IMF Staff Reaches Staff-Level Agreement with Mali on Rapid Credit Facility and Completes 2024 Article IV Mission
IMF News, April 30, 2024
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- Published: April 30, 2024
Mission timing and leadership
- An International Monetary Fund (IMF) team, led by Ms. Wenjie Chen, visited Bamako from April 21 to 26, 2024.
- The visit followed high-level discussions with the Malian authorities in Washington D.C. during the Spring Meetings from April 15 to 17, 2024.
- The team met with the Minister of Economy and Finance, Mr. Alousséni Sanou, the National Director of the BCEAO for Mali, Mr. Barema Bocoum, Directors and staff of the main ministries and government agencies, development partners, and the private sector.
Staff-level agreement and proposed financing
- IMF staff and the Malian authorities have reached a staff-level agreement on emergency financing through the Exogenous Shock Window of the IMF’s Rapid Credit Facility (RCF).
- Upon approval by IMF Management and Executive Board, Mali would receive about $US 120 million (or about 0.6 percent of GDP).
- The potential IMF financial assistance would support:
- the provisions of food and targeted cash transfers to those facing acute food insecurity in central and northern regions;
- expenditures on education, shelter, non-food items;
- access to clean water, health and sanitation facilities.
Economic assessment and recent shocks
- Mali’s economy has been hit by multiple exogenous shocks, including Russia’s war in Ukraine, the Red Sea shipping blockade, and a regional funding squeeze.
- These shocks contributed to a rise in import costs for essential goods like food, fertilizers, and materials needed to support displaced populations.
- Food insecurity is estimated to affect 24 percent of the population, up from 15 percent a year ago.
- Real GDP growth estimates and projections:
- We estimate that Mali’s economy grew by 4.4 percent in 2023.
- Real GDP growth is projected to slow to 3.8 percent in 2024.
- Real GDP growth is projected to increase to 4.4 percent in 2025.
- Inflation:
- Headline inflation dropped to 2.1 percent in 2023 from 9.7 percent in 2022.
- Food costs remained elevated and contributed to rising food insecurity.
- Factors weighing on growth and risks:
- Higher gold and cotton prices boosted exports.
- Heightened security concerns and frequent power outages have weighed negatively on growth.
- Projected lower gold production, severe electricity outages, negative effects of the MINUSMA exit on the service sector, uncertainty surrounding election delay and the ECOWAS exit.
- Significant downside risks include a continuation of power outages, security concerns, growing financial stability risks amid escalating government financing needs, volatile international commodity prices, tight global financial conditions, and climate vulnerabilities.
Fiscal stance and financing conditions
- The government’s fiscal deficit is estimated at 3.9 percent of GDP in 2023.
- Security spending, public wages, and the interest bill together consume over three quarters of fiscal revenues and risk crowding out growth-friendly spending on the social safety net and investment.
- The continued absence of external budget support, combined with tighter financing conditions across the West African Economic and Monetary Union (WAEMU), has increased borrowing costs and created a funding squeeze.
- Mali’s resource mobilization on the regional financial market was below expectations in 2023.
Policy recommendations and priorities
- Securing a stable and cost-effective electricity supply is Mali’s number one priority.
- Converging towards the 3-percent fiscal deficit ceiling of the WAEMU is important amid tight financing conditions and high borrowing costs.
- To protect fiscal sustainability, improving domestic revenue mobilization is crucial. Specific measures include:
- Broadening the tax base;
- Reducing costly tax exemptions;
- Strengthening the revenue and customs administration.
- Expenditure-side measures include:
- Curbing increases in the public sector wage bill;
- Addressing fiscal weaknesses in SOEs.
- The mission emphasized the importance of protecting public investment to maintain medium-term growth prospects, and effective debt management for debt sustainability.
- Reducing policy uncertainty to create a more predictable and stable investment climate, along with strengthening governance and fighting corruption, to rebuild confidence and attract both domestic and foreign investors.
- Policies to address the effects of climate change remain important in the long term.
IMF Staff Reaches Staff-Level Agreement with Mali on Rapid Credit Facility and Completes 2024 Article IV Mission (Press Release No. 24131, April 30, 2024)