreed ### 6. The government has prepared the 2021 budget law that is consistent with the agreed ### Budget law and timing - The government has prepared the 2021 budget law that is consistent with the agreed performance criteria under the ECF program. - This budget law will be adopted no later than December 31, 2020, by decree or otherwise, in accordance with Article 57 of Law 2013-28. ### Preparing the ground for a high-quality fiscal adjustment — tax base and tax policy reforms - Objective: expand the tax base to achieve a more sustainable increase in tax revenues ahead of fiscal adjustment beginning in 2022. - Reform options under consideration: - Broadening the tax base in the agricultural and informal sectors; studies by international experts are already advanced. - Increasing excise tax rates on certain products taxed below WAEMU ceilings (examples: tobacco, alcoholic beverages, vehicles) and introducing excise taxes on certain untaxed products. - Introducing a tax on international telecommunications (telephone calls and data) in 2021. - Taxation of remittances and e-commerce; studies are under way. - Reform of property taxation (see property taxation subsection). - Reductions in tax expenditures (see review of tax exemptions). - Timeline: finalize reform proposals by June 2021 to include necessary measures in the draft 2022 budget before September 2021. ### Property taxation - Plan to adopt, by end-2021, a draft law establishing a new tax on developed and undeveloped land properties, replacing the current property tax. - Commitments to improve recording of property and real estate titles in the Information System for Property and Real Estate Titles (SITFI) being developed by the National Property Directorate (DND) by end-2021. - SITFI database access: staff of the General Directorate of Taxes (DGI), the Treasury, and audit and control structures (Comptroller General of Public Services, Office of the Auditor General, Central Office for Combating Illicit Enrichment (OCLEI), etc.). ### VAT reductions and treatment of exemptions - Government commits not to renew the VAT reduction granted to some enterprises in the industrial sector in 2019; the reduction caused a tax revenue shortfall of around CFAF 2.5 billion. - Commitment not to grant exemptions or changes in discretionary tax rates without submitting these changes for parliamentary approval—no later than a month after government approval or as soon as Parliament is in session (continuous structural benchmark). - All exemptions must be granted in accordance with the law governing exemptions. ### Mining code and tax exemptions - New Mining Code adopted by Decree No. 2019-022/P-RM of September 27, 2019 and approved by Parliament on May 11, 2020; implementing decree adopted and standard agreement signed on December 8, 2020. - Code aims to better streamline tax exemptions and clarify beneficiaries (limited to suppliers with activities directly related to mining). ### Review of tax expenditures - Government committed to complete a full review of tax expenditures and their justifications by end-June 2021 (structural benchmark), with IMF technical assistance if necessary. - Results to update annex of the draft budget law for 2022 listing tax exemptions and their estimated tax cost. ### Strengthening taxation of petroleum products - Plans to introduce color-marking of exempt petroleum products. - Contract with a reputable supplier for color marking to be signed and registered by end-March 2021 (structural benchmark); cost to be borne by beneficiary of the exemption. - Government will meet all legal conditions necessary for the entry into force of the contract by end-March 2021. - Commit to reducing the range of exempt petroleum products by end-September 2021 by streamlining the list of equipment eligible to use tax-exempt fuel for mining companies, the Mali Energy Company (EDM-SA), and international forces — to be agreed by the Ministry of Mines and the General Directorate of Customs — and to annually update this list. - On the basis of the list, Customs and National Directorate of Geology and Mines, and Customs and Directorate of Energy, will evaluate and determine semi-annual quantities of petroleum products necessary for production equipment present on sites. ### Wage bill management - Wage bill projected to exceed 48 percent of tax revenue in 2021, above WAEMU standard of 35 percent, reflecting proliferation of special categories of civil servants. - Commitments to manage wage bill while safeguarding budget space for priority social and development expenditure: - Work with social partners to harmonize salary schedules in the civil service. - Undertake an in-depth study of wages, bonuses, and compensation and the wage setting policy in the civil service with technical assistance from international partners by June 2021 (structural benchmark). - Undertake a physical review of public employees, including detection of ghost workers, by end-September 2021. - Put in place by September 2021 a comprehensive unified digital database for the territorial civil service to strengthen wage bill management by local authorities. ### Investment and priority spending - Government committed to maintaining initial objectives for investment and priority spending, particularly in education and health. - Emergency budget plan and prioritization to accompany the 2021 budget law. - Level of social and priority development spending for 2021 is set at about CFAF 610 billion (5.7 percent of GDP). ### Contingency budgetary measures - Government will apply budget control measures if revenue collection underperforms: freeze and/or cancel budget appropriations in accordance with regulatory provisions while preserving social and priority expenditures, especially investments. - In case of revenue overperformance, government committed to consulting with the IMF on the use of additional resources. ### More effective tax and customs administration — overview - Priorities: continue reforms of tax and customs administration under the ECF program to ensure sustainable revenue increases and promote tax compliance. ### General Directorate of Taxes (DGI) — commitments and reforms - Generalize electronic procedures (e-filing, e-payment, mobile tax) and systematic use of SIGTAS. - Broad use of e-filing and e-payments for all businesses subject to VAT; mobile tax payments to be launched for other taxpayers. - Use of electronic procedures (tax filing and payments) extended to all large taxpayers by June 2021 (structural benchmark), followed by medium-sized businesses starting in January 2022. - Government committed to allowing all banks to develop an e-payment platform by end-December 2012 (structural benchmark) and to gradually roll out mobile phone tax payments for small taxpayers at all Tax Centers. - Mobile banking services expected to allow payment of certain taxes through mobile banking by September 2021 to simplify procedures and encourage compliance and to help bring informal sector taxpayers into the tax base. - Accelerate intensive and full use of all available SIGTAS applications (verification and recovery), and operationalize disputes and exemption tracking modules by June 2021 at latest. - Continue clean-up of the central taxpayer database by deactivating TINs and tax accounts of inactive taxpayers; increase use of TIN as sole reference and facilitate online accessibility of taxpayer database to Ministry of Economy and Finance departments and partner agencies. - Commit to broaden tax base by expanding tax administration information sources, connecting databases with partner departments and agencies (Customs, Budget, Public Procurement, Competition, National Social Security Institute (INPS), Mali Electricity Company, etc.), and processing collected data to improve tax controls. - Operationalize two Tax Centers for Medium-Sized Businesses (CIMEs) in Bamako by end-January 2021 (prior action) and establish CIME in Kati by end-December 2021. - Improve processing of VAT credit refund claims through: - Risk-based, differentiated monthly processing of requests (implemented by instruction). - Elimination of systematic advance verification. - Limiting deferred payment of VAT upon import (or self-assessment) to low-risk companies frequently in VAT credit situations. - Sufficient replenishment of the special account for reimbursement of VAT credits via an advance decree. - Conduct independent audit of management of funds mobilized under the VAT Credit Refund Fund and perform an audit of VAT credit refunds by end-February 2021; terms of reference prepared. - Modernize human resources management and incentive system: redeploy and adapt personnel roster, finalize transparent assignment and promotion rules, clarify individual and collective objectives, continue recruitment and