## 1mliea2023002

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### CLIMATE VULNERABILITIES AND FOOD INSECURITY IN MALI — Current challenges and impacts
- Temperature trends and climate shocks
  - Average temperature in Mali was around 28½ ̊C between 1950 and 1980, between 2000 and 2020 it averaged 29½ ̊C, and 2021 was the hottest year on record at over 29¾ ̊C.
  - Mali has experienced more frequent climate-related natural disasters including droughts and floods.
  - Climate-related INFORM risk places Mali among the highest-risk WAEMU countries.
- Exposure of the economy and livelihoods
  - Food and cotton production constitute around a third of GDP in Mali.
  - Almost 80 percent of livelihoods depend on agrarian and pastoralist activities that are highly affected by rainfall variability.
- Estimated impacts on agriculture and economic activity
  - Research suggests a temperature increase of 1 ̊C is associated with a 3 percentage point reduction in agricultural output (Dell, Jones, and Oklen, 2012).
  - Analysis for sub-Saharan Africa shows monthly economic activity decreases by 1 percentage point if the average temperature is 0.5 ̊C above the long-run average (IMF, 2020).
  - Climate change is estimated to reduce agricultural productivity by over 40 percent in Mali (Ortiz-Bobea and others, 2021).
- Rising food insecurity and humanitarian implications
  - The share of the population undernourished rose from just over 3 percent in 2017 to almost 10 percent in 2020 (FAO, 2022).
  - Food prices in late 2022 were around 30 percent above their 2019 average.
  - Food items now account for just under 60 percent of consumer spending in Mali.
  - According to the latest data, about three quarters of the population have insufficient food consumption (WFP).
  - Early 2023 estimates: more than 15 percent of the population were either facing severe food insecurity (761,000 people) or at risk of doing so (2. 9   million).
  - By mid-2023 projection: 24 percent of the population, with 1.3   million people facing severe food insecurity and a further 4 million people at risk (FSC, March 2023).
  - Analysis shows food insecurity increases by 5–20 percentage points with each flood or drought (IMF, 2020).
- Balance of payments and trade impacts
  - The price of imported cereals increased by 5½ percent in 2022, contributing to an 8 percent rise in total cereal imports.
  - The value of Mali’s total food imports increased by 15 percent in 2022 and were 65 percent higher than in 2019.
  - Combined shocks (COVID-19 supply bottlenecks, sanctions restricting food imports, and the war in Ukraine) have amplified vulnerabilities.
- Societal and long-term consequences
  - Chronic malnutrition causes irreversible cognitive and physical damage; children’s development and educational attainment are particularly affected.
  - Median age in Mali is 15.
  - Food insecurity can force households to sell physical assets, with long-term scarring on growth and productivity.
  - Political instability, security issues, weak institutions, declining international aid, and rapid population growth threaten fiscal space and resilience efforts.

### CLIMATE ADAPTATION, SOCIAL PROTECTION, AND FINANCING — Reform priorities and recommendations
- Adaptation in agriculture and infrastructure
  - Improve infrastructure for irrigation and provide reliable access to water and electricity to limit climate-related impacts on agricultural production.
  - Invest in seeds, pesticides, and fertilizers suited to higher average temperatures or resilience to extreme weather.
  - Support switches to alternative crops where appropriate and promote climate-smart agriculture, backed by information technology infrastructure and knowledge sharing.
- Targeted social protection and distributional safeguards
  - Monitor distributional effects and prioritize support for households and businesses most affected, with attention to women and girls who face heightened exposure.
  - Implement targeted cash transfers and safeguards to help poor households meet basic nutritional needs while limiting fiscal impact.
  - Regularly update the Unified Social Register (RSU) national database of social protection beneficiaries and ensure reliable payment mechanisms.
  - Consider insurance mechanisms and government-triggered transfers or subsidies that automatically activate in response to weather shocks.
- Financing climate adaptation and resilience
  - Create fiscal space to cover up-front costs of adaptation and infrastructure, recognizing adaptation spending is often more cost effective than ex post disaster relief.
  - Potential funding methods when conditions allow:
    - concessional financing, particularly through climate funds;
    - debt instruments linked to climate change;
    - international carbon credit schemes;
    - climate-related insurance schemes.
  - Accreditation of Mali’s climate agency would be an important step to access international climate funds.
  - Reduce administrative charges and language barriers to improve access to external climate finance.
- Regional and international cooperation
  - Pursue cross-country insurance programs to pool risks and spread costs of extreme weather and natural disasters, funded by bilateral and multilateral donors and financial markets.
  - Use regional trade as insurance by avoiding protectionist policies or trade embargoes that impede the ability to export excess harvests or import when production falls.
  - Strengthen international relationships to mobilize donor support and concessional lending tied to climate change and food insecurity.

