Mali

The government continued to implement its 2007-11 Strategic Framework for Growth and Poverty Reduction (SFGPR) in 2009 amid world financial and economic crisis. With a 7% annual average growth target, it aims to speed up progress towards the Millennium Development Goals (MDGs). Despite the international crisis, which complicated economic management, the economy performed satisfactorily. Real gross domestic product (GDP) grew 4.3%, mainly due to satisfactory agricultural results and good rainfall. Continued cautious budget and monetary policies, as part of formalising public finance management, curbed inflation and growing budget and current account deficits.

In spite of overall growth and limited deterioration of macroeconomic aggregates, due to ongoing budget reforms and support for agriculture, budget cuts and arbitrage imposed by reduced funding prevented further structural reform. As the world economy recovers in 2010, and based on 5% real GDP growth, the government plans to continue budget reform and speed up structural changes. It will also, with help from development partners, support the productive sector so as not to hinder investment with the kind of systematic government investment cuts made in 2008 and 2009. Inflation was brought down to 2.2% in 2009 (from 9.2% in 2008) as world food prices eased, helped by the government’s cautious monetary policy.

The government continued its conservative management of public finances, bringing the basic budget deficit down to 1.5% of GDP in 2009 (from 2.6% in 2008). Total revenue increased to 14.4% of GDP due to better monitoring of collection and the taxation department. Tax revenue averages more than 85% of the total and was about 603 billion CFA Franc BCEAO (XOF), up 16% on 2008, after better results from VAT (+ 17%), which accounts for 40% of tax revenue.

The current account showed a 9.2% of GDP deficit in 2009, a slight improvement over 2008 (9.7%) because of a smaller trade deficit in spite of difficult world conditions. The trade deficit itself shrank to 3.2% (from 5.5% in 2008) mainly because of higher gold exports (more than 70% of total exports by value), which offset a 24% fall in exports of cotton.

Increasing domestic revenue is part of the government’s action programme to improve and modernise public finance management (Pagam/GFP), which also aims to control spending.

Despite government efforts, obtaining budgetary support was slightly affected by tighter world economic conditions and only XOF 146.6 billion (90%) of a projected XOF 163.4 billion was raised. General and sectoral budget support (together 65% of the total) produced 82% and 95% of the targeted amounts.

Progress has been made in budget drafting, connecting up the spending chain, reforming public procurement procedure, decentralising budget credits, internal monitoring and overall revenue generation.

Peace and security were consolidated in 2009 with northern Tuareg tribes, including supporters of the Alliance du 23 mai pour la démocratie et le changement grouping. Civil peace is a government priority as President Amadou Toumani is constitutionally barred from re-election in 2011, so the political climate could be difficult then.

Mali has made progress towards meeting the MDG by 2015 but most of them will not be achieved. Healthcare is a national priority and the government is implementing a 10-year social and healthcare programme that will end in 2011. Substantial progress has been made in education, especially gross enrolment, which was an estimated 84% in 2009. Monetary poverty, measured by the cost of basic necessities, fell by 8 percentage points between 2001 (55.6%) and 2006 (47.4%), though with notable regional disparities and rising urban poverty due to unemployment and rural exodus. Inequality was a still-high 36% (down from 38% in 2001).

Sector shares of GDP remained stable in 2009, with the primary sector about 40% and dominated by agriculture (65%). The secondary sector was roughly 20% and the tertiary about 40% (40% of it trade). These figures should be almost the same in 2010, with a slight fall in agriculture to the advantage of the secondary and tertiary sectors, due to budget arbitrage giving slightly more money to agriculture and steps to encourage trade.

Real GDP grew 4.3% in 2009 due to a robust primary sector, which contributed 2 percentage points with growth of 5%. Cotton did best, with 17.4% growth (minus 16.8% in 2008). The sector was helped by adequate rainfall and by government support, mainly through a subsidy of more than XOF 15 billion (5 billion more than expected) to the cotton industry, much lower prices of fertiliser for farmers and their organisations, and substantial efforts to speed up its delivery throughout the country.

