Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 57600 - ML

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROGRAM DOCUMENT

FOR THE

FIFTH POVERTY REDUCTION SUPPORT CREDIT (PRSC-5)

IN THE AMOUNT OF SDR 44.5 MILLION

(US$70 MILLION EQUIVALENT)

TO THE

REPUBLIC OF MALI

March 30, 2011

Poverty Reduction and Economic Management 3 Country Management Unit AFCW3 Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective as of February 28, 2011)

Currency Unit = CFAF US$1.00 = CFAF 474

FISCAL YEAR January 1 = December 31

WEIGHTS AND MEASURES Metric System

ABBREVIATIONS AND ACRONYMS

ABG General Budget Support (Appui Budgétaire Général) ADEMA Alliance for Democracy in Mali AEP Drinkable Water Supply (Adduction d’Eau Potable) AFD French Development Agency (Agence Française de Développement) AfDB African Development Bank AMO Health insurance AQIM Al-Qaida in the Islamic Maghreb ARMDS Procurement Regulatory Agency (Autorité de Régulation des Marchés Publics et de Délégation

des Services Publics) ASDI Swedish International Development Agency (acronym in French) BCEAO Central Bank of (Francophone) West African States BHM Malian Housing Bank (Banque de l’Habitat du Mali) BOAD West Africa Development Bank (Banque Ouest Africane de Developpment) BVG Office of Auditor General (Bureau du Verificateur General) CAP School Management Committee CAS Country assistance Strategy CEM Country Economic Memorandum CENI Commission Eléctorale Nationale Indépendente CFAA Country Financial Accountability Assessment CFAF Franc of the African Francophone Monetary Community (Franc Communauté Financière

Africaine) CM Cabinet (Conseil des Ministres) CMDT Mali Textile Development Company (Compagnie Malienne pour le Développement des Textiles) CPAR Country Procurement Assessment Report CRM Mali Retirement Fund (Caisse de Retraite du Mali) CRT Telecommunications Regulatory Board (Comité de Régulation des Télécommunications) CSCOM Community Health Center (Centre de Santé Communautaire) CSREF Health Referral Center (Centre de Santé de référence) CT Territorial Collectivity (Collectivité Territoriale) DAF Administrative and Financial Department in each Ministry (Division Administrative et Financière) DGB General Directorate of the Budget (Direction Nationale du Budget) DGMP General Procurement Department (Direction Générale des Marchés Publics) DNH National Directorate of Hydraulics DNSI National Directorate of Statiscs and Informatics DPL Development Policy Lending DRH Human Resource Department (Direction Nationale des Ressources Humaines)

iii

DSA Debt Sustainability Analysis DSP Delegation of Public Services (Delegation des Services Publiques) EC European Commission ECF Extended Credit Facility ECOWAS Economic Community of West African States EDM S.A Mali Electricity and Water Utility Company (Energie du Mali, Societé Anonyme) EFA Education for All EI Extractive Industries EITI Extractive Industry Transparency Initiative ELIM Core Welfare Indicators Household Survey EMEP Malian Survey for Poverty Evaluation EPPFMC Economic Policy and Public Finance Management Credit ESMF Environmental and Social Management Framework ESP Energy Support Project ESW Economic and Sector Work FAO Food and Agricultural Organization FDI Foreign Direct Investment FIAS Foreign Investment Advisory Service FSAP Financial Sector Assessment Program FTI Fast Track Initiative GDP Gross Domestic Product GM Genetically Modified Organism GNI Gross National Income GoM Government of Mali GPRSF Growth and Poverty Reduction Strategy Framework GTZ German Technical Cooperation Agency (Deutsche Gesellschaft für Technische Zusammenarbeit) HDR Human Development Report HHRP Health Human Resource Policy HIPC Heavily Indebted Poor Countries HIV/AIDS Human Immunodeficiency Virus / Acquired Immune Deficiency Syndrome IBP International Budget Partnership IBRD International Bank of Reconstruction and Development ICRR Implementation Completion and Results Report IDA International Development Association IFRS International Financial Reporting Standard IL Investment Lending IMF International Monetary Fund INSTAT National Statistics Institute IPC Cotton Inter-Professional Association (L’interprofession du Coton Mali) ITIE Initiative de Transparence dans les Industries Extractives (EITI in English) JSAN Joint Staff Advisory Note KfW Development Bank of the Federal Republic and Federal States (Germany) LDP Letter of Development Policy M&E Monitoring and Evaluation MCC Millennium Challenge Corporation MDG Millennium Development Goal

iv

MENA Middle East and North Africa MEALN Ministry of Education, Literacy and National Languages (Ministère de l’Education, de

l’Alphabétisation et des Langues Nationales) ML Mali MoU Memorandum of Understanding MRSC Cotton Restructuring Coordinating Agency (Mission de Restructuration du Secteur Coton) MTBF Medium-Term Budget Framework MTEF Medium-Term Expenditure Framework (sectors) NA National Assembly NEAP National Environmental Action Plan NGO Non-Governmental Organization NPV Net Present Value OBS Open Budget Survey OCC Service Provider for Cotton Grading (Office de Classement de Coton) OECD Organization of Economic Cooperation and Development OHADA Organization to Harmonize Business Law in Africa (Organisation pour l'Harmonisation en

Afrique du Droit des Affaires) ON Office du Niger ONG Non-Governmental Organization (Organisation Non-Gouvernementale) OP Producer Organizations (Organisations des produteurs) PAGAM-GFP

Action Plan for Modernizing and Strengthening Public Finance Management (Plan d’Action Gouvernemental pour la Modernisation et le Renforcement de la Gestion des Finances Publiques)

PAPAM Fostering Agriculture Productivity Project PASAOP Agricultural and Producer Organization Project (Projet d’Appui aux Services Agricoles et aux

Organisations Paysannes) PASCA Plan d'Action de la Croissance Accélérée PASEC Program for the Analysis of Education Systems of the CONFEM PD Project Document PDES Party for the Economic and Social Development PDES Economic and Social Development Project (Projet de Développement Economique et Social) PEFA Public Expenditure and Financial Accountability PEMFAR Public Expenditure Management and Financial Accountability Review PFM Public Financial Management PIDRK Integrated Rural Development Program of the Kidal Region (Programme Intégré de

Développement Rural de la Région de Kidal) PIDRN Integrated Programme for the Development of Northern Region of Mali (Programme Intégré de

Développement des Régions Nords du Mali) PISE Education Sector Investment Program PPP Public Private Partnership PRED Computerized Budget Expenditure Application PRGF Poverty Reduction and Growth Facility PRODEC Ten Year Education Development Program PRODESS Health and Social Development Program (Programme de Développement Sanitaire et Social) PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper PSIA Poverty and Social Impact Analysis PTF Donor group (Partenaires Techniques et Financiers) PV Present value

v

RAMED Insurance for medication ROC Regional Operations Committee ROSC Reports on the Observance of Standards and Codes SAI Supreme Audit Institution SCA Strategy for Accelerated Growth (Stratégie de Croissance Accélérée) SCCS Audit Section of the Supreme Court SDR Special Drawing Rights SIL Specific Investment Loan SOTELMA Mali Telecommunications Company (Société des Télécommunications du Mali) SSA Sub Saharan Africa SSN Social Safety Nets SWAP Sector Wide Approach Project ToR Terms of Reference UA Unit of Account (AfDB). UEMOA West African Economic and Monetary Union (Union Economique et Monétaire Ouest Africaine) UNDP United Nations Development Program UNESCO United Nations Educational, Scientific and Cultural Organization UNICEF United Nations Children's Fund URD Union For the Republic and Democracy US United Stated USAID United States Agency for International Development VAT Value Added Tax WAEMU West African Economic and Monetary Union (UEMOA in French) WB/GFDRR World Bank's Global Facility for Disaster Reduction and Recovery WHO World Health Organization

Vice President: Acting Country Director:

Sector Director: Sector Manager:

Task Team Leader:

Obiageli Katryn Ezekwesili Kathryn Hollifield Marcelo Giugale Jan Walliser Clara de Sousa

vi

REPUBLIC OF MALI FIFTH POVERTY REDUCTION SUPPORT CREDIT (PRSC-5)

TABLE OF CONTENTS

1. INTRODUCTION .............................................................................................................................. 1

2. COUNTRY CONTEXT ..................................................................................................................... 2

A. POLITICAL CONTEXT ........................................................................................................................ 2 B. RECENT ECONOMIC DEVELOPMENTS .............................................................................................. 2 C. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY............................................................. 6

3. MALI’S GROWTH AND POVERTY REDUCTION STRATEGY FRAMEWORK............... 10

4. BANK GROUP’S SUPPORT TO THE GOVERNMENT’S PROGRAM.................................. 15

A. LINK TO THE COUNTRY ASSISTANCE STRATEGY .......................................................................... 15 B. RESULTS ACHIEVED UNDER PRSC-3 AND PRSC-4 ....................................................................... 15 C. KEY LESSONS LEARNED ................................................................................................................ 17 D. COLLABORATION WITH THE INTERNATIONAL MONETARY FUND (IMF) AND OTHER DONORS .... 18 E. COMPLEMENTARITY WITH OTHER BANK ACTIVITIES ................................................................... 20 F. ANALYTICAL UNDERPINNINGS ...................................................................................................... 21

5. THE PROPOSED PRSC-5 ..................................................................................................... 22

A. OPERATION DESCRIPTION .............................................................................................................. 22 B. RESULTS FRAMEWORK .................................................................................................................. 22 C. POLICY AREAS ............................................................................................................................... 22 D. PRIOR ACTIONS FOR THE PROPOSED PRSC-5 ................................................................................ 31 E. FOLLOW UP OPERATIONS ............................................................................................................... 37

