- Mali’s economy has been relatively resilient despite facing multiple shocks since 2020 including coups d’état, sanctions, and a cost-of-living crisis following the war in Ukraine. However, Mali’s population is suffering from high incidence of food insecurity and the country faces acute domestic security challenges.
- The lack of external budget support and tighter financial conditions are limiting Mali’s financing options amid continued spending pressures, especially security expenses and a high wage bill.
- Reducing the fiscal deficit and a faster convergence to the West African Economic and Monetary Union’s 3-percent fiscal deficit ceiling would help ensure debt sustainability and ease debt financing.
Washington, DC: An International Monetary Fund (IMF) team, led by Ms. Wenjie Chen, conducted discussions virtually on the 2023 Article IV consultation with Mali from March 6 to March 17, 2023. The mission held constructive discussions with a broad range of counterparts including the government and private sector to exchange views on economic prospects and risks, progress on reform, challenges, and policies.
At the end of the visit, Ms. Chen issued the following statement:
“Mali’s economy has been hit by multiple shocks since 2020. The economy has proved relatively resilient, however, with economic growth above 3 percent in 2021 and at 3.7 percent in 2022. The acute security challenges facing the country are ongoing, with a direct impact on food insecurity.
“The government’s fiscal deficit—at just under 5 percent of GDP in 2022—reflects a rapid increase in security spending, public wages, and the interest bill. Together, these consume close to 80 percent of fiscal revenues and risk crowding out growth-friendly spending including those on the social safety net and investment. The absence of external budget support, combined with tighter financing conditions due to global monetary policy tightening, has caused the cost of funding to increase while the sources of funding have dwindled.
“The near-term outlook is positive but subject to substantial downside risks. Real GDP growth is projected to rebound to over 5 percent in 2023 and 2024 thanks to strong agricultural and gold output. That forecast is predicated on elections taking place in 2024, which is assumed to prompt a resumption of external budget support and spur foreign investments. However, risks are titled to the downside and include a worsening security situation, potential election delays, volatile international commodity prices, tighter global financial conditions, and climate risks.
“Meanwhile, fiscal and external buffers have fallen, leaving Mali more vulnerable to a further deterioration in the financing environment. There has been a tightening of the Central Bank of West African State’s (BCEAO) bank refinancing conditions and low subscription rates for Mali’s government regional debt issuances in late 2022 and the early months of 2023, for example.
“Thus, reducing the fiscal deficit and converging towards the 3-percent fiscal deficit ceiling of the West African Economic and Monetary Union (WAEMU) is becoming more urgent. Improving domestic revenue mobilization is an important objective. Some key short-term measures would include the elimination of various tax exemptions and expansion of digital taxation. On expenditures, limiting further increases in the public sector wage bill will be the most important step. Other measures include phasing out untargeted subsidies and transfers while reprioritizing social transfers to target the most vulnerable households. The efficiency of public spending could also be improved through stronger cash management and commitment controls.
“To bolster medium-term growth prospects, strengthening governance and stepping up the fight against corruption will be essential. Crucial measures include a strengthening of the mandates of anti-corruption investigations by judicial and prosecution bodies and improved transparency in public procurement and the mining industry.
“Policies to address climate change will also be important, as well as reforms to the education and health sectors such as creating opportunities for vocational training, improving women’s labor market participation and achieving greater gender equity.
“The mission thanks the authorities and other counterparts for their close collaboration and productive discussions.”
The team met with the Minister of Finance Mr. Alousséni Sanou, the Acting Director of the BCEAO in Bamako Mr. Barema Bocoum, Directors and staff of the main ministries and government agencies, development partners, and the private sector.