The secondary sector grew 3.4% (up from ‑4.6% in 2008) and contributed 0.6 percentage points to GDP growth. It was hit by the world crisis in 2008 but started to recover in 2009, with a better performance in mining (‑0.6% growth, up from ‑6.4% in 2008), agro-food (+7.4%, as compared to ‑20% in 2008) and textiles (‑12%, as compared to ‑34% in 2008). The sector was boosted by construction, with the start of major projects such as a third bridge in Bamako and a big highway intersection near the new government centre. But the sector is held back by outdated equipment of widely-varying origin and the financial weakness of local firms.

The tertiary (services) sector only expanded 3.3% (4.3% in 2008), influenced by slower growth of its two main sub-sectors – trade (+3.5%, down from 4.4% in 2008) and transport and telecommunications (+3%, down from 10% in 2008). It contributed 1.3 percentage points to GDP growth.

Economic prospects are good and 2010 should see real GDP growth of 5%. The primary sector will lead by contributing 1.8 points (1.3 points agriculture), slightly down from the 2 points in 2009, but faster secondary sector growth of 5.5% (3.4% in 2009) should contribute 1 percentage point (0.6 points in 2009), with mining showing a rise of 2.6% (‑0.6% in 2009), manufacturing 6% (4.4% in 2009) and construction 7.5% (6% in 2009). These figures reflect the world economic recovery, continuing government efforts to help agriculture to ensure food security, investments in mining and work for 50^th anniversary of independence celebrations.

Overall demand grew in 2009 as the government acted to soften the effects of the world crisis on the population. Final consumption (part of internal demand) was down 1.4%, including a 2.8% drop in household consumption, offset by a 4.5% increase in public consumption. Public investment was affected by the credit freeze that went along with less revenue (itself caused by lower external demand) but private investment was boosted by housing programmes and foreign direct investment (FDI) flowing from privatisation. The world crisis reduced exports by 8% and imports even more (12.2%) but external demand still contributed 0.5 percentage points to growth.

Demand should rise in 2010, with 5.4% growth in final consumption, including greater household consumption (+5.9%) and public consumption (+3.7%), helped by the end of the public spending freeze, clearing payment arrears and activity linked to 50^th anniversary of independence celebrations.

The macroeconomic framework remained stable in 2009, despite the oil, food and financial crises. Real GDP growth was estimated at 4.3% and inflation was brought down to 2.2% (from 9.2% in 2008). The economic revival was due to good performances in the primary sector (plenty of rain) and secondary sector (electricity and construction). Growth is expected to increase to 5% in 2010, as all sectors do well.

Mali complied with four of eight West African Economic and Monetary Union (WAEMU/UEMOA) convergence criteria (including three first-rank ones) in 2009, up from three out of eight (including two first-rank ones) in 2008, helped by continuing government reforms. The wage bill to tax revenue ratio, at 36%, exceeded the 35% limit which had been respected in 2008. This was mainly because it included the second instalment of cost-of-living wage increases for civil servants.

 

The government continued its cautious management of public finances and the basic budget deficit target of 2% of GDP was reduced in the end to 1.5%. Locally-generated budget revenue increased by 28%, to reach XOF 690 billion, with better tax collection and restoration of government oil taxation. A plan was also drafted to cut non-priority spending for the first three quarters of the year to create a budget reserve that could be used in the last. A supplementary budget was needed in 2009 as new revenue and spending was added to the original. This included revenue of XOF 25.7 billion, comprising XOF 16 billion of the XOF 180.4 billion proceeds from the sale of 51% of the state telecommunications firm Sotelma and XOF 9.7 billion of budgetary support. This provided XOF 16 billion for Sotelma redundancy payments, extra funding for the hospital in Sikasso, sectoral budget support and payments to cotton farmers.