6. OPERATION IMPLEMENTATION ..................................................................................... 38

A. COUNTRY OWNERSHIP ................................................................................................................... 38 B. POVERTY AND SOCIAL IMPACTS .................................................................................................... 39 C. ENVIRONMENTAL ASPECTS ........................................................................................................... 42 D. IMPLEMENTATION, MONITORING AND EVALUATION .................................................................... 43 E. FIDUCIARY ASPECTS ...................................................................................................................... 44 F. DISBURSEMENT AND AUDITING ..................................................................................................... 44 G. RISKS AND RISK MITIGATION ........................................................................................................ 45

List of Annexes

Annex 1: Letter of Development Policy .................................................................................................... 47 Annex 2: Government Matrix of Measures for the period 2009-11 ......................................................... 67 Annex 3: PRSC-5 Results Framework...................................................................................................... 73 Annex 4: Definition and Measurement of Indicators ................................................................................ 82 Annex 5: IMF Assessment ........................................................................................................................ 87 Annex 6: Government Consolidated Financial Operations ...................................................................... 88 Annex 7: Summary of Relevant Lending Operations and Key Analytical Underpinnings ..................... 89 Annex 8: Mali at a Glance ........................................................................................................................ 92 Annex 9: Mali – Key Economic Indicators .............................................................................................. 94 Annex 10: Mali – Progress toward the Millennium Development Goals ................................................... 96 Annex 11: Map (IBRD 33443) ................................................................................................................... 97

vii

List of Boxes

Box 6.1: Good Practice Principles on Conditionality ................................................................................ 39

List of Tables Table 2.1: Mali Selected Economic and Financial Indicators (2005-2013) ................................................. 5 Table 2.2: Policy-Based Debt Burden Indicators ......................................................................................... 8 Table 4.1: Results Achieved under PRSC-3 and PRSC-4. ........................................................................ 15 Table 5.1: EDM SA Recent Financial performance .................................................................................. 26 Table 5.2 : PRSC-5 Prior Actions .............................................................................................................. 31

List of Charts Chart 2.1: Macroeconomic Developments, 2005-13 ................................................................................... 4 The World Bank’s core team for this operation is led by Clara de Sousa (AFTP3). The team members are: Olivier Durand (AFTAR), Abdoulaye Toure (AFTAR), Yeyande Sangho (AFTAR), Stephen Mink (AFTSN), Michel Noel (AFTFE), Pierre Kamano (AFTED), Ousmane Diadie Haidara (AFTHE), Aissatou Diack (AFTHE), Diop Saidou (AFTFM), Tawfik Ramtoolah (AFTPR), Cheick Traore (AFTPC), Rokhayatou Sarr Samb (AFTPC), Cheick Diop (AFTP3), Simon Davies (AFTP3), Fabrice Bertholet (AFTEG), Zie Coulibaly (AFTU2), Diame Youssuf Thiam (AFTFW), Maiko Miyake (CICAF), Brigitte Bocoum (COCPO), Mahamoud Magassouba (CICG), and Moussa Diarra (AFREX). Daria Goldstein (LEGAF) provided legal advice. Alexandra Bezeredi (AFTQK) provided advice on safeguard issues. Wolfgang Chadab (CTRFC) provided advice on disbursement and auditing issues. Maude Jean-Baptiste (AFTP3) and Safiatou Dicko Ba (AFMML) provided administrative assistance and helped prepare the document. The team benefited from advice and guidance from Jan Walliser, (Sector Manager, AFTP3), and Ousmane Diagana, (Country Manager, AFMML). Peer reviewers are Moukim Temourov (MNSHG), Fily Sissoko (AFTFM), and Errol Graham (AFTP4). The PRSC team worked closely with the IMF team headed by Christian Josz, and the donor general Budget Support Group in Mali.

viii

REPUBLIC OF MALI

FIFTH POVERTY REDUCTION SUPPORT CREDIT (PRSC-5)

CREDIT AND PROGRAM SUMMARY

Borrower Republic of Mali Implementing Agency

The Ministry of Economy and Finance (MEF) coordinates the implementation in close association with several line ministries.

Financing Data Credit on standard IDA terms (40-year maturity and 10-year grace period). Operation Type Third of the second series of three programmatic Development Policy Operations.

Main Policy Areas Rural policies and institutions (28%); corporate governance (27%); public expenditure, financial management and procurement (18%); decentralization (18%) other human development (9%).

Key Outcome Indicators

Detailed outcomes indicators are reported in the results matrix (Annex 3) Indicator Baseline

(2008) Target (2011)

Number of days it takes to announce a decision on incentives

30 3

PEFA indicator on scope of audits. D C Teacher pupil ratio (%) 64 58 Beneficiaries of mutual insurance schemes number).

230,000 400,000

Program Development Objective(s) and Contribution to CAS

The overall objective of this second series of PRSCs is to support implementation of Mali’s GPRSF adopted in 2006. Specifically, the development objectives to which the PRSC-5 contributes are to:

(1) improve the policy environment for infrastructure and private investment, with a particular emphasis on actions to ensure a well-managed transition to private ownership in the cotton sector, enhance governance in the office du Niger, improve the ease of doing business, enhance the financial sustainability of the electricity utility, and to strengthen transparency and accountability practices in the mining sector;

(2) strengthen public financial management, through a strengthened legal framework for procurement, increased transparency and strengthened external oversight;

(3) strengthen PFM in the sectors in charge of basic education and health in the Malian context of decentralization; and

(4) increase the utilization of health services by the poor.

The operation is an integral part of the Bank’s Country Assistance Strategy (CAS) for Mali discussed by the Board of Executive Directors on February 5, 2008, and directly contributes to the CAS Strategic Objectives 1 and 2, complementing operations that directly support Mali’s growth agenda (notably on agricultural productivity, energy, and business development) and education sector reforms.

ix

Risks and Risk Mitigation

The operation faces, external, implementation capacity, budget, and political and security risks. External risks. A slower than expected recovery from the global crisis, a reversal of the terms of trade gains, a further drop in remittances and tourism revenues, and a decline in external aid remain major risks for the country. The ongoing political crisis in Côte d’Ivoire and the political turmoil in the Middle East and North Africa add to the uncertainties emerging from global developments. Other exogenous factors such as Mali’s vulnerability to natural shocks (drought, locust invasion) could compound the situation. Mitigating factors are Mali’s strong track record in macroeconomic management and the government’s renewed focus on growth-enhancing structural reforms while giving attention to key social programs. The proposed operation would contribute to the mitigating measures by supporting policy actions that contribute to economic growth and diversification, and further strengthen public finance management including at decentralized level.

Implementation capacity risk. This risk stems from the very limited capacity in the public sector at central, regional and local levels, that could slow down the implementation of planned reforms. The proposed operation seeks to mitigate this by accompanying key reforms with technical assistance provided through Bank projects and by other donors.

Budget risks. Ongoing financial difficulties facing the cotton and electricity/water parastatal companies (CMDT and EDM SA), the Malian Housing Bank (BHM) and the social security fund CRM, could potentially require larger government transfers than those included in the 2011 budget to cover larger financial shortfalls in those sectors. These risks are mitigated by close monitoring of the financial positions of BHM, CMDT, EDM SA and CRM, and ongoing restructuring efforts. Continued high food prices and prolonged political instability in Cote d’Ivoire and the Middle East and North Africa countries could also have significant budget implications. Mitigation measures will be identified in the context of the macroeconomic dialogue with the Government, including to allow for some budget flexibility to address crisis-related expenses.

Political and security risks. Presidential and legislative elections are scheduled for 2012 and could slow down the pace of reform. Insecurity concerns, linked with the activities of al-Qaida in the Islamic Maghreb (AQIM) in the north of the country remain and budgetary allocations could be higher-than-budgeted to accommodate additional security spending. Insecurity could also reduce tourism revenues. These risks are difficult to mitigate in the context of the operation.

Operation ID P122483

1

REPUBLIC OF MALI FIFTH POVERTY REDUCTION SUPPORT CREDIT

1. INTRODUCTION

1.1. This program document proposes a Fifth Poverty Reduction Support Credit (PRSC-5) for the Republic of Mali in the amount of SDR 44.5 million (US$70 million equivalent). This operation is the third in a programmatic series of three PRSCs (PRSC-5 of PRSCs 3-5) designed to support the implementation of the Government’s poverty reduction strategy. Specifically, this second series aims to strengthen public financial management and improve access to basic social services, while enhancing the regulatory and institutional framework for infrastructure and private investment. The reform program supported by this operation continues and deepens the agenda introduced by PRSC-3 and PRSC-4, with an increased focus on improving the environment for private investment and infrastructure.

1.2. The reforms supported by this operation are embedded in Mali’s Growth and Poverty Reduction Strategy Framework (GPRSF). The GPRSF covering the period 2007-2011 and the accompanying Joint Staff Advisory Note (JSAN) were considered by the Board of Executive Directors on September 28, 2007. The GPRSF pursues strong broad-based growth and improvement of public service delivery. The most recent (third) Annual Progress Report of the GPRSF, approved by Mali’s Cabinet on September 15, 2010, shows that progress has been made in the implementation of the reform agenda but results have been mixed. Results were encouraging regarding efforts to contain HIV/AIDS and to increase access to drinking water in line with the Millennium Development Goals (MDGs), but child and maternal health indicators remain a concern.1

1.3. The PRSC-5 is an integral part of the Bank’s Country Assistance Strategy (CAS) for Mali discussed by the Board of Executive Directors on February 5, 2008. The PRSC-5 complements Bank operations that directly support Mali’s growth agenda (notably on agricultural productivity, energy, and business development) and education sector reform. The CAS indicatively allocated US$50-60 million equivalent to PRSC-5. The amount of US$70.0 million equivalent allocated to the operation was determined by the confirmed IDA allocation for Mali for FY11 and takes into consideration the country’s financing requirements.