### FRAGILITY, DEMOGRAPHICS, AND GENDER INEQUALITY — Diagnosis and policy priorities
- Fragility and structural causes
  - Mali’s FCS classification reflects interrelated factors that create “structural fragility” leading to persistently weak growth.
  - Key manifestations of structural fragility: widespread food insecurity; low capacity of the state to provide basic services; lack of basic infrastructure.
  - According to the Fund for Peace Fragile States Index, Mali is ranked 14th out of almost 180 countries in terms of fragility.
- Demographics and population pressures
  - Fertility rate is estimated at six children per woman on average.
  - Fertility has declined slowly since the early 1990s (when it was above 7) but remains very high relative to global averages.
  - Population almost doubled from about 10 to 20 million between 2000 and 2020 and is expected to almost double again over the coming 20 years.
  - Informal-sector employment already accounts for more than 95 percent of total employment.
- Gender inequality: levels and labor market impact
  - Mali is ranked 155th out of the 170 countries included in the 2021 UNDP Gender Inequality Index.
  - Only around 8 percent of women over 25 have completed lower secondary education; for men over 25 the comparable figure is 15½ percent.
  - Share of female parliamentary representatives is less than 29 percent (higher than the sub-Saharan Africa average of just under 28 percent).
  - The gap between male and female labor force participation rates in Mali is the second highest in the WAEMU.
  - Consequences: low female labor participation and high fertility constrain GDP per capita growth and social outcomes; fragility contexts further expose women and girls to forced marriages and sexual and gender-based violence.
- Links and policy implications
  - Gender inequality contributes to high fertility and weak female labor participation, which reduce GDP per capita growth and public resources, increasing social tensions.
  - Research: probability of a peace agreement lasting at least 15 years is 35 percent higher when women participate.
  - Recommended priorities:
    - Empowerment of women to help unlock growth potential.
    - Address gender gaps in education, especially among poorer households.
    - Establish more secure property rights for women and facilitate access to land and credit.
    - Improve care infrastructure including the social safety net to support increased female participation.
    - Prioritize reforms with greatest macroeconomic impact and focus on rural areas.
    - Involve women’s rights organizations and gender experts in design and implementation of reforms.
  - Role for donors: target international assistance to improving gender equality; consider additional funding conditional on successful implementation of reforms.

### WAGE BILL MANAGEMENT — Immediate challenges, medium-term reforms, and fiscal impacts
- Immediate reform challenge and short-term measures
  - Avoid further ad-hoc wage increases, and rationalize bonuses and allowances; this could be politically sensitive.
  - A nominal pay freeze has the potential to moderate both average compensation and the public wage premium.
  - A nominal pay freeze could be combined with targeted competitive compensation and performance-based bonuses and allowances to ensure adequate staffing in priority sectors.
  - Across-the-board pay freezes could generate between 1-2 percentage points of GDP reductions in the wage bill immediately, as seen in Côte d’Ivoire and Senegal, but may not be effective in containing the wage bill in the medium term (IMF, 2016).
  - Risks of across-the-board freezes include hampering public sector labor markets and generating demands for higher allowances and bonuses.
  - Alternative: restrict public sector wage growth to rise by less than inflation, nominal GDP, tax revenue or private sector wages; ensure any wage bill increase is accompanied by an equivalent increase in revenues.
  - Example: tax reform that increases the tax to GDP ratio by 1ppt would generate a drop of the wage bill to revenue ratio of nearly 0.7ppt, all else equal.
- Medium- and long-term structural reforms
  - Institutional and social arrangements to ensure control, oversight, and transparency of the wage setting mechanism.
  - Enhance payment-related digitization and PFM and integrate wage decision-making in the budgetary framework.
  - Tighter controls on bonuses and allowances.
  - Country examples: Egypt reduced its wage bill by nearly 3.5 percentage points of GDP between 2014-19 by setting up tighter controls on bonuses and allowances; Côte d’Ivoire adopted a medium-term wage bill strategy.
  - Mali-specific steps: base reforms on outcomes of the social conference; harmonize and rationalize allowances and bonuses; develop a national wage bill policy/strategy; complete the planned wage bill study.
- Key statistics and pressures
  - Public sector wage bill to tax revenue ratio: 55 percent, far exceeding the WAEMU’s 35 percent ceiling.
  - The sharp rise in the wage bill ratio since 2019 coincided with salary increases resulting from ad hoc salary negotiations with civil servant unions.
  - Public employment as a ratio to the working-age population has been declining.

### GOVERNANCE DIAGNOSTIC, ANTI-CORRUPTION, AND PUBLIC FINANCE REFORMS
- Governance diagnostic priorities
  - Mission focused on rule of law, tax and customs administration, and public financial management; Article IV mission in March 2023 took stock of progress since 2021.
  - Social conference gathered nearly 500 participants and agreed on 139 recommendations (implementation not expected to have a major fiscal implication).
- Rule of law, asset declarations, and OCLEI
  - Strengthen asset declaration framework and empower the Office Central de Lutte contre l’Enrichissement Illicite (OCLEI).
  - Reported compliance with asset declaration requirements has declined; no sanctions used since OCLEI was founded in 2017.
  - Recommended immediate action: senior government members submit asset declarations and OCLEI publish compliance rates among senior state officials.
- Mining sector transparency and procurement
  - High corruption risks in mining; mining contracts are not published and limited public information is available on mining operations.
  - BVG audits raised questions about lack of oversight; reforms should make mining contracts and licences public and investigate irregularities detected by the BVG with published results.
  - Improve public procurement transparency and beneficial ownership disclosure for companies awarded public contracts.
- AML/CFT and FATF status
  - Mali remains on the Financial Action Task Force (FATF) gray list as of March 2023.
  - Of 27 FATF Action Plan measures: 4 addressed, 19 partially addressed, 4 not addressed (including sector-level risk assessments for mining, effective sanctions for AML/CFT rule violations, addressing gaps in AML/CFT regulation, and dissemination of UN sanctions lists).
  - Upcoming FATF reviews in May 2023 and September 2023 noted as important.
- Tax, customs, digitalization, and SOEs
  - Identified tax/customs problems: multiple tax exemptions outside the general fiscal regime and their manual management; complex and discriminatory tax rules; limited use of IT tools and automated risk management.
  - Need for a National Integrity Framework for tax and customs administrations; strengthen internal auditors’ capacities and internal control offices’ resources.
  - SOEs and corporations account for close to 87 percent of all losses observed in public finances (based on recent BVG reports).
  - Government set up an SOE monitoring unit within the Ministry of Finance and signed performance contracts with major SOEs; recommendation to publish annual financial statements and audit reports where applicable.
  - Digitalization gaps: lack of interconnection between tax/customs systems and the Treasury information system; paper-based procedures remain widespread; recommendation to complete interconnection and computerize procurement procedures.

