Document o f The World Bank FOR OFFICIAL USE ONLY Report No. 45576-ML FOOD PRICE CRISIS RESPONSE TRUST FUND SUPPLEMENTAL FINANCING DOCUMENT FOR A PROPOSED SUPPLEMENTAL FINANCING IN THE AMOUNT OF US$5.0 MILLION TO THE REPUBLIC OF MALI FOR THE SECOND POVERTY REDUCTION SUPPORT CREDIT December 15,2008 Human Development Sector Unit I1 Country Department AFCFl Africa Region This document has a restricted distribution and may be used by recipients only in the performance o f their official duty. Its contents may not otherwise be discussed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No. 45576-ML
FOOD PRICE CRISIS RESPONSE TRUST FUND
SUPPLEMENTAL FINANCING DOCUMENT
FOR A PROPOSED SUPPLEMENTAL FINANCING
IN THE AMOUNT OF US$5.0 MILLION
TO
THE REPUBLIC OF MALI
FOR
THE SECOND POVERTY REDUCTION SUPPORT CREDIT
December 15,2008
Human Development Sector Unit I1 Country Department AFCFl Africa Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duty. Its contents may not otherwise be discussed without World Bank authorization.
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Currency Equivalents (October 10, 2008)
Currency Unit: CFAF US$1=483 CFA
Government Fiscal Year January 1 - December 3 1
AGEROUTE Agency for Road Maintenance AGETIC
AGETIER AGETIP ARV BHM B IM CAS CCT CMC CMTR CMDT CFAF CNCS CPAR CPIA CREE CRM CSCOM C S E F DAF
DGB DGI DGMP DNCF DNACPN
DNTCP
DNTTMF DRB ECOWAS EDM EPPFMC
FPCR GDP GPRSF
Weights and Measures Metr ic System
Abbreviations and Acronyms
Information and Communication Technology Agency Rural Public Works Executing Agency Public Works Executing Agency Anti-retro viral Malian Housing Bank International Bank for Mali Country Assistance Strategy Technical Consultative Group Money and Credit Counsel Malian Road Transport Company Mali Textile Development Company Franc of the French Community of Africa National Council of Statistical Coordination Country Procurement Assessment Report Country Policy and Institutional Assessment Water & Electricity Regulatory Authority Mali Retirement Fund Community Health center Health Referral Center Administrative and Financial Department in each Ministry General Budget Directorate General Investment Directorate General Procurement Department Natioanal Directorate for Financial Control National Directorate for Sewarage and Pollution Control National Treasury and Public Accounting Department National Transportation Directorat Regional Budget Departments Economic Community o f West-African States Mali Electricity and Water utility company
Agence d’Entretien Routier Agence des Technologies de I’Information et de la Communication Agence d’Extcution de Travaux d’Intdr8t Public Ruraux Agence d’Exkcution de Travaux d’Intket Public Anti-rttro viral Banque de 1’Habitat du Mali Banque Internationale pour l e Mali Strattgie d’assistance pays Comite Consultatif Technique Conseil de la Monnaie et du Credit Compagnie malienne de transports routiers Compagnie Malienne des Textiles Franc de la Communaute francophone de I’Afrique de I’Ouest Conseil National de Coordination Statistique Rapport analytique sur la passation des marches dans Evaluation de l a politique et des institutions nationales Commission de la Rtgulation de I’Eau et de 1’Electricite Caisse de Retraite du Mali Centres de sante communautaire Centre de sante de reference Division Administrative et Financikre
un pays
Direction gintrale du budget Direction gdnerale des investissements Direction Gknerale des Marches Publics Direction nationale du contrdle financier Direction Nationale de 1’Assainissement et ContrBle des Pollutions et Nuisance Direction Nationale du Trtsor et de la Comptabilite Publique
Direction Nationale des Transports Terrestres et Fluviaux Direction Rtgionale du Budget Communautk Economique des Etats de 1’Afrique de I’Ouest Enkgie du Mali
Economic Policy and Public Finance Management Crtdit de politique economique et de gestion des finances publiques Credit Food Price Crisis Response Gross Domestic Product Growth and Poverty Reduction Strategy Framework
Programme de Facilitt de Reponse B la Crise Alimentaire Globale Produit interieur brut Cadre de croissance et de strategie de rtduction de la pauvrete
* . 11
HIPC IDA IMF IPS LPDSC
MDG MDFU MF MEIT MPIPME
MSIPC MTEF NERICA ON
Heavily Indebted Poor Countries International Development Association International Monetary Fund Industrial Promotion Service Letter of Cotton Sector Development Policy Millennium Development Goals Multilateral Debt Relief Initiative Ministry of Finance Ministry of Economy, Industry and Trade Ministry for the Promotion of Investments and of Small and Medium Enterprises Ministry of Interior Security & Civil Protection Medium-Term Expenditure Framework (sectors) Rainfed-Rice variety Niger Office
PAGAMGFP Action Plan for Modemizing and Strengthening Public Finance Management
PRGF Poverty Reduction and Growth Facility PROSEPA Water Supply and Sanitation Sector Program PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper RWSS Rural Water Supply And Sanitation
SAC SDR TF UNDP VAT WAEMU WB WFP
Structural Adjustment Credit Special Drawing Rights Trust Fund United Nations Development Programme Value-added tax West African Economic and Monetary Union World Bank World Food Program
Pays pauvre trbs endette Association intemationale de developpement Fonds monetaire international Service de promotion industrielle Lettre de politique sectorielle sur le coton
Objectifs de developpement pour le millhaire Initiative multilatCrale d’allkgement de la dette Ministbre des Finances Ministere de I’Economie, de I’Industrie et du Commerce Ministere de l a Promotion des Investissements et des petites et Moyennes Entreprises Ministere de la SCcuritt Interieure et de l a Protection Civile Plan des d6penses A moyen-tme (sectoriel) Van& de riz Office du Niger Plan d’Action Gouvemementale pour la Modemisation et le Renforcement de la Gestion des Finances Publiques Facilite pour l a Lutte contre l a Pauvrete et pour la Croissance Programme sectoriel de l’eau potable et de I’assainissement Credit A I’appui de l a reduction de la pauvrete Document de Strategic pour la RCduction de la Pauvrete Projet d’assistance au developpement du secteur en eau et de I’assainissement en milieu rural Credit d’ajustement stucturel Droits de tirage speciaux Fonds Fiduciaire Programme des Nations-Unies pour le developpement Taxe A la valeur ajoutee Union Cconomique et monetaire ouest-africaine (UEMOA) Banque rnondiale Programme alimentaire mondial
Acting Vice President: Colin Bruce Acting Country Director: McDonald P. Benjamin
Sector Director: Yaw Ansu Sector Manager: Eva Jarawan
Task Team Leader: M o u k i m Temourov
... 111
FOR OFFICIAL USE ONLY
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
THE REPUBLIC OF MALI
SUPPLEMENTAL FINANCING FOR THE SECOND POVERTY REDUCTION SUPPORT CREDIT
DEVELOPMENT POLICY GRANT
TABLE OF CONTENTS
PROGRAM SUMMARY ............................................................................................... 1 I. BACKGROUND ......................................................................................................... 3 11. FOOD PRICE CRISIS ............................................................................................... 4 111. THE GOVERNMENT’S RESPONSE TO THE CRISIS ......................................... 5 IV. BANK’S RESPONSE TO MALI FOOD PRICE CRISIS ....................................... 7 V. MALI SECOND POVERTY REDUCTION SUPPORT CREDIT ........................... 7 VI. RATIONALE FOR PROPOSED SUPPLEMENTAL FINANCING .................... 11 VII. IMPLEMENTATION ARRANGEMENTS ......................................................... 1 1 VIII. BENEFITS AND RISKS ..................................................................................... 13
List o f Annexes
Annex 1 : Ma l i at a glance .............................................................................................................. 15 Annex 2: Mali-PRSCI-I1 Policy Action Matrix ............................................................................. 17 Annex 3: IMF Executive Board Completes First Review under the PRGF Arrangement for Ma l i and Approves US$7.5 million Disbursement ................................................................................ 22
The Supplemental Financing for M a l i Poverty Reduction Support Credit-I1 was prepared by a World Bank team comprising Mouk im Temourov (TTL), Clara Ana Coutinho de Sousa (Sr. Country Economist), Sybille Crystal (Country Officer), Oliver Durand (Sr. Agricultural Specialist), Tonia Marek (Lead Health Specialist), Haidara Ousmane Diadie (Health Specialist), Daria Goldstein (Sr. Counsel), Wolfgang Chadab (Sr. Finance Officer), Nicole Hamon (Language Program Assistant), and Fatoumata Moumoune Sidibe (Team Assistant). Advisors included McDonald P. Benjamin (Acting Country Director), Alassane Diawara (Country Manager), Eva Jarawan (Sector Manager), Antonella Bassani (Sector Manager), and Maurizia Tovo (Lead Technical Specialist). The team worked closely wi th the IMF team and with other development partners for Mali .