1.4. The design of the second PRSC series benefited from consultations with various stakeholders. The operation was prepared in coordination with other donors from the general Budget Support Group. Consultations included representatives of National Assembly, the civil society, notably business organizations, community level health associations, and women’s groups. These consultations ensure Government and country ownership of the supported policies and harmonize donors around a common set of key reforms. The lessons learned from the implementation of the first four PRSCs (PRSC-1 to PRSC-4) were taken into account in the design of this follow-up operation.

1 Mali’s GNI per capita is estimated at US$680 (Atlas method, 2009), and the country ranks 160 out of 169 countries in the UNDP’s 2010 Human Development Index.

2

2. COUNTRY CONTEXT

A. POLITICAL CONTEXT

2.1. Presidential and parliamentary elections are scheduled for 2012. Commentators of Mali’s political situation anticipate very competitive elections, with the departure of the charismatic incumbent Amadou Touré, and the expected return to the domestic political scene of the widely respected Soumaïla Cissé, who has been heading the WAEMU Commission, and is now expected to be the presidential candidate of the Union for the Republic and Democracy (Union pour la République et la Démocratie, URD). Adema, the largest political party, will have to face competition from a new party, the Party for Economic and Social Development (Parti pour le Développement Economique et Social, PDES), which could have a particular appeal to those voters looking for alternatives away from traditional parties. Adema announced its intention to put forward its own candidate (not a coalition candidate this time), but has yet to present a name. Elections will take place under a democratic system reinforced by the constitutional reform package announced by the President that includes the creation of an upper house of Parliament, independent media and election watchdogs, as well as a new code of conduct for politicians. A referendum to endorse the proposed changes is scheduled for 2011.

2.2. Insecurity concerns remain in the north of the country, linked with the activities of al-Qaida in the Islamic Maghreb (AQIM). Algeria, Mali, Mauritania and Niger seek to coordinate intelligence and military activities more effectively, especially with the establishment of the four-country joint command centre in Algeria in March, 2010. The military initiative will be complemented by the strengthening of ongoing activities to improve living standards and create jobs in Tuareg communities.

B. RECENT ECONOMIC DEVELOPMENTS

2.3. Prudent macroeconomic policies led to broadly favorable outcomes in the period 2005-09 (Table 2.1 and Chart 2.1). Gross domestic product (GDP) growth averaged 3.9 percent a year but varied between 1.1 percent and 5.3 percent, reflecting Mali’s vulnerability to climatic conditions and commodity price fluctuations (primarily of cotton, oil and gold). Average consumer inflation was estimated at 4.6 percent in the period 2005-09, above the 3 percent threshold under the West African Economic and Monetary Union (WAEMU) convergence criteria. This average is influenced by exceptional circumstances, notably the 2008 food and fuel price crisis. The good harvest, the unwinding of the 2008 fuel and food shocks, and good macroeconomic policies, contributed to the return of average inflation to 2.2 percent in 2009. The external current account deficit (excluding official transfers) worsened from 6.7 percent of GDP in 2006, to 13.9 percent in 2008, when the import bill increased steeply as a result of the food and fuel crisis. The external current account balance improved in 2009 as a result of buoyant international gold prices (gold contributes about 75 percent of Mali’s exports of goods) and lower oil and food prices. The improvement of the overall balance of payments in 2009 was also due to exceptional capital inflows, namely the revenues from the sale of 51 percent of state telecom firm SOTELMA, completed in July and yielding US$0.4 billion (4 percent of GDP), and the 74 million IMF SDR allocation. The basic fiscal balance, with a surplus of 0.3 percent of

3

GDP in 2006, turned to a deficit of 1.4 percent of GDP in 2009, reflecting exceptional capital expenditures financed by SOTELMA privatization receipts.2

2.4. Preliminary estimates suggest that economic growth during 2010 was 4.5 percent. A 16.5 percent decline in gold production reflecting the depletion of reserves in some existing mines has been more than offset by strong growth in the agricultural sector (9.9 percent), which has benefited from favorable rainfall and supportive policies, including input subsidies.

3

2.5. A moderate fiscal expansion took place in 2010 through the use of SOTELMA’s privatization revenues.

The good crop season held average inflation at 1.2 percent in the year. The external current account deficit (excluding official transfers) is estimated at 8.6 percent of GDP, due mainly to a worsening of the trade deficit reflecting a drop in gold exports. The external current account deficit was financed by net capital inflows, particularly through external aid and foreign direct investment. The overall balance-of-payments shows a deficit of about US$71 million, financed by drawing on the foreign exchange reserves of the BCEAO.

4 Preliminary estimates suggest that the basic deficit was maintained at 2.0 percent of GDP. 5 Tax revenues during 2010 corresponded to 14.8 percent of GDP. Plans to adopt a broad tax reform, including align the tax framework with recent WAEMU directives, were delayed and the reforms are now scheduled to be introduced in the context of the 2012 budget.6

Expenditure and net lending were around 24.2 percent of GDP, in line with the Government’s program.

2The basic fiscal balance is given by the total revenue less current non-interest spending and net lending, excluding grants, externally financed expenditures, and HIPC financed spending. 3 Delays in the exploration of a new mine resulted in downward revisions in the projected gold production. 4 The Government prepared a plan for the use SOTELMA resources covering the period-2009-12. 5 A supplementary budget law for 2010 was submitted to the National Assembly in October incorporating, among others, SOTELMA related expenses for which there was insufficient information at the time the budget law was voted. 6 WAEMU guidelines include a reduction in the profit tax from 35 percent to 30 percent.

4

Chart 2.1: Macroeconomic Developments, 2005-13

The high share of grants in 2006 reflects debt relief. Sources: Malin authorities and IMF Staff calculations and estimates

-20-10

0102030

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Growth trends

Real GDP Agriculture

-4-202468

10

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Consumer price inflation

0102030405060

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Revenues, % GDP

Tax revenues Non tax revenue Grants

02040

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Public expenditures, % GDP

Wages and salaries

Current non-wage spending

Capital expenditure

0

10

20

30

2008 2009 2010 2011 2012 2013 2014

Exports (% GDP)

Gold Cotton Other goods

0

10

20

30

40

2008 2009 2010 2011 2012 2013 2014

Imports (% GDP)

Food Fuel Other goods

5

Table 2.1: Mali Selected Economic and Financial Indicators (2005-2013)

Average 2005-08 2009 2010 2011 2012 2013 2014

Est. Proj. Proj. Proj. Proj.

National income and prices Real GDP 3.9 4.5 4.5 6.0 5.4 4.8 4.9GDP deflator 5.0 3.6 3.6 4.9 1.9 2.2 2.4Consumer price inflation (average) 4.6 2.2 1.2 4.5 2.7 2.7 2.8

External sector (percent change)Terms of trade (deterioration -) 13.3 27.7 10.4 14.3 2.2 -1.3 -0.2Real effective exchange rate (depreciation -) 2.5 0.3 … … … … …

Money and credit (contribution to broad money growth)Credit to the government -2.6 -13.9 11.4 7.8 2.8 -0.5 -0.6Credit to the economy 4.1 7.2 1.5 2.9 4.7 6.7 5.7Broad money (M2) 7.6 16.0 13.4 14.4 9.0 7.1 8.4

National AccountsPrimary Sector 6.7 5.6 7.7 5.7 5.5 5.5 5.5

Agriculture 9.0 6.4 9.9 6.4 6.3 6.3 6.3Secondary Sector 1.8 3.5 -2.2 12.3 6.5 3.7 3.9Tertiary Sector 7.2 3.5 4.6 3.9 4.8 4.9 4.9

Investment and saving Gross domestic investment 20.7 20.3 19.2 21.8 22.4 23.1 24.2

Of which: government 7.8 10.8 8.7 10.3 9.9 9.6 9.7 Gross national savings 12.5 12.8 10.7 14.2 14.6 15.1 16.0

Of which: government 2.1 0.2 0.1 -1.1 0.3 0.8 0.8 Gross domestic savings 11.4 12.2 10.2 16.2 16.3 17.3 18.0

Central government finance Revenue 16.8 17.1 17.0 15.9 16.8 17.2 17.4

Tax revenues 14.6 14.7 14.8 13.9 14.8 15.2 15.3Non tax revenue 2.1 2.4 2.2 2.0 2.0 2.0 2.1

Grants 12.7 4.6 3.6 4.7 4.3 4.0 4.0Budget support 1.1 1.2 1.1 0.9 0.9 0.9 0.9

Total expenditure and net lending 23.8 25.9 24.2 25.3 24.6 24.3 24.4Current expenditure 12.6 13.0 13.4 13.4 13.3 13.3 13.4

Wages and salaries 4.8 5.0 5.1 5.4 5.3 5.3 5.3Current non-wage spending 7.9 8.0 8.3 8.1 8.0 8.0 8.1

Goods and services 4.6 4.5 4.7 4.5 4.6 4.6 4.6Transfers and subsidies 2.8 3.1 3.1 3.1 3.0 3.0 3.1Interest 0.5 0.4 0.5 0.5 0.4 0.4 0.4

Capital expenditure 9.7 10.8 8.7 10.3 9.9 9.6 9.7Externally financed 6.0 7.2 4.9 6.7 6.3 6.0 6.0Domestically financed 3.7 3.6 3.8 3.7 3.6 3.6 3.6

Overall balance (payment order basis, exc. grants) -7.0 -8.8 -7.2 -9.4 -7.8 -7.1 -7.0Overall balance (payment order basis, inc. grants) 5.7 -4.2 -3.6 -4.7 -3.5 -3.1 -3.0Basic fiscal balance -0.5 -1.4 -2.0 -2.5 -1.5 -1.0 -1.0Underlying basic balance -0.5 -0.8 -0.8 -1.7 -1.0 -1.0 -1.0

