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AFRICAN DEVELOPMENT BANK GROUP
MALI
ECONOMIC GOVERNANCE REFORM SUPPORT PROGRAMME PHASE I (PARGE - I)
APPRAISAL REPORT
OSGE DEPARTMENT October 2015
TABLE OF CONTENTS
ACRONYMS AND ABBREVIATIONS ................................................................................................................. i
GRANT INFORMATION SHEET ......................................................................................................................... ii
PROGRAMME SUMMARY ................................................................................................................................ iii
I. INTRODUCTION: THE PROPOSAL ........................................................................................................... 1
II. COUNTRY CONTEXT .................................................................................................................................. 1
2.1. Political Situation and Governance Context ........................................................................................... 1
2.2. Recent Economic Developments, Macroeconomic and Fiscal Analysis ................................................ 2
2.3. Economic Competitiveness .................................................................................................................... 4 2.4. Public Finance Management .................................................................................................................. 5 2.5. Inclusive Growth, Poverty Situation and Social Context ....................................................................... 5
III. GOVERNMENT'S DEVELOPMENT AGENDA .......................................................................................... 6 3.1. Government's Overall Development Strategy and Medium-Term Reform Priorities ............................ 6 3.2. Weaknessess and Challenges affecting Implementation of the National Development ......................... 7 Agenda
3.3. Consultation and Participatory Process .................................................................................................. 8
IV. BANK SUPPORT FOR THE GOVERNMENT'S STRATEGY .................................................................... 8 4.1 Linkage with the Bank's Strategy ........................................................................................................... 8 4.2. Compliance with Eligibility Criteria ...................................................................................................... 8 4.3. Collaboration and Coordination with Other Partners ............................................................................. 9 4.4. Linkage with Other Bank Operations ..................................................................................................... 9 4.5. Analytical Underpinnings of this Operation ......................................................................................... 11
V. THE PROPOSED PROGRAMME ............................................................................................................... 11 5.1. Programme Goal and Objective ........................................................................................................... 11 5.2. Programme Components ...................................................................................................................... 12 5.3. Policy Dialgoue .................................................................................................................................... 17 5.4. Grant Conditions .................................................................................................................................. 17 5.5. Good Practice Principles for the Application of Conditionality ........................................................... 18 5.6. Financing Requirements and Arrangements ........................................................................................ 18 5.7. Application of Bank Group's Policy on Non-Concessional Debt Accumulation ................................. 19
VI. IMPLEMENTATION, MONITORING AND EVALUATION ................................................................... 19 6.1. Programme Beneficiaries ..................................................................................................................... 19 6.2. Impact on Gender Issues, Poor People and Vulnerable Groups ........................................................... 19 6.3. Impact on the Environment and Climate Change ................................................................................. 19 6.4. Implementation, Monitoring and Evaluation ....................................................................................... 19 6.5. Financial Management and Disbursement ........................................................................................... 20
VII. LEGAL DOCUMENT AND AUTHORITY ................................................................................................ 21 7.1. Legal Documentation ........................................................................................................................... 21 7.2. Conditions for Bank Intervention ......................................................................................................... 21 7.3. Compliance with Bank Group Policies ................................................................................................ 21
VIII. RISK MANAGEMENT ................................................................................................................................ 21
IX. RECOMMENDATION ................................................................................................................................ 21
Annex 1 : Letter of Government Economic Policy I
Annex 2 : Matrix of PARGE Reforms in Mali VII
Annex 3 : Results Achieved under Previous Budget Support Operations X
Annex 4 : Main Fragility Assessment Results XII
Annex 5 : Matrix of Factors Associated with Fragility XVIII
Annex 6 : Note on Relations with IMF XX
LIST OF TABLES
Table 1 Key Macroeconomic Indicators, 2013 – 2018
Table 2 External Debt Sustainability Indicators, 2014 – 2034 (in %)
Table 3 Linkages between 2012-2017 GPRSP, CSP and PARGE
Table 4 Lessons Learned from Previous Bank Operations in the Country
Table 5 PARGE Prior Actions and Triggers
Table 6 Financing Requirements
LIST OF FIGURES AND BOXES
Figure 1 Real GDP Growth and Components (annual change in %)
Figure 2 Incidence of Poverty in Mali, 2001-2010 (in %)
CURRENCY EQUIVALENTS June 2015
Currency = CFA Franc (XOF) UA 1 = XOF 824.50 EUR 1 = XOF 655.96 USD 1 = XOF 586.25
FISCAL YEAR 1 January - 31 December
WEIGHTS AND MEASURES
1 tonne = 2204 pounds (lbs) 1 kilogramme (kg) = 2.200 lbs 1 metre (m) = 3.28 feet (ft) 1 millimetre (mm) = 0.03937 inches (") 1 kilometre (km) = 0.62 miles 1 hectare (ha) = 2.471 acres
i
ACRONYMS AND ABBREVIATIONS
Acronym Meaning
ADF African Development Fund
AFD French Development Agency
AfDB African Development Bank
API Investment Promotion Agency of Mali
ARMDS Public Procurement and Public Services Delegation Regulatory Authority
BCEAO Central Bank of West African States
Bn Billion
CFRA Country Fiduciary Risk Assessment
CGA Approved Management Centre
CM Council of Ministers
CPI Corruption Perceptions Index
CPIA Country Policy and Institutional Assessment
CSP Country Strategy Paper
CTRCA Business Framework Reform Technical Unit
DGDP Directorate-General of Public Debt
DNCF National Financial Control Department
DSA Debt Sustainability Analysis
ECF Extended Credit Facility
EDM Electricity Corporation of Mali
EIG Economic Interest Group
EU European Union
FDI Foreign Direct Investment
FL Finance Law
GAP Governance Strategic Framework and Action Plan
GDP Gross Domestic Product
GoM Government of Mali
GPRSP Growth and Poverty Reduction Strategy Paper
HDI Human Development Index
ICP Industrial and Commercial Profits
IMF International Monetary Fund
ITS Tax on Wages and Salaries
LA Local Authority
MDG Millennium Development Goal
MEF Ministry of the Economy and Finance
MLFO Bank's Field Office in Mali
MUA Million Units of Account
PAB Public Administrative Body
PADDER Decentralization and Regional Economic Development Support Project
PAG Government Action Programme
PAGAM Government Action Plan to Improve and Modernize Public Finance Management
PAGE Economic Governance Support Project
PASCRP Growth and Poverty Reduction Strategy Support Project
PAUGRE Emergency Governance and Economic Recovery Support Programme
PDARN Accelerated Development Programme for the Northern Regions
PEFA Public Expenditure and Financial Accountability
PFM Public Finance Management
PUARE Emergency Economic Recovery Support Programme
PV Present Value
RM Republic of Mali
SFL Supplementary Finance Law
SME Small and Medium-Sized Enterprise
SNCI National Internal Control Strategy
TA Technical Annex
TFP Technical and Financial Partner
TSF Transitional Support Fund
UA Unit of Account
USD United States Dollar
WAEMU West African Economic and Monetary Union
WB World Bank
ii
GRANT INFORMATION SHEET
Client Information
BENEFICIARY : Republic of Mali
SECTOR : Economic and Financial Governance
EXECUTING AGENCY : Ministry of the Economy and Finance (MEF)
AMOUNT : UA 15 million
2015 Financing Plan for 2015-2016 Budget Support
Source Total Amount for
2015 - 2016 Amount (2015)
Amount (2016) -
Commitments
TSF (formerly FSF) Pillar
I Grant UA 30 million UA 15 million UA 15 million
European Union (Grant) EUR 135 million EUR 40 million EUR 95 million
World Bank (Grant) USD 40 million USD 40 million To be determined
Timeframe – Main Milestones (expected)
Activities Dates
Appraisal June 2015
Negotiations September 2015
Approval November 2015
Effectiveness December 2015
Disbursement, Phase 1 December 2015
Supervision February 2016
PARGE II Appraisal July 2016
Disbursement, Phase II September 2016
Completion Report December 2016
iii
PROGRAMME SUMMARY
Programme
Overview
Programme Name: Economic Governance Reform Support Programme, Phase I
(PARGE-I)
General Schedule: 2015 – 2016.
Financing: UA 15 million
Operational Instrument: General Budget Support
Sector: Economic Governance
Programme
Outcomes
PARGE-I, the first phase of two programme-based budget support operations
aims to consolidate the achievements of previous budget support operations and
contribute to sustained economic growth by enhancing the efficiency of public
expenditure and promoting private sector development. The first component,
which focuses on the efficiency of public expenditure, will, through major
structural reforms: (i) improve fiscal decentralization; (ii) enhance public
procurement management; and (iii) strengthen the role and efficiency of internal
control. The main objective of the second component is to support private sector
development through: (i) support for the promotion of investments and
development of private enterprises; and (ii) improvement of the business
environment. Achievement of these operational objectives will: (i) improve the
PEFA PI 23 indicator “Competition, Value for Money, and Controls in
Procurement” from a C score in 2010 to B in 2016; (ii) raise the fiscal
deconcentration rate in favour of the local authorities (% of expenditure) from
10.3% in 2014 to 14% in 2016, and increase the level of credit to the private sector
from 24.4% of GDP in 2014 to 26% and 27% of GDP in 2015 and 2016
respectively.
Alignment with
Bank's
Priorities
PARGE-I is consistent with two (strengthening of governance and private sector
development) of the five main operational priorities of the Bank's 2013-2022
Ten-Year Long-Term Strategy (LTS). It is fully aligned on Pillar 1,
“Enhancement of Governance for Inclusive Growth” of the 2015-2019 Country
Strategy Paper (CSP), as well as the Bank's 2013-2017 Private Sector
Development Policy, in particular the first long-term objective relating to the
improvement of the investment and business climate. The reforms supported by
PARGE-I are in line with Pillars 1 “Public Sector Management and Economic
Management” and 3 “Investment and Business Climate” of the 2014-2018
Governance Action Plan (GAP.II). PARGE-I is consistent with the Bank's
Strategy for Addressing Fragility and Building Resilience in Africa, particularly
with its first area of focus, “Strengthening of State capacity and support for
efficient institutions”, aimed at supporting countries in public finance
management and private sector development support to facilitate job creation.
Needs
Assessment and
Rationale
In 2014, economic activity was boosted by the return to normal of cereal
production and robust manufacturing sector growth. However, the Malian
Authorities must address the following three challenges to maintain this
momentum: (i) sustainable improvement of the security situation, a key factor
for development; (ii) continuing enhancement of good governance in public
management by improving public expenditure quality, and (iii) achievement of
strong, private sector-driven, economic growth in spite of constraints of the
economy's structural fragility, its largely informal nature and low level of public
investment.
iv
Harmonization
The design of PARGE-I drew enormously on close coordination with
development partners in Mali to improve the harmonization of their
interventions. The PARGE reforms are therefore mainly in synergy with those
supported by the respective programmes of the World Bank (WB), and
European Union (EU). Furthermore, because of the presence of a Mali Country
Office (MLFO), the Bank has an entry point which enables it to considerably
strengthen its role in dialogue with the Government and the other TFPs. There
are ongoing discussions among the TFPs regarding the preparation of a common
matrix of reforms.
Bank's Added
Value
The Bank's added value lies in its experience in providing budget support to
countries in transition, which allows it to promote dialogue on major structural
reforms, particularly public finance management and creation of conditions that
will foster the emergence of a buoyant private sector that can sustainably support
economic growth. The experience is enhanced by that gained from the
implementation of institutional support projects that back budget support
operations and complement support provided by other TFPs.
Contribution to
Gender
Equality and
Women's
Empowerment
The strengthening of internal control for greater public expenditure effectiveness
and efficiency could help to improve government action in favour of social
inclusion and equity. This should primarily benefit women and children who are
the vulnerable segments of the population. Private sector development support
through investment promotion will facilitate women's access to financing in
order to develop activities that will enhance their empowerment and reduce
gender inequalities.
Policy Dialogue
and Related
Technical
Assistance
During PARGE I and II implementation, dialogue with the Government will
focus on the following areas: (i) improvement of fiscal decentralization; (ii)
strengthening of public procurement management; and (iii) enhancement of the
role and effectiveness of internal control. With regard to the second component,
private sector development support will chiefly target: (i) support for investment
promotion and development of private enterprises; and (ii) improvement of the
business climate. Dialogue will be sustained by analytical work carried out
under PAGE, the Bank's ongoing institutional support project.
v
Results-Based Logical Framework
Country and Programme Name: Mali - Economic Governance Reform Support Programme, Phase 1 (PARGE-I)
Programme Goal: Contribute to sustained economic growth by enhancing economic governance and promoting private sector
development
RESULTS CHAIN
PERFORMANCE INDICATORS
MEANS OF
VERIFICATION
RISKS
/MITIGATION
MEASURES Indicators (including CSIs)
Baseline
Situation Target
IMP
AC
T Acceleration of
economic growth to
ensure gradual
emergence from
poverty is achieved
Number of direct and indirect
jobs created
28 000 in
2010 36 000 in 2017
PEFA 2015, MEF,
IMF,
Real GDP growth (%) 7.2% in
2014 5.6% in 2017
OU
TC
OM
ES
Outcome 1 : Public
expenditure efficiency
is improved
PEFA PI-23 on “competition,
value for money and controls in
procurement”
Score of C
in 2010
Score of B in
2016
Political and
Security Risk:
The security risk
is related to the
country's fragile
situation;
Mitigation
Measures: This
risk could be
mitigated by the
implementation
of the Algiers
Agreement
signed in June
2015.
Risk of limited
capacity to
implement
reforms:
Mitigation
Measures:
PAGE, the
ongoing
institutional
support project
will provide
significant
technical support
to the different
structures
responsible for
implementing the
PARGE reforms;
Fiduciary Risk:
In light of recent
fiscal
management
trends, the overall
fiduciary risk
remains
significant.
Rate of fiscal deconcentration in
favour of local authorities (% of
expenditure)
10.3% in
2014
14% of
expenditure in
2016
Outcome 2 : The
private sector
receives greater
support
Domestic credit to the private
sector (% of GDP)
24.4% in
2014 27% in 2016
OU
TP
UT
S
COMPONENT I – IMPROVEMENT OF PUBLIC EXPENDITURE EFFICIENCY
I.1 Improvement of
Fiscal
Decentralization
Number of planning contracts at
regional level. 0 in 2014
Two (2)
contracts for
two regions in
2015; three (3)
contracts for
three regions in
2016
MEF
Action plan for the transfer of
resources and powers
Non-
existent in
2015
An action plan
adopted for the
transfer of
resources and
powers adopted
by the
Government in
2016.
I.2 – Improvement of
public procurement
management
Revised Public Procurement
Code and related Decrees/
standard regional bidding
documents
2008
Public
Procureme
nt Code not
adapted in
2014
The 2008 Code
is revised in
compliance
with the
WAEMU
Directive and
adopted by the
CM in 2015 as
well as
WAEMU
standard
regional bidding
documents.
The
implementing
decrees for the
revised code are
adopted by the
CM in 2016
vi
Audit report on public contracts
awarded in 2015
2010
Report
An audit report
on public
procurement
contracts
awarded in
2015 is
available in
2016 and posted
on the MEF and
ARMDS
websites.
Mitigation
Measures: This
risk will be
mitigated by
strengthening
public finance
management.
I.3 Enhancement of
the role and
efficiency of internal
control
Number of risk maps at
Ministerial Department level. 4 in 2014
Six (6)
additional risk
maps are
prepared in
2015 and 2016.
Number of Ministries and
Public Administrative Bodies
(PAB) with financial control
delegations/number of activity
reports produced by these
delegations.
0 in 2014
All the
Ministries have
a delegation in
2015 / Four (04)
additional PABs
have a
delegation in
2015 and 2016 /
two (02)
activity reports
at DNCF level
for the first two
quarters of 2016
COMPONENT II. SUPPORT FOR PRIVATE SECTOR DEVELOPMENT
II.1 Support for
Investment
Promotion and
Private Enterprise
Development
Bill on minimum capital for
limited liability companies
Being
drafted in
2015
Bill adopted by
CM in 2015
MEF
Bill governing Public-Private
Partnerships
Being
drafted in
2015
A PPP Bill
adopted by CM
in 2016
Quarterly Private Sector
Development Programme
Ongoing in
2015
A quarterly
programme
adopted in 2016
II.2 – Improvement
of Business
Environment
2015-2017 strategic and
operational action plan for
business framework reform
Being
prepared in
2015
A strategic plan
is adopted by
the Joint
Committee in
2015 and is
operational in
2016.
Transposition of WAEMU
Directive on the creation of
credit bureaux.
Non-
existent
A Bill is
adopted by CM
for transposition
of the Directive
in 2015 / two
quarterly
reports by the
Office in 2016
National land and land tenure
policy / Percentage of
dematerialized Bamako and
Kati land titles
Being
prepared in
2015
A policy is
adopted in 2016
/ at least 60% of
land titles are
secure in 2016
ADB Financing: TSF = UA 15 million in 2015, ADF: UA 15 million in 2016; WB: USD 40 million; EU : EUR 40 million in 2015 and
EUR 95 million in 2016
1
I. INTRODUCTION: THE PROPOSAL
1.1 Management hereby submits the following proposal and recommendation for the award of a
UA 15 million grant from the Pillar I window of the Transition Support Facility (TSF) to the Republic
of Mali to finance the first phase of the Economic Governance Reform Support Programme (PARGE-
I). Mali fulfils the TSF eligibility requirements because of its fragile situation1. PARGE-I is the first phase of
two operations that make up a programme-based budget support covering the 2014 and 2015 fiscal years with
an estimated total budget of UA 30 million. PARGE-I presents the Programme's multi-year framework and
provides a list of reform measures considered as indicative triggers for the second phase (PARGE II). The
programme-based approach helps to improve aid predictability and facilitate alignment with the country’s
development policies, thus creating the conditions for gradual emergence from the situation of fragility.
PARGE-I is fully consistent with the Growth and Poverty Reduction Strategy Paper (2012- 2015 GPRSP)
and the 2014-2018 Government Action Programme. The programme design draws on good practice
principles for the application of conditionality as well as the TSF operational guidelines.
1.2 The programme is a continuation of the previous budget support operations, the results of
which have helped to improve the national public finance management system and private sector
development. The previous operations, in particular the Emergency Economic Recovery Support
Programme (PUARE) and the Emergency Governance and Economic Recovery Support Programme
(PAUGRE) approved in 2013 and 2014 respectively, have created conditions for inclusive and sustainable
growth that will gradually help the country to emerge from its situation of fragility (Annexes 4 and 5).