### STOCK-FLOW ADJUSTMENTS (SFAs) AND DEBT DYNAMICS — Causes, magnitude, scenarios, and policy actions
- Nature and causes of SFAs
  - SFAs: extra-budgetary and below-the-line operations not reflecting standard spending and revenue that nevertheless need financing.
  - Possible causes: differences in institutional coverage between fiscal accounts and debt statistics; using cash and accrual accounting simultaneously; asset valuation effects; changes in financial assets from privatizations or deposit accumulation/depletion; extra-budgetary and off-budget funds; contingent liabilities including government guarantees.
- Historical size and impact in Mali
  - SFAs added 9 percentage points to the debt-to-GDP ratio in Mali over the past decade — just under a third of the total increase in public debt over that period.
  - Debt-to-GDP ratio doubled over the past decade to reach 52.5 percent in 2022.
  - Domestic debt rose to 25.2 percent of GDP in 2022 from below 5 percent in 2013.
  - External debt increased to27.3 percent of GDP in 2022, from 21½ percent.
  - Specific yearly SFA examples:
    - 2014: SFAs amounted to -2.5 percent of GDP; headline deficit was 2.9 percent of GDP; effective fiscal deficit including the SFA was 0.4 percent of GDP.
    - 2019: SFAs were positive, at more than 3 percent of GDP; headline deficit was 1.7 percent of GDP; effective fiscal deficit including the SFA was 5 percent of GDP.
    - 2020: SFAs were positive, at more than 3 percent of GDP; headline deficit was 5.4 percent of GDP; effective fiscal deficit including the SFA was 8.4 percent of GDP.
    - Average over the past decade: SFAs have been positive, at just under 1 percent of GDP.
    - Of the 28 percentage point increase in the debt-to-GDP ratio over the past decade, SFAs have contributed 9 percentage points.
    - Since 2018: SFAs have contributed 7 percentage points to the 16 percentage point rise in the public debt-to-GDP ratio (more than 40 percent of the total increase).
- Drivers of higher SFAs since 2016
  - Change in the debt database leading to disbursements on external loans being collected and recorded after the year in which loans are made.
  - COVID-19 restrictions possibly causing difficulties in communicating with donors and collecting and reporting debt data on time.
- Regional context and comparisons
  - Median SFA averaged 1.1 percent of GDP across sub-Saharan Africa over 2013-2019.
  - During the pandemic, the median SFA across sub-Saharan Africa averaged 1.5 percent of GDP.
  - WAEMU region: SFAs added 13 percentage points to public debt ratios over the period 2013–2022.
  - Country examples in WAEMU over the ten years to 2022: Guinea-Bissau and Senegal: SFAs have added 20 percentage points to public debt ratios; Burkina Faso and Niger: SFAs have added 5 percentage points or less.
- Debt dynamics under alternative SFA assumptions (Mali and WAEMU)
  - Baseline public debt projection for Mali assumes zero SFAs.
  - Scenario A: SFAs remain at their historical average (0.9 percent of GDP).
    - Under Scenario A (historical SFAs): debt-to-GDP ratio in 2027 would be 3.5 percentage points higher than the baseline, reaching close to 60 percent of GDP.
  - Scenario B: SFAs are double their historical average (1.8 percent of GDP).
    - Under Scenario B (double historical SFAs): debt would be over 65 percent of GDP, close to the 70 percent debt ceiling of the WAEMU region by 2027.
  - WAEMU region projection: if SFAs were double their historical average the debt-to-GDP ratio would be expected to rise over the medium term, compared with the baseline forecast where it falls back.
- Implications and recommended actions
  - SFAs have contributed significantly to debt accumulation in Mali and other WAEMU countries; they reduce the informational value of the fiscal deficit alone.
  - Recommended actions to reduce occurrence of SFAs and improve monitoring:
    - Identify and report all drivers of debt accumulation, including below-the-line and extra-budgetary operations; introduce systematic reconciliation of fiscal and debt accounts, preferably by linking fiscal- and debt-recording systems.
    - Improve and harmonize accounting standards and practices across the region; include full, region-wide implementation of GFSM 2001/14 in line with the WAEMU Directive on fiscal statistics; apply consistent institutional coverage above and below the line; wider use of accrual accounting.
    - Track and systematically report government guarantees and other fiscal risks; strengthen oversight of State-Owned Enterprises (SOEs), including limitations on quasi-fiscal operations.
    - Account for SFAs when preparing budgets and medium-term fiscal frameworks to increase credibility of fiscal strategies.
    - Prevent accumulation of expenditure arrears and prepare settlement plans to reduce past arrears.
  - Conclusion: Reducing SFAs and increasing transparency and monitoring would be beneficial, alongside significant fiscal consolidation to achieve debt sustainability.