External sector Current external balance, inc. official transfers -8.2 -7.5 -8.5 -7.6 -7.8 -8.0 -8.1Current external balance, exc. official transfers -10.2 -8.8 -9.7 -8.6 -8.8 -9.0 -9.1Exports of goods and services 27.4 26.6 25.1 31.9 30.8 29.0 27.8Imports of goods and services -36.8 -34.6 -34.1 -37.6 -36.9 -34.8 -33.9Debt service to exports of goods and services 4.6 4.1 3.2 1.7 2.4 2.9 3.1External debt (end of period) 27.5 21.2 25.2 26.4 24.2 22.2 23.1

Memorandum items:Nominal GDP (CFAF billions) 3292.8 4233.0 4582.0 5096.0 5470.0 5859.0 6293.0Overall balance of payments (US$ millions) 46.3 447.5 -71.7 77.1 47.1 31.3 122.7Money market interest rate in percent (end of period) 5.3 ... ... ... ... ... ...Gross international reserves (US$ millions) 1113.2 1602.0 1413.0 1518.0 1542.0 1551.0 1651.0in months of next year's imports 5.5 7.7 … … … … …US$ exchange rate (end of period) 495.3 449.3 496.2 ... ... … …Gold Price (US$/fine ounce London fix) 872.0 973.0 1225.0 1345.0 1363.0 1390.0 1448.0Petroleum price (US$ per bbl, crude spot) 97.0 61.8 79.0 94.8 96.3 95.8 95.8

Sources: Malian authorities; and IMF staff estimates and projections.

(Annual percentage change)

(Annual percentage change)

(in percent of GDP, unless otherwise indicated)

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C. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY

2.6. Uncertainty on the speed and strength of the global recovery remains high. While cautious optimism returned from the third quarter of 2009 with the resumption of growth (notably in the US), recovery speeds vary, unemployment remains high and downside risks stemming from fiscal fragilities have come to the fore. Weak labor markets, particularly in Europe, could result in a further decrease in remittances. A key concern is that room for policy maneuvers in many advanced economies has either been exhausted or become much more limited given high debt levels and strained fiscal balance sheets. This could result in a reduction of aid budgets in major developed economies, with a significant fiscal impact. Recent trends in food and fuel prices in global markets are beginning to affect domestic inflation in Mali. Analysis undertaken in the context of the 2008 food crisis shows that rising food prices could lead to a substantial increase in poverty and the Government’s response could have significant fiscal impacts. The ongoing political crisis in Côte d’Ivoire adds to the uncertainties emerging from global developments. Transport routes, trade and migrant labor flows could be severely disrupted, even if at a lesser extent than in the early 2000s. The share of Mali’s imports from Côte d’Ivoire which varied between 13 and 16 percent from January to September 2010, decreased steeply to 7.4 percent in December 2010.7 The events of the last few weeks are a defining moment for Tunisia, Egypt, Libya and other Middle East and North Africa (MENA) countries, and could have significant macroeconomic impacts on Mali. Protracted unrest in Libya in particular, could affect FDI, remittances and aid flows.8

2.7. Growth is projected to increase to 6.0 percent in 2011 and to average 5.0 percent per year during 2012-14 (Table 2.1 and Chart 2.1). Growth is expected to be driven by the agricultural and gold sectors. Gold output should increase by over 20 percent in 2011 owing to a new mine expected to commence exploration, but decline moderately starting in 2013 with the decline in reserves. Despite expected good weather conditions in 2011, inflation projections have recently been revised upwards from 2 percent to 4.5 percent to reflect the expected trajectory of food and fuel prices. Inflation is expected to return to 2.7 percent in 2012 and remain below 3 percent in the medium term. Buoyant gold and cotton prices are expected to more than offset high oil and food prices thus helping strengthen the external current account balance in 2011. However, this improvement may be reversed from 2012, as gold production declines.

Given these uncertainties and Mali’s vulnerability to poor weather conditions and other natural disasters, projections for 2011 and the medium term are conservative.

2.8. The 2011 budget law submitted to the National Assembly targets a basic deficit of 2 percent of GDP. However, the targeted deficit could be revised to 2.5 percent of GDP to account for the impact of measures to mitigate the impact of the fuel and oil price increases on poverty. Based on past experience, these could include exemptions to selected imports, and subsidies. The authorities have not yet announced their response to the current crisis. The response in the 2008 crisis included: (1) the elimination of the import tax on rice; (2) a temporary ban of rice exports; and (3) measures to boost rice production. This package of measures led to revenue shortfalls and a reduction and reallocation of expenditures. The 2011 budget law 7 In the period prior to 2002 political crisis in Cote d’Ivoire, Mali’s share of imports from Cote d’Ivoire hovered around 30 percent. 8 Libya is a major investor in agriculture (ON) and tourism, and is financing a number of public projects. While data is scarce, anecdotal information suggests that a growing number of Malians work in Libya.

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programs an increase in tax revenue by 0.1 percent of GDP compared to the projected 2010 outcome, to 14.9 percent of GDP. Latest projections see a decline in tax revenue to 13.9 percent of GDP anticipating Government’s steps to temporarily reduce import taxation on, for example, imported food stuffs. The budget programs an increase in total expenditure to 25.4 percent of GDP, reflecting higher capital expenditure financed with domestic resources (including SOTELMA privatization revenue). While this target was not revised, re-allocations are likely to be needed in response to the fuel and food price increases.

2.9. With the SOTELMA financed fiscal stimulus, the trajectory of the basic deficit diverges from its sustainable level of 1 percent of GDP from 2009 to 2012. The Government is implementing revenue and expenditure measures to advance fiscal consolidation and return to a sustainable basic fiscal deficit by 2013, in the context of the program supported under the IMF ECF. The Government will propose, in the 2012 draft budget, an action plan for the next three years aimed at modernizing and simplifying tax legislation and bringing it into line with regional directives. By end February 2011, a study to inform the mechanism to index gasoline prices at the pump to changes in supplier prices will be finalized. Also in 2011, priority will be given to measures aimed at improving the mobilization of VAT, which accounts for about 40 percent of tax revenues.9

2.10. There are fiscal risks but the Government is addressing them. The first risk is that fiscal consolidation could slow down during the run-up to the 2012 presidential and parliamentary elections. The second risk is that higher than budgeted spending could be directed to security or to address financial difficulties facing the cotton ginneries (CMDT), the electricity and water company (EDM SA), the Malian Housing Bank (BHM), or the social security institution catering for public sector workers (Caisse de Retraites du Mali, CRM). The conflict in Côte d'Ivoire could depress import taxes and put pressure on the provision of basic social services through increased inflows of refugees and returnees.

Actions will also be taken to follow up systematically on taxpayers who do not abide by their filing obligations. A risk based approach to tax audits will be adopted and efforts will be made to strengthen the capacity of the National Directorate of Property Titles and the Land Registry. Measures to strengthen budget execution and oversight are also planned. These include steps for the establishment of a single treasury account, upgrading the financial management information system, and the adoption of a new procurement code in line with regional guidelines.

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9 For details on the planned actions to improve VAT administration, please see the Annex 1 (Memorandum of Economic and Financial Policies for 2010-11) of the Fifth Review under the Three-Year Arrangement under the Extended Credit Facility and Request for Extension of the Arrangement and Rephrasing of Disbursement.

Mali’s strong track record of fiscal discipline has served the country well, including in mobilizing budget support. Maintaining these gains could provide strong encouragement to pursue fiscal consolidation even in the incoming electoral period. The Government is coordinating efforts with other countries in the region to address security related risks. The budgetary implications of the financial difficulties of parastatals are being addressed through close monitoring of the financial positions of BHM, CMDT, EDM SA and CRM, privatization (CMDT, BHM), and restructuring (EDM SA).

10 The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) indicates that as of February, 7, 2011 the number of refugees had increased to over 36,000. UNHCR registered 35,790 refugees in Liberia, 670 in Guinea, 221 in Togo, 135 in Mali, 84 in Ghana, 22 in Benin, 16 in Burkina Faso and 30 in Niger respectively.

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Regarding CRM, steps to strengthen regulations to address the risks are being taken, but progress has been slow. Slippages in the implementation of critical reform actions could increase the risks above. For instance, delays in the adoption of a new tariff mechanism for electricity could worsen the difficult financial situation of EDM S.A, more so with the recent increases in fuel prices. Similarly, delays in the privatization of CMDT’s subsidiaries could entail missed opportunities to launch production in the sector while diverting scarce public resources from key priorities such as education and health to address CMDT financial difficulties.

2.11. The 2010 Debt Sustainability Analysis (DSA) update indicates that the risk of debt distress needs to be upgraded from low to moderate. Under baseline assumptions, all external debt and debt-service ratios remain below the policy-dependent thresholds throughout the projection period (Table 2.2). The present value (PV) of external debt is expected to increase from 16 percent of GDP in 2010 to 19 percent in 2030. As production from existing gold mines declines and other exports’ growth only partly compensates that decline, the PV of the external debt-to-exports ratio is projected to increase steeply from 62 percent in 2010 to 113 percent in 2030, but remain well below the threshold of 150 percent. With projected increase in tax revenue collection by about 2.6 percent of GDP from 2010 to 2030, the PV of the external debt-to-revenue ratio is projected to hover around 90 percent of GDP, which is significantly below the threshold of 250 percent. However, Mali’s external debt sustainability is highly sensitive to an export shock or a hardening of financial terms. Under an alternative scenario that lowers the exports to GDP ratio permanently by about 30 percent, the PV of the debt-to-exports ratio would exceed the threshold in the year 2017 and remain above it until the end of the projection period. Under a hardening of financial terms, the PV of debt-to-exports ratio would also breach the threshold, but only by the end of the projection period. Mali’s debt sustainability needs to remain under close scrutiny and the Government needs to limit its recourse to external financing to grants and concessional loans while strengthening debt management, or find ways to further accelerate growth of GDP and diversify exports.