Despite the significant results achieved, Mali still faces a number of challenges in this post-conflict phase, in
particular: (i) sustainable improvement of the security situation, a key factor for development, which will
depend on the Malian Authorities' capacity to implement the commitments made under the Global Peace and
Reconciliation Agreement with the armed groups in the North; (ii) continuing improvement of public finance
management through efficient expenditure and its equitable distribution in the country's different regions and
priority sectors, as well as by enhancing public procurement transparency through greater compliance with
established procurement rules and procedures, and accelerating the results-based budgeting process in the
form of Programme-Budgets in compliance with WAEMU Directives; and (iii) the private sector's
contribution to the achievement of strong, sustainable growth in spite of the constraints of the economy's
structural fragility.
1.3 The PARGE intends to consolidate the achievements of previous operations by helping Mali to
address the above-mentioned challenges through major structural reforms aimed at improving public
expenditure efficiency and increasing private development support. PARGE-I therefore aims to support
the Government of Mali's (GoM) efforts through the following operational objectives: (i) improvement of
fiscal decentralization, (ii) enhancement of public procurement management transparency; (iii) strengthening
of internal control to ensure more efficient use of public resources; (iv) improvement of the business
environment; and (v) support for the development of private enterprises and promotion of strategic
investments.
II. COUNTRY CONTEXT
2.1. Political Situation and Governance Context
2.1.1. The political situation has stabilized with a return to constitutional order following the serious
crisis in 2012. The smooth conduct of the Presidential elections in July-August 2013 and legislative elections
in November-December 2013 brought an end to the political transition period and returned the country to
constitutional normalcy.
1 Mali's Fragility Assessment, in accordance with the TSF eligibility criteria, was carried out for the CSP (2015-2019).
2
The municipal and local elections, which were to be held before the end of 2013, have been postponed on
several occasions because of the security situation in the country's northern regions. The opposition now
enjoys a status with the appointment of a leader of the political opposition. However, this relatively stable
political situation is often disrupted by opposition criticism of the Government's (GoM) management, issues
of security in general and, in the North of the country in particular.
2.1.2. However, the country still faces a climate of insecurity in the northern regions and throughout
its territory with attacks on the Malian army's positions. The United Nations Integrated Multidimensional
Stabilization Mission in Mali is now deployed throughout the country. Its mission is to attempt to support the
priority objectives of security, stabilization and protection of civilians and to support national policy
dialogue, national reconciliation and the restoration of State authority in the country. Furthermore, in August
2014, the Serval force gave way to Operation Barkhane, which has a regional mandate targeting countries
exposed to the influence of terrorist groups (Niger, Burkina Faso, Mauritania and Chad). In order to reach an
agreement on long-term peace and security stability, the Government and some of the armed groups
(Platform Coalition of Patriotic Movements) signed a National Peace and Reconciliation Agreement in
Bamako on 15 May 2015. The Coordination of Azawad Movements, which had not previously adhered to the
Agreement, finally signed it on 20 June 2015.
2.1.3. As regards governance, the Authorities have embarked on an active strategy to restore the
pre-crisis achievements. Governance deteriorated sharply in the wake of the 2012 crisis, and since 2013, the
combat against corruption has been at the forefront of the Authorities' political discourse. In order to achieve
its objectives, 2014 was declared 'the anti-corruption year' and a Law was adopted in 2014 on the prevention,
suppression and punishment of illicit enrichment with a provision stipulating the mandatory annual
declaration of assets by the country's Highest Authorities. However, results in the combat against corruption
are not very perceptible in Mali. The phenomenon is complex with many malfunctions at government level,
and the judicial authority is not equal to the task. The perception of corruption remains high, even though the
country's ranking improved from 127th position in 2013 to 115th in 2014 with a score of 30 according to
Transparency International's Corruption Perceptions Index (CPI). Similarly, the 2014 Mo Ibrahim report on
African Governance indicates that Mali has declined over the past five years with a score of 49.5 out of 100
in 2014, and is ranked 28th
out of 52 countries. Moreover, the Country Policy and Institutional Assessment
(CPIA) rating for Mali has also deteriorated as result of the crisis. The CPIA score fell to 3.6 out of 5 in 2014
compared to 4.2 in 2011, while the governance score slipped to 3.9 out of 5 in 2014 compared to 4.1 in 2011.
2.2. Recent Economic Developments, Macroeconomic and Fiscal Analysis
Recent Developments
2.2.1. Mali's economy rebounded in 2014 following a recession in 2012-2013 in the wake of the recent
security and political crisis. In 2012, Mali posted zero growth in its
economic activity following the multidimensional crisis which had
affected the country, after recording an average growth rate of about
5.5% over the previous decade (2001-2011), considerably higher than
the WAEMU average (3.9% over the same period). Economic activity
began to recover towards the end of 2013, with a slight increase in
economic growth to 1.7% of GDP following the relative improvement
of the security situation and the resumption of donor aid. This growth
was consolidated in 2014, rising to 7.2% in real terms (Figure 1 and
Table 1), compared to a forecast of 5.8%. This rebound in growth in
2014 was due to an increase in agricultural output of almost 10.4%
(assisted by favorable rainfall) and the revival of activities in the
secondary sector where output rose to 9.2% mainly because of the manufacturing industries which grew by
22.9%.
Figure 1 Real GDP Growth and Components
(annual change in %)
Source : Malian Authorities, IMF Report
No. 15.151 of June 2015
2011 2012 2013 2014 2015 2016 2017 2018
Other TertiarySecondary PrimaryTotale
3
In 2013, inflation was negative (-0.6%) due to the impact of underutilization of the economy's capacity and a
drop in the prices of imported food products. It remained low in 2014 at 0.9% due to a good crop year and the
prudent monetary policy of the Central Bank of West African States (BCEAO). The current account deficit
(including grants) widened in 2014 to 7.3% of GDP compared to 3.4% of GDP in 2013, following a drop in
gold prices and a rise in imports with the start of economic recovery. This deficit was partly financed by net
capital inflows, mainly in the form of external aid and foreign direct investment, which all fell in 2014. The
combination of these impacts led to an overall increase in the balance of payments deficit in 2014 to 2.9% of
GDP (about CFAF 174 billion or USD 353 million).
2.2.2. In 2014, fiscal management faced
difficulties. The 2014 budget had been mainly
designed to support the rebound in economic
activity and implementation of the priorities of
the Government's Action Plan (2013-2018
PAG). However, part of the budget was used
for off-budget expenditure. This was for: (i) a
Presidential aircraft costing CFAF 19 billion
(USD 40 million or 0.3% of GDP) and a
supplies and equipment contract awarded by
the Ministry of Defense for CFAF 69 billion
(USD 138 million) with a Government
guarantee equivalent to CFAF 100 billion
(USD 200 million). In 2014, this weak public
finance management led the IMF to postpone
completion of the first review of the programme under the IMF's Extended Credit Facility (ECF) because
these expenditure items did not appear in the 2014 Finance Law. This resulted in the suspension of all TFP
budget support planned for 2014. In order to remedy the situation, the GoM implemented significant
measures through two Supplementary Finance Laws (SFL) in the same year (August and October 2014)2 in
order to remain within the WAEMU community commitments and those of the IMF's ECF. Fiscal revenue
only rose marginally in 2014 to 14.9% of GDP compared to 14.7% in 2013 mainly as a result of the poor
performance of customs revenue and delays in the disbursement of budget support following the off-budget
expenditure. This budget aid, originally planned for 2014, was finally disbursed in early 2015. Total
expenditure, which represented 23.8% of GDP in 2014, remained slightly above the 2013 level of 23.5%.
The total fiscal deficit (on a cash basis including grants) remained at 2.9% of GDP, its 2013 level.
2.2.3. In order to boost economic recovery, the Malian Authorities have decided to gradually clear
domestic arrears. The Government recruited an independent firm to audit the government's accumulated
arrears following the freezing on expenditure after the 2012 coup d'état and for all the previous years since
1995 (reform supported by PUARE and PAUGRE). This audit identified arrears of CFAF 172 billion (2.9%
of GDP), one third of which was accumulated in 2012 and another third in 2010 and 2011. The Government
paid CFAF 88 billion of these validated arrears comprising 30 billion in 2013 and 58 billion in 2014. It
included an appropriation of CFAF 15 billion in the 2015 Finance Law and a supplementary appropriation of
CFAF 12 billion in the 2015 SBA. The government requested an additional audit by the firm in order to
compare the information submitted by the government services with that gathered from government
suppliers. If necessary, it will make appropriations in the 2016 Finance Law to pay additional validated
arrears identified.
2.2.4 The Debt Sustainability Analysis (DSA) shows that the risk of debt distress in Mali remains
moderate3. The outstanding Government debt in Mali mainly comprises external debt, and represents 36.9%
of GDP (Table 1). The DSA shows that all the outstanding debt and debt service ratios are below the
2 The first 2014 SBL: (i) took into account the lower level of nominal gross tax revenue compared to 2013; (ii) regularized the purchase of the Presidential
aircraft while cutting other non-priority investments; and (iii) increased expenditure, in particular the payment of arrears owed to government suppliers and
transfers to the electricity company. The second 2014 SBL mainly focused on other off-budget expenditure, in particular military spending. 3 IMF Report No.14/337, Debt Sustainability Analysis of 14 November 2014.
Table 1 ‒ Key Macroeconomic Indicators, 2013-2018
2013 2014 2015 2016 2017 2018
Estimated Projected
(in percent of GDP, unless otherwise indicated)
Real GDP Growth 1.7 7.2 5.0 5.5 5.6 5.7
Inflation (average) -0.6 0.9 1.5 2.4 2.6 2.6
Revenue 17.3 17.6 19.1 19.7 20.2 20.7
Of which : tax revenue 14.7 14.9 16.7 17.2 17.7 18.2
Total Expenditure and Net Lending 23.5 23.8 26.8 25.4 26.0 26.4
Overall Balance (cash) -2.9 -2.9 -5.0 -3.0 -3.0 -3.0
Total Public Debt 32.5 36.9 36.7 37.1 37.3 37.5
Current Account Balance -3.4 -7.3 -5.5 -5.5 -5.6 -5.0
BCEAO Gross National Reserves (in
CFAF billion) 613 465 525 559 595 646
Overall Balance of Payments -1.6 -2.9 0.7 0.2 0.4 0.6
Source : Malian Authorities and IMF Country Report No.15/151 of June 2015
4
respective thresholds (Table 2) over the projected period of 20 years. However, debt sustainability is highly
sensitive to a drop in transfers and FDI, a hardening of financial terms and an export shock stemming from
the concentration of exports in gold (which concentrates 70% of exports and whose production will decline
over the medium term). The GoM has therefore undertaken to meet its external financing requirements
mainly by loans and grants with a minimum grant element of 35%. According to the latest IMF Review4, the
zero ceiling criterion for external arrears accumulation and for new non-concessional external borrowings has
been fulfilled. In order to maintain external debt sustainability, the Authorities must strive harder to increase
exports of other products and thereby offset the anticipated drop in gold exports.
Outlook
2.2.5 The prospects for Mali's
economy are promising because of the
gradual restoration of security and the
return of the technical and financial
partners. The projected real economic
growth rates for 2015 and 2016 are 5%
and 5.7% respectively. Inflation is
expected to be below the WAMEU
community standard of 3% over the
2015-2018 period, provided rainfall is
favourable (Table 1). The current
account deficit (including grants) is
expected to narrow to 5.5% of GDP in 2015 and 2016, due to the drop in oil prices and the expected increase
in imports. This deficit is expected to be fully financed by foreign direct investment in the gold and
telecommunications sector, as well as external aid in the form of loans. As regards the fiscal outlook, the
Government will continue to implement sustainable fiscal policies with an overall deficit (on a cash basis) of
5% of GDP and 3% in 2015 and 2016 respectively. A 2015 Supplementary Finance Law (2015 SFL) was
adopted by the GoM and tabled before the National Assembly concerning an increase in tax revenue
representing 0.5% of GDP (tax increases on oil products, telecommunications, financial transactions, alcohol
and tobacco) and an increase in expenditure equivalent to 0.4% of GDP in relation to the original Law.
Furthermore, the 2015 SFL authorizes very limited use of domestic financing, which should bolster private
sector cash flows and preserve the financial stability of the banking system. However, the main risk that
could jeopardize this positive outlook is the instability of the security situation in the northern regions.
2.3. Economic Competitiveness
2.3.1. Mali's economy is not very competitive due to the country's landlocked position and low
density in terms of modern infrastructure. The country is faced with problems of both internal and
external inaccessibility, and remains highly dependent on other countries for trade. The capital is at least
1,000 km. from the nearest port, and this raises transaction costs. The road network is poor, with an estimated
density of 4.6 km/100km² compared to 5.1 km/100km² in Côte d’Ivoire, while the other modes of transport
are also underdeveloped (dilapidated railway and river only navigable for part of the year). As regards
energy, Mali is faced with electricity supply problems (quantity and quality of supply) with an access rate of
32%. Furthermore, electricity is mainly supplied by the electricity company (EDM SA), which is
experiencing financial difficulties (it receives about 1% of GDP in government subsidies every year) and
cannot meet demand for electricity (average annual growth rate of 10%). The poor energy infrastructure is
about 40% responsible for the lack of competitiveness of Malian enterprises. In the African Competitiveness
Report 2015, Mali's global competitiveness index is 3.4 out of 7 reflecting the poor competitiveness of the
Malian economy.
4 See IMF Report No. 15/151 of June 2015.
Tableau 2: External Debt Sustainability Indicators, 2014 – 2034 (in %)
Threshold
Projections
2014 2015-
19 2024 2034
Ratio of PV of Debt to
GDP 40 18 19 20 20
Exports 150 69 87 123 148
Revenue 250 97 95 94 86
Ratio of Debt Service to
Exports 20 4 5 7 10
Revenue 20 6 6 6 6
Source : Debt Sustainability Analysis of 14 November 2014 in IMF Report
No.15/151
5
2.4. Public Finance Management
2.4.1. According to the most recent assessments of the public finance management systems, in
particular, the PEFA exercise in December 20105 and PEMFAR in March 2010, Mali's public finance
management system is satisfactory overall despite some shortcomings. The PEFA 2010 assessment
highlighted the progress made in terms of budget credibility, comprehensiveness and transparency, and the
preparation and execution of Finance Laws. The GoM, through the implementation of the Government
Action Plan to Modernize and Improve Public Finance Management (PAGAM-PFM) for the 2011-2015
period, has redoubled its efforts to improve its public finance management system. The GoM has adopted an
internal control approach based on the risk at Ministry level and the 2011 Budget Review Bill6 with a
compliance certificate issued by the Audit Bench of the Supreme Court. The GoM has transposed WAEMU
Directives No. 01/2009/CM/WAEMU of 27 March 2009 instituting the transparency code applicable to
public finance management within the WAEMU and Directive No. 06/2009/CM/WAEMU on Finance Laws
establishes new rules for the preparation, execution and scrutiny of national budgets. The Malian accounting
framework has also been updated in line with WAEMU standards by the transposition of the WAEMU
Directives on a Harmonized Public Financial Management System in 2014. Furthermore, because of
irregularities in the purchase of an aircraft and execution of a military contract, the GoM has taken steps to
strengthen the implementation of budgetary and procurement rules. To that end, it issued a decree
determining the list of expenditure items paid prior to payment authorization and their payment modalities in
July 2014 and a decree (Decree No. 2014-0764/PRM of 9 October 2014) establishing the implementation
modalities of Decree No. 08-485/P-RM of 11 August 2008 on procedures for the award, execution and
settlement of public contracts and public service delegations. Despite these significant achievements
supported by PAUGRE, the previous budget support operation, there is, however, room for improvement of
the efficiency of public expenditure management by strengthening fiscal decentralization, constantly
improving public procurement, and reinforcing internal controls. These major areas are the focus of this new
general budget support operation of the Bank in Mali.
2.5. Inclusive Growth, Poverty Situation and Social Context
2.5.1. Prior to the crisis, Mali was on track to achieve inclusive
growth. Despite significant volatility, real GDP growth per capita
averaged 3.2% over the 2001-2010 period. This led to a significant
reduction of the poverty rate by over 12 percentage points (Figure 2)
(from 55.6% in 2001 to 43.6% in 2010)7 on the one hand, and the
narrowing of inequalities (from 40.01 in 2001 to 33.02 in 2010) on the
other hand, over the same period. Poverty remains a mainly rural
phenomenon (64.8% in 2001 and 50.6% in 2010).
2.5.2. The 2012 crisis seriously impacted economic activity, thereby worsening the population's
living conditions. According to the findings of the Permanent Modular Household Survey8 (EMOP 2013),
the household electricity access rate was 24.6% in 2013 compared to 33.1% in 2011. In the case of water,
78.9% of households had access to drinking water in 2013 compared to 80.9% in 2011. With a Human
Development Index (HDI) of 0.407 in 2013 compared to 0.407 in 2012, Mali falls into the category of low
human development countries (HDI below 0.556 for 2013). This HDI score ranks Mali in the 176th
position
out of 187 classified countries. It is unlikely that, by the end of 2015, the targets set for the Millennium
Development Goals 4 i.e. to reduce by two thirds the mortality rate of children under 5, and 5, i.e. to reduce
by three-quarters the maternal mortality ratio, will be achieved.
5 A PEFA Review is planned in 2015 6 This Law was passed by the National Assembly and promulgated as Law No. 2014-014 of 26 May 2014 governing the Audited 2011 General State Budget. 7 The national poverty line is CFAF 435 (about US$ 1) per day. 8 EMOP 2013 excludes the regions of Timbuktu, Gao and Kidal because of the current situation of insecurity.
6
2.5.3. Mali's fragility assessment conducted by the Bank in 2014 helped to identify several
factors/dimensions of fragility facing the country (Annex 4): security, political and economic governance,
social, environmental, sub-regional, etc. These factors of fragility represent the development challenges
facing Mali, which should guide the Bank's operations and interventions by the technical and financial
partners in the country in order to address some key aspects of the country's fragility. It is therefore
necessary to tackle: (i) inequalities on the economic front; (ii) the erosion of social cohesion; (iii) the collapse
of State authority, especially in the northern regions of the country; (iv) the persisting conflict and security
situation; and (v) environmental degradation and the effects of climate change.
III. GOVERNMENT'S DEVELOPMENT AGENDA
3.1. Government's Overall Development Strategy and Medium-Term Reform Priorities
3.1.1. Mali's Development Strategy is defined in the Growth and Poverty Reduction Strategy Paper
(GPRSP) covering the 2012–2017 period and the 2014-2018 Government Action Programme (PAG).