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THE REPUBLIC OF MALI
Recipient
SUPPLEMENTAL FINANCING FOR THE SECOND POVERTY REDUCTION SUPPORT CREDIT
Implementing Agency
Financing Data
Operation Type
Main Policy Areas
Key Outcome Indicators
PROGRAM SUMMARY
The Republic o f Ma l i
Ministry o f Economy, Industry and Trade
Grant, Food Price Crisis Response TF (TF071070), US$5.0 mil l ion
The proposed operation i s a supplemental financing for Ma l i PRSC-I1 to be disbursed in a single tranche. Mali’s PRSC-I1 i s the last operation in the f i rs t series o f two Development Policy Credits supporting the implementation o f the country’s Growth and Poverty Reduction Strategy Framework (GPRSF). The proposed grant i s being undertaken under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on May 29, 2008, and will be financed out o f the Food Price Crisis Response (FPCR) Trust Fund (TF). In l ine with GPRSF-I1 objectives, the PRSC-I1 continues and deepens support to the Government o f Ma l i as it implements the next steps in the reform program supported by PRSC-I. This includes: a) strengthening the links between GPRSF-I1 and the macroeconomic and budget frameworks with an emphasis on results-based budgeting, and strengthening public finance management including procurement; b) improving the business environment and creating a strong basis for private sector-led economic growth, through measures in the financial sector, private sector, transport and transit facilitation, electricity, cotton, and the OfJice du Niger irrigation zone; and c) strengthening the results orientation o f sectoral Medium-Term Expenditure Frameworks (MTEFs) as well as the linkages between MTEF priorities.
- Number o f MTEFs available 2008
11 20 7
70 69 11
- Ratio o f non-performing loans in bank portfolio (%) - Number o f procedures to create an enterprise
- Share o f health sector in the government current expenditure (%)
- Irrigation maintenance ratio (%) - Share o f rural population with access to potable water point (?A)
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Program Development Objective(s) and Contribution to CAS
Risks and Risk Mitigation
Operation ID
The objective o f this supplemental financing is, together with the IMF and other development partner contributions, to help the Government o f Ma l i fill an unanticipated financing gap caused by the food price cr is is and, thus, maintain the course of important socioeconomic policy reforms agreed under the PRSC-11. The PRSC-I1 i s an integral part o f the Bank’s CAS for Ma l i presented to the Board in February 2008. The proposed supplemental financing i s part o f the Bank’s short to medium-term response to the food price crisis, which also includes (i) support through the ongoing agricultural operation for the government’s Rice Initiative, (ii) preparation o f a second agricultural productivity investment operation, and (iii) preparation o f the new PRSC series, including technical assistance activities to improve targeting and effectiveness o f safety nets programs. The IMF has provided an enhanced arrangement for i t s new three-year PRGF o f US45 .7 mil l ion corresponding to 30% o f the quota and front-loaded disbursement o f 14%. Other donor responses to the crisis include the Netherlands’ budget support o f US$2.9 mil l ion and Canada’s US$7.1 mil l ion support to subsidize fertilizer.
’olitical risks are l ow to moderate. The political situation in M a l i i s stable and the ;overnment has reacted promptly to the food crisis, nevertheless the risk remains that ts emergency measures would not fully meet the expectations o f the population. A iublic communication effort toward the population at large could help mitigate this isk. External risks, notably the possible impact o f the ongoing financial crisis and the isk o f global recession, pose a substantial challenge to Mali ’s good record of nacroeconomic stability and growth. Although the short term impact o f the financial r i s i s will strengthen the terms o f trade through the effect o f lower o i l prices and elatively high gold prices, which are likely to outweigh a decline in the demand and r ice o f cotton, a global slowdown would weaken aid, remittances and foreign nvestment flows and undercut medium term growth prospects. Wi th elevated lownside risks, caution and flexibility will be needed in macroeconomic policies. To nitigate budget risks and maintain fiscal discipline, the country i s working closely vith the IMF to ensure that the PRGF arrangement i s on track. Dialogue between the uthorities and the IMF highlights vulnerabilities to shocks and the r isks associated vith the ongoing global financial crisis. Also, Ma l i remains vulnerable to limatichatural shocks, such drought and locust. Ma l i i s benefiting from the Afi ica imergency Locust Project that was put in place after the 2004 locust invasion to irovide assistance to fight, control and prevent locust invasions as well as to mitigate heir negative socioeconomic and environmental impacts.
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I. BACKGROUND
1. Mali has enjoyed a period of political stability in the past two decades. Strengthened by his re-election in the first round o f the April 2007 presidential elections and the landslide victory in the July 2007 legislative election o f the Alliance pour le dkveloppement et le progr& (ADP) - the coalition that supported him - President Tour6 has concentrated on implementing an ambitious, donor-supported poverty-reduction program and stabilizing security conditions in the north. The broad aim o f economic policy i s to achieve a level o f growth that makes possible a sustained reduction o f poverty by maintaining macroeconomic stability, further improving the business environment and making better use o f the public resources. To preserve social peace, the government has remained sensitive to popular concern over the rising cost o f living, as a sharp increase in food prices could lead to social unrest similar to that experienced in other countries in the region.
2. In November 2006, the Government approved an ambitious second generation PRSP projecting a 7 percent average annual GDP growth during the 2007-11 period. Mal i experienced a good economic performance in 2006, with real GDP growth at 5.3 percent. Growth performance in 2007 declined to 4.1 percent due to poor weather conditions, which affected agricultural output, particularly cotton, and to lower gold output stemming from technical difficulties at a few mining sites. Rising inflation and volatile commodity prices are affecting economic performance in 2008. Despite good rains, cotton output could be well below government targets and exports o f cotton are projected to decline sharply in 2008.
3. In May 2008 the IMF approved a new three-year Poverty Reduction and Growth Facility (PRGF) program with an associated financial envelope of SDR28m (US$45.7m). In order to support the government’s efforts to offset the negative effects o f rising food and fuel prices, the arrangement corresponds to 30 percent o f the quota and a frontloaded disbursement o f 14 percent o f quota. T h i s arrangement was made possible given the government’s agreement to reduce spending on non-priority areas and to defer some investment projects. Thanks to the frontloading o f the disbursement schedule, more than half the total amount i s available in 2008. The satisfactory December 2008 review allows the Fund to disburse an additional 5 percent o f quota (about US$7.5 million), which would bring total disbursements under the arrangement to about US$26.8 million.
4. Despite political and macroeconomic stability, sustained economic growth, and strong support from donors, Mali faces significant economic and social challenges in view of i t s vulnerability to climatic conditions and commodity price fluctuations. The economy remains strongly dependent on agriculture and gold production. Exports are highly concentrated, with gold and cotton together comprising over 90 percent o f export revenues. As a land-locked country, Ma l i also faces challenges due to the weak development o f infrastructure and transportation services, and to economic and political conditions in neighboring countries. Unless more ambitious structural reforms are implemented, economic growth i s unlikely to increase significantly. The Government i s fully aware o f this and has shown renewed commitment to the privatization program in recent months.
5. Poverty has fallen from 68.3 percent in 2001 to 55.6 percent in 2006. However, spatial differences are widening and high levels o f population growth will continue to make it difficult to reduce poverty rapidly. Social indicators remain low despite moderate progress, and Ma l i i s ranked 173 out o f 177 countries on the UNDP’s 2007/08 Human Development Index. Major efforts are required to improve the efficiency and effectiveness o f social service delivery.
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6. Agriculture remains one of the key drivers o f the economy and accounts for 40 percent o f the GDP. Despite a steady urbanization, almost 70 percent o f the population l ive in rural areas and close to 80 percent rely entirely or partly o n agricultural production for their livelihoods. Subsistence farming remains the dominant model for the 800,000 farms that are for the vast majority smallholders / small production units who produce very l itt le above the subsistence level for marketing purposes (68 percent o f farmers with less than 5 hectares and 86 percent with less than 10 hectares). Seventy-two percent o f cultivated areas are devoted to cereals, produced mainly for self-consumption, There i s a strong need to modernize the Mal ian agriculture and help the country explore i t s under-exploited agricultural potential in i t s areas o f comparative advantage, as wel l as i t s irrigation potential and marketing opportunities o n domestic, regional and international markets.