*May 9, 2023 — International Monetary Fund country note on Mali. Source: 1mliea2023002 (MALI, INTERNATIONAL MONETARY FUND excerpt).*

### References __________________________________________________________________________ 9

### CLIMATE VULNERABILITIES AND FOOD INSECURITY IN MALI

### Current Challenges
- Temperature trends and climate shocks
  - Average temperature in Mali was around 28½ ̊C between 1950 and 1980, between 2000 and 2020 it averaged 29½ ̊C, and 2021 was the hottest year on record at over 29¾ ̊C.
  - Mali has experienced more frequent climate-related natural disasters including droughts and floods.
  - Climate-related INFORM risk places Mali among the highest-risk WAEMU countries.

- Exposure of the economy and livelihoods
  - Food and cotton production constitute around a third of GDP in Mali.
  - Almost 80 percent of livelihoods depend on agrarian and pastoralist activities that are highly affected by rainfall variability.

- Estimated impacts on agriculture and economic activity
  - Research suggests a temperature increase of 1 ̊C is associated with a 3 percentage point reduction in agricultural output (Dell, Jones, and Oklen, 2012).
  - Analysis for sub-Saharan Africa shows monthly economic activity decreases by 1 percentage point if the average temperature is 0.5 ̊C above the long-run average (IMF, 2020).
  - Climate change is estimated to reduce agricultural productivity by over 40 percent in Mali (Ortiz-Bobea and others, 2021).

- Rising food insecurity and humanitarian implications
  - The share of the population undernourished rose from just over 3 percent in 2017 to almost 10 percent in 2020 (FAO, 2022).
  - Food prices in late 2022 were around 30 percent above their 2019 average.
  - Food items now account for just under 60 percent of consumer spending in Mali.
  - According to the latest data, about three quarters of the population have insufficient food consumption (WFP).
  - Early 2023 estimates: more than 15 percent of the population were either facing severe food insecurity (761,000 people) or at risk of doing so (2. 9   million).
  - By mid-2023 projection: 24 percent of the population, with 1.3   million people facing severe food insecurity and a further 4 million people at risk (FSC, March 2023).
  - Analysis shows food insecurity increases by 5–20 percentage points with each flood or drought (IMF, 2020).

- Balance of payments and trade impacts
  - The price of imported cereals increased by 5½ percent in 2022, contributing to an 8 percent rise in total cereal imports.
  - The value of Mali’s total food imports increased by 15 percent in 2022 and were 65 percent higher than in 2019.
  - Combined shocks (COVID-19 supply bottlenecks, sanctions restricting food imports, and the war in Ukraine) have amplified vulnerabilities.

- Societal and long-term consequences
  - Chronic malnutrition causes irreversible cognitive and physical damage; children’s development and educational attainment are particularly affected.
  - Median age in Mali is 15.
  - Food insecurity can force households to sell physical assets, with long-term scarring on growth and productivity.
  - Political instability, security issues, weak institutions, declining international aid, and rapid population growth threaten fiscal space and resilience efforts.

### Reform Priorities and Policy Recommendations
- Adaptation in agriculture and infrastructure
  - Improve infrastructure for irrigation and provide reliable access to water and electricity to limit climate-related impacts on agricultural production.
  - Invest in seeds, pesticides, and fertilizers suited to higher average temperatures or resilience to extreme weather.
  - Support switches to alternative crops where appropriate and promote climate-smart agriculture, backed by information technology infrastructure and knowledge sharing.

- Targeted social protection and distributional safeguards
  - Monitor distributional effects and prioritize support for households and businesses most affected, with attention to women and girls who face heightened exposure.
  - Implement targeted cash transfers and safeguards to help poor households meet basic nutritional needs while limiting fiscal impact.
  - Regularly update the Unified Social Register (RSU) national database of social protection beneficiaries and ensure reliable payment mechanisms.
  - Consider insurance mechanisms and government-triggered transfers or subsidies that automatically activate in response to weather shocks.

- Financing climate adaptation and resilience
  - Create fiscal space to cover up-front costs of adaptation and infrastructure, recognizing adaptation spending is often more cost effective than ex post disaster relief.
  - Potential funding methods when conditions allow:
    - concessional financing, particularly through climate funds;
    - debt instruments linked to climate change;
    - international carbon credit schemes;
    - climate-related insurance schemes.
  - Accreditation of Mali’s climate agency would be an important step to access international climate funds.
  - Reduce administrative charges and language barriers to improve access to external climate finance.

- Regional and international cooperation
  - Pursue cross-country insurance programs to pool risks and spread costs of extreme weather and natural disasters, funded by bilateral and multilateral donors and financial markets.
  - Use regional trade as insurance by avoiding protectionist policies or trade embargoes that impede the ability to export excess harvests or import when production falls.
  - Strengthen international relationships to mobilize donor support and concessional lending tied to climate change and food insecurity.