The tax burden remained 14.4% of GDP, below the 17% required by WAEMU, but revenue increased with better monitoring of collection and the taxation department. Tax revenue (about 85% of total revenue) was XOF 603 billion, 16% percent up on 2008, due to better yield (+17%) from VAT (40% of all tax revenue). Budget spending execution was least in recurrent spending (80%), transfers (72%), equipment and investment (67%), sectoral budget support (60%) and supplementary budgets.

This reflected the cuts and arbitrage made by the government to maintain macroeconomic balance under the programme with its partners and the IMF to meet the tighter world economic situation and also some sensitive spending items, including a 5% civil service pay rise in January 2009. The government also made a special payment to teachers and increased bonuses for civil defence workers.

The government froze 24% of budget allocations to allow it to make some payments rolled over from 2008 for lack of money. This reduced recurrent spending and funding of projects in most sectors.

Reform will continue in 2010 and budgetary caution maintained. Revenue is expected to rise to XOF 773 billion (up 12% on 2008), reflecting a tax burden of 15.2% of GDP (+0.8 of a point on 2009). Spending and net loans should increase by only 2.5%, to XOF 1 125 billion, in line with the government’s wish to limit the deficit to 1.1% of GDP.

The Central Bank of West African States (CBWAS/BCEAO) continued its steady monetary policy which, with the good harvest and lower world prices, allowed inflation to be brought down to 2.2% (within the WAEMU limit of 3%). This was done by ensuring regional liquidity to help financial transactions. The bank lowered its intervention rate from 4.75% to 4.25% and reduced Mali’s reserves requirement from 9% to 7%. This and the reversion to the government of XOF 49.3 billion equivalent of a 10-year special drawing rights (loan) allocation aimed to make payments of XOF 95.7 billion due at the end of August 2009 (including XOF 28.7 billion from 2008). The money supply should grow in 2010 at the same rate as 2009 (4.5%) to reach XOF 1 213 billion. Inflation should be slightly higher (2.4%).

The current account deficit was 9.2% of GDP in 2009, a slight improvement on 2008 (9.7%), due to a smaller trade deficit of 3.2% (5.5% in 2008) mainly because of the 9% higher value of gold exports (more than 70% of all exports) and 24% lower exports of cotton. The financial account did well, with XOF 180 billion generated by the 51% privatisation of Sotelma. The World Bank and the African Development Bank (AfDB) kept their promises to the government. The current account deficit is expected to increase in 2010 to 11.4% due to a bigger trade deficit of 5.6% because of a 3.2% drop in the value of gold exports and higher imports due to more energy imports to feed the economic upturn.

The external debt has fallen – to 25.3% of GDP in 2009 (from 22.6% in 2008) – since Mali qualified for relief under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) and is sustainable in the medium-term. Its management could be improved, especially registration methods and coordination with other structures and parties in the debt management chain. The government set up a national debt committee on 17 September 2009 to do an in-depth review of debt management, especially as bond issues are being considered to fund the country’s development programme.

The government has made progress in structural reforms to improve the business climate, with an action plan, launching an investment promotion agency (API-Mali) and a one-stop shop for setting up businesses. This has simplified formalities and reduced delays.

After the successful privatisation of the Banque internationale pour le Mali (BIM SA) in 2008, the government privatised Sotelma in 2009, in a transparent manner praised by development partners and civil society, selling 51% of the firm for XOF 180 billion. This raised the country’s ranking in the World Bank’s 2010 Doing Business report, to 156^th place (from 162^nd in 2008). In 2010, improvements were noted in starting a business (+18 points), dealing with construction permits (+17 points), protecting investors (+4 points) and enforcing contracts (+20 points). The reforms must be continued and strengthened to create more flexibility in regulation of the labour market.

The government’s poverty reduction and growth strategy aims for annual growth of 7% to reduce poverty and speed up progress towards the MDG. It wants to make Mali an agro-pastoral centre by developing agriculture, continuing to expand basic infrastructure, developing the private sector and increasing investment in human resources. It also intends to preserve macroeconomic balance, modernise public finance management and accelerate structural reforms to consolidate growth.