7. Despite some improvements in all sectors, Mali i s unlikely to meet all the Millennium Development Goals (MDGs) by 2015. M a l i i s well-placed to meet the MDG targets for reducing the spread o f H N / A I D S and increasing access to safe drinking water sources. With an improvement in the efficiency o f public spending and additional donor funding, the country could meet the targets related to school enrolment rates and reduction o f extreme poverty. However, the backlog o f measures for improving delivery o f health services i s too significant and the targets for maternal and chi ld mortality rates are unlikely to be met. The under-five mortality rate was estimated at 218 per 1,000 l ive births in 2005, the third-highest in the world. In addition, gender inequality, reflected in differential access to health and education, continues to be a source o f concern.
11. FOOD PRICE CRIS IS
8. In the past 12 months Mali has experienced a significant price increase for grains, particularly rice and wheat - essential food items for the Mal ian population. In August 2008 the consumer price o f Gambika, the preferred local r ice variety, was at CFAF 400 per kg, which i s 36 percent higher than last year and than the past f ive year-average. The consumer price o f sorghum has increased by 12.5 percent, while the price o f mi l le t and maize increased by 33 percent compared to last year’s at the same period.
9. The overall pressure on domestic retail prices has been caused by the high level of prices on world markets, as Mal i i s a net importer of rice and wheat. Food prices rose in al l regions, despite the introduction o f a six-month tax exemption (tariff and VAT) on imported r ice in April 2008, in return for a commitment by traders to ho ld prices at CFAF 3 1Okg (US$7.2kg) for two months. The two-month price commitment has expired and there i s evidence that the prices o f imported and local rice have risen substantially. Unsurprisingly, cereal prices are highest in Gao and Kayes, which are relatively remote f rom major farming areas in central M a l i and f rom Bamako, the country’s main import hub. Prices are lowest in Timbuktu because the area i s relatively self-sufficient after the rainy season, as seasonal floods irrigate large tracts o f land between this desert c i ty and the River Niger.
10. Mali has experienced food shortages in the past, but the scale o f the current international crisis has been too large for the country’s already weak social safety nets and food security systems. This year the Food Security Board has allowed stocks to fa l l considerably to counter the food shortages. However, past food shortages in M a l i were isolated, affecting pr imari ly northern regions with chronic cereal deficits, while the current crisis has been universal and affects households al l over the country. The government’s social safety nets, main ly
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consisting o f school feeding and nutrit ion programs, are small in scale and poor ly targeted, with l imi ted impact o n the ground.
11. Simulation models suggest that the food crisis i s having a strong impact on poverty in Mali. Whi le the potential impact o f a change in the price o f food o n poverty tends to differ for producers (who tend to benefit f rom an increase in prices) and consumers (who tend to lose out when prices increase), overall the increase in the prices o f cereals has had a clear negative effect. Whi le post-food crisis poverty survey data are not available, simulation models suggest that a 25 percent increase in the price o f various cereals would increase the share o f the population in poverty by 1.7 percentage points (this would represent close to 300,000 persons fall ing into poverty). With a 50 percent increase in prices, poverty would rise by almost 3.5 points. If the increase in prices were to affect consumers only, without benefit for producers (for example if there i s n o trickle down o f higher consumer prices to producers due to high intermediation costs), the increase in the headcount o f poverty would be even higher, at 2.5 percentage points for a 25 percent price increase, and more than f ive percentage points for a 50 percent price increase.
111. THE GOVERNMENT’S RESPONSE TO THE CRISIS
12. The increase in prices caused by the sharp rise in cereal prices in international markets has forced the Government to take drastic action to maintain the retail cost o f rice, a key staple food for Malians, at affordable levels. Soaring food prices have already caused significant social unrest in some neighboring countries. In order to avoid social tensions, the Government developed a series o f short-term actions to alleviate the impact o f food price increases and long-term measures to improve food supply. Justified by the structure o f the Mal ian economy (see paragraph 6), the government’s main actions focus o n the agricultural sector and include:
(a) Rice Initiative: An initiative to boost rice production in M a l i that aims to increase output by 50 percent in 2008/09 compared to 2007/08. This program, which benefits f rom Bank support v ia an agricultural project, includes: (i) measures to improve crop input distribution by increasing the availability o f seed for locally-produced r ice varieties; (ii) new/expanded subsidies o n crop inputs; (iii) measures to improve marketing channels, with the objective o f facilitating the commercial relationship between producer organizations; and (iv) subsidies for equipment, access to watedinigation, and extension services, with over one hundred extension agents to be recruited to provide technical advice to rice producers. The total cost o f the Rice Init iative for 2008-09 i s estimated at CFAF 42 billion, o f which ha l f would be financed by the Government, and the rest will be financed by other donors, including Canada and the Netherlands.
(b) Tax exemption on imported food items, including rice: A six-month suspension o f the 28 percent import taxes on rice starting April 1, 2008. The amount o f the foregone fiscal revenue due to tax exemption to imported food items i s estimated at CFAF 5 bil l ion.
(c) Stock management: An increase in supply using the state food-grain stocks o f the Food Security Commission. As o f October 2008, available stocks combining public and private sources amounted to 44,148 tons, consisting o f locally grown millet, sorghum, and rice. The Government i s revising i t s guidelines for food stock management in view o f establishing a more efficient and transparent management system as wel l as
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developing counter-cyclical marketing measures to stabilize cereal prices, e.g., selling cereals during the hunger season in July-September when prices are at their highest.
13. The positive impact of an increase in productivity as a result o f the Rice Initiative promises to be considerable. M a l i has an excellent potential for rice production and could become one o f the major supplier o f rice within West Africa. A combination o f market liberalization, technological improvement, and investment in irrigation infrastructure has already resulted in a higher degree o f intensification and yield improvement in the Off ice du Niger (ON) irrigation scheme, where about ha l f o f Mal ian r ice i s grown. The experience in ON illustrates the potential for this kind o f long-term investment. Over the past two decades, the total area under irrigation increased f rom 35,000 hectares in 1982-83 to 87,000 hectares in 2006-07. The result was almost a six-fold increase in production f rom 96,500 tons in 1982-83 to 560,000 tons in 2006-07. With the supply response predicted by simulation models for the Rice Initiative, production would increase by an additional 24 percent, and as much as 32 percent, in the f i rst year alone due to improved technology and increased productivity. This increase in productivity i s such that poverty would actually be reduced fol lowing the in i t ia l price shock. The implementation o f the Rice Initiative i s monitored regularly by a working group comprised o f government and donor representatives who meet monthly to monitor food price trends and evaluate stock management, food security conditions, financing and other aspects o f the program implementation.
14. The government and development partners are closely monitoring the implementation of the program of emergency actions and assessing their potential impact on the poor. Information presently available i s not sufficient t o fully assess the impact o f the different pol icy responses, but the Government i s planning a workshop in January 2009 to assess the fiscal impact o f the measures, particularly for tax exemptions o n rice. As for food stocks (measure (c) above), a recent USAID review concluded that Mal ian authorities have been quite effective in stock management and in their attempts to use the state grain stocks to stabilize local food prices'. This benefits the whole population, but given the higher share o f the poor's budget going to food, people in the lower income brackets stand to benefit the most.
15. Despite extraordinary pressures on the budget due to the food crisis, the government has maintained tight fiscal discipline, which implied severe spending restrictions. The authorities responded to the shortfall in revenues that resulted f rom the exemptions on food import taxes that were introduced to cushion consumers f rom raising prices by freezing non-essential spending for six months f rom M a y 2008. This has made it diff icult for the Government to maintain public service delivery at planned levels. Expenditures frozen in this period are estimated at 11.2 percent o f the init ial budget allocation in social sectors and 16.2 percent in other sectors. Whi le funding for essential goods, such as medicines and textbooks were protected, their t imely delivery to hospitals and schools were affected by the freeze on fuel and other related expenditures. In addition, budget reallocations were made to ensure fiscal space for priority projects, such as the Rice Initiative. Tax cuts were reversed f rom end September 2008 and together with additional resources made available by development partners, created space to considerably relax the budgetary freeze in the 2008 amended budget.
16. The Bank’s response to the food crisis in Mali consists of a series of short and medium-term measures, including (i) support through the ongoing agricultural operation for the government’s Rice Initiative, (ii) preparation o f a second agricultural productivity investment operation, and (iii) preparation o f the new PRSC series, including technical assistance activities to improve targeting and effectiveness o f safety nets programs. The PRSC-I11 planned for mid-2009 i s estimated at US$60 mi l l ion.
17. The proposed US$ 5.0 million from the Food Price Crisis Response (FPCR) Trust Fund i s supplemental financing for the Second Poverty Reduction Support Credit (PRSC), US%42 million, approved by the Board in February 2008 and disbursed in one tranche in May 2008. The objective o f this supplemental financing is, together with the IMF and other development partner contributions, to help the Government o f M a l i fill an unanticipated financing gap caused by the food crisis and thus maintain the course o f important socioeconomic pol icy reforms agreed under the PRSC-I1 and GPRSP.’ Wh i le the country has made progress toward implementing PRSC-supported reforms, the Government faces the diff icult task o f balancing reduced revenues and unexpected expenditure needs. The proposed supplemental financing, therefore, would provide the authorities with additional fiscal space to protect key interventions o f the GPRSP, whi le responding to pressing needs emerging f rom the food crisis.
