Transcript

Transcript of a Conference Call on Mali

January 28, 2013

ALISTAIR THOMSON: Good afternoon and thanks to all to all of the journalists who are taking part. I am Alistair Thomson of the IMF's External Relations Department and I'm here with the Mali Mission Chief Christian Josz, who will be able to answer your questions about the Executive Board's decision to approve an US$18.4 million disbursement for Mali under the Rapid Credit Facility. This has been announced in a press release which is on the IMF press center under embargo as is this call for 4 o'clock Eastern Time, less than an hour from now. Now I'll turn the call over to Christian who can make some introductory remarks before taking questions. Christian?

CHRISTIAN JOSZ: Good afternoon. Indeed, the Executive Board of the IMF has just decided to disburse US$18.4 million to Mali. As you know, the IMF gives support to countries that have balance-of-payment needs and Mali is in such a case. It has been hit by exogenous shocks starting at the end of 2011 when the drought hit Mali. In addition to that as you all know, Mali got attacked by insurgents already 1 year ago and this triggered an onset of events, military coups and the appointment of a transitional government and recently foreign military intervention at the request of the government to regain control of the country.

Already last summer the IMF had decided to reengage in Mali, so I went on a mission with a team in November and we looked at whether the conditions were met to consider Mali's request for a disbursement by the IMF. In light of the tight fiscal policy that the Malian government adopted in its 2013 budget, we came to the conclusion that these conditions were met. As usual when we come back from a mission we work on our report and we decided to go ahead with the board meeting in spite of the foreign military intervention because we could see that the authorities were still committed and able to implement their program of fiscal prudence, and at the same time we could also see that donors were prepared to reengage in Mali and considered this operation of the IMF with Mali as a precondition to reengage. In spite of the recent military intervention, we considered both the capacity of the authorities to implement the program and the donor support, [and] we decided to go ahead with the Board meeting today as initially planned already weeks ago. And the Board approved the request of the Malian authorities [early this afternoon].

ALISTAIR THOMSON: Thank you, Christian. I think we can go now to questions.

QUESTION: Thanks for this. What's the estimated impact of the escalation of the conflict on growth? What are the other affects going on in the economy? Can you give a 2013 GDP impact of what other spillovers there are? What international donors are you referring to?

CHRISTIAN JOSZ: Thank you for your question. The impact of the current acceleration of military developments, it is too early for us to give you an estimate. In the macroeconomic framework that we elaborated with the authorities last November, we estimated that growth could reach around 4.5 percent next year if rain is favorable --this is is a very important if in West Africa--, and provided that donor support would resume. There are actually favorable developments that are not linked to the crisis ongoing in Mali. There is opening of a new gold mine in the south of the country far away from the conflict area, and also the investment of a third mobile phone operator, so that looking at all these elements together, our estimation now is growth of 4.5 percent next year, but of course there are many uncertainties and depending on how these uncertainties are going to play out, growth could be higher or lower.

On your second question, the donors that see an engagement with the IMF as a precondition, these are the traditional donors that give budget support to Mali, i.e., the European Union, the World Bank, the African Development Bank and bilateral donors like France. All of these traditional donors, most often let's say, see an agreement with the IMF as a reassurance about macroeconomic financial policy and often see an agreement with the IMF as a precondition for donor support.

ALISTAIR THOMSON: Before we go to the next question, can I ask you when you're talking about next year for that 4.5 percent growth expectation, is that for 2013 or 2014?

CHRISTIAN JOSZ: 2013.

QUESTION: Could I follow-up?

ALISTAIR THOMSON: Sure.

QUESTION: I appreciate that there are many uncertainties, but surely you gave the board some sort of insight into how much of a potential contraction or drain on growth that the escalation of the conflict could weigh on 2013 GDP growth.

CHRISTIAN JOSZ: You see, the reality is that the south of the country that was under the control of the authorities when we negotiated the macro framework in November constitutes 95 percent of GDP, 91 percent of the population and 99.5 percent of tax revenue and our growth assumptions were only based on what was going on in the areas controlled by the government. If you ask me what has changed since we negotiated that program two months ago, I would say if anything, the uncertainty has reduced because now it appears that the area under the control of the government is gaining toward the north of the country and the uncertainties I was thinking about—meaning the potential of an insurgent attack to the south of the country and all the disruption that it could have for economic activity in the south, —if anything it has been reduced since the recent foreign military intervention. You could say that the 4.5 is probably a slightly conservative projection compared to what we knew two months ago in light of what has happened since.