One challenge is being landlocked, with the nearest ports in Abidjan, Dakar and Lomé, more than 1 000 kilometres away by road and rail, which pushes up costs. Transport infrastructure is weak. Social and political conflicts in the sub-region are also obstacles and often increase costs by 20-30%, passed on to the consumer. This makes the economy decidedly less competitive. Another problem is lack of diversity in production, which is dominated by the primary sector (about 40% of GDP and contributing 2 percentage points to growth in 2009). The sector pays few taxes and should be a focus of the enlarging of the tax-base so as to reduce chronic dependence on international aid.

Funding of the economy is a further challenge, with most bank deposits short-term, mainly to pay for trade. The way the economy is financed does not encourage investment, especially industry. Most development projects are 80% funded by development partners who, despite their adhesion to the Paris Declaration, are moving only very slowly towards harmonising their procedures, due to obstacles caused by Mali’s weak institutions which prevent speedy progress towards an efficient budget system.

The country is also vulnerable to internal and external shocks. Apart from problems of rainfall, drought and locust attacks, the prices of cotton, gold and oil often fluctuate and influence export earnings and production costs. The country’s lack of trained workers and technicians is a major obstacle to efficient production and public services.

Agriculture is a key to the accelerated growth programme aimed at reaching the MDG. Cotton, which employs 3.5 million people directly and indirectly, is a very important part of the sector, but the state-owned textile firm Compagnie malienne pour le développement des textiles (CMDT) has huge debts. Steps to deal with this are under way but will take time and have frequently been postponed for reasons of social, economic and political sensitivity and complexity. Funding and operations need urgent action to maintain cotton production and complete the firm’s privatisation. Food crops (millet, rice, sorghum and maize) are increasingly important for the government, with cereals output steadily rising. Most production is by small subsistence farmers.

The target for agriculture in the government’s 2008-12 action plan is an annual 10 million tonnes of cereals by 2012. The 2008/09 harvest (including the off-season) produced about 4.8 million tonnes. Paddy rice was 1.6 million tonnes (99.34% of the amount forecast), millet 1.4 million tonnes (115.31%), maize 0.7 million tonnes (89%) and sorghum 1.5 million tonnes (104.8%). Overall cereals output was up 2.7%, with losses on about 2% of cultivated land, mostly due to disease, birds, locusts and early flooding that destroyed young rice shoots. Targets were not achieved for cotton because of lower output linked to less demand and the sub-sector’s financial problems. About 190 000 tonnes of cottonseed were produced (462 000 tonnes forecast).

Infrastructure investment in recent years has mostly gone to transport, under the government plan to open up the country from the inside and outside, and is governed by a transport sector policy paper adopted in April 2007 and part of the 2008-12 sectoral plan (PST2).

The plan includes regular maintenance of priority roads (12 510 kilometres done in 2008), expansion and upgrading of all roads (292 kilometres done in 2008, including 216 kilometres paved and 76 kilometres dirt roads), repairing railway infrastructure and modernising rolling stock (buying 6 locomotives and 10 passenger coaches), improving facilities and equipment at Bamako-Sénou international airport and provincial airports, dredging navigable cannels and buying suitable river boats, building river ports and quays, and expanding urban roads (4 kilometres in Bamako).

Work was done under the PST2 project, WAEMU road programmes and by the Millennium Challenge Corporation, and preparation of the 10^th European Development Fund’s road programme continued. Efforts to ensure permanent funding for road maintenance will continue, by strengthening and streamlining road-toll collection at Bla (Ségou-Bla), Hèrèmakono, Zégoua, Sienso, Kourémalé, Kasséla, Koury, Tlomadio and Ty. Collection will also be made more efficient at 17 other toll-booths and systematic monitoring of vehicle weight on new roads will be stepped up.