Table 2.2: Policy-Based Debt Burden Indicators Thresholds

1/ Baseline Scenario Ratios

2010 2030 NPV of external debt-to-exports 150 62.3 112.6 NPV of external debt-to-GDP 40 15.5 19 External debt service-to-exports 20 2.9 5.4 NPV debt-to revenue 250 91.7 92.3 Debt service-to revenue 30 6.7 3.6 1/ Policy indicative thresholds for a medium policy performer. Source: December 2010 Mali DSA

2.12. The IMF presented its ECF arrangement with Mali to its Board on May 28, 2008 and its fifth review was successfully completed on January 26, 2010. In the context of its ECF-supported program, the Government is implementing measures to continue to maintain prudent macroeconomic policies. In addition, the medium term reform program targets a number of critical actions in banking, agriculture and public financial management that would reduce fiscal risks and support accelerated growth. Bank and IMF staff will continue to coordinate the content of the PRSC series and ECF to ensure that the instruments complement one another, especially in the area of public financial management and structural reforms.

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2.13. Overall, Mali’s macroeconomic framework provides an adequate basis for the proposed operation. The 2011 budget is aligned with the GPRSF priorities. The fiscal deficit is temporarily unsustainable (2009-12) but this is related to exceptional investments financed by exceptional resources from the privatization of SOTELMA. The authorities intend to use these on non-recurrent spending aimed at raising economic growth. Funds are being allocated to the eight priority areas of President Touré’s 2007-12 Economic and Social Development Plan, which is aligned with the GPRSF. About one-fourth of the money is destined for infrastructure, agriculture, and the social sectors; one-fourth for counterpart funds to co-finance public investment with donors; another one-fourth for paying down domestic debt; and the balance for housing construction, decentralization, support to small enterprises, and other uses. Moreover, the authorities have a credible fiscal consolidation plan, which is being implemented in a context in which the overall public financial management framework is being strengthened, with donor support. This plan emphasizes measures to increase domestic revenue mobilization, tighten prioritization and controls in public spending, and minimize recourse to domestic financing.

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3. MALI’S GROWTH AND POVERTY REDUCTION STRATEGY FRAMEWORK

3.1. The 2007 GPRSF embodies Mali’s medium-term vision. The GPRSF lays out strategic priorities for accelerating growth to and reducing poverty. The GPRSF is designed as the first phase of the ten-year action plan to achieve the MDGs which targets a reduction of poverty incidence to 34 percent of the population by 2015. To attain its twin objectives of rapid private sector-led growth and stronger public sector performance, the GPRSF outlines three strategic pillars: (1) development of infrastructure and economic sectors, to enhance productivity by improving the business environment; (2) continuation and consolidation of public sector structural reforms, to increase public sector efficiency, particularly through pursuing public financial management reform, decentralization, strengthening the rule of law and fighting corruption; and (3) strengthening the social sectors to improve the delivery of basic social services, including improved access for the poor.

3.2. Based on the household survey of 2006, the poverty rate was estimated at 47.4 percent (ELIM, 2006). Projections included in the 2009 GPRSF Progress Report estimate poverty at 43.7 percent in 2009. Projections indicate that poverty rates remain higher in rural areas, at 53.5 percent (from 57.6 percent in 2006), against 23.5 percent in urban areas (from 25.5 percent in 2006). Actual poverty rates are expected in the coming months, based on data from the 2010 household survey.

3.3. Despite progress in access to basic social services, Mali’s prospects for achieving several Millennium Development Goals (MDGs) are low (table 3.1). The goals related to combating HIV/AIDS, malaria and other diseases could be achieved. HIV/AIDS prevalence is estimated at 1.3 percent in 2008 and is projected to decline further. Another goal that could be achieved is universal primary education. Gross enrollment rates in 2009 reached 82 percent and the girls/boys parity index improved to 80 percent. While progress was made towards many health related targets set in the GPRSF for 2009, Mali is unlikely to achieve the 2015 goals on reducing child mortality and improving maternal health. From 2007 to 2009, the rate of deliveries assisted by qualified staff increased from 57 percent to 61 percent, but lags behind the level it would need to have achieved to ensure meeting the MDGs. The maternal mortality rate declined but it is very unlikely that the rate could be reduced by three quarters in 2015 compared to 1990. Reaching universal access to reproductive health by 2015 is also highly unlikely. The objective of cutting by half by 2015, the proportion of people without sustainable access to safe drinking water is likely to be reached. The ratio of the population with access to drinking water increased from 70.1 percent in 2007 to 73.1 percent in 2009. The gap between coverage ratios in urban and rural areas decreased in the same period. However, progress in the area of sanitation has lagged behind. Progress was made in actions to eliminate gender disparities but results are far from the MDGs. There are 15 women out of a total of 147 members of parliament, which is a representation rate of 10.2 percent. Women are also less represented at the level of mayors where they are only 7 out of 703 mayors, or a representation rate of 1 percent. Town councils have 6.7 percent women, in the Local Authorities High Council women hold 8 percent of the positions.

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Table 3.1 Mali – Progress toward the Millennium Development Goals

GOAL

CURRENT STATUS

ACTIONS PLANNED TO ACCELERATE PROGRESS

Eradicate extreme poverty and hunger

Unlikely The Government is implementing inclusive policy actions to increase productivity and reduce vulnerability in the agricultural sector, from which most of the poor derive their incomes. Actions are also ongoing to improve basic infrastructure and the overall business environment. Bank support is being provided through IL (agriculture, electricity, growth support project, and transport), PRSCs and ESW (CEM, Growth Notes, Poverty and Gender Notes).

Achieve universal primary education

Possible to achieve if some changes are made

The Government plans to improve access, quality and equity by focusing on improved human resource (HR) management, improved systems for the distribution of textbooks, enhanced monitoring of investments and through effective decentralization and greater participation at local level. Bank’s support is channeled though analytical work (2010 Education Status Report) and general and sector budget support focusing on strengthened framework for HR management, school feeding, increased equity through increased availability of public schools in rural areas, strengthened PFM, and effective decentralization.

Promote gender equality and empower women

Possible to achieve if some changes are made

The Government has defined priority areas of intervention to promote gender equity but specific actions still need to be defined. Areas selected include equal access to education and employment, framework to protect women from domestic and other forms of violence, and steps to ensure that women participate in decision making. Bank’s support is channeled through analytical work (population, Poverty and Gender Notes), IL (PAPAM), PRSCs (school feeding, HR management in the education and health sectors, mutuelles).

Reduce child mortality Off track The Government plans to increase the availability of skilled health personnel, extend access to immunization, improve sanitation and livelihoods of households, increase access to information on health care issues and reduce costs of child health care services. Bank’s support is being provided through analytical work (health status report), PRSCs (Education and health HR management, decentralization, mutuelles, access to clean water).

Improve maternal health Off track

The Government has an action plan which includes free access to cesarean sections for poor women, inclusion of sexual education in the education curriculum, increase access to family

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GOAL

CURRENT STATUS

ACTIONS PLANNED TO ACCELERATE PROGRESS

planning, enhance decentralized provision of health services and community participation. Bank’s support is channeled through analytical work (health status report), PRSCs (HR management, mutuelles, strengthening PFM at decentralized level), TA (increased capacity for PFM at decentralized level), IL (Strengthening Reproductive Health Project).

Combat HIV/AIDS, malaria and other diseases

Possible to achieve if some changes are made

The Government plans to enhance monitoring and evaluation efforts, intensify actions to change behavior, continue research activities to better provide health care to those affected by the virus. A program is in place to improve diagnostic and effectiveness of tuberculosis treatment. Actions to combat malaria focus on prevention measures, including through sanitation and wide distribution of mosquito nets.

Ensure environmental sustainability

Insufficient information

The Government plans to strengthen its interventions to expand access to drinking water including through PPP, and provide sanitation. Also, actions will be undertaken to improve the collection and treatment of data on environmental issues, strengthen the role of institutions in charge of environmental issues, take into account environmental issues in the design of strategies and actions plans, disseminate information on international agreements ratified by Mali and ensure adequate resources for decentralized environmental management. Bank’s support is channeled through PRSCs (drinking water) IL (Urban Development Project) and WB/GFDRR’s activities.

Develop a global partnership for development

Insufficient information

Actions planned by the Government include improved aid management though the adoption of computerized systems, enhanced monitoring of the PRSP and tightened linkages with the budget, to facilitate donor support aligned with PRSP priorities, and improved governance. The Bank plays a key role in promoting donor coordination and is gradually increasing the use of country systems (eg: PAPAM, TA).