redeployment, and prepare and implement a professional development plan; adapt incentive system based on objective performance criteria. ### General Directorate of Customs (DGD) — commitments and reforms - Transaction value application: - Deployed necessary actions for strictly rule-based application of transaction value throughout the country. - Entry into operation of ASYCUDA WORLD “Value” Module and application of transaction value to 45 tariff lines scheduled for January 1, 2021 (prior action). - Automatic updating of data on values of targeted products scheduled for end-April 2021. - Government intends to rapidly release additional resources for timely implementation, in collaboration with IMF Technical Assistance Center for West Africa and UNCTAD. - Consolidation of direct collections: restrict direct collections to goods exclusively listed in regulation; from November 1, 2020 direct collections authorized only at Airport Office; operations of companies with uncleared D24s blocked since November 11, 2019; quarterly report on direct collections by product compiled. - Electronic acceptance of air waybills (AWB) in ASYCUDA WORLD partially implemented (Air France, Cargo Lux, DHL starting February 29, 2020) covering about 85 percent of total air freight; full implementation by end-2021 (structural benchmark). - New Customs Code drafted to reflect international best practices and modernize procedures; submitted to National Assembly, adoption delayed and will be resubmitted to National Transition Council once set up; necessary regulations to be issued no later than six months following adoption of code. - Interconnection of SIGMAT: - Interconnection with Senegal scheduled for end-March 2020 and subsequent interconnections with Côte d'Ivoire and other countries were delayed due to Covid-19; work resumed and interconnection should be completed by end-December 2021. - Strengthened monitoring of commitments: systematic closing of assessments of duties and fees at end of calendar month and closing of collections five (5) business days later; government committed to continue strict application. - Automated risk management for all operational departments: work underway to improve reliability via computerization of litigations (TAC); Intelligence and Risk Analysis Division (DRAR) staff increased in second half of 2019 (five IT staff). - Strengthening physical inspection: deployment and use of scanners on strategic routes (examples and locations listed) allow scanning of goods; suspect goods subject to escort and mandatory physical inspection; mobile anti-fraud units deployed in Diema and Kadiolo. - Price structure of petroleum products: government simulated change in unit from weight to volume; results inconclusive; simulation to be reconducted with IMF assistance when in-person missions authorized. ### Improving public financial management (PFM) - Cash management modernization to control payment arrears and avoid accumulating new arrears: - Efficient data management: accelerate interconnection of business applications (AICE2, SIGTAS, ASYCUDA WORLD, SIGED) and automatic data sharing among National Treasury and Public Accounting Directorate (DNTCP) and the DGI and the DGD by end-September 2021 (structural benchmark). - Finalize development and deployment of SITFI application by end-2021 and interface with other systems; interface ASYCUDA WORLD with computer system of National Directorate of Trade and Competition. - Treasury Single Account (TSA) consolidation: expand TSA coverage to include deposits of 50 national public institutions by end-2021; remaining public institutions (approximately 80) to be gradually integrated by end-June 2022. - Preparing ground for electronic payments: activate module allowing interconnection of AICE2 with WAEMU banking system to automate expenditure and revenue transactions; despite delays, contract signed and module to be operationalized by end-June 2021 (structural benchmark); scoping meeting for development and integration with WAEMU STAR and SICA held on November 12, 2020. - Operationalizing electronic payments: once AICE2 cash management module is operational, expand electronic payments to all beneficiaries (civil servants, service providers). - Government to take necessary measures by end-June 2021 to enable Treasury electronic payments and require recipients with bank accounts to provide standardized references. - For recipients without bank accounts or without standardized references, government will ensure payments via other electronic means (e.g., bank cards provided by GIM-WAEMU or GIM). - Prerequisites for Treasury connection to GIM-WAEMU and interfacing the electronic banking platform with AICE2 to be in place by end-December 2021, per timetable agreed by technical teams and BCEAO. - GIM-WAEMU cards to be distributed and put into service starting in January 2022. *International Monetary Fund — selected commitments and structural benchmarks extracted from the government’s program text.* ### 15. The quality of expenditure programming will be enhanced in order to ensure a smooth ### 15. The quality of expenditure programming will be enhanced in order to ensure a smooth ### Expenditure programming and commitment plans - Objective: enhance quality of expenditure programming to ensure smooth budget execution, protect priority expenditures, and avoid accumulation of domestic payment arrears. - Measures and timeline: - Continue 2020 dynamics: (i) national training workshop on commitment plans in February 2020; (ii) develop and validate outline of the commitment plan in April 2020; (iii) train staff in pilot ministries to fill in outline in April 2020; (iv) work with eight pilot ministries to prepare commitment plans (by program and consolidated) with partner and IMF technical assistance from March to July 2020; (v) develop computerized commitment plan model in June 2020 to design the management module within information system PRED. - Deployment and training for remaining ministries during fiscal year 2021 (structural benchmark). - Development (design, execution, updating) of the management module for the commitment plan to be completed by June 2021; operationalization for programming expenditures within the 2022 budget to be completed by December 2021. - Coordination requirement: strengthen coordination of expenditure commitments with government procurement plans and cash plans to optimize programming based on available liquidity. - Technical support: activities carried out in collaboration with IMF technical assistance. ### Public Financial Management (PFM) reform (PREM 2017-2021 and follow-up) - Commitment: deepen reforms to ensure integrity and transparency in PFM; adopt new 2022-2026 PFM reform program before end-June 2021. - Investment selection and implementation: - Follow recommendations of the 2017 Public Investment Management Assessment (PIMA); follow-up IMF mission expected to identify measures to reduce the efficiency gap. - Standard costs for infrastructure: - Terms of reference prepared for developing a list of standard costs for transportation, construction, and agricultural irrigation infrastructure by end-June 2021; application from December 2021. - Public procurement system evaluation (MAPS): - Terms of reference shared with partners; recruitment of consultant in progress with the World Bank; relevant results expected at end-2021. - Inspectorate of Finance reform: - Project developed to create General Inspectorate of Finance to replace current Inspectorate; broaden missions to include audit, research, and evaluation; move from one-level horizontal structure to two hierarchical levels. - Draft documents approved by Ministry of Economy and Finance; to be forwarded to Government Office of the Secretary General for approval process; government committed to adopt by end-2021 at latest. ### Public-Private Partnerships (PPPs) - Objective: strengthen investment framework and attract FDI by strengthening PPPs. - Law revision: revision of Law on PPPs to follow WAEMU Commission processes; transposition into Mali’s Law on PPPs expected after regional texts adopted, tentatively planned for 2021. - Institutional and fiscal risk management: - Establish incentive system for project performance, strengthen institutional framework for monitoring, assessment, and management of fiscal risks associated with PPPs in line with IMF Fiscal Affairs Department recommendations. - PACEM / AfDB support: - Support for launching PPP Unit and assistance in PPP implementation, including capacity building for PPP Unit staff and Malian administration by end-June 2021, provision of external expertise, and training of trainers. - Short-term focus: recruit legal and financial advisors, develop standard PPP contracts, and train PPP participants. ### Debt policy and data transparency - Debt