The government continued implementing the March 2006 national energy policy paper (PEN) aimed chiefly at boosting sustainable development by providing cheap energy to the largest number of people. Provision of rural public lighting (each lamp serving 125 people) by the energy body AMADER (Agence malienne pour le développement de l’énergie domestique et de l’électrification rurale) rose from 3 400 units in 2007 to 5 090 in 2008. The government continued efforts to diversify oil sources in a bid to lower costs.

The government plans to maintain the country’s rising energy indicators in 2010 and try to get more funding for the sector. The national energy action plan, estimated to cost XOF 1 400 billion to achieve the MDG, has not been adequately funded, except for two Islamic Development Bank projects to electrify seven towns and boost the delivery capacity of the firm Énergie du Mali (EDM). The government aims to strengthen the sector’s institutions and regulations, create an effective energy planning system, develop domestic energy and rural electrification, promote renewable energy and alternatives to traditional fuels, develop a national grid and connect it to those of neighbouring countries.

The financial sector was stable in 2009 and unaffected by the world crisis because of its few links with international financial markets and the government began developing it. Restructuring of the BHM housing bank (Banque de l’habitat du Mali) continued to prepare it for privatisation. The government also adopted a measure regulating pensions for civil servants, soldiers and members of parliament as part of improving the finances of social security bodies.

Approval of a national plan to develop the microfinance sector and a 2008-12 action programme aimed to increase access to a range of financial services nationwide for the majority of poor people and small and medium-sized firms (SME). A joint financing agreement (part of a joint financing mechanism) will enable funding of the action programme in an orderly way. Microfinance continues to expand despite national and international crises, with growing membership, penetration rates, deposits and loans.

The economy and finance ministry is in charge of coordinating generation of domestic and foreign revenue in close cooperation with the foreign ministry. In an effort to get more aid, the government has improved contacts with its development partners about the progress of reforms. As part of implementing the Paris Declaration, Mali drafted and signed a framework agreement with them about budget, general and sectoral support. Meetings are held each year for in-depth discussion of agreed indicators concerning partner programmes to boost the government’s development programme. The resulting greater dialogue improves the use and effectiveness of the funding received.

The framework is part of implementing the Paris Declaration, notably the results of the third High-Level Forum on Aid Effectiveness in Accra in September 2008, which welcomed progress made but called on countries and development partners to try harder to meet targets of appropriation, harmonisation, alignment, results-based management and shared responsibility. Mali and its partners signed an aid agreement (Stratégie commune d’assistance pays – Mali – SCAP) on 7 December 2009 to improve and strengthen each side’s special domains according to comparative advantages, and better integrate their actions with Mali’s budget framework. The development partners set up a technical and operations pool and a website. The pool, with a permanent link to the technical unit of the strategic framework for poverty reduction (SFPR) and the aid harmonisation secretariat (SHA), helps dialogue to raise external funding for development.

Generating domestic revenue comes under the Pagam/GFP programme to improve public finances (controlling spending and collecting more domestic revenue). Progress has been made in budget preparation, interconnection of the spending chain, reforming public procurement, decentralising budget credits and internal monitoring, and generating revenue.

Making tax and financial bodies more efficient has helped to enlarge the tax base through registering new taxpayers from the informal sector, stepping up the battle against tax and customs fraud, increasing taxpayer access to information such as regular publication of tax and customs reviews, strengthening local tax management by setting up 15 payment offices serving 99 localities in the Kayes, Koulikoro, Sikasso, Ségou, Mopti and Tombouctou regions under an 18 November 2008 finance ministry decree (n° 08‑3 235/MF‑S).

These changes helped budget revenue exceed the 2009 target of XOF 689.7 billion by raising XOF 705.3 billion, a performance rate of 102.3%. The central customs office (DGD) and the central tax office (DGI), which collected 83% of the total, had performance rates of 102.7% and 102%.

Despite government efforts, obtaining budget support was slightly affected by the tighter world economic situation, and only XOF 146.6 billion was raised of the XOF 163.4 billion hoped for (90% performance). General and sectoral budget support (together 65% of the total) had 82% and 95% performance rates.