Source: Gouvernement of Mali (2009), Deuxième Rapport de Mise en œuvre des Objectifs du Millénaire pour le Développement au Mali. 3.4. A number of public policies demonstrate the Government’s willingness to assist the poor and the vulnerable. However, the multiplicity of policies and action plans lacks cross sectoral consistency and therefore fails to provide a comprehensive framework for social protection. There is a consensus on the need to develop a cost-effective social protection system, and introduce innovative social safety nets to mitigate the consequences shocks. The Government is in the process of reviewing its social protection strategy, including the social safety net system, and is looking for support to develop instruments to (1) better mitigate

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economic risks in the face of price, exchange rate and climatic volatility, and (2) protect the chronic poor and most vulnerable. In his context and to assist the Government the Bank has prepared a review of social safety nets (Report No 53222-ML, December 2010). The findings of the review show that: (1) the scope and coverage of the social safety net is very small (0.5 percent of GDP in 2009) compared to the most urgent needs (about 27 percent of population is food insecure). The largest safety net programs (other than the general food subsidies of 2008) are food rations (through food security stock) and nutrition transfer programs; (2) most of the existing safety nets programs are heavily dependent on external financing, and due to inadequate funding have limited impact; (3) existing policies fail to provide a comprehensive view of social protection or ensures trans-sectoral consistency; and (4) weak institutional capacity and lack of reliable information on beneficiaries and cost of the programs make it difficult to design a comprehensive social protection strategy (including social safety net system) and to monitor the results. To improve the efficiency and relevance of safety net programs Government needs to play a more proactive role in terms of designing, coordinating, implementing, monitoring and evaluating various safety nets programs. More specifically there is need to:

• strengthen the institutional framework and capacity to design, coordinate, implement, monitor and evaluate the social protection strategy, including the social safety net systems, through reviewing the responsibilities of various institutions engaged in implementing the safety nets programs, as well as identifying the financing sources for safety nets programs (Budget, donors, NGOs);

• improve cost-effectiveness of the safety net programs through improving the targeting of the programs and investing in monitoring and evaluation. Given the limited fiscal space available for safety net programs, the government must allocate its scarce resources to programs that are well targeted, cost-efficient and promote demand for health care and education, especially for young girls; and

• expand safety nets instruments by introducing cash transfers and labor intensive public works as one of the main policy instrument to address the needs of chronic poor both during normal period as well as crises.

3.5. Preliminary results of the 2009 population census highlight the urgency in tackling demographic issues. The 2009 GPRSF report indicates that the population has increased from 3.5 million in 1960 to 14.5 million in 2009. The annual population growth rate is 3.6 percent (compared with 2.5 percent, 3.7 percent, and 2.2 percent, in 1976, 1987, and 1998 respectively). Determinants of the rapid population growth include the very high total fertility rate of 7 children, unmoved for the last two decades, and a mortality rate for children under five declining steadily from 250/1000 in 1990 to 196/1000 in 2009. The increase in immigration due the instability in some countries of the sub-region in recent years could have contributed to the observed trend, particularly between 1998 and 2009. Population in Mali is bound to continue to increase for a long time, given the age structure. Also, given the cultural background in Mali, the size of the rural population and the fact that female education is among the lowest in SSA, population policies will take a long time to have any effect. In addition, the 2006 Population and Health Survey shows that about 30 percent of the demand for family planning is not met. The Mali National Population Policy and its third implementation program for 2010-2014 advance

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reforms to tackle the problem. Demographic trends have also been highlighted as a critical issue in the context of the preparation of the third PRSP.

3.6. The Government of Mali launched the preparation of the third generation Poverty Reduction Strategy, the GPRSF 2012-17, on December 6 and 7, 2010. The new strategy is scheduled to be completed by June 2011, on time to inform the 2012 budget. The strategy will cover the period 2012-17 to coincide with the electoral cycle. Thematic groups composed by government officials at central and sub-national levels, and representatives of the civil society and of the donor community were organized to prepare the draft strategy, which will be informed by analytical work, including economic and sector work prepared by the Bank.11

3.7. The institutional framework for managing the overall implementation of the GPRSF is well established. A technical unit within the Ministry of Economy and Finance is responsible for the coordination of the GPRSF’s implementation as well as for its monitoring and evaluation. Four thematic groups (macroeconomic policies, basic infrastructure development and productive sectors, institutional development and governance, sustainable human development) made of representatives from the relevant line ministries as well as civil society meet on an ad hoc basis to prepare the Progress Report. A Commission bringing together the Malian Government and the donor community meets regularly to discuss progress made and next steps. Work is underway to harmonize calendars to better incorporate the GPRSF’s evaluation in the budgetary process. The data collection phase of the new household survey was completed in August 2010 and a population census was undertaken in April 2009. These two exercises will provide updated information on various aspects of poverty in Mali.

3.8. Annual progress reports of the GPRSF are prepared in a consultative process, which includes government entities at national and sub-national level, NGOs and the donor community. As with the previous ones, the preparation of the third report of the GPRSF had two stages. In the first stage (the technical stage), three working groups were organized, focusing on the following themes: (1) accelerated growth and the population issues; (2) poverty trends and progress towards the MDGs; and (3) aid effectiveness and financing. Each of these three groups prepared a report. Participation of the government officials and donor representatives at central level was high. Civil society representatives were involved in the process, but more need to be done to ensure a more effective participation in the future. The second stage (political stage) consists of a review meeting, attended by representatives of the main stakeholders at high level (ministers, presidents of regional assemblies, heads of donor agencies, etc.). This event validates the consolidated GPRSF progress report. The report is widely disseminated across the country. These dissemination efforts in 2011 will also be used to consult the Malian population on priorities for the GPRSF 2012-17.

11 Work has recently begun on Poverty and Gender Notes using a 2010 household survey. The notes will close knowledge gaps and inform the preparation of the GPRSF (2012- 2017).

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4. BANK GROUP’S SUPPORT TO THE GOVERNMENT’S PROGRAM

A. LINK TO THE COUNTRY ASSISTANCE STRATEGY

4.1. The Bank’s CAS discussed by the Board of Directors on February 5, 2008 was designed to support the implementation of the GPRSF. The CAS covers the period FY08-11 and has two strategic objectives: (1) promote rapid and broad-based growth; and (2) strengthen public sector performance for service delivery. Within the two CAS pillars, the Bank will focus on: (a) private sector led growth by addressing key constraints such as productivity, energy, transport, and finance and by linking the country to the rest of the world; (b) governance; and (c) capacity development. It foresees the use of three types of instruments: development policy operations (PRSCs), investment credits, and analytical and advisory activities. The proposed PRSC-5 is an integral part of the CAS as it is designed to provide financing for the budget in support of the implementation of policy reforms in key areas targeted by the CAS namely: (1) enhancing the regulatory and institutional framework for infrastructure and private investment to improve productivity; (2) strengthening public financial management for improved public sector efficiency; and (3) improving service delivery to increase access to basic social services.

B. RESULTS ACHIEVED UNDER PRSC-3 AND PRSC-4

4.2. Over 80 percent of the results targeted for 2009 were met. Information available as of September 2010 indicates that good progress is being made towards the targets also in 2010 (Table 4.1, Annex 3).

Table 4.1: Results Achieved under PRSC-3 and PRSC-4. PRSC-3 and PRSC-4 Prior Actions Results Improving the Policy Environment for Private Investment and Infrastructure Transfer budget resources to CMDT to pay arrears due by CMDT to producers (CFAF 3.7 billion) and adopt a price mechanism aligning the seed cotton price to the international lint market price for the 2009/2010 campaign.

The measures created conditions for farmers to return to cotton production and gradually increase output. For the campaign 2008/09 seed cotton output is estimated at 201,462 tons and for 2009/10 it is estimated at 230,000 tons, both above the PRSC targets.

Establish the Cotton Inter-professional Association (L’interprofession du Coton Mali) and the Service Provider for Cotton Grading (Office de Classement de Coton) for the private management of the cotton sub-sector. Nominate members of the Council of the Telecommunications Regulatory Agency (the CRT).

The nomination of the CRT Council operationalized the entity mandated to foster fair competition, enhance governance (including through information sharing), resolve disputes, and protect consumer interest. The PRSC results indicator is the publication by CRT of a yearly report reflecting council decisions and the general performance of the sector. This target was met in 2009 and in 2010.

Adopt an inter-ministerial decision establishing the period of validity of import and export licenses issued by National Directorate of Commerce and Competition at twelve (12) months

The extension of the validity of import and export licenses issued by the Chamber of Commerce reduced the number of days, documents and costs to import and export. All PRSC targets were met in 2009. For 2010, information is available for all indicators but one (cost of licenses to export). All targets for which

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PRSC-3 and PRSC-4 Prior Actions Results information is available were met.

Sufficient progress on the drafting of the EITI validation report and towards completing the EITI validation process.

The EITI validation process underway has so far helped increase transparency and accountability in the mining sector. The 2006 audited report (1st EITI report) on tax revenues accrued from mining activities is publicly available as targeted by the PRSC. A second report covering 2007-2008 will be made available by June 2011.

Strengthening Public Financial Management Expand the MTEF to 4 additional ministries (Ministry of Finance, Ministry of Economy, Industry and Trade, Ministry of Domestic Security and Internal Protection, Ministry of Youth and Sports), consistent with the ministries' implementation capacity and the macroeconomic framework.

The extension of the MTEF to four additional ministries contributed to the increased alignment between the allocation of available budget resources to GPRSF development objectives. The share of primary expenditure of sectors for which statements of sector strategies exist and are fully costed, broadly consistent with fiscal forecasts increased from 48.2 percent in 2005 to 68 percent in 2009 and 75 in 2010.

Establish the regional procurement control directorates (Directions Régionales des Marchés Publics) and the independent procurement regulatory body (Autorité de Régulation des Marchés Publics et de Délégation des Services Publics) including by nominating the regional procurement control department managers and nominating the members of the independent procurement regulatory institution.

The establishment of the procurement control department and the independent procurement regulatory institution were crucial for the implementation of the new Procurement Code. The share of contracts awarded through open bids (number) increased to 76 percent in 2009, in line with the target set by the PRSC. For 2010 the share is 77 percent, below the target set in the PRSC-4 PD but in line with the revised target set by the GoM in 2010.

Issue quality quarterly budget execution reports for the last quarter of 2009 and first quarter of 2010 and publish them in the Ministry of Economy and Finance’s website.