The medium-to-long term goal of the 2012-2017 GPRSP, which is a continuation of the 2001-2006 GPRSP
and the 2007-2011 GPRSP, is to make Mali an emerging country and an agricultural force that can ensure
good quality of life for the Malian people. It is focused on the following five pillars (i) Pillar 1: Consolidate
peace and security, (ii) Pillar 2: Improve macroeconomic stability, (iii) Pillar 3: Promote stronger, sustainable
and pro-poor growth that will create jobs and generate income, (iv) Pillar 4: Consolidate the foundations for
long-term development and facilitate equitable access to high quality social services; and (v) Pillar 5:
Improve institutions and governance. Following the Presidential elections, a Government Action Programme
(PAG) was prepared adopting an inclusive process to align the manifesto for the Presidential term with the
country's strategic directions. This programme ensures consistency of the government's action and GPRSP
interventions, and has six main thrusts: (i) establishment of strong and credible institutions; (ii) restoration of
the security of people and property throughout the national territory; (iii) implementation of an active
national reconciliation policy; (iv) reconstruction of Malian schools; (v) building of an emerging economy;
and (vi) implementation of an active social development policy.
3.1.2. The development of northern Mali remains a key priority to achieve final and lasting peace
following the structural crisis affecting that part of the country. In 2014, the Government adopted an
Accelerated Development Programme for the Northern Regions (PDARN). The PDARN is consistent with
the Government's strategic guidelines and priorities reflected in the 2014-2018 PAG. This programme is
therefore a concrete expression of the determination of the Government and all the other stakeholders to
make the required changes to engage in structured development in harmony with the national vision and
taking into account the vulnerability of Mali's northern regions. Its objective is to consolidate peace and
security through the socio-economic development of the affected regions and the transfer of powers and
resources to these regions.
3.1.3. PARGE-I is in line with Mali's overall development strategy. This programme is aligned on
three pillars of the 2012-2017 GPRSP (see Table 3), which, together with the 2014-18 PAG, represents the
country's sole medium-term reference framework for economic and social policy in Mali. The three pillars
are: (i) Pillar 1: Consolidate peace and security, (ii) Pillar 2: Improve macroeconomic stability, and (iii) Pillar
5: Improve institutions and governance. This general budget support is also supported by PDARN which
seeks greater decentralization and deconcentration towards the Local Authorities (LA) to ensure inclusive
and sustainable development. Support for improved public finance management through enhanced public
expenditure transparency and effectiveness will ensure the alignment of PARGE–I with the 2011-2015
Government Action Plan to Improve and Modernize Public Finance Management (PAGAM-PFM). The
Bank's 2015-2019 Country Strategy Paper (CSP) is consistent with the GPRSP priorities.
7
3.2. Weaknesses and Challenges Affecting Implementation of the National Development Agenda
3.2.1. Despite the economic recovery begun in 2014, the Government continues to face great
challenges in the present post-conflict phase. In 2014, economic activity was boosted by the return to
normal cereal production and robust manufacturing sector growth. However, in order to maintain this
momentum, the Malian Authorities are faced with three challenges: (i) sustainable improvement of the
security situation, a key development factor, which will depend on the Malian Authorities' ability to ensure
timely response to their commitments under the Global Peace and Reconciliation Agreement with the armed
groups of the North; (ii) continuing enhancement of public management governance by improving the quality
of public expenditure and ensuring its equitable distribution in the country's regions and in the priority
sectors, by observing greater public procurement transparency through compliance with established
procurement rules and procedures, and by accelerating the results-based budgeting process in the form of
Programme-Budgets in compliance with the WAEMU Directives; and (iii) achievement of strong and
sustainable economic growth despite the constraints of the economy's structural fragility, its mainly informal
nature, low level of public investment, especially in infrastructure and energy combined with a weak private
sector, constitutes the 3rd
challenge that Mali will have to address in the new post-crisis context.
3.2.2. Major security challenges continue to affect Mali's political and institutional security, as well
as its socio-economic prosperity. The main security challenges are closely linked to the management of the
Sahel area, where the weak representation of central government authority has allowed illegal activities and
organized crime to spread and prosper. Similarly, the grievances of some Tuareg communities and the
activities of Islamic terrorists have created a climate of insecurity with the support of some local communities
that benefit from the cash generated by these criminal activities (light arms, petrol, drugs, cigarettes, food
products, and in particular, stolen cars). This security problem in the North of the country is one of the main
constraints on the implementation of political and socioeconomic reforms.
3.2.3. In 1992, the Government of Mali opted for a Public Management Reform Policy based on
decentralization. This policy choice for the devolution of powers and resources to the Local Authorities was
based on several reasons, particularly the need to: (i) deepen the ongoing democratic process; and (ii) adopt a
different approach to local development problems, rebuild the State and promote peace and security.
Decentralization became a reality in 1999 following the organization of municipal elections. However, the
Local Authorities were not established as part of a regional development policy but rather on the basis of
political rationality than on economic considerations, which raises the problem of their lack of viability.
Similarly, the transfer of resources, which was to have accompanied the transfer of powers, is not effective.
Consequently: (i) the lack of human resources is weakening the operational capacities of the authorities with
regard to the design, implementation and monitoring of local development programmes and affects public
asset management, as well as accountability; and (ii) the local authorities do not have sufficient financial
autonomy because of their weak fiscal potential and low yields of taxes and duties transferred.
3.2.4. There are several constraints impeding private sector development in Mali. Mali's private
sector remains informal, and its development will depend on a significant improvement in the business
climate, as well as the facilitation of access to financing. The main constraints on a more dynamic private
sector in Mali are: (i) the weaknesses of the legal and regulatory framework characterized by lack of
supervision of business, production and export support; (ii) an inefficient judicial system with limited
credibility; (iii) a complex tax system which is still being simplified and harmonized in line with WAEMU;
(iv) a financial system dominated by poorly performing banks with limited access to financing; (v) limited
development of basic infrastructure; (vi) scarcity of skilled labour; and (vii) lack of public-private sector-TFP
dialogue. In order to address these factors which contribute to the private sector's vulnerability, the
Government intends to make every effort to create a more enabling environment for its expansion. The
formal industrial private sector contributes about 4% to GDP, which seems low given the country's potential.
8
3.3. Consultation and Participatory Process
3.3.1. The Malian Authorities have carried out widespread consultations with all the stakeholders to
ensure broad-based ownership and internalization of the country's post-crisis development strategies.
Both national and regional consultations have been held. The Authorities held discussions with
parliamentarians, local elected officials (at central level or in the decentralized bodies), representatives of
civil society or the private sector, the media and technical and financial partners. A series of institutional
mechanisms (Steering Committee comprising thematic groups, TFP-Mali Joint Committee, Technical
Secretariat and regional, local and municipal committees) guided the preparation of the GPRSP in order to
ensure comprehensive understanding and full involvement of all the actors.
3.3.2. Preparation of this operation involved exchanges with the direct beneficiary structures i.e.
Departments of the Ministry of Economy and Finance, in particular the Directorate-General of Public
Procurement, the Directorate-General of the Budget, the National Financial Control Directorate, the
Investment Promotion Agency of Mali (API), and civil society. The programme's implementation will benefit
from the participation of these different actors
IV. BANK SUPPORT FOR THE GOVERNMENT'S STRATEGY
4.1. Linkages with the Bank's Strategy
4.1.1. At Bank level, PARGE-I is in line with two (enhancement of governance and private sector
development) of the five main operational priorities of the Bank's Ten-Year Strategy (LTS) 2013-2022.
This operation is also fully aligned with Pillar 1, “Enhancement of Governance for Inclusive Growth” of the
2015-2019 Country Strategy Paper (CSP). Consistent with this CSP, PARGE-I aims to contribute to the
achievement of the latter's final outcomes, in particular: (i) the enhancement of economic governance, and
(ii) contribution to job creation, especially for women and young people through private sector support
(Table 2). The 2015-2019 CSP aims to support Mali's efforts to emerge from fragility through a transition
towards a diversified economy with modern infrastructure that will be able to lay the foundations for
sustainable and inclusive growth. PARGE-I is also aligned with the Bank's 2013-2017 Private Sector
Development Policy, in particular, its first long-term objective on the improvement of the business climate
and investments. PARGE-supported reforms are in keeping with Pillar 1, “Public Sector and Economic
Management” and Pillar 3 “Investment and Business Climate” of the 2014-2018 Governance Action Plan
(GAP.II). PARGE-I is consistent with the “Bank's Strategy for Addressing Fragility and Building Resilience
in Africa” especially with its first area of focus, “Strengthening of State Capacity and Establishment of
Effective Institutions” which aims to provide States with public finance management and private sector
development support in order to facilitate job creation. Table 3 below summarizes the linkages between the
GPRSP, the CSP and two PARGE.
Table 3: Linkages between the 2012-2017 GPRSP, CSP and PARGE
2012 – 2017 GPRSP 2015-2019 CSP PARGE I and II
Pillar 1 – Strengthen peace and security,
Pillar 2 – Improve macroeconomic stability
Pillar 5 – Improve institutions and governance.
Pillar 1 - Enhance
Governance
for Inclusive Growth
Enhance Economic Governance Improve public expenditure efficiency
Improve the business environment and support the development of growth-bearing
enterprises
Support private sector
development
4.2. Compliance with Eligibility Criteria
4.2.1. Mali fulfills the eligibility criteria for general budget support operations as defined by the
Bank's Policy on Programme-Based Operations adopted in March 2012 (ADF/BD/WP/2011/38). A
detailed analysis of these criteria is presented in Technical Annex (TA) 1. It should be noted that, regarding
Government commitment to poverty reduction, the Government, in 2011, adopted GPRSP II for the 2012-
2017 period, which is the reference framework for development policy. In keeping with the 2012-2017
9
GPRSP, the new Authorities have prepared, and are implementing, the 2013-2018 Government Action Plan.
Regarding macroeconomic stability, in December 2013, the Malian Government and IMF concluded an
economic and financial reform programme supported by an Extended Credit Facility (ECF). The first three
IMF reviews in 2014 and 2015 noted satisfactory progress regarding the programme's implementation despite
the fragile security situation. Mali's debt risk remains moderate (§2.2.4). The medium-term outlook is
promising with the return of donors and enhancement of governance (§2.2.5). Progress has been made
concerning political stability through the consolidation of national peace and reconciliation since the 2012
crisis (§ 2.1). The final signing of the Algiers Peace Agreements by rebel groups on 20 June 2015 has eased
the political climate in the country. The successful implementation of this agreement will therefore contribute
to more sustainable and inclusive political stability in Mali. As regards the fiduciary assessment, as a result
of the efforts noted concerning implementation of the most recent assessments of the public finance system
(§2.4), the initial fiduciary risk (considered significant) has reverted to moderate since 2014. Finally,
harmonization efforts are continuing between the Bank and other TFPs, in particular, the IMF, WB, EU and
AFD which are Mali's main budget support donors (§4.3).
4.3. Collaboration and Coordination with Other Partners
4.3.1. The Bank is particularly active in the area of aid coordination and harmonization. It was the
leader of the Collective Group of TFPs in Mali and member of the troika for the 2010-2012 period. It has led
the Economy and Finance Thematic Group since 2013 (composed of two statistical and private sector sub-
groups of which it was the leader until the end of 2014). In this context, it coordinated the seventh and eighth
Joint Budget Reviews (in 2013 and 2014). This operation was prepared in close cooperation with the TFPs in
order to improve harmonization of the different interventions. Thus, PARGE-I reforms are in synergy with
those supported by the World Bank (WB) and European Union (EU) in their respective programmes. The
presence of the Bank's Country Office in Mali (MLFO) has provided the Bank with an entry point enabling it
to considerably strengthen its dialogue role with the Government and other TFPs. There are ongoing
discussions among the TFPs regarding the preparation of a common matrix of reforms. The preparation of
this operation involved exchanges with the direct beneficiary structures, i.e. Departments of the Ministry of
Economy and Finance, in particular the General Control Office for Public Services, the Public Procurement
Regulatory Agency, the Directorate-General of the Budget, the National Financial Control Directorate, the
Investment Promotion Agency of Mali (API), the Business Framework Reform Technical Unit (CTRCA),
and civil society. The programme's implementation will be enhanced by the participation of these different
actors.
4.4. Linkages with Other Bank Operations
4.4.1. As at 30 June 2015, the Bank's active portfolio in Mali comprised seventeen (17) operations for
a total approved amount of UA 305.6 million. The overall disbursement rate is 24%. The portfolio in Mali
is young, with an average age of 2.7 years and 59% of operations approved in 2013 and 2014. (TA 8). The
portfolio includes two private sector operations (MUA 17.6) and two regional operations (MUA 46.4), one of
which is in the cotton sector and the other in the agricultural sector targeting food security in the Sahel. The
portfolio performance is satisfactory with a score of 2.36 out of 3. The project does not currently include any
projects at risk (TA 6). A portfolio review was carried out in April 2015 and some major constraints were
identified, in particular: very long timeframes for the procurement processes, financial management that does
not comply with the rules and good practices; and slow implementation of projects by the executing agencies.
To address these shortcomings, a Portfolio Performance Improvement Plan was prepared with the following
specific actions: establishment, together with the Ministry of Finance, of an accurate mechanism for
monitoring and reporting project malfunctions; and prior assessment of the capacities of agencies required to
implement future projects in order to accurately determine their capacity building requirements.
10
4.4.2. PARGE-I complements the Bank's other operations in Mali. This general budget support
operation aims to support structural economic reforms, particularly by improving public expenditure
efficiency, and it cuts across all sectors of the economy. This will provide a channel for support to the
activities of the Bank's other ongoing operations in Mali. The PAGE9 institutional support project, approved
in 2013, provides the Government with technical support for implementation of the reforms retained under
PARGE-I. The complementarity between these two operations will not only help to consolidate the
governance-related achievements of emergency budget supports (PUARE in 2013 and PAUGRE in 2014),
but also to support the Government's efforts to gradually emerge from the country's situation of fragility.
4.4.3. This programme-based operation's design has taken into account the lessons learned from
previous Bank operations in Mali. In recent years, the Bank has financed several budget support operations
in Mali. The Emergency Governance and Economic Recovery Support Programme (PAUGRE), approved in
2014 after PUARE in 2013 and PASCRP II in 2011, aimed to (i) restore the normal functioning of the public
administration and rebuild the Government’s capacity to provide basic social services; and (ii) support the
creation of appropriate conditions for a rapid recovery of the economy. This operation, drawing on the
previous ones (PUARE and PASCRP II), laid the foundations for the gradual improvement of the
Government's reform capacity which PARGE-I aims to consolidate using a programme-based approach.
Indeed, the completion reports of the three earlier programmes concluded that Mali's performance was
satisfactory regarding implementation and strong ownership by the Authorities of the agreed cyclical
emergency and structural reforms. The main achievements of these programmes include: (i) the adoption and
operationalization of the transitional tax system, (ii) capacity building for actors involved in public
procurement, (iii) strengthening of the budget management capacities of LA as part of the decentralization
process, (iv) establishment of a consultative framework for the selection of public investment programmes
and projects, and (v) revision of Decrees and Orders to improve the procedures for the award, execution and
settlement of public procurement contracts and public service delegations. These significant strides (Annex
3) made in the implementation of these projects justifies the need to support the Government's reform efforts
in agreement with the other development partners. Thus, the formulation of PARGE-I on the basis of a
programme-based approach for 2015 and 2016 took into account the key lessons summarized in Table 4
below.
Table 4 : Lessons Learned from Previous Bank Operations in Mali Key Lessons Taken into Account in PARGE I
Budget support operations must be carried out
concomitantly with institutional support operations
targeting the same priority areas.
The economic governance support projects whose activities started up in April 2015 target the
same priority areas as PARGE I.
Budget support operations in Fragile States are major instruments for dialogue and provide
impetus to the reforms in priority areas for poverty
reduction and the creation of strong and inclusive growth.
PARGE I is consistent with this approach by supporting the Government in its efforts to strengthen public finance management and private sector development prerequisites for the
creation of sustainable growth that will benefit Mali's entire population.
Conditions precedent to disbursement must be
realistic and take into account the country's capacities.
Meetings with the technical departments during preparation and appraisal confirmed the
feasibility of the measures proposed in PARGE I. PARGE I was designed on the basis of a programme-based approach (2 operations with a single tranche each), which provides
flexibility regarding the reform measures prior to disbursement and ensures that dialogue on
reforms is maintained in order to ensure their effective implementation.
4.4.4. Over the past few years, the Bank has acquired considerable regional experience through its
operations in several countries, especially in countries which are fragile or in transition, in public
finance management and private sector development reforms. As regards its budget and institutional
support operations in Mali, the Bank has contributed to the improvement of the presentation of its budget
documents, real time monitoring of the overall implementation status of the general State budget and the
creation of fresh impetus for development at local authority level. As a result of these different budget
support operations in Mali, the Bank has become a preferred partner.
9 The PAGE, in the amount of UA 9.97 million aims to contribute to the restoration and building of the public administration's capacity to provide basic services
to the population and economic operators.
11
These operations have provided it with considerable experience in the public finance enhancement and
private sector promotion process. It is therefore part of a continuing process, and the Bank has sound
experience in the area of budget support operations in general, and in Mali, in particular.
This experience is supplemented by that acquired from the implementation of institutional support projects
which complement those of other development partners and the implementation of similar operations in other
fragile States, in particular Madagascar, Central African Republic, Burundi, Comoros, Liberia and Sierra
Leone.
4.5. Analytical Underpinnings of this Operation
4.5.1. Several documents prepared by the Government, Bank and other TFPs contributed to the
design of this programme. In the area of public finance management: (i) the annual evaluation report of the
2011-2015 Government Action Plan to Improve and Modernize Public Finance Management (PAGAM-
PFM) of March 2015; (ii) the International Monetary Fund's Article IV report (December 2013); and (iii) the
Public Procurement and Public Service Delegation Reform Action Plan. Concerning private sector
development, this programme is mainly based on: (i) the 2015 Business Climate Reform Action Plan; (ii)
Mali's Private Sector Orientation Law; and the (ii) Doing Business reports. Several other studies and surveys
were also taken into account in PARG-1 formulation, in particular the IDEV Report on the Bank's Budget
Support Operations for the 1999-2009 period, and the Bank's 2014 report on fragility in Mali. The main
conclusions of these studies and reports confirm the need to: (i) improve public resource management
effectiveness in order to create sustainable conditions for inclusive and lasting growth, (ii) strengthen fiscal
decentralization by gradually transferring powers to the LAs while ensuring public finance sustainability; (iii)
support the country's structural reform efforts to ensure gradual emergence from the situation of fragility; and
(iv) strengthen private sector development.
