## MALI — Staff Assessment of Qualification for the Multilateral Debt Relief Initiative

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### Macroeconomic Performance
- Status of Fund arrangement:
  - Three-year PRGF arrangement approved by the Executive Board June 23, 2004.
  - First review concluded on March 7, 2005.
  - Second and third reviews scheduled to be completed on December 19, 2005 (possibility of delay pending issuance of a Joint Staff Assessment Note on poverty reduction strategy implementation).
  - Quantitative financial program was on track through end-September 2005.
  - Performance criterion on net domestic financing was observed.
  - Performance indicators for tax revenues, wages and the basic balance were observed.
  - Structural reform program faced significant delays; a waiver for nonobservance of three structural performance criteria will be requested.
    - Two measures completed after temporary delays: announcement of a cotton producer price that minimizes budgetary risks; launching an actuarial study of the civil service pension scheme.
    - Third measure (launch of a tender for privatizing a commercial [entity]) delayed by a legal challenge to the validity of the government shareholding; authorities committed to implementation once legal impediment is lifted.

- Recent macroeconomic developments:
  - Rising food prices and food insecurity due to drought and locust infestation.
  - Agricultural output expected to recover in 2005/06 supported by good rains.
  - Since the completion point, economy performed strongly in 2003-04; in 2005 adverse external shocks to cotton and oil prices increased the external current account deficit and slowed reserve accumulation and GDP growth.
  - Real GDP growth averaged 5 percent over 2003-05 (higher than projected at the completion point).
  - Foreign exchange reserves remain above six months of import coverage.
  - Fiscal balances better than projected in 2003-04, but worsened in 2005, particularly due to cotton sector losses.
  - Debt indicators remain below HIPC thresholds through end-2005.
  - Mali is current on obligations to the World Bank and the African Development Bank.

- Summary assessment:
  - Staff conclusion: related criterion to qualify for MDRI debt relief is met given no substantial deterioration since the completion point, completion of first PRGF review, impending consideration of second and third reviews, and recent satisfactory macroeconomic performance.

### Implementation of the Poverty Reduction Strategy (PRS)
- Recent developments:
  - Mali’s second PRS adopted in May 2002.
  - First annual performance report for 2003–04 adopted in August 2005.
  - Data partial but poverty, health and social indicators generally show modest improvement.
  - Latest data (from 2001) indicate poverty fell significantly between 1989 and 2001 and income inequality decreased.
  - Strong growth since 2001 suggests poverty and inequality have likely continued to decline.
  - PRS-tracked indicators improved between 2002 and 2004, including:
    - Vaccination coverage of children under 1 year.
    - Share of assisted births.
    - Proportion of the population within five kilometers of a health center.
    - Gross primary school enrollment rate.
    - Number of books per student.
  - Structural reform agenda progressed, albeit slowly; privatization programs for banking and cotton sectors delayed by exogenous factors and complexity.
  - Need to accelerate structural reforms critical to continued growth, particularly in the cotton sector.

- Summary assessment:
  - Staff conclusion: related criterion to qualify for MDRI debt relief is met given satisfactory implementation of poverty reduction policies and no substantial deterioration since the completion point.

### Public Expenditure Management (PEM) System
- Recent developments:
  - PEM system has improved since the completion point; core systems work reasonably well.
  - Mali met 11 of the 16 expenditure management benchmarks in the 2004 HIPC Assessment Action Plan (AAP), up from 8 in 2001.
  - Tracking of poverty-reducing expenditures is good.
  - Key weaknesses to be addressed: procurement, internal controls, timely audits of budget execution, and tracking of grant-financed activities and extra budgetary funds.
  - Authorities have a comprehensive action plan to strengthen PEM; some delays in enhancing internal controls and audits, but progress continues.

- Summary assessment:
  - Staff conclusion: the relevant criterion on the quality of PEM systems to qualify for MDRI debt relief is met.

### Other
- Provision of information to the Fund:
  - Staff is satisfied that the authorities collaborate with the Fund and provide appropriate information in the context of surveillance and use of Fund resources.
- Payments to the IMF:
  - Mali is current on its obligations to the IMF.

### Overall Assessment and Recommendation
- Staff recommends that the Board determine that Mali qualifies for MDRI debt relief.

### Key Macroeconomic Indicators (selected, 2000–05)
- Real GDP: 2000 -3.2; 2001 12.1; 2002 4.3; 2003 7.2; 2004 2.3; 2005 (est.) 5.4
- Inflation (annual average): 2000 -0.7; 2001 5.2; 2002 5.0; 2003 -1.3; 2004 -2.8; 2005 5.0
- Real effective exchange rate: 2000 -7.4; 2001 3.6; 2002 4.8; 2003 1.1; 2004 -3.9; 2005 ...
- Broad Money: 2000 11.9; 2001 19.3; 2002 28.4; 2003 25.5; 2004 -2.4; 2005 6.5
- Overall fiscal balance including grants (in percent of GDP): 2000 -2.9; 2001 -3.2; 2002 -3.6; 2003 -1.3; 2004 -2.6; 2005 -4.1
- Current account balance including grants (in percent of GDP): 2000 -9.6; 2001    ; 2002 -10.3; 2003 -3.0; 2004 -6.1; 2005 -7.7; 2005 (alternate) -9.1
- Foreign Exchange reserves (in months of imports): 2000 3.8; 2001 4.2; 2002 5.2; 2003 7.1; 2004 6.4; 2005 6.1

### Public and Publicly Guaranteed (PPG) External Debt and Debt Relief (selected)
- Table notes:
  - 1/ After HIPC assistance
  - 2/ Assuming delivery (full stock operation) at Jan 1, 2006 for the Fund and the AfDB, and on July 1, 2006 for IDA.
  - 3/ Exports of goods and services for the year under consideration

- Stock and post-MDRI projections (in millions of US dollars; unless otherwise indicated):
  - PPG External Debt: 2004 3,304; 2005 (est.) 3,440; 2006 (proj.) 3,573; After MDRI (2007 Proj.) 1,434; After MDRI (2007 Proj. alt) 1,724
  - Owed to the Fund: 2004 144; 2005 115; 2006 99; After MDRI 10; After MDRI 12
  - Owed to IDA: 2004 1,489; 2005 1,479; 2006 1,609; After MDRI 142; After MDRI 255
  - Owed to AfDB: 2004 592; 2005 588; 2006 654; After MDRI 71; After MDRI 127
  - NPV of PPG external debt to exports: 2004 106.3; 2005 105.2; 2006 95.6; After MDRI 0.4; After MDRI 56.0
  - Debt service to exports: 2004 6.4; 2005 7.4; 2006 6.8; After MDRI 4.4; After MDRI 3.5
  - PPG external debt to GDP: 2004 63.1; 2005 67.5; 2006 66.5; After MDRI 26.7; After MDRI 29.2
  - NPV of PPG External debt to GDP: 2004 24.5; 2005 27.2; 2006 27.5; After MDRI 14.5; After MDRI 16.3

*Prepared by the African Department (In consultation with other departments); Approved by Benedicte Vibe Christensen and Mark Plant; December 8, 2005.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2005/_mali.pdf_