The quarterly reports enhanced the authorities’ ability to identify and address budget implementation problems promptly. The timeliness of intra-year budget reports improved and is in line with the PRSC targets both in 2009 and in 2010. While the scope of reports in terms of coverage and compatibility with budget estimates also improved, in 2010 it was below the targets set by the PRSC.

Submit to National Assembly the draft 2007 budget executing report "Loi de Règlement 2007" within the deadline established by law.

The submission to National Assembly of the new organic law of the Audit Section (Section des Comptes) removed the limits on the number of financial judges that could be hired, pre-requisite for timely and better quality external audits. The timeliness of submission of audit reports to legislature improved but the targets set by the PRSC were not yet met.

Submit to the National Assembly a draft law revising the Organic Law 96-071 to eliminate limits to the number of judges in the Audit Section of the Supreme Court that can be recruited.

Improving Basic Social Service Delivery Allocate in the 2009 budget resources for the integrated school feeding program (Cantines Integrées), for an amount of CFAF 1.6 billion to be allocated to the poorest regions of the country.

114,000 children from the 166 poorest communes benefited from budget financed school feeding programs in 2009 and the number increased to over 170,000 in 2010. These results are above the targets set by the PRSCs. School feeding helped increase school enrollment in the 166 poorest communes from 68.8 percent in 2008 to 70 percent in 2009 and 73 percent in 2010. Regarding girls, enrolment rates increased from 61 percent in 2008 to 64 percent in 2009 and 66.1 percent in 2010.

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PRSC-3 and PRSC-4 Prior Actions Results Adoption by the Ministry of Education of its Human Resource Management Strategy, among others, to retain trained teachers in remote areas.

The Education Human Resource Management Strategy defines the approach to be followed to improve the availability and retention of qualified teachers, including in remote areas. Budget allocations for the co-participation in the payment of community teachers’ salaries were in line with targets in 2009 but in 2010 the target was not met because the Government intensified its efforts to absorb community teachers into the public service. Information for 2009 and preliminary information for 2010 suggest that the teacher pupil ratio declined in line with targets.

Adoption by the Ministry of Health of a Health Human Resource Policy aimed at improving the availability of staff in health services, with emphasis on peripheral services.

The Health Human Resource Policy defines the approach to be followed to improve the availability and retention of qualified health personnel, including in remote areas. The DRH launched the recruitment process for medical personnel for the regions of Mopti, Kayes and Timbuktu. The targets for the recruitment of midwives set by the new Human resource Department in 2010 and used to monitor PRSC results were met.

Establishment of the National Directorate of Human Resources (DRH) in the Ministry of Health and allocation in the 2010 budget law sufficient resources to finance the deployment of at least 20% of the annual needs of midwives and medical doctors in Mopti, Kayes and Timbuktu regions. Adoption of the operational guidelines of Decree 02-314 on decentralization in the health sector, including the framework for the transfer of financial resources to the local communities and monitoring and oversight mechanisms at the regional level.

The guidelines prepared conditions for the transfer of financial resources to the local communities. Health budget resources transferred to decentralized entities were in line with the targets in 2009. The target for 2010 was not met due to low investment execution rates.

Delegate the management of five (5) drinking water supply (AEP) systems to private operators.

Public-private partnerships have expanded access and improved the management of drinking water systems in rural areas. The average access rate for Kayes, Koulikoro, Mopti, Gao and Timbuktu increased to 61 percent in 2009, above the target. Actual numbers for 2010 are not yet available.

Signing of at least 50 conventions regarding the co-financing of at least 50% of the contributions of the poor households who adhere to health mutual insurance schemes and reflect corresponding resources in the 2010 Budget Law.

The Government’s co-financing of contributions of the poor to health “mutuelles” helped increase their membership in line with the targets. By end 2009, the number of beneficiaries was 285,835 and the target was met. By July 2010, the number of beneficiaries had reached 360331 and the target set in the PRSC-4 PD is unlikely to be met. The Government revised targets in 2010 to reflect the effects of delays in reform implementation.

C. KEY LESSONS LEARNED

4.3. PRSCs are an effective instrument to support key GPRSF reforms and improve policy dialogue in Mali. This said, the Implementation Completion and Results Report (ICRR) for the first PRSC series and experience from the implementation of PRSC-3 and PRSC-4 highlighted important lessons that were taken into account in the formulation of the agenda supported by PRSC-5. In particular, greater realism and selectivity guided the design of policy areas targeted for support, to better take into account what can be achieved in one tranche support instrument in a context of limited capacity and a complex political economy.

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4.4. The PRSC-5 supports 11 policy actions, more than previous operations. While the PRSC series had targeted an average of 9 prior actions per year, delays in the implementation of reforms resulted in the increase in the number of policy measures in the last operation of the series, reflecting an effort to catch up.

4.5. Understanding the political economy of reforms is critical. Consensus is sought for major policy decisions in Mali. The process can be lengthy, delaying implementation of critical reforms. The PRSC series faced such delays regarding two measures, namely the adoption of a new Investment Code and of a new tariff mechanism for electricity. These were PRSC-4 prior actions that had to be postponed to PRSC-5. A draft investment code was prepared in the context of PRSC-4 but more time was needed to build stakeholder consensus and improve the quality of the code. The investment code submitted to the National Assembly in February 2011was prepared in a participatory manner. Bank and IMF teams worked closely together to provide inputs regarding the content of the code. This positive collaboration will continue to ensure adequate implementation. The new tariff mechanism is politically sensitive and before adopting it, the Government chose to conduct a number of studies and stakeholder consultations. While this delayed the process, it could strengthen ownership of the mechanism and facilitate its implementation.

4.6. Close supervision and technical assistance are critical to address capacity constraints and bottlenecks impeding or delaying the implementation of reforms. Supervision has been intensified by complementing missions and regular meetings with written quarterly status reports prepared by the authorities. Inadequate programming of technical assistance by the authorities led to delays which ultimately resulted in the drop of the audit of producer organizations debt as a prior action for the PRSC-5. This illustrates the criticality of timely technical assistance for good progress in the implementation of reforms.

4.7. Experience from the implementation of previous operations favors a streamlined but strong monitoring and evaluation (M&E) framework. Limitations in the availability and reliability of data to measure outcome indicators are considerable in Mali. The PRSC-5 includes a results matrix that is selective and contains indicators linked with the measures supported and that are regularly monitored without imposing additional costs to the Government. Some targets and indicators were adjusted to reflect revisions by the sectors, and difficulties in compiling reliable information.

D. COLLABORATION WITH THE INTERNATIONAL MONETARY FUND (IMF) AND OTHER DONORS

4.8. The Bank and IMF staffs coordinate activities closely. The two teams agree that Mali’s main macroeconomic challenges are to (1) create fiscal space to respond to the shocks to which the country is vulnerable and (2) to raise the growth rate to reduce poverty more rapidly. Over the medium term, meeting these challenges would require collaboration in a number of key areas: (1) reform of the parastatal sector, notably in the cotton and banking sectors; (2) strengthening public financial management (PFM) and well-executed decentralization; (3) improving the business environment and international competitiveness; (4) orienting economic management to strengthen the leading sources of economic growth; and (5) strengthening statistical systems. In addition, it will be important to support development efforts and reforms at the regional level, including through regional institutions (especially with regard to the financial

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sector) and infrastructure development (and its financing). The Fund will continue to support Mali through the ECF, focusing on maintaining a macroeconomic environment favorable to growth. Over the next year, program-related structural reforms will be focused on PFM issues, and the housing bank. The Bank will support Mali through budget support operations, investment operations and analytical and advisory work focusing on PFM, restructuring the cotton sector, energy and energy pricing, agriculture productivity, private sector development, and improved basic social service delivery. The teams prepared jointly a new DSA and coordinated advice on the GPRSF Progress Report.

4.9. In line with the Paris Declaration, development partners are supporting Mali in implementing the GPRSF, by coordinating financial and technical support. A Memorandum of Understanding (MoU) was signed in March 2006 and renewed on July 1, 2010 by the Government and a group of donors, including the Bank, African Development Bank (AfDB), European Commission (EC), Sweden, France, Germany, the Netherlands and Canada to provide a framework for a multi-donor approach to budget support. This Budget Support Group initiated annual joint-donor missions in 2007. The last joint donor mission took place in October 2010 and resulted in the preparation of a joint policy matrix, on which to base the programs supported by the participating institutions. Under the Bank, EC and AfDB Tripartite Partnership, Mali is a pilot for joint budget support. Budget support, including the PRSCs, is gradually helping reduce Government’s transaction costs. However, expected improvements in the predictability of aid have yet to materialize, in part due to delays in the implementation of agreed reforms that underpin disbursements. Development partners are organized in thematic groups, each of which maintains close dialogue with the Government in specific areas. The support to the public expenditure reform agenda is coordinated in line with the Government's PAGAM. The Government has convened meetings periodically with the main donors to inform them of progress on implementation. Key reforms in public financial management are being supported by financing from IDA together with technical assistance from Canada, the EC and the French Cooperation. Donor coordination around decentralization reforms has also improved with a thematic group on decentralization chaired by the EC being in place. The working group focuses on the institutional framework of the decentralization process in Mali.

4.10. The Ministry in charge of Basic Education has continued to lead the dialogue with donors in the education sector. The Education For All (EFA)-Fast Track Initiative (FTI) process has strengthened the Ministry further in this role and has given a focus to the Donor Group, which includes 14 development partners. Regular donor meetings are organized and through this, a deeper sharing of information on appraisal missions, technical assistance and studies. The education sector benefits from sectoral budget support since 2006.