V. MALI SECOND POVERTY REDUCTION SUPPORT CREDIT
18. The PRSC-11 i s the last operation in the first series of Development Policy Credits supporting the implementation of the country’s GPRSF. The program focuses on: (a) maintaining a stable macroeconomic framework and improving overall public expenditure management; (b) enhancing growth; and (c) improving access to basic social services to reach the MDGs. In l ine with this agenda, the PRSC-I1 continues and deepens support t o the Government o f M a l i as it implements the next steps in the reform program supported by PRSC-I. This includes: (a) strengthening the links between the GPRSF and the macroeconomic and budget frameworks with an emphasis o n results-based budgeting, and strengthening public finance management including procurement; (b) improving the business environment and creating a strong basis for private sector-led economic growth through measures in the financial sector, private sector, transport and transit facilitation, electricity, cotton, and the OfJice du Niger irrigation zone; and (c) strengthening the results orientation o f sectoral MTEFs, particularly in health, rural water supply and sanitation, and strengthening the linkages between MTEF priorities. The operation i s an integral part o f the Bank’s Country Assistance Strategy (CAS) for M a l i presented to the Board in February 2008.
A. Recent Economic Performance
19. GDP growth in 2008 i s expected to be broadly in line with projections made at the time of PRSC-11 approval (see Table l)3. Favorable weather, high farm gate prices and policies supporting food production helped the outlook for the year, despite the adverse impacts o f high
T h e IMF has responded through its three-year PRGF o f USs45.7 million, the Netherlands and Canada, among other
The IMF undertook a mission to Mali to prepare the new PRGF, having updated the macroeconomic assessment, in donors, are providing USS2.9 million for budget support and US$7.1 million to subsidize fertilizer, respectively.
February 2008. We use the information included in the PRGF program (collected mainly in February) to assess the economic conditions at the time of the Board approval of the PRSC-11.
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food and o i l prices. Projections made by IMF staff, mainly based o n information collected in February 2008 to prepare the new PRGF, put GDP growth at 5.4 percent in 2008, but revisions made in September indicate that growth could recover to i t s medium-term trend o f about 5 percent in 2008.
Table 1, Mali: Selected Economic and Financial indicators, 2005-10'
(Annual percentage change) Real GDP Consumer price inflation (average)
External sector (percent change) Terms of trade (deterioration -) Real effective exchange rate (depreciation -)
Money and credit (contribution to brad money growth) Credit to the government Credit to the economy Broad money
investment and savings Gross domestic invesbnent
of which government Gross national savings
of which government Gross domestic savings
Central government finance Revenue Grants Total expenditure and net lending Overall balance (payment order basis, excluding grants) Basic fiscal balance'
External sector Current external balance, including official transfers Current external balance, excluding official transfers Exports of goods and services imports of goods and services Debt service to exports of goods and services
External debt (end of period)
Nominal GDP (CFAF billions) Overall balance of payments (US$ miliions) Money malket interest rate in percent (end of period) Gross international reserves (US$ miliions)
Source: IMF, Malian authwities '2006 data after adjustment for MDRl 'Revenue (excluding grants) less total expenditure (excluding fweign financed investment projects and HlPC initiative related spending).
20. Rising inflation and volatile commodity prices dominated economic developments in 2008. The annual average inflation for 2008 i s projected to reach 9.2 percent, when projections in February indicated an average inflation rate o f 2.5 percent4 Food prices began to moderate in September, brightening prospects for a single digit average inflation in the year. External developments were marked by a real effective exchange rate appreciation and a weakening current account balance. Projections made early in the year put the external current account deficit (including official transfers) at 6 percent o f GDP but revised projections expect the deficit to be at 6.5 percent o f GDP. The poor performance o f the cotton sector i s a key factor in the
Higher prices o f cereals account for nearly h a l f o f the increase observed in the f i r s t six months o f 2008.
8
decline o f exports o f goods and services as a share o f GDP, by about 4 percentage points from an initial projection o f 29 percent o f GDP. Unanticipated increases in food and fuel prices explain the upward revisions in the import bill o f about 1 percent o f GDP.
21. Fiscal outcomes in 2008 are expected to be broadly in line with the projections made early in the year and reflected in the program supported by the PRGF. Revenue collection was slow in the beginning o f the year, in part due to exemptions granted on food imports and fuel tax reductions. Simultaneously, exceptional spending needs emerged after the 2008 budget was approved by the National Assembly, notably to encourage food production in response to the crisis. The authorities reacted to the revenue shortfall by freezing spending from May to September/October.’ In September 2008 the authorities submitted a revised budget to the National Assembly, with spending reduced by nearly 2 percent o f GDP compared to the original budget. Tax measures on food were removed at end-September. The 2008 fiscal balance i s expected to be -8.6 percent o f GDP (payment order basis, excluding grants). The revised projection for the budget under the program supported by the IMF under the PRGF for 2008 i s fully financed, including the proposed supplemental operation (see Table 2 below).
22. Mali’s very limited integration with international capital markets should insulate the economy from direct effects of the global financial crisis in the short run. Potential short and medium term impacts o f the crisis differ and relate to terms o f trade and r isks associated with access to financing (mainly regionally), foreign direct investment, remittances, aid flows and possibly deceleration in global commodity demand. Heightened risk aversion and tightening liquidity in the West African Economic and Monetary Union could nonetheless reduce the scope for raising funds regionally, particularly for the budget. According to the IMF, the international financial turmoil and the risk o f a global recession pose a substantial challenge to maintaining Mali’s macroeconomic stability and growth over the medium term, underlining the need for the authorities to pursue their structural reform agenda.6
Table 2: Financing (Billion CFA) 2007 2008
Feb 08 Est. Rev. Prog. Overall fiscal balance (payment order basis)
Excluding grants -275.7 -307.3 Including grants -1 13.5 -155.8 Adjustment to cash basis 10 -52.6
External financing (net) O f which budgetary loans Amortization HIPC
98 115.5 18 19.5
10.7 12.7 31.4 -29.1
Domestic financing (net) 5.5 92.9
The freeze i s estimated at 11.2 percent in social sectors and 16.2 percent in other sectors, from May to September-October 2008. Improved revenue mobilization, including from development partners, created space to relax the budgetary freeze, particularly for social sectors. IMF Press Release No. 08/3 17, December 11, 2008.
9
Banking system Privatization receipts Other financing
11.5 68.4 0.7 42.0
-6.7 -17.5
Financing gap 0.0 0.0 Note: Budgetary loans include the proposed supplemental financing
B. PRSC-11 Policy Action Progress
23. I1 policy matrix (the complete PRSC-I1 pol icy action matr ix i s presented in Annex 2):
Mali i s currently making good progress in the implementation of the agreed PRSC-
8
0
24.
The links between the poverty reduction strategy and sectoral policies have been strengthened through the completion o f the MTEF-based budgeting process for six sectoral ministries, with an additional ten ministries to complete the exercise by the end o f 2008. Public resource management has been reinforced thanks to a new Procurement Code approved by the National Assembly in August 2008 (the approval o f a draft decree was a pr ior action for PRSC-11). At the same time, the budget monitoring process i s being increasingly computerized, and the action plan to modernize and strengthen the public management system i s under implementation. Efforts to improve the performance o f the banking sector are underway, including the recent privatization o f the.Malian Investment Bank (BIM), and the establishment o f a micro-finance supervision unit in the Ministry o f Finance. T o reduce the deficits o f the social security institutions, the Government has embarked in the reform o f the M a l i Retirement Fund (CRM) and a new l a w to that effect has been drafted. Efforts are also going into strengthening the performance o f the transport sector: truck transit times have been successfully reduced to meet the recommendations o f the Wor ld Customs Organization and the recommendations o f the National Facilitation Committee concerning transport corridors have been implemented. Concerning rural development, the management and viabil ity o f the cotton sector have been improved by establishing new monitoring mechanisms that are being applied to the 2008- 09 season, whi le the l aw authorizing privatization o f the M a l i Textile Development Company (CMDT) has been approved by the National Assembly and the privatization process i s o n track. In addition, plans to strengthen the financing mechanisms o f the Office du Niger through private funding are being pursued and a master action plan i s under development. Efforts to improve the performance o f the health sector have produced encouraging results, with performance-based contracts signed with 1 1 hospitals, the rates o f assisted childbirths at 58 percent in 2007 (against a target o f 57 percent for 2008), the coverage o f community- based health insurance expanded (1.9 percent in 2007), and a 2008 budget originally in line with the MTEF (however, exogenous shocks resulted in an 11.5 percent reduction in recurrent costs for social sectors).