management policy: - Commitment to reduce refinancing risk by favoring long-term concessional external loans and accelerate implementation of the short- and medium-term debt management strategy (for 2021-2023). - Efforts include issuing longer maturity bonds (five years, seven years, and even eight years), mobilizing financing at more fixed interest rates, and strengthening capacity to manage exchange risk. - Data transparency: - Establish mechanism for regular publication of information on public debt. - Specifically, starting in March 2021 the General Directorate of Public Debt will regularly publish information on domestic and external public debt and loan guarantees on its website. ### Monitoring the financial position of public enterprises; EDM-SA (electricity sector) - Electricity sector recovery plan: - Government pursuing Recovery Plan for the Electricity Sector adopted April 2020 with World Bank support. - Execution should allow EDM-SA to regain financial balance and eliminate annual state subsidy by 2025. - Key elements: - Modify energy mix: control decisions on production capacity increases; avoid costly emergency and diesel-based contracts; favor low-cost production including imports and clean domestic sources to complement HFO thermal plants. - Government commitment to clear, by mid-December 2020, about CFAF 62 billion in arrears (including CFAF 24 billion in outstanding drafts) on imports from Côte d'Ivoire under a new multi-year plan with Côte d'Ivoire. - Increase revenue (ensure payment for public sector consumption to EDM-SA) and reduce costs (notably fuel supplies); government committed to prepay for general government electricity consumption. - Structural deficit and arrears: - Annual real structural deficit in 2020: CFAF 78 billion (0.8 percent of GDP). - Operating subsidy in 2020: around CFAF 30 billion. - Arrears to suppliers grew to CFAF 125 billion (1.2 percent of GDP) in November 2020. - Projected structural deficit for 2021: around CFAF 85 billion. - Projected arrears at end-2021 in absence of sufficient subsidies: could rise to CFAF 180 billion (1.7 percent of GDP). - Policy: sufficient budget subsidy necessary for 2021; revenues above budget targets, including those from the new tax introduced in 2021, will be used to supplement the current subsidy of CFAF 30 billion available to EDM-SA. ### EDM-SA performance and governance - Performance contract: - Performance contract between government and EDM-SA signed on November 18, 2019, defines reciprocal commitments: buyout and renegotiation of bank debt, prepayment mechanism for government consumption, financing of investments for recovery, clearing central government consumption arrears. - Annex “EDM-SA Performance Improvement Plan” being developed with World Bank support. - Ministry of Energy and Water and Ministry of Economy and Finance will ensure: (i) EDM-SA implements 2019 performance contract; (ii) continued implementation overseen by Monitoring Committee; (iii) contract updated as needed to ensure monitorability. - Monitoring Committee held two meetings (February 24, 2020 and June 4, 2020); has not convened since due to COVID-19 and recent events. ### Strengthening financial monitoring of public enterprises (SOEs / EPNs) - Risks: public enterprises (e.g., CMDT) could become major contingent liabilities; regular monitoring required to avoid undermining fiscal sustainability. - Commitments and structural benchmarks: - Council of Ministers decision by end-April 2021 to establish Unit for Public Enterprises responsible for monitoring economic and financial situation and informing government at least quarterly to determine fiscal risks associated with contingent liabilities (structural benchmark). Monitoring Unit to be set up by end-2021. - Reduce budget costs of subsidized public enterprises (EDM-SA, CMDT, SOMAGEP) by requiring procurement consistent with Public Procurement Code and Delegation of Public Services via circular from Ministry of Economy and Finance by end-February 2021 (structural benchmark). Requirements: - (i) Enterprises present procurement plans to DGMP three months before year start; exception: procurement plans for 2021 to be submitted by end-March 2021. - (ii) Enterprises develop specific manual for procurement of goods and services (separate from administrative/accounting/financial procedures). Manual to conform with Public Procurement Code, include institutional framework, operational procurement process, internal and a priori control, independent external audit, appeals/disputes procedure. Manual to be developed with DGMP assistance and approved by Ministry of Economy and Finance and respective Boards by end of June 2021. - (iii) DGMP to set up a unit in these enterprises to assist procurement services by end of March 2021 to strengthen application of procurement procedures. - (iv) DGMP to report quarterly (at least during first year) to Minister of Economy and Finance on compliance; monitor and disseminate performance on competition, advertising of tenders and awards, deadlines for contract signature and payment. - (v) Annual independent audit by the Public Procurement Regulatory Authority and Public Service Delegations; reports transmitted to responsible Minister, Minister of Economy and Finance, SOE Unit and Prime Minister. - Inclusion: requirements to be included in revised 2021 EDM-SA Performance Plan by end of March 2021 and in a 2021 Performance Plan with CMDT. - Broader SOE strategy: - Request World Bank support to prepare an integrated assessment of state enterprise sector ("iSOEF") to improve management, governance, and monitoring. - Fiscal statistics coverage for national public institutions (EPNs): - Continue broadening coverage through introduction of new software in all extrabudgetary units with own resources to provide regular/timely statistics in line with Government Finance Statistics Manual 2014 (GFSM). - Treasury Directorate to produce and publish consolidated budget execution reports for EPN subsector as of June 30 and December 31 each year starting with December 2021. - June 30 data to be published at end-August of same year. - December data to be published at end-February of following year. - Circular from Minister of Economy and Finance to all EPN managers by end-February 2021. - Governance Assessment: - Governance Assessment in first half of 2021 expected to provide recommendations on fiscal reporting of public enterprises and institutions outside central government; government to develop plan to address institutional weaknesses to strengthen financial monitoring. ### Transparency, accountability, and COVID-19 related commitments (RCF) - Publishing COVID-19 expenditure reports: - Government commits to publish reports on expenditure execution related to COVID-19 (prior action). - Published first two monthly reports for October and November on November 26 and December 7, respectively, and will continue monthly publication. - Publication of large COVID-19 procurement information (structural benchmark): - Commit to publish, on an easily accessible governmental website, by end-May 2021 and ongoing thereafter, documents on large public procurement contracts in connection with COVID-19 and names of entities along with beneficial owner(s) information of awarded entities, as well as ex-post validation of their execution. - Definition: “major public procurement projects” means projects entered into by or on behalf of government of Mali in response to COVID-19 with a value equivalent to $50,000 USD and above. - Independent audit: - Independent audit of COVID-19 expenditure commissioned to Office of the Auditor General (BVG). - Government commits to publish results of the independent audit by end-July 2021 (structural benchmark). ### Supreme Court Accounts Section procedural manuals - Revision: - Revise procedural manuals of Accounts Section to align verification procedures and methods with regional guidelines and International Standards of Supreme Audit Institutions (ISSAI). - Four volumes of procedural manual for judicial and non-judicial judgments harmonized at community level validated by WAEMU Court of Accounts Steering Committee. - Final validation by WAEMU Council of Ministers delayed until 2021 due to COVID-19 constraints. ### Prevention and suppression of illicit enrichment; asset declaration regime (Law No. 2014-015 of May 27, 2014) - Legal review and amendments: - Accelerate legal review of Criminal Code and Law on Prevention and Suppression of Illicit Enrichment to criminalize acts of corruption in line with UNCAC and address application difficulties and deficiencies. - Based on Commission report, draft amendment of law (expand base of parties subject to asset declaration) and draft decree establishing implementing mechanisms filed with Government Office of