V. THE PROPOSED PROGRAMME
5.1. Programme Goal and Objective
5.1.1. By enhancing economic governance, PARGE-I aims to help create conditions for growth that
is strong, inclusive and driven by a better developed and more dynamic private sector. In light of Mali's
major challenges (§ 3.2), it should be noted that the objectives of sound public resource management and a
stronger private sector contribution to the country's development still require continuing support in the post-
crisis situation. Consequently, the development partners will, in agreement with the Malian Authorities,
pursue and deepen the structural reforms. The main public finance management objectives are to improve the
efficiency of public expenditure so as to increase its impact on the country's economic and social
development. In the case of the private sector, it is essential to implement major reforms to ensure the
emergence of a more dynamic private sector by improving the business climate, scaling up investment
promotion, and developing small and medium-sized enterprises. To that end, efforts must be continued to
address the challenges in this post-crisis situation which has led to Mali's fragility and seek to consolidate the
reforms already implemented (Annex 3) under previous similar operations (§ 4.4.4). PARGE-I is the first
phase of two operations constituting a general programme-based budget support operation10
to cover the
2015 and 2016 fiscal years. Indeed, following two crisis-response budget support operations (§ 4.4.4), the
conditions have now been met for a general budget support operation (§ 4.2), due to the existence of a
credible economic reform programme backed by all the development partners. This operation presents the
programme's multi-year framework and proposes a series of reforms to be considered as triggers for the
second phase (PARGE-II).
10 It is a series of one-year operations in a multiyear framework. See paragraph 7.5.1 of the policy on budget support operations
(ADF/BD/WP/2011/38/Rev.3/Approval).
12
5.2. Programme Components
5.2.1. PARGE-I is organized around two complementary components. The formulation of PARGE-I,
involving an approach that is consistent with and complements the other TFP (§ 2.8), while ensuring full
ownership by the Malian Authorities, is based on two main thrusts: (i) improve the effectiveness of public
expenditure management in order ensure more efficient public procurement that will improve the living
conditions of all Malians; and (ii) support development of the private sector in order to allow it to play its key
role in economic growth, which is to create jobs and reduce poverty as well as socio-economic inequalities.
These two components are complementary because the quest for public expenditure efficiency not only
contributes to better achievement of development objectives, but also fosters optimal use of public resources
for public procurement from which a buoyant and more ably supported private sector will benefit to create
wealth and jobs. The specific objectives of PARGE-1 are therefore to: (i) improve fiscal management
decentralization; (ii) strengthen the internal control role; (iii) improve public procurement management; (iv)
develop small and medium-sized private sector enterprises and promote strategic investments in the country;
and (v) improve the business environment.
Component I: Improvement of Public Expenditure Efficiency
5.2.2. The aim of this component is to ensure optimal use of public resources to boost economic recovery
that will help to effectively reduce poverty. It will therefore cover the following three areas: (a) fiscal
decentralization towards the Local Authorities (LA), (b) improvement of public procurement management in
line with the related WAEMU Directives issued, and lastly (c) strengthening of internal control bodies and
enhancement of their efficiency to ensure more transparent public procurement.
a) Context, Challenges and Government's Recent Actions
5.2.3. The Bank previously supported Mali's decentralization process through the Decentralization
and Regional Development Support Project (PADDER). The goal of this project was to support the
country in regionalizing its growth strategy to reduce poverty. In particular, it aimed to promote a regional
institutional, organizational and good governance environment conducive to regional economic development
and revival of economic activities in the regions. This institutional support project, in the amount of UA 10
million until its activities ceased in 2012 as a result of the coup, had helped to lay the foundations for
regional economic growth by improving the legal, institutional and organizational framework and building
the capacities of regional actors. It is now necessary to consolidate achievements in this area by focusing on
financial and budgetary aspects.
5.2.4. The GoM is aware that decentralization is a driver of local democracy, economic development
and poverty reduction. The overarching objective of decentralization is balanced territorial development.
The Malian Authorities have therefore adopted a number of legal and regulatory texts, in particular: (i) the
adoption in 2010 by the Council of Ministers of texts amending: (a) amended Law No. 93-008 defining
conditions for administering LAs11
; (b) amended Law No. 95-034 instituting a Code for LAs ; (c) Law No.
00-44 of 7 July 2000 determining the tax resources of the municipalities, districts and regions of Mali; and
(ii) Law No. 2012-007 of 7 February 2012 on Local Authorities defining the general and specific powers to
be transferred to LAs. Pursuant to this law, a series of implementing decrees were adopted setting out details
of the powers transferred from the central government to LAs for the following Ministries: National
Education, Health, Rural Water Supply, Social Development, Handicraft-Tourism and Livestock-Fisheries
i.e. 6 of the Government's 29 Ministries. In order to ensure success and overcome reluctance, the Prime
Minister issued Instruction No. 08-0003/PM-RM on 21 November 2008 urging Ministers to take all
appropriate measures to speed up the issuing of decrees transferring powers and resources to LAs pursuant to
the law. The Inter-Ministerial Steering Committee for the transfer of powers and resources, which is chaired
by the Prime Minister, will prepare an action plan for effective implementation of the Plan.
11 This reform was one of the achievements of the Bank's previous budget support, PASCRP II.
13
5.2.5. In order to give fresh impetus to the deepening of decentralization, the GoM in 2014 adopted
the legal framework for establishing State-region or district planning contracts12
. Despite the existence
of a local taxation system (a reform which was supported by the previous budget support operation,
PARSCRP II), the LAs scarcely mobilize these resources, thereby limiting their capacity to finance the
powers transferred by the central government. The State-Region Planning Contract was therefore identified
as a key instrument for consolidating the LA budget process so as to further promote regional economic
development. These contracts are concluded for 5-year periods and concern the multi-year programming and
financing of core projects with a regional or district scope and targeting strategic investments that will create
wealth and jobs. In order to support implementation of Planning Contracts, the GoM established regional
development agencies in each region and in Bamako District to assist the LAs in managing regional and local
development. The first Planning Contracts will be signed in 2015 in order to scale up the resources
transferred to Local Authorities. These commitments by the Malian authorities, which seek to deepen
decentralization and regional development based on regionalization, represent significant progress that will
contribute to effective implementation of the Malian Peace and Reconciliation Agreement resulting from the
Algiers process (§ 2.1.2). It should be noted that the Agreement consolidates the pivotal role of regions in
economic, social and cultural development. PARGE-I aims to support GoM's efforts to transfer the necessary
powers and resources to LAs and towards the signing of Region-State Planning Contracts.
5.2.6. Since 2008, the Malian Government has embarked upon comprehensive reforms of the
national public procurement system in compliance with the provisions of WAEMU Directives Nos.
4/2005 and 5/2005 governing public procurement. The legal and regulatory framework for Mali's
procurement system is governed by Decree No. 08-485/P-RM of 11 August 2008 on procedures for the
award, execution and settlement of public procurement contracts and public service delegations and its
amendments, as well as a subsequent series of implementing texts. It was noted, in particular, that the
proportion of contracts awarded through open competitive bidding rose in volume from 75.18% in 2013 to
85% in 2014 (reform supported under the previous budget support, PASCRP II). However, the expenditure
chain audit performed by the IMF in March 2014 reveals that procurement procedures are complex, usually
resulting in very long delays (the minimum timeframe for the award of a public contract was 94 days in
2013). In most cases, this situation is a contributory factor to the under-execution of the country's investment
budget. The investment budget implementation rate was only 68% in 2010 and 72.2% in 2011. To address
this situation, the GoM initially established, through the PUARE, a Development Project and Programme
Monitoring Committee by setting up and operationalizing the technical committee for selecting Public
Investment Projects and Programmes in Mali. The GoM in a subsequent phase in 2014, in efforts to further
empower the contracting authorities, reviewed the Decree establishing thresholds for the conclusion and
approval of contracts, as well as the implementing decree for the Public Procurement Code. This review,
mainly based on the related WAEMU Directives, led to a complete revision of the Public Procurement Code
in 200813
with the main purpose of simplifying the public procurement process, improving the public contract
execution rate, fostering public investment, and boosting execution of the investment budget. A Draft
Revised Code was submitted to the GoM in June 2015 for consideration and adoption by the Public
Procurement and Public Services Delegation Regulatory Authority (ARMDS). The Public Procurement Code
now provides for the conduct of independent annual audits by ARMDS, which can also deal with violations
of the public procurement regulations on its own initiative. The 2010 to 2014 audits were delayed by the
crisis situation in the country. These audits are now being conducted by an independent firm. The object of
PARGE-I is to support GoM's efforts towards ensuring successful adoption of the new revised Public
Procurement Code, as well as compliance with the Code instituting the conduct of annual audits.
12 Decree No.2014-0644/9-RM of 21 August 2014 defining terms and conditions for the drafting, implementation and monitoring/evaluation of State-Region or
District Planning Contracts. 13 The main changes concern: (i) raising of the threshold for conclusion and approval of contracts, (ii) shortening of the timeframe allocated to each actor in the
public procurement chain, (iii) reduction in the number of contract signatories from 7 to 4, (iv) elimination of duplication in the prior review of procurement
files, (v) subsequent reduction in the number of eliminatory administrative documents, and (vi) review of some articles for further clarification of their content
and supervise the preparation of procurement plans.
14
5.2.7. In order to improve fiscal decentralization and ensure efficient public procurement
management, the Government of Mali is making every effort to strengthen its internal control system. The control bodies constitute a key link in the mechanism for ensuring compliance with budget management
rules and public expenditure control. It is therefore important for their role to be strengthened at all levels to
ensure good economic and financial governance. Thus, under its Government Action Plan to Improve and
Modernize Public Finance Management (PAGAM-PTM, Phases I and II), the GoM has identified measures
to address the shortcomings of control organs. As a result, a National Internal Control Strategy (SNCI) has
been prepared, accompanied by an Action Plan for the 2011-2015 period, with the following strategic
objectives: (i) empower credit administrators and ensure credit management; (ii) ensure regularity and
efficient public administration operations; (iii) guarantee the reliability and integrity of public information;
(iv) harmonize and professionalize control and audit practices; (v) introduce risk mapping in Ministries and
other specialized organizations (Public Administrative Bodies - PABs) and wherever public funds are used.
Furthermore, the various WAEMU Directives on harmonization of budget management frameworks and
practices have been transposed into domestic law and measures to introduce results-based management in the
2016 Budget with all the financial public administration adaptation which that entails.
b) Reforms Envisaged in the Programme
5.2.8. In order to help the Malian Authorities improve public expenditure efficiency, PARGE-I, by
adopting an approach that will complement the interventions of the other development partners, will focus on
the following three operational priorities: (a) improvement of fiscal decentralization; (b) improvement of
public procurement management; and (c) strengthening of internal control and its effectiveness.
5.2.9. First, effective implementation of fiscal decentralization in the post-crisis situation will strengthen
ownership of the regions' development and facilitate implementation of the Peace Agreements. Against this
backdrop, the Bank, through PARGE-I, will provide the GoM with support for major reforms focused on: (a)
the signing of five Planning Contracts (two in 2015 “PARGE-I Prior Action” and three in 2016 “PARGE-II
trigger” at regional level, which will facilitate subsequent assessment of the outcomes of efforts made by the
Regional Administration in implementing its development programme; and (b) GoM adoption and
operationalization of an action plan to transfer powers and resources to LAs “PARGE-II trigger”. These
different structural reforms will ensure concrete engagement in the fiscal decentralization process, thereby
creating appropriate conditions for sustained and inclusive growth that will facilitate gradual emergence from
the situation of fragility caused by the 2012 crisis. Second, improved public procurement management will
help to enhance public procurement transparency resulting in more effective resource utilization to address
the country's numerous challenges. PARGE-I-backed reforms are: (a) adoption of the revised Public
Procurement Code “PARGE-I prior action” and its implementing decrees in accordance with WAEMU
Directives “PARGE-II trigger”; (b) the transposition of WAEMU regional standard bidding documents into
Malian law “PARGE-I prior action”. These reforms will not only meet the requirements of harmonization
with the related rules in all member States, but will also simplify access to public procurement by all
economic agents who are nationals of any of the member States. Finally, the PARGE will support: (c) the
conduct of an external audit of public contracts awarded in 2015 “PARGE-II trigger” in accordance with the
provisions of the new revised Public Procurement Code and publication of the report on the MEF or ARMDS
website. Third, improvement of internal control effectiveness through PARGE-I will provide support to the
Authorities' efforts to optimize the use of public resources not only at national level but also in the grassroots
decentralized structures. The reforms supported in this regard chiefly concern: (a) completion and
operationalization of the establishment in Ministries “PARGE-I prior action” and specific bodies such as
the Public Administrative Bodies (PABs) “PARGE-II trigger” (4 PABs in 2016) of Financial Control
Delegations in order to ensure enforcement, by the contracting authorities, of strict rules and procedures for
the procurement of goods and services; and (b) preparation of risk maps for twelve Ministries “PARGE-II
trigger” on the basis of which controls will be conducted by the National Financial Control Directorate
(DNCF). These reforms will result in the establishment of a simplified and more efficient internal control
system since the trend will now be to empower payment authorization officers within a results-based
management perspective.
15
5.2.10. Expected Outcomes: It is expected that successful implementation of these structural reforms will
improve public expenditure efficiency mainly by a positive PEFA indicator trend: (i) indicator PI-23
“Competition, Value for Money, and Controls in Procurement” which will improve from a C score in 2010 to
B in 2016; and (ii) the fiscal deconcentration rate in favour of the Las, which will rise from 13% of public
expenditure in 2014 to about 14% in 2016.
Component II: Support for Private Sector Development
5.2.11. The aim of this component is to support GoM efforts to create appropriate conditions to improve the
business climate so as to promote inclusive development of Mali's private sector and enhance the country's
competitiveness. The Programme will therefore focus on the following two areas: (a) promotion of strategic
investments and development of small and medium-sized enterprises, and (b) the business environment.
a) Context, Challenges and Recent Government Actions
5.2.12. Foreign Direct Investments (FDI) dropped sharply following the outbreak of the 2012 crisis.
FDI, which stood at USD 556 million in 2011 (5.2% of GDP), has steadily declined over the past four years
from USD 398 million in 2012 (3.8% of GDP) to USD 308 million in 2013 (2.7% of GDP) and finally to
USD 199 million in 2014. These successive drops of 28% in 2012, 23% in 2013, and 35% in 2014 are clearly
due to the political and military crisis triggered in March 2012, and even more so by the security situation
that still prevails in the country. The investments have prioritized the mining sector (gold). In order to
address this situation, the Government has speeded up implementation of reforms aimed at improving the
business climate and supporting the activities of the Investment Promotion Agency of Mali (API-Mali),
which has been operational since 2009 and whose mission is to foster and promote the development of
foreign direct and national investments, to help improve the business climate, as well as the development and
regulation of industrial zones. Incentive measures have been taken through the Investment Code adopted by
Law No. 2012-016 of 27 February 2012. From 2009 to 2014, 26 836 individual enterprises were established
or were in the form of Economic Interest Groups (EIG), LLCs and PLCs. However, the primary focus is to
promote major developmental investments in the infrastructure and energy sectors that will remove
constraints on the development of private sector enterprises. Therefore, in order to meet growing needs in
terms of infrastructure and public service delivery and address budget constraints, the GoM intends to create
a transparent, enabling environment to facilitate private sector participation in infrastructure financing and
management, drawing on the skills and resources of the private sector. To that end, a bill on Public-Private
Partnerships (with the World Bank's financial and technical support) is being prepared. The Bill not only
aims to create favourable conditions to attract more FDI but also to create an enabling environment for
private sector development to provide more financing for the construction and rehabilitation of key
infrastructure. To complement the Law on Wage and Salary Tax Reductions (ITS) being adopted in 2015, the
Malian authorities have undertaken to have a bill adopted establishing the minimum amount of capital
required to facilitate the creation of private enterprises. These major GoM reforms are all supported by the
Bank's PARGE-I.
5.2.13. In Mali, the informal sector represents about 80% of the country's economic activities. This
sector covers the following three types of economic activity: skilled production work (25% of the sector),
artisanal service activities (7.7%) and petty trade (67.3%). These activities are a source of production of
goods and services, employment training and income. In 2005, the Government, using its own resources,
decided to prioritize trading activities in this informal environment through the Retail Traders Support
Project (PACD), the three successive phases of which (2005-2008, 2009-2012 and 2013-2017) received total
financing of about CFAF 8 billion. Through this project, a number of male and female retailers were granted
small individual loans of between CFAF 200,000 to CFAF 2 million renewable following repayment with
accompanying training and management assistance provided by the Approved Management Centres (CGA).
Thus, supervised and supported, these retailers were subject to a flat-rate synthetic tax. The tax revenue
collected by the Government using this method amounted to CFAF 10 billion for the 2011, 2012, 2013 and
2014 fiscal years alone. These microenterprises, which are now taxed, will thrive and become real formal
SMEs. The GoM intends to prepare a three-year private sector development programme to scale up the
development of these private enterprises. This major reform is supported by PARGE-I.
16
5.2.14. For about ten years, Mali has embarked upon a far-reaching reform programme aimed at
improving the business environment so as to foster the development of private sector enterprises. In
recent years, the GoM has implemented a vast programme to improve the business climate resulting in: (i)
the establishment of the one-stop-shop; (ii) registration of property with the adoption of a new Tax Code
containing a provision lowering the tax on property transfers; and (iii) a reduction in the tax on industrial and
commercial profits (BIC) from 35% to 30% was included in the 2012 Finance Law in accordance with
WAEMU Directives. The country has improved its business climate ranking and was even classified in the
World Bank's Doing Business 2012 report as the most reforming country in the WAEMU zone in 2011.
However, the crisis that ensued from the events of March 2012 had a negative impact on the perception of the
country's risk and the business environment in Mali. Consequently, Mali's ranking in the Doing Business
2015 report dropped from 143rd
position in 2013 to 146th
in 2014 out of 189 economies. To address this
situation, the GoM under the PAUGRE, the Bank's previous budget support operation, established by decree
a Joint Government/Private Sector Committee14
responsible for boosting, controlling, monitoring and
evaluating the implementation of appropriate urgent reforms of Mali's business environment. This joint
committee is supported by the Business Framework Reform Technical Unit (CTRCA), which was established
in 2009 to ensure effective implementation of the various business reforms. The GoM therefore intends to
consider a bill that will allow transposition of the WAEMU Directive on the operationalization of credit
bureaus, the objective of which is to facilitate access to financing and information on companies' debt levels.