The poverty and social impacts of the PRSC-11 are expected to be favorable. Many o f the measures have an indirect pover ty and social impact by creating the conditions for improved governance and provision o f public services (e.g., macroeconomic and public finance management), improved quality o f infrastructure services (e.g., road maintenance, irrigation reforms), improved health o f and access to financial sector services (e.g., financial sector reforms), and lower cost o f goods and services (e.g., transit facilitation). The elimination o f the
10
export-related “expertise tax” o n handicrafts would benefit the poor since handicrafts are a major source o f income for large numbers o f the poor. Handicraft activities are also the ma in source o f diversification outside agriculture in the rural areas, thereby translating into economic opportunities for the poorest Malians.
VI. RATIONALE FOR PROPOSED SUPPLEMENTAL FINANCING
25. The proposed Supplemental Financing, which would contribute to the sustainability of the overall reform program of the Government, meets Bank requirements for Supplemental Financing under OP8.60 as follows:
The program is being implemented in compliance with provisions of the PRSC-11 Financing Agreement. M a l i i s currently implementing the PRSC-I1 in compliance with the pol icy action matrix. Specifically, the reform program i s proceeding according with the agreed agenda, with the expectation that it would be completed before the closing date for the PRSC-11. Whi le progress has been somewhat uneven, o n balance and in v iew o f challenging country circumstances, management’s judgment i s that progress i s sufficient to meet OP 8.60 requirements for supplemental financing.
The Borrower is unable to obtain sufficient funds from other lenders on reasonable terms or in a reasonable time. The Government of M a l i has approached development partners to support i t s crisis response program. The donor response has been positive, with the IMF and Netherlands providing budget assistance and Canada supporting the implementation o f the Rice Program, but i t i s not sufficient to fill the budget gap caused by the crisis. The proposed supplemental financing for the PRSC- I1 i s an integral part o f the government’s strategy to finance the 2008 budget deficit.
The time available is too short to process a further freestanding I D A credit. The Supplemental Financing option would enable the Bank to deliver program support in a timely manner. The second series o f M a l i PRSC i s not expected to be presented to the Board before mid-2009.
The Borrower is committed to the program and the implementation agencies have demonstrated competence in carrying it out. The Government i s committed to the implementation o f i t s medium-term poverty reduction strategy, the GPRSF. The government’s performance in pursuing macroeconomic stability and structural policies for growth and poverty reduction together with i t s overall satisfactory progress in implementing the PRSC-I1 program demonstrate i t s continued commitment to the pol icy program.
VII. IMPLEMENTATION ARRANGEMENTS
(0 Terms of the Supplemental Financing
26. N o condition will apply to this proposed Supplemental Financing other than the Government continues to maintain a satisfactory macroeconomic pol icy framework and continues making overall satisfactory progress in implementing the PRSC-I1 pol icy program.
11
(ii) Overall Implementation, Coordination and Monitoring
27. The implementation of this supplemental financing will be managed in the same manner as the PRSC-II credit. Therefore, the Ministry o f Economy, Industry and Trade (MEIT) i s the main entity responsible for the overall supervision, monitoring and reporting o f this grant. It will ensure that the funds are used for their intended purpose in the context o f the budget execution.
(iii) Monitoring and Evaluation
28. The MEIT i s the main entity responsible for the overall implementation of the Grant. I t will ensure that the funds are used for their intended purpose in the context o f the budget and as indicated in the Letter o f Development Policy.
29. Regular Bank missions will interact closely with staff o f the MEIT for reporting progress and coordinating activities among concerned ministries. Bank staff will also continue the pol icy dialogue in the f ie ld with the institutions involved in the implementation o f the policies and programs, as wel l as to coordinate effectively with donors and agencies, especially those involved in the delivery o f emergency assistance. Bank missions will review government progress in the implementation o f the interventions, monitor actions, and ensure that the expected project outputs and outcomes materialize. The outcome indicators are the same as for the PRSC-I1 and wil l be monitored by a committee comprising representatives o f the MEIT, Ministry o f Planning, GPRSF Unit and donors (See Annex 2 in the PRSC-I1 PAD for details).
(iv) Fiduciary Aspects, Disbursements and Auditing
30. Mali's fiduciary framework i s deemed adequate to receive the proceeds of the proposed grant. Disbursement o f the grant would fo l low the agreed disbursement procedures o f the General Budget Support Framework, which are in line with the Bank's disbursement procedures for development pol icy lending. This untied budget support would be disbursed in one single tranche; i t s disbursement would not be l inked to any specific purchases and no procurement requirements would be needed. Once this supplemental financing has been approved by the Board and becomes effective, and upon receipt o f an application to withdraw funds from the grant account the proceeds o f the grant will be deposited by IDA in a Dedicated Account designated by the Recipient at the Central Bank o f West Afr ican States (BCEAO) and which forms part o f the Borrower's official foreign exchange reserves. The BCEAO will credit promptly the CFAF equivalent o f the grant proceeds to the same dedicated government account which had been set up for the in i t ia l Financing with an indication o f the exchange rate used. The government o f M a l i will provide through the Ministry o f Finance a written confirmation that this transfer has taken place. The Borrower shall ensure that upon the deposit o f the proceeds o f the Grant into the said account, an equivalent amount i s credited in the Borrower's budget management system. Although an audit o f the deposit will not be required, the Bank reserves the right to require audits at any time. I f proceeds o f the grant are used to finance ineligible expenditures, as defined in the financing agreement, the Bank would require the Borrower to promptly refund an equivalent amount the Bank. Amounts refunded to the Bank upon such request shall be cancelled.
(v) Environmental Aspects
31. The implementation of the proposed grant i s not expected to have any significant environmental impact, given that no new policy measures are being undertaken as a result
12
of this grant. The grant will be used to provide the government with additional financing to respond to unexpected fiscal needs caused by the food price crisis and therefore enable it to maintain the course o f the ongoing reforms under the GPRSP.
VIII. BENEFITS AND R I S K S
(i) Benefits
32. The provision of timely and flexible support to the Government of Mali will enable it to fill in an unanticipated financing gap caused by the food price crisis. The urgent policy measures put in place to combat high food prices have put extraordinary pressures on the national budget. The proposed supplemental financing would be, together with the IMF and other development partner contributions, to help the Government o f Ma l i fill in an unanticipated financing gap caused by the food crisis and thus maintain the course o f important socioeconomic policy reforms agreed under the PRSC-I1 and GPRSP.
(ii) Risks
33. external and budget risks.
The operation faces low to moderate political risks and moderate to significant
Political risks are low to moderate. The political situation in Ma l i i s stable and the Government has reacted promptly to the food crisis, nevertheless the risk remains that i t s emergency measures would not fully meet the expectations o f the population. A public communication effort toward the population at large could help mitigate this risk External risks, notably the possible impact o f the ongoing financial crisis and the risk o f global recession, pose a substantial challenge to Mali’s good record o f macroeconomic stability and growth. Although the short te rm impact o f the financial crisis will strengthen the terms o f trade through the effect o f lower o i l prices and relatively high gold prices, which are likely to outweigh a decline in the demand and price o f cotton, a global slowdown would weaken aid, remittances and foreign investment flows and undercut medium term growth prospects. With elevated downside risks, caution and flexibility will be needed in macroeconomic policies. Budget risks: To maintain fiscal discipline and ensure that balance o f payments deficits are financed by external funding, the country i s working closely with the IMF to ensure that the IMF program under the PRGF arrangement i s on track. Dialogue between the authorities and the IMF highlights vulnerabilities to shocks and the r isks associated with the ongoing global financial crisis. Also, Ma l i remains vulnerable to climatichatural shocks, such drought and locust. Ma l i i s benefiting from the Africa Emergency Locust Project that was put in place after the 2004 locust invasion to provide assistance to fight, control and prevent locust invasions as well as to mitigate their negative socioeconomic and environmental impacts.
0
34. The Government’s sustained implementation of the agreed course of reforms under the GPRSP would be an important factor in ensuring sustained high levels of support to Government from the Bank and other development partners in mitigating the above- mentioned risks. T h i s i s especially true concerning medium-term risks. The donor community will work in close collaboration with the Government to assess the l ikely impact o f various actual and potential policy responses to external shocks, with a special attention to their effectiveness in protecting the vulnerable without compromising ongoing reforms and fiscal discipline. To this
13
end, the authorities intend to evaluate the measures undertaken in response to the food crisis and develop more targeted and sustainable support mechanisms. To launch the process, a workshop i s scheduled for December 2008 in Bamako. The proposed supplemental financing, along with other donor commitments, would help the Government maintain the course o f reforms. This in turn will facilitate the provision o f predictable and timely support through a new PRSC series, and solid donor coordination, which will be important elements for mitigating external and budget r isks.