the Secretary General in November 2020 for adoption by government by end-March 2021 (structural benchmark) and by legislative body by end-December 2021. - Asset declaration regime to align with international standards and best practices: coverage, frequency/content, submission process, access to information, enforcement, sanctions. - Parties subject to new regime to include civil servants at risk, politically exposed persons, and at a minimum: Head of State, Head of Government, Ministers, Deputy Ministers and Secretaries of State, Members of the National Assembly, senior civil service officials, Malian Armed Forces, and managers of public enterprises. - Strengthening compliance and monitoring: - Commitment to ensure definitive list of obligated parties submit declarations and update regularly within legal deadlines. - Reporting rates: 223 (8 percent) of declarations submitted to Supreme Court as of December 12, 2020 compared to 336 (23 percent) as of December 31, 2019. - Prime Minister circular on October 30, 2020 inviting government members to submit declarations by November 6, 2020; reminder letter dated November 26, 2020 asking officials under their authority to report by December 5, 2020. - Target reporting rates: 50 percent by end-June 2021 and 75 percent by end-September 2021. - OCLEI call center: - Call center established to receive reports of illicit enrichment, corruption, and/or fraud to OCLEI: toll-free number, call receiving equipment, message recording and transcription software, staff for processing information, senior call dispatch manager to direct entries to OCLEI investigation division and judicial authorities. - Government to continue public awareness campaigns; anti-corruption week organized in early December to mark Global Anti-Corruption Day. *Source: IMF content unit 1mliea2021003 (PDF chapter/section).* ### 25. Promoting coordination among auditing, inspection, and control bodies. In order to ### 25. Promoting coordination among auditing, inspection, and control bodies ### Coordination frameworks and internal control - The government has set up two consultation frameworks to align actions of control, auditing, and inspection bodies: - Framework between the Ministry of Justice and control, auditing, and inspection bodies. - Plan to put in place a database to enhance efficacy of coordination of internal control units (Auditor General of Public Services and Chief Inspectors of the 16 inspection units in the ministerial departments). - Commitment to allow internal control units to be informed of legal outcomes of their denunciations to the Public Prosecutor’s Office, to the State Litigation or to the Accounts Section of the Supreme Court via implementing quarterly meetings between these units and the Ministry of Justice by June 2021. - Framework for consultation to be set up by the Ministry of Justice between the OCLEI, the Office of the Auditor General, the Economic Division, the National Financial Intelligence Processing Unit (CENTIF), and other control, audit and inspection structures by end-March 2021. ### Justice administration and prosecution of economic/financial offenses - Commitments: - Introduce direct referrals to the Prosecutor General by authorities for control and audit (including general control by staff and the Office of the Auditor General) and inspection. - Incorporate a systematic procedure for referral of cases by prosecutors to investigative magistrates or criminal court in the Code of criminal procedure by end-March 2021. - Adoption of the new Code of criminal procedure is being considered by end-June 2021 at the level of the Permanent Legislative Committee (CPL) within the National Judiciary Affairs and Justice Directorate (DNAJS). - Create a specialized Economic and Financial Prosecution service with national jurisdiction operating under the Bamako Court of Appeals. - A draft amending law is included in the transitional government’s action plan for implementation of this service by end-June 2021. - The new specialized service will focus solely on investigating financial irregularities denounced by control and verification bodies. ### Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) - Status and actions: - Finalizing National Risk Assessment (NRA) for money laundering and terrorist financing, begun in October 2018 with World Bank support; assessment delayed due to COVID-19. - Peer Review (Mutual Evaluation) final report approved at GIABA meeting on November 16, 2019; report identified significant weaknesses in AML/CFT framework, exacerbated by gaps in legal framework and lack of effectiveness. - Prepared action plan to address shortcomings; action plan, mutual assessment report, and related written communication were submitted to the Government Office of the Secretary General to be presented to the Council of Ministers during Q1 2020. - Ministry of Economy and Finance will present the action plan to the Council of Ministers for approval by end-January 2021. - Mali’s participation in regional FATF-type body activities was suspended due to ECOWAS measures; status restored by ECOWAS in October (year implied 2020), enabling participation in GIABA activities and technical assistance. - Recommendation: - Priority actions under the Mutual Evaluation Report provide a good starting point for reforms. ### Governance diagnostic mission and statistical improvements - Governance diagnostic: - Government invited IMF diagnostic mission to perform detailed analysis of governance vulnerabilities, including public finances. - Synthetic assessment of budget transparency to be carried out to identify improvements in fiscal information transmission by end-May 2021. - Diagnostic to include examination of public and budget execution procedures to identify scope for digitalization (computerization) improvements by end-May 2021. - Mission anticipates publication of a final report to help sequence and prioritize measures. - Statistical data improvements: - Finalize national accounts with new 2015 base year and the 2016 national accounts no later than end-March 2021. - This includes making up for delays in production of national accounts for 2017, 2018, and 2019, and extrapolation of national accounts back to 1997. - Implementation of new short-term indicators to be finished no later than September 2021. - Distribution of quarterly accounts began at end-2019; implementation delayed by crises in 2020. ### Non-operating fixed assets in the banking sector - Actions taken: - Since 2018, Ministry of Economy and Finance conducted exhaustive inventory of banks’ non-operating fixed assets and developed a strategy for their treatment. - Decision to create an independent unit for managing non-operating fixed assets. - Feasibility and sustainability study final report available since February 2020. - Technical assistance for formal establishment of Non-Operating Fixed Asset Management Unit (legal, financial, technical, human resources) scheduled for six months and started on December 9, 2020. ### Program monitoring: performance vis-à-vis ECF-supported policies - Structural benchmark implementation: - Three of four structural benchmarks from second program review were met: - Approval by Parliament of a 2020 Budget Law meeting ECF performance criteria. - Finalization and implementation of formal framework for collaboration and information-sharing among DGI, DGD, Treasury, DGB, DGMP-DSP, DGCC, INPS, and CAISFF. - Automation of procedures for control of suspensive regimes. - Fourth benchmark (elimination of non-electronic receipt) partially completed. - Four of six structural benchmarks under third program review implemented: - (i) Deployment of measures for strictly regulatory application of transaction value nationwide. - (ii) Reservation of direct collection procedure (emergency procedure) covered by D24 declarations for airport office only and short list of goods. - (iii) Development of action plan to identify and introduce payment of certain taxes and fees through mobile banking. - (iv) Operationalization of two tax centers for medium-sized businesses in Bamako. - The first two and the fourth benchmarks were implemented with a delay. ### Reviews, performance criteria, and monitoring (TMU highlights) - Review schedule: - Fourth, fifth, and sixth reviews based on end-December 2020, end-June 2021, and end-December 2021 performance criteria, respectively, and on continuous performance criteria, prior actions and structural benchmarks, and indicative targets as defined in the TMU. - Key definitional and adjustor provisions: - Government defined as central government of the Republic of Mali excluding local authorities, central bank, or other autonomous public entities not included in TOFE. - Ceiling on Net Domestic Financing: - Adjusted upward if external budget support falls short