A Strategic and Operational Plan for Business Climate Reforms is being prepared for the 2015-2018 period.
This plan mainly seeks to improve Mali's attractiveness in order to increase foreign direct and domestic
investment, facilitate business practice in Mali, and build the Unit's capacity to successfully implement
reforms. The GoM has also embarked upon land tenure management reforms that will safeguard land titles,
which is key factor for the enhancement of Mali's attractiveness. To that end, a national land tenure and
State-owned land policy is being formulated, and the dematerialization of data (land titles) at the Bamako and
Kati Land Offices has begun. The programme aims to support these efforts by the GoM which are helping to
improve the business climate in Mali, which, in turn, will boost the country's private sector development.
b) Reforms Envisaged under the Programme
5.2.15. Component II, in synergy with the other development partners, will promote major structural
reforms that will help to create a more dynamic and job-creating private sector that will ensure inclusive and
sustainable growth.
5.2.16. First, major structural reforms will be supported by PARGE-I in order to facilitate the promotion of
investments and sustainable development of private enterprises. These will concern: (a) the adoption, by the
Council of Ministers (CM), of the bill determining the minimum capital for limited liability companies so as
to reduce business creation costs and broaden the tax base due to an increase in the number of formal
enterprises following the promulgation of that law “PARGE–I Prior Action”; (b) adoption of a three-year
private sector development programme “PARGE-II trigger”; and (iii) adoption of a regulatory framework
governing public-private partnerships “PARGE-II trigger”. Second, PARGE-I will support the GoM's
efforts to improve the overall business climate framework in order to make the private sector the engine of
growth in accordance with the 2012-2017 GPRSP vision. In this regard, PARGE-I reforms concern: (a)
adoption of the 2015-2018 Strategic and Operational Action Plan to reform the business climate so as to
create a more conducive and attractive investment climate “PARGE–I Prior Action”; (b) the transposition of
the WAEMU Directive on the opening of credit bureaus and its operationalization “PARGE–I Prior Action”;
and the adoption of the National State-owned Land and Land Tenure Policy, as well as the dematerialization
of 80% of land titles in Bamako and Kati in order to ensure their security “PARGE-II trigger”.
14 Decree No. 2015-0117/PM-RM of 25 February 2015.
17
5.2.17. Expected Outcomes: It is expected that implementation of the reforms under this second component
of the Programme will increase private sector credit from 24.4% of GDP in 2014 to about 27% in 2016.
5.3. Policy Dialogue
5.3.1. During the PARGE-I and II implementation periods, dialogue with the Government will mainly
focus on the following areas: (i) enhancement of public finance management by improving fiscal
decentralization, strengthening the public procurement management system, as well as internal control to
ensure more efficient public spending; and (ii) promotion of private sector development to improve the
sector's contribution to the country's economic growth. This dialogue will be supported by analytical work to
be carried out under the PAGE project and will comprise: (i) a study on the development impact of public
investments; (ii) a study on the implementation of programme-budgets; (iii) a study on the simplification of
internal control. These studies will be conducted in consultation with development partners.
5.4. Grant Conditions
5.4.1 PARGE-I is the first phase of two programme-based budget support operations. This first phase is
subject to implementation of some measures prior to Board presentation. In the preparation of Phase II,
PARGE-II is subject to a series of triggers that will be assessed in July 2016.
5.4.2 Prior Measures and Triggers: Following dialogue with the Malian Authorities, the measures
precedent to PARGE-I presentation to the Board and PARGE-II triggers are summarized in the following
table.
Table 5 : PARGE-I Measures Precedent and PARGE II Triggers
PARGE-I related Measures Precedent PARGE II Indicative Triggers
General Condition Precedent - Maintenance of a stable macroeconomic framework as shown in IMF reports and
evaluations. Evidence: Certified copy of the press release on the conclusion of the most recent review (less than three months
old) of the ECF programme
Component I – Public Expenditure Efficiency
Action 1: Sign two (2) planning contracts for two regions.
Status: Completed; Evidence: Certified copies of the plans
signed between the Government and the regions:
Trigger 1: Sign three (3) planning contracts for three regions.
Evidence : Certified copies of the plans signed between the
Government and the regions :
Trigger 2: Adopt an action plan for the transfer of powers and
resources to LAs at government level. Evidence : Certified
copy of the communication by the Council of Ministers
adopting the Action Plan
Action 2: Complete the establishment of financial control
delegations in the Ministries. Status: Completed.
Evidence : Certified copy of the decree establishing
financial control delegations in the seven (7) remaining
Ministries by the Ministry of the Economy and Finance
(MEF)
Trigger 3: Four (4) additional Public Administrative Bodies
(PABs) have financial control delegations / prepare risk maps
for 6 new Ministries. Evidence : Certified copy of the decree
establishing financial control delegations by MEF / Certified
copies of the six (6) additional risk maps prepared in 2015 and
2016
Action 3: Have adopted, by the Council of Ministers, the
Revised Public Procurement Code and transpose the
WAEMU regional standard bidding documents. Status:
Completed. Evidence: Certified copy of communication
by the CM adopting the Public Procurement Code; Order
or Decree on the transposition of regional standard bidding
documents into Malian domestic law.
Trigger 4: Adopt the implementing decrees for the revised
code. Evidence: Certified copy of decrees by the Minister of
finance
Trigger 5: Prepare the 2015 public procurement audit report
and publish the report on the MEF or ARMDS website.
Evidence: The 2015 Public Procurement Audit Report and copy
of the website screen or report is published.
Component II – Support for Private Sector Development
Action 4: Have adopted, by the Joint Committee, the
2015-2018 Strategic and Operational Action Plan to
improve the business framework. Status: Completed.
Evidence : Certified copy of minutes of the Joint
Trigger 6: Prepare and have adopted by the CM a private sector
development programme. Evidence: Certified copy of the
communication by the CM adopting the three-year programme.
18
5.5. Good Practice Principles for the Application of Conditionality
5.5.1. The programme design, in compliance with Bank Group Policy on Programme-Based
Operations15
, took into account the five good principles on conditionality. The programme-based
approach adopted in this new operation is mainly aimed, within the context of fragility, at creating a flexible
and inclusive framework to improve budget resource predictability in keeping with the smooth
implementation of major economic and structural reforms. Thus to ensure more effective support by the
Malian Authorities in this programme, the good practice principles were followed: (i) the GoM has assumed
ownership of the Programme for it was designed with the active collaboration of the structures concerned; (ii)
coordination among the development partners was effective in order to improve complementarity of
interventions in support of GoM policies; (iii) the Programme, which is fully aligned with Mali's national
policies, helps to support the latter's strong efforts to create sustainable and inclusive conditions for the
country's emergence from fragility; (iv) the conditions precedent to Board presentation (§ 5.4) and triggers of
the Programme's Phase II are realistic, achievable, have been approved by the GoM and chiefly relate to
major structural reforms whose objective, given the country's fragile situation, is to significantly contribute to
improving public expenditure efficiency and providing sustainable support to private sector development;
and (v) PARGE-I is also aligned with the country's budget cycle, thereby allowing the GoM to include it in
its 2015 and 2016 budget projections.
5.6. Financing Requirements and Arrangements
5.6.1. This programme-based budget support operation is an integral part of the external sources of
financing that will help to narrow the 2015-2016 fiscal
deficit. Over the programme's implementation period, the
overall fiscal deficit (including grants) will be CFAF
204.4 billion and CFAF 206.4 billion in 2015 and 2016
respectively (Table 6). The financing requirements will
be CFAF 320.9 billion and CFAF 210.1 billion in 2015
and 2016 respectively. In order to meet these
requirements, the GoM will use domestic financing in
the amount of CFAF 158.1 billion in 2015 and CFAF
12.6 billion in 2016, as well as external financing of
CFAF 162.9 billion in 2015 and CFAF 197.5 billion in
2016.
15
See: ADF/BD/WP/2011/38/Rev.3/Approval of 29 February 2012.
Committee meeting adopting the Plan
Action 5: Have adopted, by the CM, of the bill on the
minimum capital for limited liability companies. Status:
Completed. Evidence: Certified copy of the
communication by the CM adopting the bill.
Trigger 7: Have the National State-owned Land and Land
Tenure Policy adopted by the Council of
Ministers/Dematerialize 60% of land titles in Bamako and Kati.
Evidence: Certified copy of communication by CM adopting the
Policy and a letter from the MEF confirming the
dematerialization of 60% 0f land titles in Bamako and Kati.
Action -6: Transpose the WAEMU Directive on the
opening of credit bureaus into domestic law. Status:
Completed. Evidence: Certified Copy of the
communication by the CM adopting the transposition of
the Directive into Malian domestic law.
Trigger 8: Have adopted, by the Council of Ministers, and table
before Parliament a Bill on Public-Private Partnerships.
Evidence: Certified Copy of the communication by the CM
adopting the bill on PPPs and the letter of Transmittal to
Parliament.
Table 6 : Financing Requirements and Sources (CFAF billion)
Financing Requirements/Sources of Financing 2015 2016
Revenue and grants
- Total revenue
- Grants Of which: General budget support
ADB MUA 15 i.e.
1 507.6
1 224.3
283.3 111.9
12.46
1 542.9
1 355.5
187.4 78.3
12.46
Total Expenditure and Net Loans -1 712 -1 749.3
-Fiscal balance Change in domestic arrears
Adjustment (cash basis)
-204.4
-48.8
-67.7
206.4 -6.8
+3.1
Total Financing Requirements --320.9 -210.1
Total financing of which:
Domestic Financing
External Financing
320.9
158.1
162.9
210.1
12.6
197.5
FINANCING GAP 0.0 0. 0
Source : Malian Authorities
19
5.7. Application of Bank Group's Policy on Non-Concessional Debt Accumulation
5.7.1. The Bank's principles governing the Policy on the Accumulation of Non-Concessional Debt are
applied and complied with under PARGE-I. Mali is classified as an ADF-only country. The most recent
debt sustainability analysis in November 2014 indicated a moderate debt distress risk for Mali (§ 2.1.7).
However, in order to address the numerous post-crisis development challenges, the GoM in 2015 proposed to
the IMF, which endorsed it16
, an increase in the ceiling for non-concessional borrowing from CFAF 49 to
250 billion (USD 430 million, or 3.9% of GDP) to finance various projects, in particular, investments in
transport and electric power distribution.
VI. IMPLEMENTATION, MONITORING AND EVALUATION
6.1. Programme Beneficiaries
PARGE-I will benefit the entire Malian population by improving public expenditure efficiency and
creating a more dynamic private sector. Improved public resource management will increase the supply of
basic social services and facilitate countrywide access to them. The programme reforms will help to speed up
fiscal decentralization which remains a key element of the Algiers Peace Agreement. Private sector
development will not only attract dynamic entrepreneurs with proposals for major projects, but will also
create the right conditions for improving access to financing and ensuring more effective contribution by the
sector to the country's economic growth.
6.2. Impact on Gender Issues, Poor People and Vulnerable Groups
6.2.1. Implementation of the Programme's Reforms will improve the living conditions of vulnerable
groups in general, and women, in particular. The acceleration of fiscal decentralization and strengthening
of internal control resulting in enhanced public expenditure effectiveness and efficiency could help to
improve Government action in favour of social inclusion and equity. This should primarily benefit women
and children, who are the vulnerable segments of the population, especially in the northern regions which
were hardest hit by the 2012 security crisis.
6.2.2. Gender Impact: The programme as a whole will help to reduce gender inequalities in Mali. Indeed,
the 2012 security crisis in the northern regions has resulted in the deterioration of women's situation in these
regions. Effective implementation of the PARGE-supported State-Region Planning Contracts will help to
create the right conditions for sustained and inclusive development through multifaceted support to women
who have suffered tremendously from this crisis. Moreover, support for private sector development through
investment promotion will facilitate women's access to financing in general, and in the northern areas in
particular, so as to develop activities that will strengthen their empowerment and reduce gender inequalities.
6.3. Impact on the Environment and Climate Change
6.3.1 The Programme is a general budget support operation, which supports reforms that do not have any
impact on the environment and climate change. It has been classified in Category IIII.
6.4. Implementation, Monitoring and Evaluation
6.4.1 The programme will be implemented by the Ministry of the Economy and Finance. Coordination
with the other Ministries and State structures involved in the implementation of the programme reform
measures falling within their remit will also be carried out by the Ministry of the Economy and Finance. The
routine monitoring and evaluation of the programme will be the responsibility of the Directorate-General of
16 See Table 2 'Implementation Criteria and Indicators Proposed for 2015', 3rd Review Report N°15/151 of June 2015.
20
Public Debt (DGDP), which is also responsible for implementation of all the partners' programmes. This
structure has satisfactorily implemented previous Bank-financed budget support programmes. The results-
based logical framework and reform matrix will serve as framework for the Programme's monitoring and
evaluation. The Bank will monitor the programme through six-monthly reviews and continuing dialogue
between the Malian Authorities and the Bank, particularly through the Bank's Country Office in Mali
(MLFO). Upon completion of the programme, a completion report will be prepared jointly with the
Government.
6.5. Financial Management and Disbursement
6.5.1 Country Fiduciary Risk Assessment (CFRA): Despite the encouraging results achieved
regarding improvement of its public finance management system (§ 2.4), the country's overall
fiduciary risk as at June 2015 remained moderate. The fiduciary risk assessment is mainly based on
existing and available diagnoses on Mali's public finance management system, which revealed that Mali's
public finance management system has produced encouraging results. However, fiduciary risks have been
identified at the levels of: (i) internal and external control; and (ii) corruption in the country. For the past two
years, efforts have been made regarding: (i) external control (accelerated judicial auditing of government
accounts from 1992 to 2008, now completed; and (ii) financial transparency and fight against corruption with
the adoption by Parliament on 23 July 2013 of Law No. 2013-031 on the approval of the Public Finance
Management Transparency Code, the promulgation on 27 May 2014, by the President of the Republic, of
Law No. 2014-015 governing the prevention, suppression and punishment of illicit enrichment; and
preparation, by the Prime Minister’s Office, of a framework document on national transparency policy in the
public administration. Despite these considerable efforts, the fiduciary risk remains moderate on the whole,
but the continuing implementation of the ongoing reforms keeps the national public finance system on track.
TA2 presents a detailed country risk analysis with proposals for country fiduciary risk mitigation measures.
6.5.2 Financial Management, Auditing and Disbursement Mechanism: The Programme's resources
will be used in compliance with national regulations on public finance, including the procurement
system. The Ministry of the Economy and Finance will be responsible for the operation's administrative,
financial and accounting management. An appropriation for the operation will be made in the 2015 and 2016
Budgets under the heading “ADB support” for the amounts to be disbursed for the operation in each fiscal
year. A copy of each of the Finance Laws will be sent to the Bank for information. The funds will be utilized
through the Integrated Public Finance Management System (SIGFIP). The first phase of these two operations
- PARGE I - consists of a single tranche disbursement of UA 15 million. This disbursement in 2015 is subject
to the conditions precedent set out in § 7.2.2 below. As stipulated in § 5.4, the operation's presentation to the
Board is subject to the fulfillment of certain reform measures (Table 5), and the PARGE-I appraisal report
proposes a list of key reforms (indicative triggers in Table 5), the positive evaluation of whose
implementation will trigger the preparation of PARGE II and the 2016 disbursement. This programme-based
approach will help to maintain continuing dialogue with the authorities on priority structural reforms and
provide adjusters that will ensure budget aid flexibility and predictability in a context of fragility. PARGE-I
will be audited in accordance with the provisions of the general budget support framework arrangement,
which provides for the use of the national system, i.e., the Audit Bench of the Supreme Court (SCCS) which
controls budget execution. The SCCS reports on implementation of the 2015 and 2016 Finance Laws, as well
as the declaration of compliance, will be available in 2018.
6.5.3. Procurement: Since this operation uses the budget support instrument, which provides support
for structural reforms that will enhance economic governance in Mali, its implementation does not
raise direct issues regarding the procurement of goods and services. Since 2008, the Government of Mali
has conducted deep reforms of the national public procurement system. Public procurement regulations have
been changed/modified several times in order to adapt them to the trends observed and, in particular, to
international norms and standards. The adoption of a revised Public Procurement Code (Programme prior
action) will allow for complete overhaul of public procurement rules, thereby enhancing public procurement
effectiveness. The national public procurement system review conducted by the Bank and updated in 2013, a
21
summary of which is provided in TA 3, concluded that, on the whole, the regulations comply with the
relevant international standards and Bank policy.
VII. LEGAL DOCUMENT AND AUTHORITY
7.1. Legal Documentation
7.1.1 The legal document used for PARGE-I in the amount of UA 15 million will be a Grant Agreement
between the Republic of Mali, the African Development Bank and the African Development Fund (ADF)
acting on behalf of the Transition Support Facility (TSF).
7.2. Conditions for Bank Intervention
7.2.1 Measures Precedent and Effectiveness: Prior to presentation of the grant proposal to the Board of
Directors of the Bank and Fund, the Government of Mali will provide evidence of fulfillment of the PARGE
I conditions precedent as stipulated in Table 5. Grant effectiveness is subject to the signing of a Grant
Agreement between the Bank, the Fund and the Republic of Mali.
7.2.2 Conditions precedent to disbursement of resources under Phase 1 of the programme-based
PARGE I operation in 2015. In addition to the conditions for effectiveness specified in 7.2.1 above, the
disbursement of the UA 15 million grant resources is subject to the following condition precedent: Provide
details of a Public Treasury Account opened at the Central Bank of West African States (BCEAO) in
Bamako for the payment of grant resources.
7.2.3 A simplified appraisal report will be prepared for PARGE-II in 2016 and presented to the Board for
approval. The report will indicate, in particular, the relevant measures precedent taken by the Malian
Authorities prior to Board presentation. A separate Grant Agreement will be prepared for PARGE-II.
7.3. Compliance with Bank Group Policies
7.3.1 PARGE I complies with Bank Group policies and guidelines on programme-based support operations.
No waiver of these guidelines has been requested for this operation.