14
Annex 1 : Mali at a glance
2007
2.4
POVERTY and SOCIAL
2007 Population, mid-year /h#k:i GNI per capita {Aff"cmh& L@) GNI / A t b s m W LtWAWa?) Average annual growth. 2001-07 Population fit? Labor force LfQ
Growth of erports and imports [ X I
q' 1
Mali
12.3 500
6.1
3.0 2.9
Most recent estimate [latest gear available. 2001-071 Poverty f i : ' & & & . k # n n a + # d ~ < e ~ i Urban population p'dt&a'pp&f..) Life expectancy at birth &%:i Infant mortality {&v.!~&eMf&) Child malnutrition p'ceCMwm&~? Access to an improved water source p'd&&&t Literacy fi;'&&&h+?.-P,I' Gross primary enrollment ~ ~ ? r v ' ~ ~ ~ a p ~ a t & t
Male Female
32 54 119 30 60 24 80 90 71
KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1987 1997
GDP /ttWh&'msI' 1.9 2.5 Gross capital formationlGDP 20.7 20.6 Exports of goods and servicesfGDP 16.6 26.1 Gross domestic savingslGDP 4.2 10.0 Gross national savingslGDP 10.2 13.0
Current account balancelGDP Interest paymentslGDP Total debtlGDP Total debt servicelexports Present value of debtlGDP Present value of debtlexports
-10.6 e7.6 0.7 11.8
106.1 127.4 18.5 11.5
1987-97 1937-07 2006 / M a p # a.?Udgw!&i GDP 3.2 5.8 5.3 GDP per capita 0.5 2.7 2.2 Exports of goods and services 8.0 7.7 11.3
Sub- Saharan Low-
Africa income
800 952 762
2.5 2.6
36 51 94 27 58 59 94 99 88
2006 5.9
22.9 32.1 14.8 13.0
-4.2 0.3
24.5 4.2
13.2 40.3
2007
2.8 -0.2 3.4
1,296 578 749
2.2 2.7
32 57 85 29 68 61 94
100 e9
2007 6.9
23.3 27.3 13.5
4.7
2007-11
Development diamond'
I Life expectancy
GNI Gross Per primary capita nrollment
I
Access to improved water source
Economic ratios'
Trade
Domestic Capital savings formation
Indebtedness
STRUCTURE of the ECONOMY
$ : : : ' C d m i Agriculture Industry
Services
Household final consumption expenditure General gov't final consumption expenditure Imports of goods and services
Manufacturing
fMW md-QYcM4W Agriculture Industry
Services
Household final consumption expenditure General gov't final consumption QXpenditUre Gross capital formation Imports of goods and services
Manufacturing
1987 1997
45.2 44.5 15.9 15.6 8.7 4.2
38.9 38.9
81.6 78.0 14.2 12.0 33.1 36.8
1987-97 1997-07
3.1 3.5 4.9 5.8 3.8 0.7 1.9 5.9
2.5 1.6 2.4 12.6 0.5 10.6 2.7 5.2
2006
36.9 24.0
3.1 39.1
75.3 9.9
40.2
2006
5.7 4.4 0.9 6.7
m5.2 31.1 5.3 4.1
2007
36.5 24.2
3.1
75.8 10.7
37.0
Growth of capital and GDP ( X I
1 50
0
-50
-GCF d - G D P
3.7 4.4 7.6
-5.9 22.0
20
0
-20
6.4 -Exports -1noports 3.0 I
Note: 2007 data are preliminary estimates. This table was produced from the Development Economics LOB database. 'The diamonds show four key indicators in the country [in bold] compared with its incomegroup average. If data are missing, the diamond wlll
be incomplete.
15
PRICES and GOVERNMENT FINANCE
Dmesf.ic,wice5 fl?&ao& Consumer prices Implicit GDP deflator
G o y e ~ n m e ~ r &dace ( z ' & ' L X E &s wrm-qmxj Current revenue Current budget balanoe Overall surplusfdeficit
TRADE
taksx&wxmq Total errports (fob]
Cotton Gold Manufactures
Total imports (cif] Food Fuel end energy Capital goods
Export price index &WW=,@?' Impart price index fi@O8:&7@' Terms of trade /,YAM;@)
BALANCE of PAYMENTS
f%b%?,MmTt Exports of goods and services Imports of gonds and services Resource balance
Net income Net current transfers
Current account balance
Finencing items (netj Changes in net reserves
Mew: Reserves including gold p t % # m @ L - b ? s i
Conversion rate (NC;,'rdfLK$)
1987
-1.6 0.4
16.5 5.6
-3.6
1987
256 115 51
479 64 68
159
118 86
137
1987
320 639 -319
-20 135
-204
239 -34
25 300.5
EXTERNAL DEBT and RESOURCE FLOUS
flmm!&w:! Total debt outstanding and dishursed
1987
2,043 IBRD 0 IDA 340
Total debt service 63 IERD 0 IDA 4
Composition of net resource flows Official grants 172 Official creditors 125 Private creditors -7 Foreign direct investment [net inflows) -6 Purtfulio equity (net irrflows) 0
Commitments 0 Disbursements 44 Principal repayments 1 Net flows 42 Interest payments 3 Met transfers 33
World Bank program
1397
-0.7 1.0
18.3 7.2
.4.8
1997
561 276 201
753 111
105 221
33 84 118
1997
646 910
-263
-53 123
-187
185 3
417 583.7
1997
3.152 0
333
85 0
14
211 86 0
63 0
21 75 7
67 7
61
2006
1.5 4.1
51.8 38.4 23.2
2006
1.570 276
1,128
2006
1.916 2.058
-142
-342 233
-245
150 95
377 522.3
2006
1,436 0
2 82
80 0
18
2,120 141
1 185
6
123 105 12 93 7
87
2007
2.0 4.3
17.6 3.4
-6.7
2007
1,414 213
1,016
2007
1.751 2,132 -381
-248
-383
241 148
1,113 479.3
2007
0 452
0 3
203 133
0 133
3 136
inflation [ x )
5
a -E
GDP deflator -W?-CFI
Erport and import levels (US$ mi1l.J
2,oaa
1.5*6
1.**6
60P
a 01 62 43 64 65 66 P7
Exports 6 Imports
Current account balance to GDP ( X I
-15
Compo+itian of 2006 debt (US$ mill.)
E . Bilgtorai
C . Short-term
k . leRD 6 . IDA D - Other multilQtcr4 F . Private C - IMF
Note This table was produced from the Development Economics LDB database 9!24,'08
16
Annex 2: Mali-PRSCI-I1 of Policv Actions
Medium-term objectives
Strengthen the links between the poverty reduction strategy and the sector strategies
Strengthen and modernize public finance management
Strengthen the budget monitoring process
Strengthen the procurement system
PRSC-2 (2007) (Prior actions in bold)
Expand the MTEF process to food security and the environment, and update al l existing MTEFs (health, education, agriculture, livestock and fisheries, rural water supply and sanitation) for 2008-2010
Elaborate and adopt (January 2007), and implement the updated 2007 program o f the PAGAMGFP (2007)
Operationalize the interconnection of finance departments of four ministries and four regional budget departments, consistent with the network infrastructure established by AGETIC
Draft Decree on the Procurement Code i s approved by the Government
Elaborate and adopt (by GOM) the draft texts for the creation o f the procurement regulatory department (including an appeal mechanism and a procurement transaction audit mechanism), and the procurement control audit
Strengthen capacities and responsibilities o f the contracting authorities
Install a database with integrated procurement management system in four ministries
Summar
Indicator@)
Number o f MTEFs available
Number of MTEFs validated after the budget arbitrage
Number o f weeks after the end of each month to produce the budget execution report (including functional, economic and administrative classification) Procurement Decree published
Regulation and audit entities established.
Threshold for periodic reviews o f the contracting authorities
Number o f national departments whose staff i s trained.
Periodic monitoring reports including indicators
Indicator reference value bear)
7 (2006)
7 (2006)
6 weeks (2006)
No (2006)
No (2006)
CFAF 10 million (2006)
0 (2006)
0 (2006)
17
Execution - 2007
- 9
7
- 5
weeks
- Yes
Yes
4
-
-
2008
11
9
4 weeks
All
Agency
MF/ DGB, and other concerned ministries
MF/CARFIP
Execution: MF/ DGB, MFiDNTCP, MFiDNCF
Monitoring: MF/ DGB
DGMP, CNCS.
DGMP, CNCS.