of program projections up to a maximum of CFAF 144 billion. - Adjusted upward (downward) if net reduction in budgetary float (instances de paiement) is higher (lower) than program amounts. - Adjusted upward (downward) for payment of VAT credits, other tax refunds, and audited arrears from previous fiscal years which exceed (fall short of) program amounts. - Ceiling on accumulation of government external payment arrears: - Government agrees not to accumulate external payment arrears except arrears under renegotiation; non-accumulation is a continuous performance criterion. - Ceiling on accumulation of government domestic payment arrears: - Domestic payment arrears defined as undisputed overdue payment obligations with payment date exceeding 90 days (unless longer grace period specified); arrears on domestic debt service to banks or financial market refer to obligations with payment date exceeding 30 days. - Non-accumulation of new domestic payment arrears is a continuous performance criterion until the conclusion of the second and third review (test dates end-December 2019 and end-June 2020) and will thereafter become a continuous indicative target until automatic controls on expenditure commitments are operationalized in all ministries. - Ceiling on external debt contracted or guaranteed by the government: - Applies to present value of all new external debt measured using contraction date on cumulative basis from August 28, 2019. - Debt defined per IMF Executive Board Decision No. 15688-(14/107); concessional debt has grant element of at least 35 percent; present value discounted using 5 percent. - Special provision: performance criterion does not apply to import-related, short-term external loans with maturities of less than one year. - Reporting requirement: government shall immediately report any new external loans contracted or guaranteed to IMF staff, stating loan conditions. - Ceiling on overall fiscal deficit (commitment basis): - Ceiling adjusted upward by shortfall in budget support grants relative to program projections up to a maximum of CFAF 45 billion. - Ceiling adjusted upward by unbudgeted spending directly related to cost of COVID-19 vaccination in 2021 not financed by grants or donations up to a maximum of CFAF 30 billion. - Safeguarding program execution (revenue and expenditure monitoring): - Monthly cash flow plan annexed to the 2021 Budget Law (in billion CFAF): - Total 2,280.7; Jan 118.5; Feb 167.6; Mar 183.6; Apr 176.3; May 171.2; Jun 188.4; Jul 184.7; Aug 181.8; Sept 168.1; Oct 171.3; Nov 183.3; Dec 386.2. - Treasury plan annexed to the 2021 Budget Law — Total expenditure (in billion CFAF): - Total 2,280.713; January - June 1,005.491; July - December 1,275.222. - Wages 758.024 (379.012; 379.012). - Goods and services 434.403 (164.686; 269.717). - Interest payments 141.201 (65.752; 75.449). - Transfers and subventions 385.352 (169.225; 216.127). - Capital Spending 262.629 (106.044; 156.585). - Special Investment Spending 299.104 (120.772; 178.332). - Semester procedures: - Budget spending commitments authorized on a semi-annual basis and preliminarily scheduled but issued six-months ahead. - If shortfall in revenues at end of semester relative to budgeted revenues, authorities will reduce commitment authorization pro tanto in following semester by amount corresponding to difference in projected revenue for entire year; authorizations to be reported to Fund staff each semester, and during second semester on a monthly basis as modified. *Source: 1mliea2021003 - 25. Promoting coordination among auditing, inspection, and control bodies.* ### 20. The government’s net tax revenue is defined as the revenue appearing in the TOFE and ### 20. The government’s net tax revenue is defined as the revenue appearing in the TOFE and ### Definition and Adjustor - The government’s net tax revenue is defined as the revenue appearing in the TOFE and includes all tax revenue in the national budget, after deducting the tax refunds generated during the year, in particular VAT credits. - Adjustor: The floor on net tax revenue will be adjusted downward (upward) by the amount of the tax refunds exceeding (falling short of) the projected amount (MEFP, Table1). ### Indicative Targets and Timing - Unless otherwise indicated, the following serves as an indicative target at end-December 2019, end-June 2020, end-December 2020, end-June 2021 and end-December 2021. ### Floor on Priority Social Spending - Priority social spending for 2019 is defined as the sum of expenditure in the sectors of basic education, secondary and higher education, scientific research, health, and social development other than transfers to the Malian Social Security Fund. - Exclusions and additions: - 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. ### Prior Action - Prior action on the operationalization of the two tax centers for medium-sized enterprises (CIME) in Bamako will be considered as met with appointments of the directors for the two centers and staff distributed between the two centers. ### Structural Benchmarks - Implementation reporting: Information concerning the implementation of measures constituting structural benchmarks will be reported to the IMF staff when the measures are implemented. - End-June 2021 e-procedures benchmark: - Considered met if at least 95 percent of large taxpayers use e-procedures by the end of June 2021. - Publication on large procurement projects related to COVID-19 (structural benchmark considered met with publication by end-May of information on): - i. large procurement contracts, where the value of the contract exceeds US$50,000; - ii. beneficial owner(s) of awarded entities involved in COVID contracts as per the legal and regulatory procurement framework in force at the time the contact was awarded; - iii. in addition to beneficial ownership, the published information will include the date and reference of the contract, the name of the parties to the contract, the object of purchase under the contract and the value, company type, and legal owners. - Beneficial Ownership definition: - Defined in line with Article 1 (¶12) of the AML/CFT Law 2016-008 and understood to be the natural person(s) who “ultimately owns or controls” or has “ultimate effective control” over a legal person (e.g., company, foundation, non-profit organizations), as reported by the companies that benefit from the procurement contracts. - “Ultimately owns or controls” and “ultimate effective control” refer to situations in which ownership/control is exercised through a chain of ownership or by means of control other than direct control. ### Additional Information for Program Monitoring — Summary of Reporting Requirements - Reporting format: Government will report the information (in Excel format for all quantitative data) indicated in the summary table to the IMF staff. - Selected reporting requirements (sector — type of data — frequency — reporting deadline): - Real Sector: - National accounts — Yearly — Year-end + 9 months - Revised national accounts — Variable — 8 weeks after revision - National accounts — Quarterly — End of quarter + 8 weeks - Consumer price index breakdowns — Monthly — Month-end + 2 weeks - Public Finance: - Central government TOFE — Monthly — Month-end + 4 weeks (provisional); Month-end + 6 weeks (final) - Monthly revenue table — Monthly — Month-end + 2 weeks - Information on social and developmental priority spending execution — Quarterly — End of quarter + 4 weeks - Information on COVID-19 vaccine expenditures — Quarterly — End of quarter + 4 weeks - Information on military and security spending — Quarterly — End of quarter + 4 weeks - Information on transfers and subsidies — Quarterly — End of quarter + 4 weeks - Tax and customs exemptions — Monthly — Month-end + 4 weeks - Order fixing petroleum prices, tax revenue from petroleum products, and total exemptions granted — Monthly — Month-end - Imports of petroleum products broken down by type and by point of entry — Monthly — Month-end + 2 weeks - Expenses authorized and not paid 90 days after validation by the financial comptroller — Monthly — Month-end + 1 week - Monetary and Financial Data: - Summary survey of the BCEAO, summary survey of the banks, survey of monetary institutions — Monthly — Month-end + 4 weeks (provisional); Month-end + 8 weeks (final) - Foreign assets and liabilities and breakdown of other items net (OIN) of the BCEAO and the commercial banks — Monthly — Month-end + 8 weeks - Lending and deposit interest rates, BCEAO policy rate, BCEAO reserve requirements — Monthly — Month-end + 4 weeks - Bank prudential ratios — Monthly — Month-end + 6 weeks - Balance of Payments: - Balance of payments — Yearly — Year-end + 12 months - Revised balance of payments — Variable — 8 weeks after each revision - External Debt: - Debt service with breakdown of principal, interest, relief obtained under the HIPC Initiative — Monthly — Month-end + 4 weeks - Updated information on borrowing plans, including the contraction date for any new external debt — Quarterly — Month-end + 4 weeks - EDM detailed financial statements showing EDM’s total revenues, including subsidies received; total expenditures; the level of debts to banks; and the situation in terms of arrears — Quarterly — Month-end + 4 weeks ### Debt Sustainability Analysis — Key Findings and Risks - Risk ratings: - Risk of external debt distress: Moderate - Overall risk of debt distress: Moderate - Granularity in risk rating: Moderate risk tool: Some space to absorb shocks - Application of judgement: Yes, customized scenario is considered for external and overall debt distress risk rating - Main assessment: - Mali remains at moderate risk of both external and overall debt distress consistent with the joint Bank-Fund assessment from May 2020, but vulnerabilities have increased. - Drivers of increased vulnerabilities: the pandemic and coup-induced deterioration in the fiscal balance, a more gradual consolidation path towards the WAEMU fiscal target, and a shortfall in external donor grant support leading to heavier reliance on more expensive domestic borrowing. - Standardized stress tests do not result in breaches of DSA thresholds for either external or public debt, but a customized scenario demonstrates the vulnerability of Mali’s external debt to a change in security conditions or other fiscal pressures that could lead to larger fiscal deficits financed on non-concessional terms. - Under the customized scenario, public debt and debt service levels would breach their respective thresholds if commodity prices and exports were to deteriorate. - Policy implications: - To avoid deterioration in debt levels and the debt servicing burden it is essential that the authorities continue efforts to mobilize tax revenue and implement structural reforms that address fiscal risks from state-owned enterprises and the cost of the civil service, as well as strengthen debt and public financial management. ### Public Debt Coverage and Contingent Liability Shock - Public debt coverage: - Mali’s public debt covers external and domestic obligations of the central government. State and local government entities do not borrow directly on their own. Detailed information on SOE debt is currently not available. - The SOE contingent liability shock has been revised upward to 5 percent of GDP from the default shock of 2 percent. - Staffs support efforts to broaden public debt coverage to include SOE debt and debt of other public institutions outside the central government in public debt reports. - Contingent liability testing: - A contingent liability test with tailored magnitude of shocks is applied to reflect the potential impacts of additional liabilities. - Components of the contingent liability shock: - SOEs not accounted for in public sector coverage: 5 percent of GDP (3 percentage points higher than the default setting). - PPP component: PPP capital stock estimated at 3.7 percent of GDP implies a calibrated 1.3 percent of GDP for the PPP component of the contingent liability stress test. - Financial sector shock: set at the default level of 5 percent of GDP. - Total contingent liabilities for the stress test are estimated at 11.3 percent of GDP. - Classification note: - BOAD (West African Development Bank) loans are treated as external debt, although they are denominated in CFAF, because program targets were set when BOAD loans were classified as external debt. ### Debt Background — Key Figures and Trends - End–2019 public debt: - Public debt amounted to 40.5 percent of GDP, with almost two-thirds consisting of external debt. - External debt amounted to CFAF 2,682 billion (26.4 percent of GDP), of which CFAF 2,044 billion (20.1 percent of GDP) to multilateral creditors and CFAF 638 billion (5.3 percent of GDP) to bilateral creditors. - Domestic debt increased from 6.3 percent of GDP in 2014 to 14.0 percent of GDP in 2019, mostly in treasury bills and bonds issued on the WAEMU regional market. - Interest rate differential: - Average effective rate for domestic debt: 5.8 percent. - Average effective rate for external debt: 1.4 percent. - 2020 developments: - The overall deficit for 2020 is projected to widen to 5.5 percent of GDP compared to 3.5 percent of GDP targeted at the time of the first ECF review. - Public debt is projected to increase to 45.9 percent of GDP at end-2020. - Domestic borrowing is projected to finance much of the fiscal deficit, increasing the share of domestic debt in total public debt to around 40 percent. - Authorities were temporarily unable to service debt due to post-coup sanctions in place between late August and early October 2020. - Missed debt service payments on regional and external debt amounted to US$57 million or 0.3 percent of GDP, of which 0.2 of a percentage points to external creditors and 0.1 of a percentage point to regional creditors. Of the missed payments, only 0.01 percent of GDP represented arrears as other payments were settled within respective grace periods after sanctions were lifted and access to the Treasury Single Account at the BCEAO was regained in early October 2020. ### Debt Relief and Suspension Measures - Catastrophe Containment and Relief Trust (CCRT) and DSSI: - CCRT relief: - 1st and 2nd tranches provided relief on IMF debt payments during April 2020-April 2021 of CFAF 11.5 billion (about 0.12 percent of GDP). - 3rd and 4th tranches are expected to provide relief on IMF debt payments during April 2021-April 2022 of CFAF 12.2 billion (about 0.12 percent of GDP). - G20 DSSI requests and outcomes: - Authorities formally requested relief from the Paris Club and other official bilateral creditors for debt service amounting to 0.25 percent of GDP during May-December 2020; only 0.07 percent of GDP was effectively suspended by France, Belgium, Korea, Saudi Arabia, Libya and Kuwait. - Authorities requested relief under the DSSI extension in 2021, with an expected reduction in debt service of 0.23 percent of GDP for the January-June 2021 period, and have received agreement on debt service suspension of 0.05 percent of GDP. ### Underlying Macroeconomic Assumptions — Key Projections and Risks - Growth: - GDP growth estimated to fall to around -2 percent in 2020 and expected to pick up in 2021 to 4 percent, before settling at estimated potential growth of 5 percent over the medium term. - Previous DSA comparison: 2020 outlook deteriorated from -0.9 percent versus 2 percent growth in the earlier DSA. - Fiscal path and consolidation: - Fiscal performance in 2019: overall deficit narrowed to 1.7 percent of GDP compared to the 3 percent of GDP ceiling under the program. - 2020 overall deficit projected at 5.5 percent of GDP. - Structural pressures expected to weaken medium-term fiscal position: structural increase in the wage bill (1.3 percent of GDP), weak position of state-owned enterprises, and lower yield from tax administration measures. - Revised program envisages a more gradual return of the fiscal deficit to the WAEMU ceiling of 3 percent of GDP by 2024, while maintaining authorities’ commitment to priority social spending as reflected in indicative targets in 2020 and 2021. - Current account: - Projected to narrow to 2.0 percent of GDP in 2020 (3.6 in previous DSA) from 4.8 percent of GDP in 2019, driven by significantly higher gold prices and lower oil prices. - Projected to widen over the medium term with stronger domestic demand and gradual deterioration in the terms of trade. - Financing sources: mainly official grants and loans, FDI, and IMF programs. - External support and financing needs: - Gross financing needs projected to increase and peak in 2022, mainly driven by larger targeted deficit and heavier reliance on domestic financing with shorter maturities and higher interest rates. - External borrowing (including from the Fund) is estimated to have decreased to 2.9 percent of GDP in 2020. *Prepared jointly by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA) — February 8, 2021.