### Conclusion
- Urgency and risks
  - Climate change is already contributing to rising food insecurity in Mali; further increases would risk exacerbating social tensions and conflict.
  - The combined effects pose lasting adverse impacts on economic growth and poverty, creating a pressing need for immediate and sustained action.
  - Given Mali’s severe climate and food insecurity challenges, the country stands to benefit from strengthened international cooperation, climate-related funding schemes, and cross-country insurance programs.

*May 9, 2023 — International Monetary Fund country note on Mali*

### 1. Mali’s classification as a fragile and conflict-affected state (FCS) reflects a number of

### 1mliea2023002 - 1. Mali’s classification as a fragile and conflict-affected state (FCS) reflects a number of

### Fragility, structural causes, and outcomes
- Mali’s FCS classification reflects interrelated factors that create “structural fragility” leading to persistently weak growth.
- Key manifestations of structural fragility:
  - Widespread food insecurity.
  - Low capacity of the state to provide basic services.
  - Lack of basic infrastructure.
- The political system is described as “fragile to stress,” with frequent internal and external conflict in recent years.
- Persistent fragility increases the risk of a fragility “trap,” where shocks (drivers) and vulnerabilities (sources) produce adverse outcomes that increase future susceptibility to shocks.
- According to the Fund for Peace Fragile States Index, Mali’s fragility ranking increased sharply in 2012 and continued to increase steadily since; in the latest index Mali is ranked 14th out of almost 180 countries in terms of fragility.

### Demographics and population pressures
- Population growth and fertility:
  - Fertility rate is estimated at six children per woman on average.
  - Fertility has declined slowly since the early 1990s (when it was above 7) but remains very high relative to global averages.
  - Population almost doubled from about 10 to 20 million between 2000 and 2020 and is expected to almost double again over the coming 20 years.
- Economic and fiscal pressures from population growth:
  - High population growth increases pressures on resources, including food supplies.
  - If job creation cannot keep pace, risks include rising unemployment, expanded informal-sector employment (already accounting for more than 95 percent of total employment), and increased social tensions.
  - Changes in age structure and more people relying on state support will raise the dependency ratio and add pressure on public finances.

### Gender inequality: levels, manifestations, and labor market impact
- Rankings and indicators:
  - Mali is ranked 155th out of the 170 countries included in the 2021 UNDP Gender Inequality Index.
  - Educational attainment: only around 8 percent of women over 25 have completed lower secondary education; for men over 25 the comparable figure is 15½ percent.
  - Maternal mortality is among the highest in the world; gender-based violence is widespread.
- Labor market participation and representation:
  - The gap between male and female labor force participation rates in Mali is the second highest in the WAEMU.
  - Inequalities are especially prevalent among skilled jobs.
  - Share of female parliamentary representatives is less than 29 percent (higher than the sub-Saharan Africa average of just under 28 percent).
  - Women are under-represented in appointed government positions.
- Consequences:
  - Women are severely underrepresented in the labor force, constraining economic potential.
  - Low education opportunities for women are linked to higher fertility rates, reinforcing demographic pressures.
  - High fertility limits women’s health, productive capacity, and time available for employment, contributing to lower growth in GDP per capita and potential social tensions.
  - Fragility and conflict contexts further expose women and girls to forced marriages, unpaid economic participation, and sexual and gender-based violence.

### Links between fragility, demographics, and gender inequality
- Feedback loops described:
  - Gender inequality contributes to high fertility and weak female labor participation.
  - High fertility and demographic pressure reduce GDP per capita growth and public resources, increasing risk of discontent and social tensions.
  - Weak growth and tensions can further exacerbate gender inequality, creating a vicious cycle.
- Research evidence cited:
  - Women’s participation in peace negotiations and constitutional reform increases likelihood that agreements will be reached and implemented.
  - One study finds the probability of a peace agreement lasting at least 15 years is 35 percent higher when women participate.
- Policy implication:
  - Sustained policy action is required to overcome fragility; research suggests supporting growth, increasing social/education spending, strengthening government effectiveness, and increasing political inclusion are especially beneficial.

### Reforms enacted to date
- Security and fiscal trade-offs:
  - Security and military spending averaged around 5½ percent of GDP in 2021 and 2022, the highest in the Sahel G5 and a significant increase relative to the previous decade (when it averaged just over 3 percent).
  - Higher security spending has come at the expense of other priority spending including public investment and social spending.
- Institutional mechanisms and policies to improve gender equality:
  - 1997: Ministry for the Promotion of Women, Children, and Families (MPFEF) created.
  - 2014: National Policy on Promotion and Protection of Children (PNPPE).
  - 2015: National Family Policy (PNF) and National Gender Policy (includes a requirement that share of either gender in public agencies should not be lower than 30 percent).
  - 2017: PRECOFEM (Emergence of Women’s Capacities) launched as a forum for information exchange.
  - 2019-2023: National Action Plan ensures women are given prominent roles in peacebuilding, reconciliation, and post-conflict governance and provides support to women's rights organizations.