The progress made will be strengthened in 2010 as part of drafting and implementing Pagam 2, the IMF programme and the dialogue about budget execution in the context of the SCAP and the budget support framework. Attention will be given to lingering weaknesses in estates and land registry, and jurisdictional and parliamentary monitoring.

The DGI will step up inspection of all taxpayers, monitor assessment and collection throughout the SIGTAS integrated tax management network, monitor VAT better and strengthen collection with automatic deduction, and streamline the medium-size businesses department and budget policy unit (which suggests ways to enlarge and control the tax base, evaluate the tax implications, monitor application of adopted policies and evaluate their effect on revenue). It will also improve collection of property tax, continue computerisation of regional tax offices, revise monitoring of non-mining sector taxpayers, transfer all collection operations to the DGI, organise on-the-job training and retraining, and draft career plans.

The DGD will aim to limit exemptions; reform customs inspection by setting up and strengthening offices, mobile teams and monitoring points; process cars more efficiently; redeploy staff; strengthen the PVI import inspection programme with automatic penalties; monitor and follow up declarations; and increase scanning of imported items.

The government achieved its priority aim of consolidating peace and security in the north of the country in 2009 and between July and October, a ceremony was held to mark resumption of development. The authorities are trying to restore peace in the Kidal region with the Alliance du 23 mai pour la démocratie et le changement led by Lt.Col. Hassan Ag Fagaga, which supports the 2006 Algiers peace agreement, and hunt down armed bandits it calls terrorists. Municipal and local elections were held in 2009 and a national census was taken. Muslim groups and some tribal leaders protested strongly against a new law concerning family and individual rights. Pacification efforts will continue in the north in 2010 but the political scene will heat up with power struggles in the run-up to elections in 2011, when President Toumani is constitutionally barred from re-election.

SFGPR progress reports show that monetary poverty, calculated on the cost of basic necessities, fell by 8 percentage points to 47.4% in 2006 (from 55.6% in 2001), though with notable regional disparities and rising urban poverty due to unemployment and rural exodus. Poverty hits farmers the hardest (nearly 59.2% of all poor people) and those without jobs. Rising income, which accompanies growth, has not reduced inequality, which stabilised at a high 36% in 2006 (slightly down from 38% in 2001).

Prospects are dim for achieving most of the MDG by 2015, especially as government spending has been frozen for two years, or even reduced, to cope with the world economic crisis. If progress made so far is speeded up and per capita annual growth is above 4%, extreme poverty could be eradicated and the monetary poverty rate brought down to about 30% by 2015. Reports indicate that goals for clean water, HIV/AIDS, extreme poverty eradication and primary school enrolment may be achieved with closer cooperation between government, development partners and civil society. But nutrition and infant and maternal mortality goals have little chance of being reached.

Progress has been made in healthcare (a government priority in poverty reduction efforts) under Prodess II 2006-09, which is part of a 10-year health programme that has been extended to 2011 to be in step with the SFGPR period. The government and its technical and financial partners signed in 2009 a Compact (Cadre unique d’intervention) for healthcare development, which focuses on harmonising procedures, medium-term planning of funding and shared responsibility.

Efforts were made in 2009 to improve educational enrolment and quality by implementing government policy on enrolment of girls, drafting the Pise‑III investment programme, designing a higher education policy, finding university housing and opening a regional university. Overall gross enrolment was expected to be 84% in 2009. The HIV/AIDS rate (according to the EDSM‑IV survey) was 1.3% in 2009. The government increased the supply of free anti-retroviral medicine (ARV) and extended ARV coverage, with 23 754 patients starting on it in 2008 (up from 6 815 in 2005).

Social security protection is mostly accounted for in the social development section of Prodess II. Parliament approved in 2009 the introduction of compulsory health insurance (AMO) and a medical assistance fund (FAM) to strengthen social security. 3% of Malians were covered by supplementary health insurance in 2009 (up from 1.7% in 2007). The government ratified international agreements on child labour and steps were taken by the children’s affairs ministry, helped by NGOs, to abolish child labour.