VIII. RISK MANAGEMENT
8.1.1 The main risks likely to affect the effective implementation of the programme's reforms mainly relate
to: (i) the security and political risk linked not only to the country's fragile situation, but also to the
management of the North Mali problem and good public resource governance; (ii) weak reform
implementation capacity; (iii) the overall fiduciary risk which, in light of recent budget management trends,
remains moderate. The GoM has undertaken to take appropriate measures to mitigate this risk. As regards the
security and political risk, the population elected a President in August 2013 and a National Assembly in
January 2014. Although the security situation in the North of the country has improved tremendously, it
remains uncertain. This risk has been mitigated by the signing of the Algiers Agreement by the Northern
Mali rebel groups in June 2015. MLFO's contribution to policy dialogue and its participation in the different
technical and financial partner monitoring frameworks will help to monitor this risk. The risk of weak
capacity will be mitigated by all the technical assistance provided, in particular, the Bank's PAGE. The
ongoing institutional support project (PAGE) provides significant technical support to the various structures
responsible for implementing the various PARGE-I reforms. The fiduciary risk will be mainly mitigated by
strengthening public finance management through effective implementation of the National Internal Control
Strategy and PAGAM-PFM II.
22
IX. RECOMMENDATION
In light of the foregoing, Management recommends that the Board of Directors should approve: (i) the
proposed programme-based support operation, spread over two years (2015-2016); and (ii) an amount of UA
15 million from Pillar 1 resources of the Transition Support Facility to finance Phase I of the Governance and
Economic Reform Support Programme (PARGE I) for the purposes and subject to the conditions stipulated
in this report.
I
Annex 1: Letter of Government Development Policy
MINISTRY OF THE ECONOMY AND FINANCE REPUBLIC OF MALI
ONE PEOPLE – ONE GOAL– ONE FAITH
GENERAL SECRETARIAT
Bamako, 24 August 2015
No. __________/ EFM – GS The Minister of the Economy and Finance
To
Mr. Abdellatif BERNOUSSI
Director, West Africa Region,
African Development Bank
CCIA Building,
Avenue Jean Paul II
01 P.O. Box 1387,
Abidjan 01,
Côte d'Ivoire
Subject : Letter of Development Policy for the Economic Governance Reform
Support Programme, Phase 1 (PARGE I).
Dear Sir,
I have the honour to transmit to you this Letter of Development Policy in support of the Government of the
Republic of Mali's request for assistance from the African Development Bank Group (ADB) for an Economic
Governance Reform Support Programme (PARG) to improve economic and financial governance and
contribute to the establishment of conditions for strong, inclusive growth driven by a more effective and
dynamic private sector. This Letter of Development Policy (LDP) outlines economic and social
developments in Mali in 2014 and the outlook for 2015 and 2016. It is consistent with the 2012-2017
GPRSP adopted in December 2011 and the 2013-2018 Government Action Plan (GAP). The main focus of
the Letter of Development Policy is the implementation of the Government's priority reforms, which will be
supported by the Economic Governance Reform Support Programme that the African Development Bank
(AfDB) wishes to set up.
2. The Economic Governance Reform Support Programme, Phase I, is a continuation of the African
Development Bank Group's support to Mali in order to help the Authorities maintain macroeconomic
stability. To that end, it addresses two major concerns: (i) improve public expenditure efficiency so as to
heighten its impact on the country's economic and social development; (ii) strengthen investment promotion
and the development of enterprises in the country by improving the business environment and establishing
appropriate financing mechanisms.
3. PARFE-I will support the continuing implementation of reform measures concerning the following
two main areas: (a) public expenditure efficiency; and (b) private sector development support. These two
components relate to reform measures to be implemented over the Programme period. The Component 1
reform measures are drawn from the Government Action Plan to Improve and Modernize Public Finance
Management (PAGAM-PFM). The measures under the second component fall within the scope of the 2015
Business Climate Action Plan. Implementation of these plans is supported technically by the PAGE, the
ongoing institutional support project.
II
All these measures are intended to ensure more effective use of public resources so as to heighten their
impact on the country's economic and social development and, at the same time, contribute to private sector
development in order to allow it to play its role as a driver of economic growth, job creation as well as
reduction of poverty and inequalities.
Salient Features in 2014
Political, Social and Economic Context
4. Mali is gradually recovering from the 2012 crisis following the restoration of security, the triggering
of the Algiers process peace negotiations in 2014 which led to the signing of the Global Peace Agreement in
two stages on 15 May 2015 and 20 June 2015, and the return of the country's technical and financial partners.
5. The redeployment of the French force “Serval”, which was replaced by the much more regional
Barkhane force, the European Union Training Mission for Malian Armed Forces (EUTM), as well as for
soldiers from several countries participating in the United Nations Integrated Multidimensional Stabilization
Mission in Mali (MINUSMA) have helped to rebuild the Malian army and contributed to the overall
restoration of the central government's authority and integrity in Mali's northern regions. The Government
also adopted the Military Orientation and Programming Law, which demonstrates the determination of Mali's
highest political and military authorities to provide the country with a defense tool that is capable of
preserving the country's fundamental interests.
6. Starting in 2004 with international community support and under the auspices of the Republic of
Algeria, the Inter-Malian negotiations led to the signing of the Peace Agreement on 15 May and 20 June
2015 which has paved the way for peace and reconciliation in the country.
7. The Donor Conference to aid Mali's development, held in Brussels on 15 May 2013 and the five
follow-up meetings were highly successful bringing together 80 countries and 28 international organizations
that pledged €3.3 billion, (USD 4.4 billion, CFAF 2,200 billion or 39% of GDP), 66% of which has already
been disbursed and 33% disbursed through the general government budget. The fifth and final follow-up
meeting was held in Bamako on 17 February 2015.
Macroeconomic Developments and Implementation of Emergency Economic Recovery Measures
Macroeconomic level
The economic recovery is gathering momentum as a result of policies in favour of agriculture and the
restructuring of public finance through the payment of arrears owed to suppliers. Real GDP growth was 7.2
percent compared to 1.7 percent in 2013. This sound performance was due to a rebound in growth in the
primary and secondary sectors. As a result of favourable rainfall and the provision of agricultural inputs early
in the crop year, agricultural output rose by almost 15 percent. In the secondary sector, production was up by
9 percent as a result of a particularly strong rebound in the manufacturing industry sector. Tertiary sector
growth was below 4%. Consumer price inflation was only 0.9% as a result of the good crop year.
9. On the public finance front, the overall fiscal deficit (cash basis, including grants) rose to 4.6% of
GDP compared to 2.9% in 2013. Revenue and grants totalled CFAF 1,265 billion (21.2% of GDP), less than
the programme level (23.7%), for a number of reasons including underperformance in customs receipts and
delays in the disbursement of general and sectoral budget support grants which were initially planned for
2014 but disbursed only in 2015. Total expenditure and net lending stood at CFAF 1,571 billion (26.3% of
GDP). The basic fiscal balance posted a deficit of CFAF 97.3 billion (1.6 % of GDP), nearly twice the
programme level.
10. The current account deficit (including grants) of the balance of payments widened to 7.3% of GDP
compared to the 2013 figure of 3.4%. This came about in the wake of declining gold prices and increased
III
imports associated with the economic recovery. The current account deficit was only partly financed by net
inflows of capital, mainly in the form of external assistance and foreign direct investment (FDI). As a result,
the overall balance of payments posted a deficit of CFAF 174 billion (USD 353 million), financed by a
drawdown of Mali’s foreign-exchange reserves at the Central Bank of West African States (BCEAO).
11. The money supply expanded by 7.1%, driven by an 18.7% expansion in credit to the economy. The
commercial banks benefit from the BCEAO’s accommodative monetary policy by using central bank
advances to finance the Malian economy and purchase securities issued by the West African Economic and
Monetary Union (WAEMU).
Implementation of Emergency Recovery Measures
Enhancement of Public Management Governance
Improvement of Public Expenditure Quality
12. Adequate provision of basic social services is required to improve the population's living conditions.
In order to address this challenge, the Government has continued its efforts to improve public expenditure
quality through basic social spending of about CFAF 366 billion on education and health compared to the
forecast of CFAF 364 billion. This measure has helped to build central government's capacity to provide the
population with basic social services, especially in education and health.
Strengthening of Public Management Transparency Mechanisms
13. For several years, the Government has adopted a policy to strengthen public management
transparency and make public administrators more accountable, particularly by implementing the
Government Action Plan to Modernize and Improve Public Finance Management (2006-2010 and 2011-2015
PAGAM). In order to ensure constant improvement of public finance management, the Government
continued the finalization in 2014 by the Audit Bench of the Supreme Court (SCS) of the settlement of the
public accountants' management accounts from 1960 to 2015. As a result of this work, updates are provided
of normal audits of accounts, while strengthening judicial oversight of public management.
14. Furthermore, in order to help improve public management transparency in budget execution, the
Government signed Decree No. 2014-2037/MEF-SG on 31 July 2014 determining the list of expenditure
items paid before authorization to pay and the conditions for their settlement.
15. It also established a framework for contracts awarded and classified as pertaining to a defense secret
or essential government interests which are exempted from the selection methods and controls of the bodies
planned under the public procurement code as stipulated in Article 8 of Decree No. 08-485/P-PM of 11
August 2008 in accordance with Decree No. 2014-0764 of 9/10/2014 concerning the procurement of goods
and services excluded from the scope of Decree 08-85/P-RM of 11 August 2008, which governs contracting
procedures, the execution of contracts, settlement of public contracts and public service delegations. This
new decree focused on public management transparency mechanisms, including those areas pertaining to
defense secrets or essential government interests.
Consolidation of Economic Recovery
Support for Priority Public Investments
16. One of the main drivers of economic recovery is the promotion of public investment. In order to
increase the investment rate in its budget, the Government has included in its Special Investment Budget
under the 2015 Finance Law priority investment projects (social, education, health, and infrastructure
agriculture and water supply sectors) for an aggregate amount of over CFAF 100 billion. This has
consolidated support for the social, education, health, infrastructure, agriculture and water supply sectors in
favour of the population.
IV
17. It is also essential to carefully select investments in order to make priority investments that will
support economic recovery. To that end, a single consultative committee has been established to select
projects whose purpose is to examine, assess and select public investment projects to be included in the
Three-Year Investment Plan (TYI) and the Special Investment Budget (SSIB). In order to operationalize the
Committee, the Government has established a Technical Committee for the selection of projects and
programmes in Mali. This more technical Committee has improved the selection of projects to be included in
the Three-Year Investment Plan and Special Investment Budget.
Support for Private Sector Activities
18. A buoyant private sector can act as a catalyst for economic recovery. This buoyancy depends
greatly on the rapid payment of government financial commitments to private suppliers, in particular, in
sectors such as energy (the example of EDM-SA) and the establishment of business environment reform
management and monitoring tools. To that end, the Government entered a significant subsidy amount in the
2014 budget in order to clear payment arrears owed to its suppliers. Clearance of these arrears owed by
Government to its suppliers, particularly in key sectors such as energy (the example of EDM-SA), has
allowed private enterprises to honour their commitments to the banking system and will enable the latter to
finance economic activity by granting more credit to the economy, especially in the priority sectors of energy
and water.
19. In efforts to constantly improve the business environment, the Government revised Decrees Nos.
2009-127 and 2011-142 on the establishment of the Joint Business Framework Reform Monitoring
Committee. This revision laid the foundations for the recovery of private sector activities and revival of the
economy on a sound footing in terms of monitoring and steering reforms aimed at improving the business
environment.
Outlook for 2015-2016
Macroeconomic Prospects
20. The efforts made by the Government, particularly in the agriculture sector and the return of the TFPs, will
help to maintain real GDP growth at 5% in 2015 and over 5% in 2016. These projections will depend on
sound performances in the construction and services sectors.
21. The current account deficit (including grants) is expected to narrow to 4.3% of GDP in 2015 due to
a drop in oil product prices, and to be completely financed by foreign direct investment in the gold sector and
telecommunications and external aid in the form of loans. The overall balance of payments is expected to be
close to equilibrium over the 2015-2016 period.
22. Implementation of prudent monetary and fiscal policies should contain inflation in line with the
community convergence criterion of 3% per year provided rainfall is favourable.
23. As regards fiscal policy, the Government adopted the 2015 Supplementary Finance Law at the
National Assembly to reflect expenditure relating to the Military Orientation and Programming Law
(LOPM), the partial impact of the Algiers Agreement, and wage increases following an agreement with the
Trade Unions. Revenue has also increased due to the sound performance of the taxation and collection
services. The targeted levels of revenue and grants is CFAF 1508 billion, i.e. 23.6% of GDP compared to
CFAF 1395 billion and 22.3% under the original law. With these adjustments, the new SBL will be built
around a deficit on the basic balance of CFAF 49 billion (0.8% of GDP) compared to an equilibrium balance
under the original law and an overall deficit (including grants) of CFAF 321 billion (5% of GDP) compared
to 4.4% under the original Finance Law.
V
Measures Envisaged to Enhance Governance and Boost Economic Recovery
Improved Public Expenditure Efficiency
Strengthening of Fiscal Decentralization
24. In order to give fresh impetus to the deepening of decentralization, the Government in 2014 adopted
the legal framework for establishing State-Region Planning Contracts and intends to sign two (2) planning
contracts in two regions in 2015 and three (03) planning contracts in three regions in 2016. The objective of
this policy is to equip the regions with adequate infrastructure financing management tools to ensure the
economic and social development of the regions.
25. In support of the process, it is the Government's intention to relaunch the process for transferring
powers and resources to the Local Authorities. To achieve this goal, it undertakes to prepare an action plan
to facilitate the transfer of powers in previously identified sectors.
Strengthening the Role of Internal Control
26. Internal control plays a key role in improving transparency and economic and financial governance.
Since 2013, the Government has embarked upon a far-reaching project to provide the sector departments with
risk maps in order to better target controls and improve their efficiency. It has completed the mapping for
four (4) departments. To support this policy, the Government intends to complete the establishment of
financial control delegations in the Ministries and specialized bodies in order to strengthen internal controls.
27. To that end, the Government undertakes to complete before the end of 2015 the establishment, in
seven (7) Ministries, of financial control delegations and, subsequently, in 2016 to propose financial control
delegations in PABs in view of the size of their budget. The establishment of financial control delegations in
the Ministries and specialized bodies will help to improve public expenditure quality.
Improvement of Public Procurement Management
28. Public procurement management contributes to public expenditure efficiency and public service
delivery of government services. In order to adapt to community standards, the Government is planning to
revise the Public Procurement Code in 2015 to reflect the related new WAEMU Directives.
29. It also intends to approve the transposition of WAEMU's standard public procurement documents
into national law.
30. In order to reiterate the elementary rules of ethics and deontology concerning public procurement,
the Government intends to adopt in 2015 a Code of Ethics and Deontology, which will apply to all actors in
the public procurement chain. This Code aims to improve public procurement transparency and governance.
The Public Procurement Regulatory Authority will prepare a public procurement audit report for the 2015
fiscal year in 2016 as it does every year.
Support for Private Sector Development
Investment Promotion and Support for Private Sector Development
31. Addressing the challenges of the post-crisis period requires the promotion and relaunching of
investment in the country. Consequently, the following reforms constitute the framework for building a
cohesive private sector development programme by facilitating the establishment of a Limited Liability
Company and by describing the Public-Private-Partnership Framework. To that end, the Government intends
to have the Joint Committee approve the 2015-2018 Strategic and Operational Action Plan for the business
framework in 2015.
VI
32. It is also planning to prepare and have adopted a Three-Year Private Sector Development
Programme to promote a dynamic private sector that can generate wealth and increase revenue.
33. The Government had previously undertaken to have adopted by the Council of Ministers a bill
fixing the minimum capital required to establish a limited liability company. The bill will foster the
emergence of LLCs in order to promote the establishment of job-creating small and medium-sized
enterprises.
34. In order to provide the country with a legal framework for public-private partnerships, the
Government undertakes to have a bill on the institutional framework governing Public-Private Partnerships
adopted. The instrument will contribute to the promotion of PPs in the country.
Improvement of the Business Environment
35. A dynamic private sector spurs job creation and economic growth. The Government will therefore
implement reforms concerning the transposition of the Directives on the opening of credit bureaux, the 2015-
2018 strategic and operational action plan for the business framework and a lowering of the tax on wages and
salaries (ITS) and land tenure security.
36. In order to improve credit information management to increase credit to the economy in favour of
the private sector, the Government will in 2015 adopt texts on the opening of credit bureaux.
37. The aim of the measure to reduce the tax on wages and salaries is to foster job creation and make
legislation more attractive. To that end, the Government undertakes to have the Council of Ministers adopt a
national state-owned land and land tenure policy in 2016.
Programme Monitoring
39. The implementation of the Economic Governance Reform Support Programme (PARGE) will be
coordinated by an Inter-Ministerial Committee chaired by the Ministry of the Economy and Finance, and will
comprise the Ministries responsible for Investment Promotion and Justice.
40. The Government remains convinced that, with AfDB's support through the Economic Governance
Reform Support Programme (PARGE), the satisfactory implementation of the envisaged measures will help
to improve the quality of expenditure and promote a dynamic private sector that can contribute to economic
recovery and poverty reduction.
41. Please accept, Sir, the assurances of my highest consideration.
Mamadou Igor DIARRA
Officer of the National Order
[Signed]
Copies:
-AfDB Executive Director for Mali
-AfDB Resident Representative
VII
Annex 2
MALI: Economic Governance Reform Support Programme
Matrix of PARGE Reforms
Specific
Objectives 2015 Measure 2016 Measure Output Indicators
Outcome
Indicators
Component I – Improvement of Public Expenditure efficiency
Improvement
of fiscal
decentralizatio
n
Adopt and operationalize, at government
level, an action plan for the transfer of
powers and resources to Local
Authorities
- Action Plan for the transfer of powers
and resources adopted before the end
of July 2016.
Overall budget
appropriation
deconcentration
rate: Baseline
10.3% of
expenditure in
2014; Target
14% in 2016
Sign two (2) planning contracts for
the regions
Sign three (3) planning contracts for the
regions
- 2 planning contracts before the end
of September 2015;
- 3 planning contracts before the end
of July 2016.
Transpose the WAEMU Directive on
the Local Authorities' financial
system into Malian domestic law
Operationalize/implement the new
financial system for local communities
in the country's 9 regions
Texts relating to WAEMU Directives
on the financial system adopted by
the CM for transposition into
domestic law before the end of 2015;
Eight (08) of the country's regions
implement the new system before the
end of July 2016.
Improvement
of Public
Procurement
Management
Have the Council of Ministers adopt
the revised Public Procurement Code
Adopt the implementing decrees in
compliance with WAEMU Directives
The revised Public Procurement
Code is adopted by the CM before
the end of September 2015; The Implementing Decrees for the
Code issued by the Minister before
the end of July 2016.
