July 26, 2002
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The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of Mali's performance under the Poverty Reduction and Growth Facility (PRGF) arrangement and approved the requests for waiver of two performance criteria.
The Executive Board decision enables Mali to draw an amount equivalent to SDR 6.75 million (about US$9.03 million) under the arrangement.
Mali's program was originally supported under the Enhanced Structural Adjustment Facility (ESAF), approved on August 6, 1999 (see Press Release No. 99/39) for SDR 46.65 million (about US$62.42 million). This amount was increased in July 2001 by SDR 4.665 million (about US$6.240 million). So far, Mali has drawn SDR 31.67 million (about US$42.36 million) under the arrangement.
After the Executive Board's discussion on Mali, Eduardo Aninat, Deputy Managing Director and Acting Chairman, stated:
"Economic growth slowed in 2001 owing to the effects of the crisis in the cotton sector, the hike in oil prices, and lower rainfall. Inflation rose slightly, reflecting lower cereal production and the increase in utility tariffs. Notwithstanding a more difficult environment, the implementation of the revised program for 2001 was broadly satisfactory. The fiscal deficit was ½ percentage point of GDP less than programmed as government revenue exceeded projections, while government expenditure was lower than the program target.
"Progress on the structural front, however, was slow. In particular, two structural performance criteria for end--December 2001 were not observed as a result of delays in implementing the reform of the cotton sector (caused by the late arrival of funds to finance relevant studies).
"The outlook for 2002 and beyond remains favorable, although the price of cotton on world markets--which some Directors noted has been adversely affected by subsidies in industrial countries--is a source of much uncertainty. The authorities aim at achieving strong economic growth and reducing poverty, while maintaining financial viability. Real GDP growth is expected to rise sharply--as a result of a doubling of cotton output and a strong recovery in food production--and to remain above 5 percent thereafter. To achieve these objectives, the authorities are firmly committed to implementing macroeconomic policies and structural reforms under the PRGF-supported program.
"The fiscal policy stance remains appropriate in 2002; it reflects efforts to pursue fiscal consolidation, while lowering poverty and addressing the problems in the cotton sector. The achievement of the fiscal targets will, however, require restraint on nonpriority current outlays, improved monitoring of social spending, and further efforts to boost fiscal revenue.
"The full and timely implementation of the structural reform agenda is of critical importance to the efforts to accelerate growth, strengthen Mali's competitive position, and reduce poverty. The new timetable for the liberalization of the cotton sector should be strictly adhered to, while the privatization of public enterprises in other sectors needs to be pursued. It is also important to implement the reform of the civil service to improve its management and efficiency. Other key aspects of the reform agenda are continued efforts to improve governance and the judicial system--with help from the World Bank, and the further strengthening of the banking sector.
"Regarding poverty alleviation, the authorities should continue to increase the size and quality of public spending in basic social services. In that context, it will be important to press ahead with the reform of the public expenditure management system, which is designed to ensure a more efficient allocation and monitoring of public resources and a better tracking of poverty-related outlays. With the recent completion of a full PRSP, and following the implementation of enhanced HIPC Initiative completion point conditions, Mali is expected to begin to benefit substantially from debt relief in the coming months
"Mali's economy remains vulnerable to external shocks because of the continued heavy dependence on cotton and gold production and exports. In response to future shocks, the Malian authorities will need to stand ready to strengthen further their adjustment and reform efforts. In addition, a prudent policy as regards new borrowings is necessary to maintain a sustainable external debt path," Mr. Aninat said.