QUESTION: Thanks a lot. I see in your press release you say that the initial program was "derailed" by the March 2012 coup. I just wonder, it seems like the coup leader himself, Amadou Sanogo, is still involved with the government and that Prime Minister Diarra was arrested in his home. Did this issue come up in considering how representative the existing government is and whether it still is tied to the coup? Can you explain the difference that in the wake of the coup it was derailed, but now it's a semi coup government it could go forward?

CHRISTIAN JOSZ: What derailed the program with the coup was of course its macroeconomic consequences and the macroeconomic consequences were that the coup and the insurgent attack sent the economy into recession. When we negotiated the program one year ago with the authorities, we banked on real GDP growth of about 5.5 percent. After the coup, it was pretty clear that the economy was going into a tailspin downwards and we revised growth downwards to minus 1.5 percent of GDP instead of plus 5.5 percent of GDP growth when we negotiated the program, and of course this recession had a major impact on tax revenue and that's what sent the program off-track. Now with what we see as a signals of donors' reengagement in Mali and with the fact that, with the French military intervention, the authorities have clearly consolidated their control of the south of the country and look like regaining control over the north of the country, we feel comforted by our growth projections. So we see less chance of a repeat of the program going off-track as we had one year ago, when the coup came as complete surprise to us and to everybody.

QUESTION: Thanks a lot. Quickly one other question, in your discussion with the board was there any consideration of different possibilities going forward, whether AFISMA, the African led force, really becomes a leading force instead of the French, and also whether autonomy of some kind is granted to northern Mali. There is a lot of pressure to negotiate. It might be only 5 percent of the economy, but were the different scenarios worked out in coming forward with this announcement?

CHRISTIAN JOSZ: The only thing we look at the IMF is basically whether the country has a balance of payment need, and, of course, whether the government is recognized by the international community. In this case both conditions were met and the board consideration didn't go beyond macroeconomic considerations. We basically looked at the following elements: do they have balance of payment needs; has this government international support; and is it in a position to implement its program of fiscal austerity that it's putting before us. On all accounts the answer was positive, and so the board decided to go ahead.

QUESTION: Can you give us some perspective? Does the US$18.4 million cover the whole shortfall? How does it compare with the gap that they have?

CHRISTIAN JOSZ: No, in the budget of 2013 we have identified a gap of US$110 million and so this disbursement of US$18.4 million only covers part of it. The 2013 budget that the authorities have approved is a minimalist budget. They made a very prudent budget not banking on reengagement with donors. Now with this approval of the IMF's board, there is hope that traditional donors like the one I cited before, the European Union, the World Bank, the African Development Bank and the traditional bilateral donors that support Mali, there is hope that these donors will together cover at least the US$110 million gap that we have identified in the budget.

QUESTION: So the important thing is that you're giving the country a vote of confidence?

CHRISTIAN JOSZ: Yes.

QUESTION: Thanks for doing this. I have two quick questions. Can you comment on the timing of this decision? When specifically did it happen and what was the reason for that? Also what are the expenditures in the government's budget? What are they going to be spending money on?

CHRISTIAN JOSZ: As to the timing of the decision, we went on the mission in Mali to discuss this operation in November. In the press release you will see there is a link to the statement that I issued at the end of my mission, I think it was November 13 or 14 or something like that, where we clearly announced that we had reached an agreement with the authorities and that we would propose to our board a disbursement under the Rapid Credit Facility at the beginning of 2013. This is what happened this morning. On the composition of expenditures in Mali, obviously security is an important consideration so that the government has adopted a budget where there is an important share devoted to military and security expenditures. In our staff report that is going to be released in a few days, we clearly show that military spending gets an allocation that is about 37 percent higher than it was 2 years ago and it's an allocation close to, if my memory is correct, I think US$300 million. But nonetheless the government has committed with this difficult environment to as far as possible also prioritize education spending, health spending and social protection.

ALISTAIR THOMSON: To recap, this conference call is on the record. It's under embargo until 4:00 p.m. today, under 40 minutes' time. The main speaker you've been listening to is Christian Josz who is the Mali Mission Chief here at the IMF. If we don't have any other questions waiting then we'll wrap up. Thank you very much everybody for calling up and participating in this call. If you do have any follow-up queries, you can email media@imf.org. Thank you and good afternoon.