PEFA PI-23
(formerly PI-19)
on competition,
value for money
and controls in
public
procurement:
Baseline C in
2010; Target B
in 2016
Prepare a PP Code of Ethics and
Deontology applicable to all public
procurement actors
A PP Code of Ethics and Deontology
applicable to all public procurement
actors is prepared and adopted before
the end of July 2016.
Transpose and adopt the WAEMU
regional standard bidding documents
WAEMU regional standard bidding
documents adopted and transposed
into Malian domestic law before the
VIII
Specific
Objectives 2015 Measure 2016 Measure Output Indicators
Outcome
Indicators
end of September 2015
Preparation of 2015 Public Procurement
Audit Report and publication of the
Report on the MEF or ARMDS websites
The 2015 Audi report is prepared and
published on the MEF or ARMDS
website before the end of July 2016.
Strengthening
of Role and
Effectiveness of
Internal
Control
Finalize the establishment of
financial control delegations in the
Ministries
Establishment of financial control
delegations in four (4) additional
specialized bodies e.g. public
administrative bodies.
Preparation of the quarterly activity
reports of the financial control
delegations
- All the Ministries have a financial
control delegation before the end of
September 2015;
- Four (04) – PABs have a financial
control delegation before the end of
July 2016;
- 2 activity reports for the Ministries
for the first two quarters of 2016
before the end of July 2016.
Prepare risk maps for 6 new Ministries - Risk maps for 12 Ministries before
the end of July 2016.
Have the CM adopt the texts on the
establishment of internal audit services
in the Ministries and specialized bodies
- Text adopted by CM before the end
of July 2016.
Strengthen control of the service
rendered by the preparation of an annual
audit report on internal control service
delivery
- Annual verification report on
service delivery [2015 Report]
before the end of July 2016.
Component II – Support for Private Sector Development
Improvement
of the Business
Environment
Have the Council of Ministers adopt
the 2015-2018 Business Framework
Strategic and Operational Action
Plan
Implement the strategic plan Strategic and Operational Action
Plan adopted by the Joint Committee
before the end of September 2015
and by the Council of Ministers
before the end of 2015;
Report on implementation of the plan
during the first half of 2016 available
before the end of July 2016.
Domestic credit to
private sector (%
of GDP) : Target
24.4% of GDP
in 2014; Target
27% in 2016
Transpose into domestic law the Operationalize the credit bureaux Transposition text adopted before the
IX
Specific
Objectives 2015 Measure 2016 Measure Output Indicators
Outcome
Indicators
WAEMU Directive on the opening
of credit bureaus
end of September 2015;
Quarterly Office operationalization
reports available before the end of
July 2016.
Prepare and have the CM adopt the
national state-owned land and land
tenure policy
The policy is adopted before the end
of July 2016.
Dematerialization of 60% of land titles
in Bamako and Kati
60% of land titles are safeguarded
before the end of July 2016.
Support for
Investment
Promotion and
Private
Enterprise
Development
Reduce companies' payroll expenses
[Have the CM adopt a text reducing
the tax on wages and salaries (ITS)]
- Text adopted before the end of
2015
Have the CM adopt the bill on the
minimum capital for limited liability
companies
Text adopted by CM before the end
of August 2015
Prepare and have the CM adopt a
quarterly private sector development
programme
Programme adopted by CM before
the end of July 2016.
Have the CM adopt and table before
parliament a regulatory framework [bill]
governing Public-Private Partnerships
Bill adopted by CM before the end
of July 2016.
Launch the selection process for projects
eligible for PPP financing
Public investment project selection
system: the system is established
before the end of 2015 and
operational before the end of July
2016.
X
Annex 3
Results Achieved under Previous Budget Support Operations in Mali
Strengthening of Public Finance Management
Reduction of the amount of central government transfers to CMDT from CFAF 23 billion in 2007 to a maximum
of CFAF 15 billion in 2008 and CFAF 10 billion in 2009.
Launching of competitive bidding for the privatization of the four CMDT branches retained no later than June
2009
The coverage rate of services (budget of interconnected services compared to total general government budget
excluding external financing and accounts in annex) was 45.2% as at 31 March 2008, 48.1% at end 2008
compared to an estimated 50 %. In 2009, it was 83.5% compared to 75% i.e. an overrun of 8.5%. By the end of the
first half of 2010, all expenditure services were interconnected except for Kidal region, which is being connected.
However, the interconnection of revenue services is experiencing difficulties because the new management of the
Telecommunications Company of Mali (SOTELMA) following its privatization, has called into question the
programme to expand its fiber optic (F.O.) interconnection infrastructure to the Revenue Authorities. The Ministry
of the Economy and Finance envisaged alternative solutions and has decided to establish an IT Master Plan for
that Ministry which will ultimately ensure interconnection of the revenue and recovery services.
The regularization of suspense and advance payment accounts was made mandatory at least in the first two months
of year n+1 pursuant to Instruction No. 001 issued by the National Treasury and Public Accounting Director on 29
October 2007 inviting all senior accountants to systematically settle accounts and provide ten-day accounting
statements. This instruction has entered into force, and suspense and advance payment accounts will be
regularized in the first two months of year n+1 as from 2010.
Recruitment of financial judges for the Audit Bench increasing the number to 67 by the end of 2009 in order to
ensure timely production and certification of State accounts.
Public Procurement and Public Services Delegation Regulatory Authority (ARMDS) was established by Law No.
08-023 of 23 July 2008 and its members appointed on 15 April 2009. ARMD's budget was CFAF 300 million in
2009 and CFAF 1.637 billion in 2010. From the start-up of its activities in 30 November 30 November 2010,
ARMDS has issued 43 decisions, including 3 decisions on sanctions. The Authority has also trained 299 public
procurement actors. However, ARMDS is faced with a number of challenges: (i) difficulties concerning the
collection of dues, (ii) lack of financial resources, and (iii) the need to build human resource capacities.
In terms of value, the proportion of contracts awarded through direct negotiation represented 19.13% of total
contracts awarded in 2009. Also, the value of contracts awarded by direct negotiation fell from CFAF
52,331,508,137 in 2008 to CFAF 42,858,612,239 in 2009, i.e. by 18.10%. In addition, the public procurement
bulletin has been published on a regular monthly basis by DGMP since March 2007. In short, there is general
satisfaction in this area.
In 2014, the Government established the list of expenditure items paid without payment authorization and the
procedure for their settlement.
The Audit Bench of the Supreme Court (SCCS) audited the management accounts of public accountants from
1960-2008: Law 2013 /001- AN-RM of 15 January 2013; from 92 to 2008 : 61 hearings organized, 186 public
accountant accounts audited, and 46 decisions given. In the case of Local Authorities (from 1992 – 2008): 4566
LA public accountant accounts audited and 54 decisions given.
The Government has issued a decree (No. 2014 – 0764/ PM- RM of 19 October 2014) establishing the system for
the procurement of works, supplies and services excluded from the scope of Decree 08-85/P-RM of 11 August
2008 which governs contracting procedures, the execution of contracts, settlement of public contracts and public
service delegations.
Promotion of Decentralization
Adoption in 2010, by the Council of Ministers, of texts on the revision of: (a) amended Law No. 93-008 defining
conditions for the administration of LAs; (b) amended Law No. 95-034 providing a Code for the Local
Authorities; (c) Law No. 00-044 determining the tax resources of municipalities, districts and regions of Mali
Effective utilization of budget and accounting instructions, as well as the account operating guide from 2008:
As part of the establishment of transparent procedures, training programmes and appropriate technological
resources in order to strengthen territorial financial governance, the implementation of budget and accounting
instructions and availability of the account operating guide are effective since 2006.
Development of software for payment authorization officer's requirements in 2009.
XI
Resumption of normal operation of government services and rebuilding of State capacity to provide basic
social services
Budget allocations to the social sectors represented CFAF 386.43 billion in the 2013 SBL.
The Government made budget allocations for the ANICT (National Local Authority Investment Agency) in favour
of the decentralized communities for the rehabilitation and equipping of basic health centres and schools in the
amounts of CFAF 10.1 billion and CFAF 14.778 billion in 2013 and 2014 respectively
The redeployment of public service workers to the liberated regions was effective, especially to Gao and
Timbuktu.
The CPIA indicator score for “Service delivery and operational efficiency of public administration” rose from 3.5
in 2012 to 4 out of 5 in 2014.
Support for Creation of Appropriate Conditions for Economic Recovery
The Government has established a single consultative framework for the selection of public investment projects
and programmes (Decision 0027/MEFB-SG of 1 March 2013).
The Government had an independent audit conducted in 2012 for a comprehensive inventory of cumulative
domestic payment arrears.
The public investment rate rose from 4.8% of GDP in 2012 to 6.8% in 2013.
The Government has established a Development Project and Programme Monitoring Committee through the
creation and operation of the Technical Committee for the Selection of Public Investment Projects and
Programmes in Mali. This Committee provides support to priority public investments.
The Government included CFAF 7 billion allocation in the 2014 SBL for the settlement of EDM-SA's arrears
owed to suppliers
The Government has revised Decrees 2009-127 and 2011-142 establishing the Business Framework Reform Joint
Monitoring Committee (Decree 2015 -0117/PM-RM of 25 February 2015)
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Annex 4
Annex 6: Main Fragility Assessment Results
Introduction
1. Over two years after the security, political and institutional crisis which shook the country and
threatened the sub-region's stability, Mali is struggling to regain its former stability despite the return to
constitutional order and the establishment of new institutions following the democratic elections considered
to be transparent and credible by international observers. The coup d’état on 22 March 2012 in Mali plunged
the country into one of its most serious crises since its accession to international sovereignty with the 9-
month long occupation of the northern regions by armed groups. Mali's territorial integrity was thus
threatened, rendering the Government and army incapable of assuring the security of citizens and their
property following the mutiny of a small group led by junior officers which rapidly turned into an improvised
coup d’état. The crisis resulted in the weakening, and even collapse, of institutions and central government's
capacity to provide the population with essential services, as well as in the deterioration of the population's
living conditions, performance of the economy, infrastructure, governance and the business climate. The
political class neutralized itself by indulging in the manoeuvres and rhetoric of the putsch supporters and
detractors, and thus demonstrated its inability to abandon elitist and opportunistic rivalries to meaningfully
contribute to the quest for solutions commensurate with the challenges facing the country. The efforts made
both by the International Community and by regional institutions led to the retreat and dispersal of the
putchists and the formation of a Transitional Government. Following the announced retreat of the putchists
and the resignation of President Ahmed Toumani Touré, the Constitutional Court confirmed the vacancy of
power and mandated the President of the National Assembly, Mr. Dioncounda Traoré, to lead the transition
period as from April 2012.
2. It was against this backdrop of transition and following the resumption of operations by the Bank in
October 2012, that the Bank fielded a mission of high-level experts to Mali in November 2012 “to take stock
of the Bank's portfolio in Mali and make proposals for its restructuring”. On that occasion, the Bank agreed
with Mali on an operations programme that would allow it to support the transition process and, in particular,
“contribute to strengthening the resilience of the most vulnerable segments of the population, entrench the
rule of law and lay the foundations for a robust economic recovery to accompany the transition, pull Mali out
of the crisis and hence prevent or curb the spillover of this situation to all the countries of the Sahel and
Saharan sub-region (ECOWAS and WAEMU)”. Mali's development partners established that the crisis had
not affected the macroeconomic fundamentals. However, its nature, scale and potential threat to the entire
sub-region suggests that Malians and the International Community should endeavour to determine the root
causes of an apparently sudden and brutal security, political and institutional crisis in a country and
institutions hitherto cited as an example of democracy and stability. The disintegration of State institutions
within a two-month period highlighted Mali's degree of fragility and led Malians and external observers to
reflect not only on external factors of fragility, but also on internal factors specific to Mali.
Mali's Factors of Fragility
3. Even though many were shocked by the collapse of institutions in Mali in the wake of the 2012 coup
d’état, it did not surprise many Malian citizens and other analysts who had long sensed the growing
frustration and tension related to poverty, inequality, corruption and sectarian divisions. The challenge to the
State's legitimacy clearly shows that the signs of democratic order or economic growth masked uncertainty,
which is often the major underlying problem facing the authorities every day. Mali's factors of fragility may
be grouped into 4 broad categories:
I. Geographic and Demographic Environment
4. Mali is a country with an ancient civilization, whose geographical space is split between the
Sahel/Sahara, savannah and forest areas. The country suffers from vulnerability inherited from balkanization,
a hostile isoclimatic environment, which is struggling to achieve sustainable economic development that
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would contain endemic poverty. A vast Sahel-Saharan country (second only to Niger in terms of size among
its 7 neighbours), it is characterized by a desert area over 2/3 of its territory and is landlocked in the interior
of West Africa. These vast expanses located in the North of the country are inhabited by various human
groups (Songhaï, Fulani, Bella, Tamasheq, Arabs and Moors). It is a region with no natural resources and its
naturally weak nomadic pastoral economy is subjected to severe climatic conditions. The country's relief is
fairly flat. The very vast alluvial plains are, however, dominated by some limestone and sandstone plateaux.
The country has three climatic zones: desert in the north (with less than 127 mm of water per years) through
the forest zone in the south (up to 1400 mm) to the Sahel zone in the centre (where rainfall varies between
200 and 550 mm). The cycle of droughts that hit the Sahel in the 1970s and 1980s deeply affected the North
of Mali, gradually eroded the population's living conditions, and made the socioeconomic system even more
vulnerable. The region's marginalization was exacerbated as a result, as the Government, moreover,
acknowledged during the National Pact negotiations.
5. Mali's population has quadrupled since independence, despite high emigration, from 3.5 million in
1960 to 14.5 million in 2009. Population density, which is highly variable, ranges from 90 inhabitants/km² in
the Central Niger Delta to fewer than 5 inhabitants/km² in the Saharan region of the North. The population is
therefore concentrated in the southern part of the country, while the three northern regions (Gao, Timbuktu
and Kidal) only account for 9% of the total population. Overall, Mali's population is very young with the
under-25 representing 65%. Furthermore, children (especially girls) and women remain vulnerable as a result
of violence (early marriage, genital mutilation, fattening, etc.) against them. Rapid urbanization drove the
urban population (in the administrative sense) up from 22% in 1987 to 27% in 1998 then to 35% in 2009,
without the urbanization being triggered by growing industrialization. According to an economic survey
carried out in 2008, Mali suffers an annual loss in well-being and income equivalent to about 20% of its
GDP, i.e. over CFAF 680 billion (or almost 1.3 billion US dollars), caused by environmental degradation and
the inefficient use of natural resources and energy.
6. Drought: Drought causes a sharp reduction in cereal production and an increase in cereal prices, a
shortage of cattle fodder and environmental degradation, which is responsible for the displacement of
communities and the deepening of chronic poverty, further exacerbated by the conflict/crisis. According to
the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), a serious food and nutrition
crisis is threatening the Sahel region, while over 10 million people are already affected by food insecurity and
over a million exposed to acute malnutrition. Five of the six countries in the region (Burkina Faso, Chad,
Mali, Mauritania and Niger) are concerned with almost 800,000 farmers and stockbreeders vulnerable,
experiencing a series of recurring food crises. According to estimates, at least 15 million people are
threatened by food insecurity in the Sahel region.
Causes of Environmental Degradation
7. Mali's environmental governance performance is weak, which rank's the country in 156th position
out of 163 classified countries (2010 EPI). Population pressure on scarce arable land in a fragile ecosystem is
the most important factor, which accelerates environmental degradation in Mali. The relatively high
population growth rate in Mali occurs within an already fragile biophysical and socioeconomic environment
characterized by irregular and insufficient rainfall as well as drought. There is only sufficient rainfall for
rainfed crops (estimated at over 600 mm per year) in about 25% of Mali's total surface area, chiefly in the
Sudano-savannah agro-climatic zone. Moreover, arable land only represents one-third of the country's total
area (1.24 million km2). In light of these constraints, the unregulated interaction between population growth,
the fragility of the ecosystem and irregularity of rainfall have created serious environmental problems with
economic and social consequences for the rural poor, in particular women. The main environmental problems
are the degradation of land (agricultural land, forests and river shores), surface and groundwater pollution,
dwindling biodiversity, air pollution and drought.
8. Alongside this population pressure, other factors causing degradation include the lack of economic
alternatives, particularly for the agricultural and rural communities, the widespread lack of environmental
awareness raising, limited institutional capacity to comply with existing regulations, no comprehensive
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policy on land use with land tenure rights and clearly defined macroeconomic policies, and the absence of
general institutional standards. The lack of alternative economic activities has resulted in greater dependency
on, and overexploitation of agricultural land. On the macroeconomic front, the loss of traditional livestock
export markets due to weaker international competitiveness, firewood pricing policies and an inefficient
forestry taxation system have indirectly contributed to the growing environmental problem.
9. Even though some of the causes of land degradation are beyond human control, others, such as the
declining soil fertility, erosion or bush fires, are not. The main variables which cause land degradation are
determined by human behaviour in relation to the environment. This includes, in particular, the reduction of
fallow periods, inappropriate agricultural practices, overgrazing of pasturelands, deforestation and use of
firewood. Most of these variables have deeply rooted institutional, legal, economic and social causes, which
have resulted in environmental degradation.
10. In order to address this environmental problem, Mali and its development partners must identify the
main factors influencing degradation and develop strategies to: (a) stop the present rate of degradation, (b)
prevent future environmental deterioration, and (c) restore a functional natural environment. These strategies
will entail the preparation of coherent population growth policies, the promotion of more efficient public
resource management, training and increased environmental awareness raising and stronger participation of
community associations. The key components of these strategies could be local capacity building, i.e. for
community associations to encourage greater grassroots participation, appropriate incentive measures and the
revision and implementation of land ownership and other laws.
II. Structural Factors of the Economy
11. Mali's political and economic structures were built on the basis of models inherited from the French
colonial administration, which were not always designed for the benefit of the Malian people. Until 2011, i.e.
prior to the 2012 crisis, all the country's economic indicators were still strong due to stable growth averaging
5.7% since 2005 and a sustainable budget deficit. Even though this economy was one of the best performing
economies in the WAEMU sub-region – due to the fact that it is mostly based on activities carried out in the
southern part of the country, under government control, and where abundant rainfall stimulates the
production of cotton and other agricultural products, and where gold mining continues to grow – and has
demonstrated its resilience to environmental, security and political crises, the country remains one of the
poorest in the sub-region and its fragility cannot be ignored. With a projected population of 30 million by
2030, the country could be asphyxiated by its very rapid population growth. Since under-15 youths represent
almost half the population, it is to be feared that a flood of young people will enter the already sluggish
labour market, which will have to deal with almost 300,000 additional jobseekers per year by 2030.