### Future priorities and measures of success
- Policy priorities recommended:
  - Empowerment of women to help unlock growth potential.
  - Address gender gaps in education, especially among poorer households.
  - Establish more secure property rights for women and facilitate access to land and credit.
  - Improve care infrastructure including the social safety net to support increased female participation.
  - Prioritize reforms with greatest macroeconomic impact, including improved access to education for women and girls, guided by skills needed in expanding sectors.
  - Focus policies on rural areas where economic diversification is lowest and fertility and gender inequality are highest.
  - Involve women’s rights organizations and gender experts in design and implementation of reforms.
- Role for donors and partners:
  - International assistance could be further targeted towards improving gender equality.
  - Additional funding could be offered conditional on successful implementation of reforms.
  - Improved diplomatic relations with international partners would increase likelihood of support grants and funding to address fragility, demographics, and gender inequality.
- Coordination:
  - Given interrelated nature of challenges, reforms should be conducted in coordination using well-designed packages of interventions (e.g., widening education opportunities combined with strengthening the social safety net).

### Conclusion
- Mali has been trapped in a state of fragility since 2012, with high population growth and gender inequality playing important roles.
- A number of reforms have been enacted, but further coordinated efforts are needed, including:
  - Empowerment of women.
  - Improvements to care infrastructure and the social safety net.
  - Improved collaboration with international partners.
- Breaking the vicious cycle of fragility, demographics, and gender inequality requires sustained, coordinated policy action.

*Prepared by Luc Tucker (section) and Youssouf Kiendrebeogo (FAD) (wage bill material).*

### 5. The immediate reform challenge is to avoid further ad-hoc wage increases, and

### 5. The immediate reform challenge is to avoid further ad-hoc wage increases, and

### Immediate reform challenge and short-term measures
- Avoid further ad-hoc wage increases, and rationalize bonuses and allowances; this could be politically sensitive.
- A nominal pay freeze has the potential to moderate both average compensation and the public wage premium.
- A nominal pay freeze could be combined with targeted competitive compensation and performance-based bonuses and allowances to ensure adequate staffing in priority sectors.
- Across-the-board pay freezes could generate between 1-2 percentage points of GDP reductions in the wage bill immediately, as seen in Côte d’Ivoire and Senegal, but may not be effective in containing the wage bill in the medium term (IMF, 2016).
- Risks of across-the-board freezes:
  - Hampering public sector labor markets and setting back provision of adequate staffing in priority sectors.
  - Distorting the wage structure by generating demands for higher allowances and bonuses (as in Côte d’Ivoire and Senegal).
  - In Mali, an across-the-board wage freeze may be inconsistent with the agreement reached during the social conference, ultimately leading to social unrest in an already-fragile environment.
- Alternatives and complements:
  - Restrict public sector wage growth to rise by less than inflation, nominal GDP, tax revenue or private sector wages.
  - Ensure any wage bill increase is accompanied by an equivalent increase in revenues through specific tax policy measures (previous ECF program consideration).
  - Example effect: tax reform that increases the tax to GDP ratio by 1ppt would generate a drop of the wage bill to revenue ratio of nearly 0.7ppt, all else equal (implementation may be complicated by budget execution issues).

### Medium- and long-term structural reforms for wage bill management
- Structural wage reforms to stabilize nominal wage growth and strengthen wage bill management are critical for fiscal sustainability.
- Possible measures:
  - Institutional and social arrangements to ensure control, oversight, and transparency of the wage setting mechanism.
  - Enhancing payment-related digitization and PFM and integrating wage decision-making in the budgetary framework.
  - Tighter controls on bonuses and allowances.
- Cross-country evidence and country examples:
  - Such arrangements tend to improve the efficiency of wage formation and hiring processes (IMF, 2014).
  - Egypt reduced its wage bill by nearly 3.5 percentage points of GDP between 2014-19 by setting up tighter controls on bonuses and allowances.
  - Côte d’Ivoire has adopted a medium-term wage bill strategy with a pathway to improve wage bill management over the medium term.
- Mali-specific steps:
  - Structural measures should be based on outcomes of the social conference, which could:
    - Pave the way for an effective wage bill management through adoption of a social stability pact.
    - Harmonize and rationalize allowances and bonuses.
    - Develop a national wage bill policy/strategy for civil servants.
  - The completion of the planned wage bill study is a critical milestone to understand drivers of wage bill growth and available policy options.
- Caveats:
  - Weak institutional capacity complicates implementation of structural reforms; IMF Technical Assistance would be useful in many reform areas.
  - Wage bill moderation measures should be well-targeted and sector-specific; in LICs, some wages should be set to attract and motivate staff.

### Key findings on recent wage bill developments and pressures
- The wage bill has increased substantially and now exceeds the WAEMU norm.
- Average compensation level has been a key driver of the recent wage bill increase.
- Public sector wage bill to tax revenue ratio: 55 percent, far exceeding the WAEMU’s 35 percent ceiling.
- The sharp rise in the wage bill ratio since 2019 coincided with salary increases resulting from ad hoc salary negotiations with civil servant unions.
- Public employment as a ratio to the working-age population has been declining.
- While pay freezes may be effective in the short run, they are difficult to maintain and structural measures are needed for medium-term sustainability.

### Governance diagnostic — summary of main governance reform priorities
- The governance diagnostic mission (early 2021) focused on three pillars: the rule of law, tax and customs administration, and public financial management.
- The mission assessed progress, identified weaknesses, and produced measures to guide reforms; the Article IV mission in March 2023 took stock of progress since 2021.
- Social conference: gathered nearly 500 participants from the government, unions, and private sector; participants agreed on 139 recommendations (implementation not expected to have a major fiscal implication).