New entities resulting from the procurement reforms
Progress (Sept 2008)
5 sectoral MTEF finalized md/or put in place [education, health, transport, soc.,dev’t, employment, and state reforms); 7 in process o f validation (environment, agriculture, livestock, industry, commerce, food security, and water & sanitation), and 3 more are programmed. PAGAM actualized with PEFA results. An action plan for 2005-08 and an external evaluation o f PAGAM results will be carried out as asked by PTF for developing
11 DAFand4DRB,3 regions and the District o f Bamako are connected to the electronic version o f PRED4, but implementation reports are not yet regularly produced.
PAGAM-11.
A new procurement code was prepared and adopted by the Government in April 2008 and signed in August 2008.
Draft texts adopted by the Gov’t in April 2008 and by the National Assembly in August 2008.
After the implementation o f the new Procurement Code, the threshold set at 20 million CFA.
Th is activity i s under implementation, not all structures are yet in place. The number o f public procurement based on public offering was 67.47% at the end o f 2007, compared to 54.3% in 2006.
Improve performance o f banks
Reduce the deficits of the social security institutions
Increase exports
lmprove the investment Aimate
The commercial banks implement the measures for analysis, approval, monitoring, and recovery o f loans, recommended in the consultant’s report
Adopt a strategy for each concerned bank to clean-up the bad debts in bank portfolios
The micro-finance supervision unit located in the Ministry of Finance i s adequately funded in the 2008 budget Continue timely implementation of the restructuring action plan
Continue implementation of the restructuring action plan.
Launch the cal l for bids for BIM’s privatization Submit the new CRM law to Parliament, authorizing the parameters reforms, and adopt the decree to implement this reform
Adopt (by GOM) the new texts pertaining to INPS Formulate and adopt quality standards for export industries, notably agricultural products
i) Operationalize the one- stop window (guichet unique) for investors, and taking into account the new
Ratio of non- performing loans in bank portfolios
Rate of bank margins
The micro finance sector i s well integrated in the financial sector reform program
GOM’s share in BHM
Gross share of non-performing loans in the portfolio
Operating ratios GOM’s share
Ratio o f non- performing loans CRM deficit
INPS (old age, disability and health insurance plan) deficit Value o f exports other than gold and cotton
Number of procedures to create an enterprise
29% (as o f 30
June 2005)
9.1%
December 2005)
(3 1
80% (end 2005)
75.8% (end 2005)
11.7% (end 2005)
(end 2005)
35% (2005)
CFAF 18 bn
(2006)
CFAF 6.3 bn
(2005)
CFAF 43 1 billion (2005)
6 1.5%
13% (2006)
75.8%
95%
CFAF 21 bn
CFAF 7.2 bn
+12%
9
20% (April 2008)
8%
80%
5 0%
80%
20%
20%
CFAF 20 bn
CFAF 6.3 bn
+13%
7
Execution: MF, PDSF.
Monitoring: MF/ DNTCP’s verification report
MFIDNTCP MF and PDSF
MDSSPA
Ministry of Artisanal ActivitiedCNP A; Ministry o f CulturdThe National Museum; MICIDNI, Agriculture ministry/CP S, MPATIDNSI, Chamber of Commerce MPATIDNSI; MEFIDNI; MEFDNTCP;
A database for monitoring o f procurement of public goods and a website created.
On-going
On-going
Done
Good progress has been made to resolve BHM dire financial situation, a restructuring plan submitted to Banking Commission
B IM successfully privatized.
A new CRM law prepared not yet submitted to the National Assembly.
Measures for operationalizing the one-stop window are being implemented. The window
18
Time taken to create an enterprise
Cost o f creating an enterprise (YO of GDP per capita). Taxes and fees other than registration tax
42 days (2006)
202% (2006) 20.7% (2006)
INPS ANPE MPIPME
Improve enterprise taxation (to align it with WAEMU best practice)
Enhance the competitiveness and flexibility o f formal labor contracts Strengthen the road maintenance financial and institutional framework
Improve the competitiveness and quality o f road transporters
Reduce truck transit times
law for the single identification process
In the context of a new general tax code, reduce the property registration fees for property acquired by firms for operational purposes Conduct a study o f corporate taxation in Mali
Conduct a study on labor market competitiveness
Implement measures to increase the share of revenues from road user fees to 40% of the 2008 road maintenance budget
Conduct a study on taxation and special levies on (road) transport operators, with emphasis on reducing tax burden, number o f taxes, and on the measures encouraging small transport operators to remain in the informal sector Conduct a study toward creating a competitive freight exchange (based on pre- selection and call for bids) to enable shippers their own selection of transporter to use (July 2007); and implement the pilot freight exchange operation covering a selection of products identified by shippers (end 2007) Implement the recommendations of the 2006 World Customs Organization s external audit
Number o f payments
Time taken to effectuate payments
Taxes Number ofjobs in the formal sector.
Share of user fees in the Road Authority’s budget
Share of the road network that i s maintained
Tax burden on transport operators
Number of contracts established through the freight exchange
Share of customs declarations cleared, by risk category
Average duration of customs clearance for
60 (2006)
270 hours
50% 35,000
15% (2006)
65%
50% for formal sector
companies 18% for informal sector (2004)
0 (2006)
Green circuit:
2% (2006) Red circuit: 95% (2006)
4.5 days
35,000 35,500 -l 40% 40% t 66% 67%
4days I 3 days
MFDNI
MF, Ministry of Gov’t Lands, MPIPME
Ministry of Work Ministry of Employment, MDS, MPIPME
Execution: MF; Monitorinq: The Road Authority (RA) \ ,
Execution: AGEROUTE, RA Monitoring: SDR MFDGI; METDNTTMF
Execution: METDNTTMF, CMC
Monitoring: CMC, CMTR
Execution: MF/Customs
Monitoring: MFiCustoms’ monthly statistics; and
i s expected to start knctioning in Dec 2008.
Done
First draft of the study available.
The number of payments: 58 (08).
Time for paying taxes 270 hours (08) Relevance o f the study to be discussed during the upcomin MTR o f the Sources of Grow Project
Delays in the share of revenues from road user fees to be resolved by early Dec 2008.
The study i s on-going
TORS are finalized, Ministry o f Finance to allocate funds for the study
Indicators met
19
Improve governance on Mali’s transport corridors
Improve the management and viability o f the cotton sector and CMDT
Improve the management and performance o f the ON within a framework for
Strengthen the mandate and means of the National Facilitation Committee; and make effective the recommendations of its inspection reports (September 2007)
Organize monthly meetings of the Treasury Monitoring Committee for the CMDT
Make available the CMDT accounting and financial evaluation (June 2007)
Timely implementation o f the 2005 cotton sector reform timetable
Publish the document describing the irrigation financing mechanism scheme in the Office du Niger Zone ( including the draft text for the creation o f the department charged with managing irrigation financing)
Adopt the private irrigation financing mechanism scheme in the Office du Niger zone (including the draft text for the creation o f the department charged with managing irrigation financing) Adopt (by GOM) the Master Development plan of the ON zone (March 2007)
shipments
Average duration of immobilization of vehicles in customs Duration o f truck round trip travel between Dakar and Bamako
Duration of one way trip between Dakar and Bamako
Transfers to the CMDT
CMDT’s cash deficit
Cotton producers’ share in the cotton companies
Tne process of privatizing the CMDT i s well driven.
Number o f hectares developed with private funds
Number o f professional cultivators (larger than 30 ha)
Cultivation intensity rate
8 days
31 days
I days
CFAF 28 billion (2005)
CFAF 43 bn
(2005) 0 Yo
(2006)
0 (2005)
0
1.2
5 days
29 days
6 days
0
834
14
1.25
4 days
- 27
days
5 days
0
- 1.35
Internal (Customs) and external (WCO) audits
Execution: CMC, MFICustoms, METIDNTTMF, Police, Gendarmerie, MSIPC, MS, Ministries for Forest and Water Resources, Nat’l Facilitation Committee MF, MRSC
MRSC
ON
ON
:ndicators met
f i e MF has established the mechanism and started to ipply for the 08/09 :ampaign.
The four zones are identified. The law authorizing the privatization o f the CMDT approved by the National Assembly. An action plan for preparing transition toward the privatization i s underway to be concluded by Dec 2008. The financing mechanism scheme for irrigation has been created.
Adoption by the Cabinet o f the MD plan for the reforms and an action plan for development with ON i s programmed for the end of 2008.
20
development of the ON zone
MS/ ANEH Report o f the results obtained with the hospital performance contracts
MS/ SNIS
MSDAF
MDSDAF
MS, MDS
Improve supply and quality of health services
implementation o f recommendations of the organizational audit of ON i s underway. Contracts with 11 hospitals have been signed. Performance needs to be evaluated by the end of 2008.
In 2007, only 64,000 couples-years o f contraceptive protection were delivered.