* ### 3.9 percent of GDP in 2019, reflecting the ### 1mliea2021003 - 3.9 percent of GDP in 2019, reflecting the ### Fiscal financing and near-term outlook - Budget execution in 2020 faced financing challenges after the coup, with budget support from international and regional partners temporarily disengaging, contributing to "3.9 percent of GDP in 2019" as a contextual reference. - World Bank budget support shifted to project investment in 2020-21; other donors are still firming up budget support. - Baseline assumption for 2021: lower budget support, somewhat offset by higher project lending. - Over the medium term, gross financing needs will be met by external multilateral sources and bonds issued in the domestic and regional bond market (UMOA-Titres and APA). ### Debt dynamics and realism checks - Realism tools show projections broadly in line with historical and peers’ experiences. - Debt dynamics: - Public debt: deterioration in the near to medium term because of a wider fiscal deficit and a more gradual return to WAEMU target. - External debt: improvement compared to the previous DSA in the near term. - Different dynamics driven by projected shortfall in external financing in 2020 and 2021, higher reliance on domestic borrowing, and a heavier debt service burden. - Projected negative contribution of price and exchange rate in the projection, mainly driven by the appreciation path of CFAF. - Fiscal adjustment: - Projected 3-year change in the primary balance: "-2.1 percent of GDP". - This lies below the 75th percentile of the distribution of approved Fund-supported programs for LICs since 1990s. - Public investment and growth: - Projected contribution of government capital stock to growth: "24 percent" (versus "30 percent in the previous DSA" and "44 percent at the historical level"). - Decline in public investment-to-GDP ratio driven by expenditure switch to a higher wage bill. - Baseline does not yet include anticipated revenue increase from a tax package to be finalized ahead of the 2022 budget; if implemented, tax reforms could open additional fiscal space for public investment. ### Debt carrying capacity and stress scenarios - Mali assessed as having a medium debt carrying capacity: - Composite indicator score calculated to be "2.90" (above lower cut-off "2.69" but below strong capacity cut-off "3.05"). - Customized scenario (in addition to standardized stress tests and commodity price tailored test): - Illustrates risk from a deterioration in the primary fiscal balance relative to baseline: "2.5 percent of GDP higher in 2021, and then 2 percent of GDP higher in 2022 and 2023". - Financing gaps in this scenario are assumed closed by more expensive external borrowing due to a fixed envelope of available concessional financing and grants. ### External Debt Sustainability (baseline and risks) - Baseline projections: - External debt expected to decline in the near term due to shortfall in external official support during 2020-21. - External debt projected to reach "25.6 percent of GDP in 2023". - External debt projected to rise as external official budget support resumes, reaching "28.5 percent of GDP" around 2030, then settling at around "28 percent of GDP" by 2040. - Risk assessment: - Risk of external debt distress: "moderate". - Under baseline, PV of external debt-to-GDP ratio: decline from "21.4 percent in 2020" to "20.1 percent in 2025", then increase to "21.3 percent in 2030" — below the indicative threshold of "40 percent" throughout the projection period. - PV of external debt-to-exports ratio rising but comfortably below the "180 percent" threshold. - Debt service indicators stable and below thresholds under baseline and standardized stress tests. - Customized fragility scenario: - A shock to export growth would result in two breaches of the "15 percent" threshold for external debt service-to-exports (by "0.2 of a percentage point in 2024" and "0.4 of a percentage point in 2027"), downgrading the risk rating from low to moderate. - Debt service-to-revenue ratio almost breaches the "18 percent" threshold in 2024 under the customized scenario. ### Public Debt Sustainability (baseline and risks) - Baseline projections: - Public debt expected to increase to "47 percent of GDP in 2023", then gradually decline to "43.2 percent of GDP in 2030". - In the very long run, public debt expected to stabilize below "40 percent of GDP" by 2040. - Share of domestic debt in public debt peaks at "45.5 percent in 2022" (almost 10 percentage points higher than in 2019), then declines to "34.1 percent in 2030". - Risk assessment: - Risk of public debt distress: "moderate". - PV of public debt-to-GDP ratio under baseline increases to about "41 percent in 2022-23" then declines to "36 percent in 2030", remaining under the "55 percent" indicative threshold throughout the projection period. - Under the customized scenario (market-financed deterioration in the fiscal balance and a shock to commodity prices), indicative thresholds breached from 2023 onwards (by "0.6 of a percentage point in 2023" and almost "7 percentage points in 2030"), bringing overall public debt risk to moderate. ### Financing needs and vulnerabilities - Gross financing needs: - Estimated to average "12 percent of GDP" over the next two years. - Estimated to average "11.5 percent of GDP" over the next five years. - Vulnerabilities and risks: - Larger primary deficits, tighter donor support in the near term, and increasing debt service burden compound financing risks. - Dependence on regional markets as main near-term financing source increases risk through more expensive borrowing and potential market tightening if other WAEMU countries also finance larger deficits in the regional market simultaneously. - Liquidity risks associated with higher debt service burden are highlighted in the customized scenario where export shocks breach external debt service thresholds. ### Policy recommendations and authorities’ views - Policy recommendations: - Maintain prudent macroeconomic policies to ensure macroeconomic stability. - Proactively engage with external official partners to secure more grants and concessional loans. - Strengthen the effectiveness of debt management and tax revenue mobilization. - Continue and deepen structural reforms that prioritize areas of fiscal pressure, including measures to prevent arrears accumulation, manage the wage bill, and improve SOE performance to safeguard fiscal space for developmental, social and security spending. - Authorities’ views: - Authorities agree Mali remains at moderate risk of debt distress with some room to absorb shocks. - They emphasize the importance of external support from international donors and have been actively re-engaging with them. - Their debt strategy aims at mobilizing more concessional external loans, favoring domestic loans with longer maturities, maintaining a prudent policy to mobilize fixed-rate loans, and implementing a more active policy to choose currencies of loans (noting limited flexibility). ### Key numerical indicators from the baseline (selected) - Projected PV of external debt-to-GDP: "21.4 percent in 2020", "20.1 percent in 2025", "21.3 percent in 2030". - External debt stock projections: nominal external debt values include "24.5", "23.4", "26.4", "26.3", "27.9", "29.5", "30.6", "29.8", "29.3", "28.5", "28.2", "28.8", "28.6" (percent of GDP across 2017–2040 series as presented). - PV of PPG external debt-to-exports ratio (selected projected values): "82.3", "78.7", "85.1", "94.3", "102.9", "103.1", "105.3", "118.6", "174.6" (series as presented). - PPG debt service-to-exports ratio (selected): "4.6", "3.5", "5.0", "6.6", "6.7", "8.0", "10.6", "12.6", "11.6", "8.6", "12.9" (series as presented). - Gross external financing need (Million of U.S. dollars, selected): "691.2", "479.0", "689.2", "347.8", "525.6", "678.3", "985.4", "1337.6", "1593.1", "3048.3", "8463.9" (series as presented). - Real GDP growth (in percent, selected): "5.3", "4.7", "4.8", "-2.0", "4.0", "6.0", "5.0", "5.0", "5.0", "5.0", "5.0", "4.4", "4.4" (series as presented). - Government revenues (excluding grants, in percent of GDP, selected): "18.4", "14.3", "19.5", "18.6", "17.4", "17.8", "18.1", "19.8", "19.9", "20.2", "15.4", "15.8", "19.3" (series as presented). - Nominal GDP (Million of US dollars, selected): "15,360", "17,079", "17,308", "17,592", "19,519", "21,274", "22,880", "24,560", "26,074", "37,108", "84,055" (series as presented). *Source: IMF staff estimates and projections as presented in the provided content.