### Rule of law, anti-corruption, and AML/CFT
- Strengthening rule of law, judicial/legal transparency, and exemplarity in managing the State are key governance priorities.
- Asset declaration and OCLEI:
  - Strengthening the asset declaration framework and empowering the Office Central de Lutte contre l’Enrichissement Illicite (OCLEI) remain essential.
  - Reported compliance with asset declaration requirements has declined in recent years.
  - Despite non-compliance penalties under the law, there have been no sanctions used since OCLEI was founded in 2017.
  - Diagnostic mission recommended reinforcing OCLEI through specialized training and granting powers (e.g., to order seizure or freeze assets).
  - Immediate action recommended: senior government members submit asset declarations and OCLEI publish compliance rates among senior state officials.
- Mining sector and transparency:
  - Mali faces high corruption risks in mining; mining contracts are not published and limited public information is available on mining operations.
  - BVG audits raised questions about lack of oversight of the mining sector; reforms should make mining contracts and licences public and investigate irregularities detected by the BVG with published results.
  - Improve public procurement transparency and beneficial ownership disclosure for companies awarded public contracts.
  - Direction Générale des Marchés Publics has developed a website publishing information on public procurements above a certain threshold; some progress on collecting beneficial ownership for COVID-19 related contracts.
- AML/CFT risks and FATF status:
  - Mali remains on the Financial Action Task Force (FATF) gray list as of March 2023.
  - Challenges: lack of transparency in extractive sectors, weak reporting and quality of suspicious transaction reports, uncertainty about the body responsible for investigating suspicious activities, poor coordination among law enforcement, limited capacity to trace and confiscate assets.
  - Of 27 FATF Action Plan measures: 4 addressed, 19 partially addressed, 4 not addressed (including sector-level risk assessments for mining, effective sanctions for AML/CFT rule violations, addressing gaps in AML/CFT regulation, and dissemination of UN sanctions lists).
  - Upcoming FATF reviews in May 2023 and September 2023 noted as important.

### Tax and customs administration reforms
- Streamlining tax and customs administrations can improve governance, generate additional revenues, and improve the business environment.
- Identified problems:
  - Multiple tax exemptions outside the general fiscal regime and their manual management impede traceability and create corruption opportunities.
  - Complex and discriminatory tax rules, lack of effective appeal mechanisms, and lack of inclusiveness in drafting tax/customs legislation.
  - Limited use of IT tools and automated risk management prevents fair treatment of importers and taxpayers where dispute resolution is not impartial.
- Integrity and accountability:
  - Need to develop a National Integrity Framework for tax and customs administrations.
  - Strengthen internal auditors’ capacities and increase internal control offices’ resources.

### Public Financial Management and SOEs
- State Owned Enterprises (SOEs):
  - SOEs and corporations account for close to 87 percent of all losses observed in public finances (based on recent BVG reports).
  - Government has struggled to achieve financial sustainability and effective operation of large SOEs.
  - Prioritize supervision of SOEs; an SOE monitoring unit has been set up within the Ministry of Finance and performance contracts signed with major SOEs.
  - Improve transparency by publishing annual financial statements and audit reports where applicable.
- Digitalization:
  - Progress in digitalization will support reforms in tax/customs administration and public financial management.
  - Key gaps: lack of interconnection between tax/customs systems and the Treasury information system; paper-based procedures remain widespread; Customs Code still treats paper-based declarations as the norm.
  - Recommendations: prioritize completion of interconnection between systems and computerize procurement procedures.

### Stock-flow adjustments and debt dynamics — key statistics and implications
- Stock-flow adjustments (SFAs) definition: extra-budgetary and below-the-line operations not reflecting standard spending and revenue that nevertheless need financing.
- SFAs added 9 percentage points to the debt-to-GDP ratio in Mali over the past decade — just under a third of the total increase in public debt over that period.
- Public debt trends (exact figures):
  - Debt-to-GDP ratio doubled over the past decade to reach 52.5 percent in 2022.
  - Domestic debt rose to 25.2 percent of GDP in 2022 from below 5 percent in 2013.
  - External debt increased to27.3 percent of GDP in 2022, from 21½ percent.
- Drivers of recent debt rise:
  - Regional and global sanctions, the COVID-19 pandemic and its scarring effects, fallout of the war in Ukraine, increasingly frequent extreme weather events, insecurity and political instability.
  - Shift away from highly concessional multilateral and bilateral borrowing to more expensive and shorter-term market-based debt.
- Policy implications:
  - Positive SFAs imply that debt increases faster than fiscal deficits indicate; thus the fiscal deficit may understate financing needs.
  - Actions could reduce occurrence of SFAs or increase transparency and monitoring to assist fiscal policy decision-making.

*Source: 1mliea2023002 (MALI, INTERNATIONAL MONETARY FUND excerpt).*

### 4.      In general, there are several possible reasons for the disconnect between the fiscal

### 4. In general, there are several possible reasons for the disconnect between the fiscal deficit and the change in public debt

### Causes of stock-flow adjustments (SFAs)
- Differences in institutional coverage between fiscal accounts and debt statistics.
- Using cash and accrual accounting simultaneously for different transactions, creating a disconnect between the cash-based debt and the accruals-based deficit.
- Asset valuation effects, for example, if exchange rate movements create a disconnect between external borrowing and the change in the external debt stock measured in local currency.
- Changes in financial assets as a result of privatizations or accumulation/depletion of government deposits.
- Extra-budgetary and off-budget funds, which can lead to public borrowing that is outside the central government budget.
- Contingent liabilities including government guarantees, which have no equivalent in the fiscal deficit until they are called and generate a financing need (could include recapitalizations of banks or State-Owned Enterprises).