The budget for 2008 was adopted based on the MTEF data of the two ministries. Exogenous shocks resulted in 11.5% reduction o f recurrent costs for social
Increase the use o f the health services (public and private)
MWSNIS
Improve access to sustainable and affordable water services
The rate o f assisted childbirths achieved 58% in
Adopt (by the ON Board) the d o n plan of the ON xganizational audit (April 2007)
[mplement the hospital performance contracts
Make the FP services operational in half of the CSCOM and CSREF
MDSiSISO
National Directorate of
Adopt a budget for the 2008 program based on the MTEFs of the two ministries, including a provisional health map taking into account the private sector in the statistics o f existing health centers
1.9% was achieved in 2007.
T h e MTEF 2008/10 ofthe DNH i s being revised to be validated in Sept 2008.
Finalize the standard contracts for engaging NGOs and private sector entities
Finalize the plan to extend community health insurance programs (mutuelles)
Validate the 2008-2010 DNH and DNACPN MTEF based on sector objectives (PROSEA) Include in the DNH text updating exercise the planning / monitoring mission o f the Water Sector Program Finalize the new water points maintenance strategy, including the tools for the development of publidprivate partnership (PPP) for improving the management o f piped water systems
Irrigation maintenance ratio
Number of contracts signed with hospitals
Number o f couples-years of contraceptive protection
Current resources allocated to health and social development as a share of the Government current expenditure
Transfers to sub- national central Government units, as a share o f current expenses o f the MS and MDS Rate of assisted childbirths, including by trained traditional midwives
Share o f population covered by community health insurance programs Share of rural population with access to potable water point
Share of the potable water delivery systems that i s functional
Number of piped water systems managed under PPP
50% (2005)
0 (2006)
Data :ollected from 2007
MS: 10.1 8% (2005)
MDS: 5% (2005)
27% (2005)
51%
1.4% (2006)
67,4% (DNH- 2006)
70% (2005)
2 (2005)
60%
2
96,050
10.69 %
6.01%
>= 30%
55%
1.9%
68%
72%
5
70%
7
112,05 8
10.73 YO
6.08%
>= 35%
57%
2.1%
69%
75%
15
ON I The action olan for the
sectors
2007.
21
Annex 3: IMF Executive Board Completes First Review under PRGF Arrangement for Mali and Approves US$7.5 Million Disbursement
Press Release No. 08/3 17 December 11,2008
The Executive Board o f the International Monetary Fund (IMF) has completed the f i rst review o f Mali's performance under a program supported by a three-year Poverty Reduction and Growth Facilitv (PRGF) arrangement. The completion o f the review allows for the disbursement o f SDR 5 mil l ion (about US$7.5 million), which would bring total disbursements under the arrangement to SDR 17.99 mil l ion (about US$26.8 million).
The Executive Board also approved the authorities' request for waivers o f nonobservance o f two structural performance criteria concerning taxation o f o i l products and the call for tenders for the sale o f the state telecommunications company. The PRGF arrangement with Mal i was approved on May 28,2008 for an amount o f SDR 27.99 mill ion (about US$41.7 million).
Following the Executive Board's discussion, Mr. Muri lo Portugal, Deputy Managing Director and Acting Chair, said: "Economic developments in Ma l i in the f i rst half o f 2008 were dominated by an inflationary surge, now abating, from rising food and fuel prices. Against this difficult backdrop, the Malian authorities are to be commended for implementing sound macroeconomic policies and structural reforms. With the likelihood o f an increasingly difficult international environment in the coming period, i t will be especially important that Ma l i be able to respond to shocks. Continued reliance on grants, highly concessional financing, and privatization receipts limits the risk o f debt distress. A continuing challenge will be to design carefully-targeted schemes to protect the most vulnerable and difficult-to-reach population groups from external shocks.
With elevated downside risks, added caution and flexibility may be needed in fiscal policy implementation. Wh i le the fiscal program has been adjusted to make room for additional growth- enhancing public investment in agriculture and regional infrastructure, fiscal consolidation will continue to be pursued. This will be achieved through increasing government revenue through an improvement in tax administration and policy and a strengthening o f public expenditure management.
The international financial turmoil and the risk o f a global recession pose a substantial challenge to maintaining Mali's macroeconomic stability and growth over the medium term, underlining the need for the authorities to pursue their structural reform agenda. In particular, the government should continue to disengage from commercial activities, including in the cotton, banking, and telecommunications sectors, thereby reducing the fiscal burden o f money-losing state enterprises in those sectors. In this context, the Fund welcomes the authorities' renewed resolve to restructure the housing bank, strengthen the financial operations and expansion prospects o f the cotton ginning and energy companies, and complete the privatization o f the national telecommunications provider,'' Mr. Portugal said.
22
Map Section
HomboriHomboriTTondoondo
(1,155 m)(1,155 m)
SS aa hh aa rr aa DD ee ss ee rr tt
M O P T IM O P T I
SS ÉÉ G O UG O U
S I K A S S O S I K A S S O
T O M B O U C T O UT O M B O U C T O U
K I D A LK I D A L
G A OG A O
K AK AY E SY E S
KK
OOUU
LL IIKK
OORR
OO
BBaaoouulléé
BBaaffiinngg
NNiiggeerr
NNiiggeerr
BBaa nnii
LacLacDDéébobo
Lac NiangayLac Niangay
VVaalllléé
eedduu
TTiillee
mmssii
VVaalllléé
eeddee
LL’’AAzzaa
oouuaakk
KoulikoroKoulikoro
SikassoSikasso
SSéégougou
MoptiMopti
GaoGao
KayesKayes
TTombouctouombouctou(T(Timbuktu)imbuktu)
KidalKidal
BAMAKOBAMAKO
BougouniBougouni
SanSan
NionoNiono
NampalaNampala
KolokaniKolokani
NioroNiorodu Saheldu Sahel
KitaKita
NaraNara
KeniebaKenieba
KoutialaKoutiala
BandiagaraBandiagara
NiafounkeNiafounke
AraouaneAraouane
DouentzaDouentza
GourGourmamaRharousRharous
AnsongoAnsongo
MenakaMenaka
BouremBourem
TTessalitessalit
TTaoudenniaoudenni
M A U R I TM A U R I T A N I A
A L G E R I A
B U R K I N AF A S O
N I G E R
G H A N A
B E N I N
TO
GO
G U I N E A
S I E R R AL E O N EL E O N E
To o El MreEl Mreîti
To o ChenachaneChenachane
To o Poste MauricePoste Maurice
CorCortiertier
To o AbalessaAbalessa
To o AbalaAbala
To o OuahigouyaOuahigouya
To o NounaNouna
To o BoboBobo
DioulassoDioulasso
To o KorhogoKorhogo
To o KankanKankan
To o SiguiriSiguiri
To o Kédougoudougou
To o GoudirGoudiry
To o KifaKifa
To o Ayunyun
el el ’AtrousAtrousTo No Némama
To Niameyo Niamey
To o El MreEl Mreîti
C Ô T E D ’ I V O I R EI V O I R E
M O P T I
S É G O U
S I K A S S O
T O M B O U C T O U
K I D A L
G A O
K AY E S
K
OU
L IK
OR
O
Bougouni
San
Niono
Nampala
Kolokani
Niorodu Sahel
Kita
Nara
Kenieba
Koutiala
Bandiagara
Niafounke
Araouane
Douentza
GourmaRharous
Ansongo
Menaka
Bourem
Tessalit
Taoudenni
Koulikoro
Sikasso
Ségou
Mopti
Gao
Kayes
Tombouctou(Timbuktu)
Kidal
BAMAKO
M A U R I T A N I A
A L G E R I A
B U R K I N AF A S O
N I G E R
G H A N A
B E N I N
TO
GO
C Ô T E D ’ I V O I R E
G U I N E A
S I E R R AL E O N E
Baoulé
Bafing
Niger
Niger
Ba ni
LacDébo
Lac Niangay
Vallé
edu
Tile
msi
Vallé
ede
L’Aza
ouak
To El Mreîti
To Chenachane
To Poste Maurice
Cortier
To Abalessa
To Abala
To Ouahigouya
To Nouna
To Bobo
Dioulasso
To Korhogo
To Kankan
To Siguiri
To Kédougou
To Goudiry
To Kifa
To Ayun
el ’AtrousTo Néma
To Niamey
To El Mreîti
S a h a r a D e s e r t
HomboriTondo
(1,155 m)
5°W 0°
10°W 5°W 0°
10°N
15°N
20°N
10°N
15°N
20°N
25°N
MALI
IBRD 33443
NOVEMBER 2004
MALISELECTED CITIES AND TOWNS
PROVINCE CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
PROVINCE BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endorsemen t or a c c e p t a n c e o f s u c h boundaries.