* ### 1. On ### 1. On ### I. Background and context - Malian authorities express gratitude for IMF Executive Board, Management, and staff support. - Since early 2020, Mali has been impacted by the fallout of the Covid-19 pandemic and is experiencing a larger second wave of infections. - Responses implemented include: - early emergency disbursement under the Rapid Credit Facility (RCF); - debt service relief under the Catastrophe Containment and Relief Trust (CCRT). - Recurrent terrorist attacks and a socio-political crisis over the past year have worsened the macroeconomic policy environment and amplified development challenges and fragility. - Program implementation was impacted; the program was recalibrated to reflect the changed macroeconomic and political environment while remaining faithful to sustainability requirements. - Transitional authorities commit to maintaining macroeconomic stability and advancing reforms under the ECF-supported program and have taken remedial actions to improve program performance and pursue medium-term policies compatible with debt sustainability and WAEMU convergence criteria. ### II. Recent economic developments and outlook - 2020 macroeconomic outcomes and impacts: - real GDP growth is estimated to have dropped to -2 percent in 2020 due to the pandemic and deteriorating socio-political and security environments. - an estimated 9.1 million people are affected by rising poverty. - sectors most affected: construction, hotel, restaurant, and transportation. - average inflation is expected to have accelerated to 0.7 percent due to higher food prices. - regional economic embargo following the coup d’état and falling demand for exports including cotton accentuated the decline in economic activity. - gold exports benefitted from rising international prices; falling oil prices helped improve the terms of trade and the current account balance. - Fiscal 2020 adjustments: - a revised 2020 budget accounted for the fall in revenues, including external grants, and increased pandemic-related spending. - fiscal deficit is estimated to have increased from 3.5 percent to 5.5 percent of GDP. - economic support measures were fully implemented; measures to improve medical care and support to vulnerable households experienced delays. - authorities will reform the unified social directory to extend social assistance coverage with World Bank support. - Medium-term outlook and risks: - 2021 real GDP growth is projected to be in the order of 4 to 5 percent. - inflation is expected to be contained and not exceed the regional benchmark of 3 percent. - the current account deficit is projected to widen gradually over the medium term as the terms of trade deteriorate. - downside risks: pandemic, security situation, and exogenous shocks. ### III. Performance under the ECF program - Program performance: - at end-December 2019, performance was strong with all performance criteria (PCs) met. - meeting all end-June 2020 PCs proved unfeasible due to the outbreak, sociopolitical crisis, and regional sanctions. - authorities request waivers for non-observation of performance criteria and modification of a performance criterion. - Structural measures: - second review: 3 structural benchmarks out of 4 met. - third review: 4 structural benchmarks out of 6 implemented. - authorities are accelerating completion of remaining structural measures. ### IV. Medium-term policies and structural reforms Fiscal policy - Policy orientation: - guided by the Transition Charter and the Strategic Framework for Economic Recovery and Sustainable Development (CREDD) 2019-23. - priorities consistent with the ECF-supported program: strengthen Covid-19 response, improve governance and domestic resource mobilization, enhance social services provision, and lay groundwork for inclusive and sustainable growth. - Fiscal stance and targets: - fiscal policy in 2021 will focus on implementing the transitional Government’s action program while preserving fiscal discipline and public debt sustainability. - fiscal deficit is projected to remain at 5.5 percent in 2021, before gradually returning to 3 percent in 2024, in line with debt sustainability and WAEMU regional agreement to loosen the fiscal stance due to the Covid-19 pandemic. - the gradual adjustment will safeguard priority development and social outlays, contain pressures on the wage bill, restore public enterprise performance, and progressively increase tax revenues. - Revenue measures and tax policy: - increase tax revenues to enable a high quality adjustment in 2022. - tax policy measures aim at broadening the tax base, notably in the agricultural and informal sectors. - introduce a new tax on developed and undeveloped land properties (property taxation change). - discretionary exemptions or changes in tax rates will be strictly regulated in accordance with the law. - apply the new mining code and improve taxation of petroleum products to address revenue shortfalls. - Tax and customs administration reforms: - improve efficiency and modernize procedures to promote tax compliance and boost revenue mobilization. - reinforce crosschecking of information among tax, customs, Treasury and other agencies. - promote online procedures (e-filing and e-payment) for all businesses subject to the VAT. - initiate tax payment by mobile phone for other taxpayers notably in the informal sector. - in customs: reinforce organizational structure, digitalize procedures, and strengthen the fight against fraud and smuggling. - Expenditure management: - authorities committed to safeguarding priority social and capital spending, particularly in education and health. - efficient management of the wage bill is central: harmonize salary scales and undertake an in-depth study on wage bill management with technical assistance from international partners. - 2021 Budget Law to be supported by an emergency budgetary plan and prioritization of expenditure items should revenue underperformance occur. - enhance efficiency of public investment via rigorous project selection and implementation based on the 2017 PIMA recommendations. - strengthen institutional framework for monitoring, evaluating and managing Public Private Partnerships (PPPs) to better manage fiscal risks. - Cash management and debt management: - improve cash management and budget execution to avoid payment arrears; expand the coverage of the Single Treasury Account (TSA). - major IT system upgrades to automate revenue and expenditure operations and link them with the WAEMU banking system. - preserve debt sustainability by addressing refinancing risk associated with short-term financing instruments in the regional market. - give priority to concessional long-maturity external borrowing and implement the short and medium-term debt management strategy for 2021-23. Financial sector - deepen financial inclusion leveraging rapid development of mobile banking; promote access to basic banking services and modernize payment systems for SMEs. - support removal of non-operating fixed assets from banks’ balance sheets to ensure compliance with WAEMU prudential norms. - AML/CFT: - finalization of the National Risk Assessment (ENR) underway with World Bank assistance. - a Peer Review (Mutual Evaluation) was done and the final report was approved in 2019 by the 21st meeting of the Ministerial Committee of GIABA. - authorities will address shortcomings identified in the AML/CFT framework given the country’s vulnerability to terrorism activities. Structural reforms - priorities: improve living standards, bolster job creation (especially for youth), improve business environment, promote good governance, and strengthen monitoring of procurement and public enterprises’ financial situations. - establishment of a unit on public enterprises envisaged by the end of 2021. - electricity company (EDM-SA): - efforts to achieve cost recovery and ensure the company can meet financial obligations and provide affordable reliable electricity. - with World Bank support, implement a restructuring plan aimed at stabilizing the company’s financial situation and eliminating government subsidies by 2025. - transparency and anti-corruption: - ensure compliance with RCF transparency and accountability requirements. - started publishing monthly reports on execution of Covid-19 expenditures. - will begin publishing documentation on large pandemic-related public procurement contracts and beneficiary ownership in end-May 2021. - independent audit of Covid-19 expenditure by the Office of the Auditor General commissioned; results expected to be published by the end of July 2021. - enforce timely asset declarations of civil servants and continue revision of the Law on illicit enrichment to make it more effective and inclusive. - strengthen coordination between anti-corruption agencies. - consider additional actions to reinforce governance and fight corruption following the Fund’s diagnostic mission expected in 2021. ### V. Conclusion and requests - Authorities assert they are pursuing sound policies and reforms under the ECF-supported program to preserve macroeconomic stability and consolidate foundations for strong and inclusive growth. - Despite challenging macroeconomic conditions from multiple shocks, authorities are determined to catch up with pre-crisis program implementation progress. - Authorities request the Executive Board’s completion of the second and third reviews under the ECF arrangement, approval of requests for non-observance of performance criteria, and modification of a performance criterion. *Source: Malian authorities’ letter to the IMF as presented in the IMF chapter "1. On".* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1mliea2021003.pdf_