### Importance of understanding SFAs
- Data limitations often make it difficult to identify drivers of observed SFAs or predict their potential future size.
- Because drivers are often unidentifiable or unpredictable, it is difficult for governments to set fiscal policy that ensures debt sustainability.

### Size and impact of SFAs in Mali (historical)
- 2014: SFAs amounted to -2.5 percent of GDP; headline deficit was 2.9 percent of GDP; effective fiscal deficit including the SFA was 0.4 percent of GDP.
- 2019: SFAs were positive, at more than 3 percent of GDP; headline deficit was 1.7 percent of GDP; effective fiscal deficit including the SFA was 5 percent of GDP.
- 2020: SFAs were positive, at more than 3 percent of GDP; headline deficit was 5.4 percent of GDP; effective fiscal deficit including the SFA was 8.4 percent of GDP.
- Average over the past decade: SFAs have been positive, at just under 1 percent of GDP.
- Of the 28 percentage point increase in the debt-to-GDP ratio over the past decade, SFAs have contributed 9 percentage points.
- Since 2018: SFAs have contributed 7 percentage points to the 16 percentage point rise in the public debt-to-GDP ratio (more than 40 percent of the total increase).

### Possible drivers of higher SFAs since 2016
- Change in the debt database leading to disbursements on external loans being collected and recorded after the year in which loans are made, increasing outstanding debt in later years.
- COVID-19 restrictions possibly causing difficulties in communicating with donors and collecting and reporting debt data on time.

### Regional context (WAEMU and sub-Saharan Africa)
- Median SFA averaged 1.1 percent of GDP across sub-Saharan Africa over 2013-2019.
- During the pandemic, the median SFA across sub-Saharan Africa averaged 1.5 percent of GDP.
- WAEMU region: SFAs added 13 percentage points to public debt ratios over the period 2013–2022.
- Country examples in WAEMU over the ten years to 2022:
  - Guinea-Bissau and Senegal: SFAs have added 20 percentage points to public debt ratios.
  - Burkina Faso and Niger: SFAs have added 5 percentage points or less.
- WAEMU countries with initially higher debt accumulated more SFAs over time.

### Debt dynamics under alternative SFA assumptions (Mali and WAEMU)
- Baseline public debt projection for Mali assumes zero SFAs.
- Two alternative scenarios:
  - Scenario A: SFAs remain at their historical average (0.9 percent of GDP).
  - Scenario B: SFAs are double their historical average (1.8 percent of GDP).
- Both scenarios assume the fiscal deficit will return to the 3-percent WEAMU ceiling by 2026, in line with the baseline projection.
- Mali projections:
  - Under Scenario A (historical SFAs): debt-to-GDP ratio in 2027 would be 3.5 percentage points higher than the baseline, reaching close to 60 percent of GDP.
  - Under Scenario B (double historical SFAs): debt would be over 65 percent of GDP, close to the 70 percent debt ceiling of the WAEMU region by 2027.
- WAEMU region projection:
  - If SFAs were double their historical average the debt-to-GDP ratio would be expected to rise over the medium term, compared with the baseline forecast where it falls back.

### Implications
- SFAs have contributed significantly to debt accumulation in Mali and other WAEMU countries.
- Little understanding of causes of SFAs due to data limitations and a lack of systematic monitoring and reporting.
- Fiscal deficit alone offers highly incomplete information on fiscal discipline across WAEMU member countries; unmonitored SFAs can undermine the credibility and effectiveness of WAEMU fiscal rules.
- Reducing SFAs is necessary but not sufficient for debt sustainability in Mali; the fiscal deficit is a larger contributor to debt than in other WAEMU countries, so significant fiscal consolidation remains critical.

### Recommended actions to reduce occurrence of SFAs and improve monitoring
- Identify and report all drivers of debt accumulation, including below-the-line and extra-budgetary operations; introduce systematic reconciliation of fiscal and debt accounts, preferably by linking fiscal- and debt-recording systems.
- Improve and harmonize accounting standards and practices across the region; include full, region-wide implementation of GFSM 2001/14 in line with the WAEMU Directive on fiscal statistics; apply consistent institutional coverage above and below the line; wider use of accrual accounting to ensure consistent transaction treatment.
- Track and systematically report government guarantees and other fiscal risks; strengthen oversight of State-Owned Enterprises (SOEs), including limitations on quasi-fiscal operations.
- Account for SFAs when preparing budgets and medium-term fiscal frameworks to increase credibility of fiscal strategies.
- Prevent accumulation of expenditure arrears and prepare settlement plans to reduce past arrears.

### Conclusion
- SFAs have added significantly to Mali’s public debt over the past decade, but there remains little understanding or systematic monitoring of their causes.
- Scenario analysis shows that if SFAs are in line with their past average in Mali and the authorities follow current fiscal plans, public debt would be expected to increase over the medium term, reaching close to 60 percent of GDP by 2027.
- Actions to reduce SFAs and increase transparency and monitoring would be beneficial, alongside significant fiscal consolidation to achieve debt sustainability.

*Source: Prepared by Peter Kovacs and Luc Tucker; IMF Staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1mliea2023002.pdf_