However, education and training, which are essential for such an inflow require significant budget efforts
which the country is unable to meet. The country is also faced with a type of unbridled urbanization – it is
estimated that Bamako will have 5 million inhabitants by 2030 – which exerts stronger pressure on the public
authorities who are experiencing great difficulty in keeping up with the movement in terms of appropriate
infrastructure, especially sanitation, water and transport. If these difficulties are compounded by the recurrent
problems of insecurity with, as a corollary, rising urban poverty and youth unemployment, it is possible that
the country will experience great difficulty in reducing its dependency on multilateral and bilateral aid which,
representing one-quarter of the general government budget and about 4/5ths of public investments, limit
government's ability to take initiatives.
12. Agriculture, which remains of the family type, employs almost 2/3 of the labour force, while the
country only cultivates 3.2 million hectares, i.e. thirteen times less than the amount of arable land identified.
It is therefore important to prioritize investments in more intensive and rational use of water resources.
13. Mali's medium-term mining prospects are not strong. Almost all the companies mining gold - the
main source of export earnings – are of foreign origin. The contribution of the private sector, in general, and
the industrial sector, in particular, to GDP formation is low and the economy is dominated by the informal
sector. Unemployment tends to be structural, and rural under-employment is widespread. Rising urban
XV
unemployment and precarious informal activities are the salient features of the employment landscape. The
private and public formal sector only employs 6% of the labour force. Women are under-represented in the
formal sector and socio-professional categories which require a certain level of training and qualification.
III. Political Agreements and Governance
14. Mali, like most African countries, has experienced a long period of authoritarian regimes and/or
military dictatorships. However, unlike many of these countries, Mali's transition to a full multiparty system
and democracy has been atypical: the surge of social movements demanding the establishment of multiparty
democracy was brutal and claimed the lives of thousands of Malians. This process was, moreover,
accompanied by a group of officers considered as “soldiers of democracy” who overthrew the existing
regime (March 1991). This upheaval led to the holding (in July – August 1991) of a Sovereign National
Conference, which served as framework for serious discussion between the elite and all the actors in society
on the new policy, economic and social directions of the future Mali. Unlike other countries, where the
democratization experience was called into question, Mali was able to stay the course (for 20 years) and
continue to strengthen democratic governance, in particular, normalization of the multi-party system
anchored on a peaceful and credible electoral process, respect for political freedoms, etc. (even though the
participation of Malian citizens in elections has not been strong: in the last five Presidential elections in the
country's democratic history, the 40% turnout threshold was only reached or exceeded once at the last
presidential elections).
15. Analyses of Tuareg grievances indicate that the central government in Bamako has generally failed to
address these grievances in the North of the country. These communities consider that they have not
benefited from the distribution of the country's wealth and the growth dividends over the years, automatically
creating tension. Many other signs of potential problems could range from low political participation rates as
mentioned above, especially in elections to widespread corruption of the authorities. In recent years, Bamako
has been identified by international police sources as an increasingly important transit hub in the international
drug trade with high level complicity within the government.
16. On the social front, according to the most recently available assessments (2010 data), Mali lags
considerably in relation to the cut-off date for the achievement of the MDGs (2015), and the challenges are
considered immense especially in the areas of health and development financing, as well as recurring
vulnerabilities linked to the environment, the structural fragility of the economy and new governance and
security-related challenges. With regard to health care coverage, the high population growth rate has
prevented any significant increase in the proportion of the population with access to health care facilities
despite the strides made at this level. Significant progress has been made in the area of regional development:
opening up of towns and agricultural areas, improved access to drinking water and electricity, housing
programmes with 40% of the houses allocated to women. It is considered that 76% of the road network is
reliable.
IV. Security Factors
17. The security situation continues to remain a major concern in Mali, where sporadic attacks by armed
groups on the UN peacekeeping forces have already resulted in over twenty fatalities since the start of
Mission in Mali in July 2013. The security challenge, which particularly concerns the North of Mali, is
rooted in the country's colonial management. Indeed, in the wake of independence, Mali was faced with
constraints and recurring vulnerabilities stemming from the balkanization which most African countries
inherited. The border line between Mali and Mauritania for example, has changed several times. The
situation in Northern Mali reflects this situation, which most African States acknowledge and where borders
delimit territorial spaces shared by diverse ethno-cultural communities whose historical social relationships,
often conflictual, had not evolved sufficiently to the point of creating a homogeneous group in terms of
identity or attained a level of cohesion that might characterize a strong State and pluralistic nation.
XVI
18. It was noted that under the reign of the different empires, and especially under colonization, some of
these communities, the Tuaregs of Kidal region, in particular, enjoyed special administrative status which
protected their specificities, integrated their identity as a parameter of legitimacy and the basis of their mode
of social organization. This situation of selective autonomy in favour of several ethno-cultural groups sowed
the seeds of a difficult national integration and constituted a threat to Mali's social cohesion following
independence.
19. From a military and security standpoint, the disorder in the defense and security forces is not only the
result of the Libyan crisis, contrary to some arguments. The state of FAMA (weakness, lack of
professionalism) as revealed by the 2012 crisis is perceived as the result of increasingly poor governance in
recent years, a period which a large segment of public opinion considers to have been marked by
unprecedented laxity in the management of the State. Despite the undeniable and significant impact of the
Libyan crisis on the rise of armed movements in Mali, this crisis was certainly more of an accelerator than a
factor of a relatively programmed collapse of an army that, according to several observers, suffered from lack
of a political and military strategy. Mention could also be made of the absence of the rule of law, which is the
result of poor management of a very large expanse of land, as is the case with Mali.
V.
Sub-Regional Aspect of the Fragility
20. Mali is at the centre of a geopolitical entity whose boundaries vary according to the challenges of the moment. The Sahel/Sahara space was, until recently, known rather for its austere climate and its impact on the ecosystem and inhabitants of the region, following years of severe drought. This Sahelo-Saharan space has, for a few years, been described as the centre of all trafficking, organized cross-border crime, the crossing point of large multinational mafias and terrorist movements, as well as growing insecurity.
21. The crises that shook Northern Mali impacted on, or affected its neighbours to various degrees.
Within this context, it can be noted that two neighbouring countries in particular, Algeria and Libya, have
played (or are still playing) a key role in resolving the crises that have marked the history of Mali to the point
where some analysts do not hesitate to say that Libya, for example, "is capable of influencing the beginning
and end of irregular armed initiatives, including the Tuareg uprisings in Northern Mali and Northern Niger."
In this respect, it could be noted that Libya had instituted the practice of welcoming fighters on its territory
and "integrating" Malian and Niger Tuaregs into its defense and security forces, and even making them
special units. The massive arrival of heavily armed fighters from Libya in Malian territory in 2012 is an
example, even if it has not been established that Libya condoned or gave material support to these rebellions.
22. It is generally accepted that the instability in Mali, Niger and Mauritania stems mainly from the Maghreb area. The vulnerability of these countries (level of overall poverty,porous nature of their borders, lack of technical capacity and/or incompetence or corruption of their intelligence services, marked laxity in the command chain of their armies, etc.) is often considered as conducive to the development or worsening of cross-border organized crime. Atone time, the tolerance of armed groups (increase in the number of hostages on the Malian territory with ransom payments) or the impunity they seemed to enjoy made some neighbouring States and some partners in Mali "suspect a pact of non-aggression between Malian and terrorist forces”. Mali alone has the three vectors of violence in the region, which shows and supports the idea that its institutions are fragile: the country serves as a base for terrorism; it is a vital transit point for smuggling; and it is the centre of identity grievances for Arab and Tuareg minorities. It is also mainly in Mali that security cooperation initiatives materialize, particularly with France and USA.
23. At the humanitarian level, the countries in the sub-region are suffering from the consequences of the
Malian and Libyan crises, with the massive arrival of refugees on their territories. It is encouraging to note
that the Malian crisis triggered a strong reaction that, for the first time, witnessed the general mobilization of
stakeholders (Governments, sub-regional organizations, international community, and development partners)
and, in principle, tackled the root causes of the problems revealed by the crisis.
XVII
VI. Conclusion
24. The fragility factors identified and developed in this report outline the development challenges facing
Mali and which should guide the operations of TFPs in the country. This report aims to strengthen Bank
interventions in the country which seek to address some key aspects of fragility in Mali.
XVIII
Annex 5
Matrix of Factors Associated with Fragility
Factors of
fragility
identified by
the fragility
assessment
Situation, challenges and resilience measures supported by the General
Government Policy backed by the Technical and Financial Partners (TFP)
Measures supported by the Bank's
intervention under PARGE (2015-
2016)
Political
Institutional
and Security
Factors
1. Legitimate Policies and Political Governance (legitimacy, inclusiveness, State-Building and confidence in State
Institutions
Following two decades of relative stability marked by successful changes at the
helm of the State, Mali experienced one of its worst crises in 2012 following a
coup d'état perpetrated on 22 March 2012 and nine months' occupation of the
northern regions by armed groups. Aware of the need to promote peace and
security, as well as guarantee Mali's territorial integrity, the Government and
some armed groups signed an agreement on 18 June 2013 prior to the
Presidential elections and the inter-Malian inclusive peace negotiations
(Ouagadougou Agreement). This triggered the crisis exit process and paved the
way for the organization of the Presidential elections throughout the national
territory in a peaceful atmosphere. The smooth conduct of the Presidential
elections in July/August 2013 and legislative elections in November/December
2013 ensured the country's return to constitutional normalcy.
PARGE aims to support the government's
efforts in public management,
transparency and accountability through
the efficient use of public resources. The
Programme is also fully in keeping with
the Government's General Policy
Declaration of 8 June 2015 which serves
as its strategic framework and rationale for
ensuring the security of people and
protection of their property in a peaceful
environment. However, PARGE is also
the Bank Group's instrument for dialogue
on the peacebuilding and State building
challenges raised, in accordance with the
main thrusts of the CSP (2015-2018) and
the 3rd area of focus of the Bank's Strategy
for Addressing Fragility and Building
Resilience (SAFBR).
2. Issues of security and Violence, Capacity and Performance of the Security Sector
The national peace consolidation and reconciliation process still faces some
challenges. Despite the sporadic attacks resulting in loss of lives, hostilities have
never ceased in the northern part of the country despite the signing of a cease-
fire agreement under the auspices of the African Union. Moreover, in order to
reach a global peace agreement that would lead the country to stability with
sustainable security, the Government and armed groups resumed negotiations on
16 July 2013. These inclusive negotiations under the mediation of Algeria with
the International Community (ECOWAS, AU, UN) culminated, on 15 May
2015, in the signing of the Agreement for Peace and Reconciliation in Mali
resulting from the Algiers Process, prior to the adoption of a consensual
roadmap on 24 July 2014. All these measures by both Malian stakeholders and
the International Community augur well for the restoration and consolidation of
peace and security throughout Mali.
PARGE does not offer any specific direct
measures in the security sector. However,
through its impacts on public expenditure
efficiency and the improvement of the
business climate, the Government will
secure additional resources with which to
finance the sector. Bank advocacy in
accordance with the SAFBR will also
facilitate the leveraging of resources from
other TFPs.
3. Justice Sector (inclusive access to justice, rule of law and judicial independence and countervailing
mechanisms)
The crisis which Mali has experienced has greatly weakened the judicial
services and undermined the functionality of the judiciary, particularly in the
northern regions, to the extent that courts no longer have the resources necessary
to fulfill their missions. Such a situation can only weaken the efficiency of
justice insofar as it may affect the length of proceedings and the swift and
efficient delivery of justice. Furthermore, Mali intends to build a justice system
that will assist the most disadvantaged segments of the population in order to
create a core of support for peace and reconciliation, for it must reconcile the
hearts of its sons to achieve lasting peace and social cohesion. It must also
rebuild the State, and combat corruption and impunity. Mali has also initiated a
process to revise legal and regulatory texts relating to the rights of women and
youths and the promotion of good environmental governance.
PARGE does not offer any specific direct
measures in the justice sector, but
contributes indirectly through its inputs.
PARGE supervision missions will provide
the necessary links in line with Bank
advocacy in accordance with the SAFBR
Economic and
Financial
Factors
4. Strengthening of Economic and Community Resilience (equitable access to infrastructure and benefits of
natural resources)
Even though the economy has withstood the environmental, security and
political crises which have hit the country, it remains fragile due to its
dependence on agriculture which, while providing livelihoods for about 90% of
the population, remains of the family-type. The real GDP growth rate, after
averaging about 5.5% between 2001 and 2011, fell to zero in 2012. In 2013,
there was a slight upturn in growth with an estimated real GDP growth rate of
1.7%, compared to a forecast of 5.1%. In 2014, the real GDP growth rate
climbed to 7.2% due to higher cereal production as a result of favourable
rainfall.
PARGE contributes directly to reducing
the factors of fragility through the
implementation of Component 1 of the
programme by generating positive spin-
offs in terms of improvement of economic
management governance. Through the
sub-components “Improvement of Public
Expenditure Quality” and “Strengthening
of Public Management Transparency
XIX
Factors of
fragility
identified by
the fragility
assessment
Situation, challenges and resilience measures supported by the General
Government Policy backed by the Technical and Financial Partners (TFP)
Measures supported by the Bank's
intervention under PARGE (2015-
2016)
The crisis did not lead to any deterioration in the public debt indicators due to
the fiscal discipline imposed by the Authorities in 2013 and 2014. Mali's
external debt (27% of GDP in 2014) is entirely made up of public debt, and
domestic debt (3.7% of GDP) remains low. This public debt to GDP ratio
remains well below the WAMU convergence criterion (70%). The debt
sustainability analysis (DSA) conducted in 2013 indicates a moderate debt
distress risk.
Mechanisms”, the country will be able to
release additional resources to directly
finance infrastructure, reduce the
country’s debt, and guarantee the
sustainability of its debt.
PARGE also provides support to priority
public investments and the recovery of
private sector activities to support growth
and create the necessary fiscal space to
ensure inclusive access to basic services.
Social factors:
Poverty and
Inequality
5. Increase resource mobilization to create opportunities for jobs, income and inclusive access to social
services, focused on the critical role of the State, enhancement of financial governance, and appropriate refocusing of
government's role
Inequalities: Poverty indicator trends vary considerably from region to region
with progress in the western and southern regions in contrast to persistence or
even deterioration in the North. These inequalities were deepened as a result of
the food crisis, which negatively and disproportionately affected households. In
the North, for example, 41% increase was observed in the proportion of people
living in households affected by food poverty in the wake of the 2011 shocks to
prices and production. Even though budget expenditure in the education and
health sectors is in line with the averages for the other WAMU countries, it
remains very unequal and biased. It does not benefit the most disadvantaged
segments of the population. Furthermore, government spending on social safety
nets aimed at supporting the poor remains very low and not always well targeted
(a significant proportion of these resources does not reach the poorest
households).
PARGE's impacts will help to reduce
poverty and gender inequalities. It will
also directly support the equitable supply
of basic social services through the
resources released as a result of efficient
public finance and expenditure
management, but especially through
domestic resource mobilization.
Sources of Revenue: The suspension for much of 2014, due to a sharp
deterioration of the country's relations with the IMF, of official development
assistance, which is one of the country's main financial inflows, the suspension
of many investment projects, the difficulty of mobilizing domestic resources, the
slowdown of many economic operators' activities have impacted seriously on
the population's living conditions. Removal of these constraints is closely linked
to the financial resources, which the Government can mobilize to successfully
implement its transitional programmes and strategies. To that end, the
Government is counting on technical and financial support from its partners, but
it is also necessary for it to reduce its dependence on official development
assistance.
Regulatory Framework (Government's role in the provision of services):
The low government mobilization of required resources reflects its weak
capacity to provide its population with adequate and equitable basic services in
all areas.
XX
Annex 6
NOTE ON RELATIONS WITH IMF
Le IMF Executive Board Completes Third Review under the ECF Arrangement for Mali and
Approves US$ 5.6 Million Disbursement
Press Release No. 15/271 June 11, 2015
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Mali’s
performance under an economic program supported by a three-year Extended Credit Facility (ECF)
arrangement. The Board’s decision, which was taken without a formal meeting, enables the disbursement of
SDR 4 million (about US$5.6 million), bringing total disbursements under the arrangement to SDR 18
million (about US$25.3 million).
In a still fragile security environment, the economic recovery is gathering strength. Activity in 2014 was
driven by a return to more normal levels of cereal production and strong growth in the manufacturing sector.
The favorable medium-term outlook is based on growing business confidence following the donor
reengagement and improved governance. Nevertheless, the vagaries of climatic conditions, setbacks in
national reconciliation, or a quick reversal of recent declines in oil prices could undermine the recovery.
Program performance was mixed at end-December 2014 but improved during the first quarter of 2015. In
spite of the implementation of measures to strengthen public financial management during the last quarter of
2014, the performance criteria for end-2014 relating to gross tax revenue and bank and market financing of
the government were not met owing to administrative weaknesses at the customs administration and a
conflict with importers. Steps taken by the authorities to increase oil product taxation and implement better
management at the tax and customs administration have put tax revenue back on track at end-March 2015.
The 2015 draft supplementary budget is a temporary solution to pressing spending challenges, including
ramped up military spending and deferred payments from earlier years. On the revenue side, it targets an
increase of tax revenue by 1.8 percent of GDP to be achieved through an increase in taxes on some products
(oil, telecommunication, financial transactions, alcohol and tobacco) and reforms in tax and customs
administration to broaden the tax base. On the expenditure side, the composition reflects the priorities of the
growth enhancing and poverty-reducing strategies, including restoring peace and security and paying arrears.
Steadfast implementation of reforms is needed to further strengthen public financial management. Tax policy
and administration reforms need to be accelerated to successfully raise the tax yield. Simplifying the tax and
customs administrative procedures will help improve the overall business environment. The promising results
obtained by closer cooperation and information sharing between tax, customs and procurement
administrations should now be used to improve tax auditing. Tighter expenditure control, supported by
improvements in Treasury management, will help prevent accumulation of arrears. Paying the outstanding
domestic arrears will support the recovery.
Reforms aimed at improving the business environment are essential to boost Mali’s prospects for stronger
medium-term growth. The authorities’ agenda is ambitious and targets areas with documented weaknesses.
Progress in strengthening the financial system, lightening the administrative burden for taxpayers, placing the
electricity company’s finances on a sustainable footing, and strengthening governance are critical to durably
raising growth and employment prospects.
The Executive Board approved the ECF arrangement for Mali on December 18, 2013 for an amount of SDR
30 million (about US$42.2 million or 32 percent of quota (see Press Release No. 13/524).