4.11. The health sector has adopted a sector wide approach. The sector development strategy was the first building block of a Sector Wide Approach Project (SWAP) in the health sector and has constituted the focus of donor coordination and harmonization. In addition, support for HIV/AIDS is already structured around a sector wide approach with all donors' programs aligned with the Government strategy. Steps are also ongoing to adopt a sector wide approach in rural development.

4.12. Capacity constraints hamper Mali's ability to achieve its development objectives. This justifies the emphasis given by the donor community to strengthening capacity through a

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range of technical assistance grants and training initiatives designed to enhance the implementation of the GPRSF. The key donors involved include the Bank, IMF, EC, United Nations Development Program (UNDP), the French Co-operation Agency (AFD), AfDB, the Swedish Development Agency (ASDI) and the Unites States Agency for International Development (USAID). Donor coordination to support capacity building efforts is also being enhanced through the different thematic groups.

E. COMPLEMENTARITY WITH OTHER BANK ACTIVITIES

4.13. Bank support for the agricultural sector under the Agricultural Services and Producer’s Organizations Program (PASAOP), the Fostering Agriculture Productivity Project (PAPAM) and the PRSC series are complementary. These projects focus on increasing production and productivity of key selected production systems based on sustainable land and water management practices in selected priority areas. The operation includes the following axes: (1) investing in productive infrastructures and equipment; (2) enhancing service provision to producers (research, training, advisory services, financing, input supply, etc.); and (3) enabling the policy and institutional environment for productivity increase, while ensuring a stronger sector monitoring for better policy decision making. Regarding cotton, these projects include: (1) provision of technical assistance to the unit in charge of the restructuring program in the cotton sector, the Mission de Restructuration du Secteur Coton (MRSC); (2) facilitation of access by producer organizations to agricultural support services; (3) strengthening of capacity of producer organizations and cotton related unions; and (4) supporting strategic and demand-driven research and disseminate research results on new varieties, diversification, mechanization or innovative practices, including environment-friendly agricultural practices.

4.14. Measures to stimulate private sector development supported by the Growth Support Project and the PRSC agenda well aligned. The Growth Support Project, restructured in mid 2009, streamlined its mining component to focus on four key activities: (1) carrying out studies on the diversification of non-gold mining; (2) provision of technical assistance in the area of mining research; (3) developing small and medium-scale mining activities; and (4) supporting the improvement in the transparency of financial flows in the sector, in line with EITI. The PRSC-5 complements the Growth Support project by supporting the completion of all validation steps and submission of the validation request to the EITI International Secretariat.

4.15. The Bank’s Energy Support Project, approved by the Board in mid-2009, and the PRSC series are mutually reinforcing. The Energy Support Project aims to help the Government improve the availability, reliability, and efficiency of electricity services to support shared-growth and competitiveness of the economy. The PRSC-5 reinforces these activities by supporting the restructuring program of EDM SA, notably through the adoption of the new tariff and subsidy policy for electricity.

4.16. A technical assistance (TA) project on Governance and Budget Decentralization, planned for Board presentation in FY11 would accompany the PRSC series. The TA project would enhance capacity and support the implementation of the reforms proposed by the PRSCs, notably in the area of public financial management including at decentralized level. Technical assistance is also being provided through trust funds focusing on strengthening poverty related data collection and analysis as well as GPRSF participatory processes.

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F. ANALYTICAL UNDERPINNINGS

4.17. To inform policies aimed at accelerating growth, the proposed PRSC-5 draws from Bank, Government and other partners’ economic and sector work. The Country Economic Memorandum (CEM) prepared by the Bank in 2007 (Report No. 36571-ML) highlighted the critical importance of reforms in the agriculture sector, notably cotton and ON, in overcoming vulnerability to climate shocks and enhancing food security and growth in Mali. The CEM also highlighted the key role of measures to improve infrastructure and the business environment that informed the choice of policy measures supported by the PRSC series. The CEM findings are complemented by a number of reports, notably on cotton (Comparative Analysis of Organization and Performance of African Cotton Sectors: Learning from Experience of Cotton Sector Reform in Africa, draft, 2007, and Strategies for Cotton in West and Central Africa, 2007), and on energy (Études Tarifaires des Services de l’Electricité et de l’Eau Potable, 2008). Studies by IMF staff on cotton, mining and private sector development (IMF Country Report No. 08/286) also provided relevant insights into the choice of policies supported by the PRSC series. Policy notes focusing on growth will be completed during FY11 geared to enhance the understanding of economic challenges and to strengthen evidence-based policy dialogue.

4.18. Government policy actions supported by the PRSC-5 are underpinned by considerable analytical and fiduciary work undertaken by the Bank, the Government and other partners. The Mali Country Systems Review for Project Financial Management, prepared by the Bank in 2009 assesses PFM systems in Mali, with a view to improve their readiness for the use of country systems by the Bank and other donors. Other recent Bank studies identifying weaknesses and strengths of the PFM framework in Mali include the 2009 Public Expenditure Management and Financial Accountability Review (PEMFAR), the 2004 CPAR update, and various project specific assessments of FM and procurement. Government actions supported by the PRSC-5 were also informed by the 2010 PAGAM II, which benefited from the Government commissioned independent assessment of the PAGAM-GFP, and the EC 2009 Audit of Reform Implementation to Improve Public Finance Management Procedures. Key issues regarding transparent budgeting and public access to budget information highlighted by the International Budget Partnership (IBP) 2010 Open Budget Survey (OBS), which in 2010 included Mali for the first time, were also used in the preparation of the PRSC-5.

4.19. Finally, MDG reports and sector specific studies on education, health, social development, and water supply underpin the reform agenda in those areas. MDG reports have highlighted the challenges facing Mali in its efforts to move towards the targets defined for 2015. The Bank’s 2006 Education Status Report and its update, the 2009 Action Plan to Strengthen Capacity in the Education System in a Context of Decentralization and Deconcentration, the 2009 Report on Basic Education Teachers in Mali: Training, Management, Deployment, highlight key management issues in the sector, including inadequate recruitment, deployment, training and remuneration of teachers. Insufficient definition of attributions at different administrative levels and insufficient transfer of resources to decentralized entities are also flagged as bottlenecks that need to be addressed. Government policies to advance PFM reform for enhanced PFM at decentralized level supported by the PRSC-5 are drawn from the Institutional Development Program, which targets measures to advance the decentralization agenda as a means to strengthen delivery of basic social services.

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5. THE PROPOSED PRSC-5

A. OPERATION DESCRIPTION

5.1. The proposed operation is the last of a programmatic series of three annual PRSCs (PRSCs 3, 4 and 5). The overall objective of this second series of PRSCs is to support implementation of Mali’s GPRSF adopted in 2006. Specifically, the development objectives to which the PRSC-5 contributes are to:

(1) improve the policy environment for infrastructure and private investment, with a particular emphasis on actions to ensure a well-managed transition to private ownership in the cotton sector, enhance governance in the office du Niger, improve the ease of doing business, enhance the financial sustainability of the electricity utility, and to strengthen transparency and accountability practices in the mining sector;

(2) strengthen public financial management, through a strengthened legal framework for procurement, increased transparency and strengthened external oversight;

(3) strengthen PFM in the sectors in charge of basic education and health in the Malian context of decentralization; and

(4) increase the utilization of health services by the poor.

B. RESULTS FRAMEWORK

5.2. The framework for monitoring and evaluation for the PRSC-5 is in line with the institutionalized framework used for the monitoring and evaluation of the government’s program. Government development objectives to which this operation contributes specifically and the associated outcome indicators that will be used to assess progress are summarized in Annex 3. Alignment will be sought with monitoring and evaluation exercises for the GPRSF, PAGAM II, and the preparation of the budget. The following changes were introduced to the results framework: (1) cotton production forecasts were revised downwards, to reflect adjustments made by the agriculture sector; (2) the indicator on cost of licenses to export was dropped because of compilation difficulties; (3) the target on open competitive procedures was revised downwards, reflecting updates made in the PAGAM II; (4) targets on budgetary transfers for the co-participation in the pay of community teachers and for decentralized entities in the health sector were revised downwards taking into account recent trends which result from delays in reform implementation; (5) targets on midwives recruitments were introduced in the matrix (this information was not previously available); and (6) the target for beneficiaries of mutual health insurance schemes was revised downwards by the sector due to delays in the adoption and implementation of the strategy to expand mutual health insurance schemes.

C. POLICY AREAS

5.3. Prior actions for PRSC-5 were selected from the Government planned reforms. Basic criteria for the selection included: (1) criticality for the success of the Government’s reform program in the areas covered by the PRSC series; (2) expressed commitment; and (3) feasibility.

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Improving the Policy Environment for Infrastructure and Private Investment

5.4. Stimulating sustained agricultural productivity and diversification is critical for growth and poverty reduction in Mali. Agriculture remains the mainstay of most Malians and its performance determines output and inflation developments in the country. However, productivity in the sector remains low, and with the exception of rice and some horticulture crops, growth reflects mostly increased extensions of land used. In addition, agriculture is highly vulnerable to recurrent droughts, floods, locust infestation, diseases and variations in world prices notably for cotton.

5.5. Years of subdued output prices and poor management have significantly affected the profitability of CMDT and farmers’ livelihoods, while putting pressure on government finances. CMDT’s financial situation led to the accumulation of debt to its suppliers, estimated at CFAF 10 billion by end 2009. Farmers and producer organizations (OPs) are also burdened by both internal (amongst their members) and external (to other parties) debt. The OPs’ debt accumulation results from a combination of factors, including poor performance of some farmers, late payments and inadequate access to inputs due to CMDT management problems, and shocks related to weather and prices. Mali cotton OPs take on input credit based on solidarity principles. As a result, debt to banks and other suppliers is paid by surplus producers who also bear the burden of deficit producers. This discourages the most efficient farmers from remaining in the sector.

5.6. The Government is implementing a transition plan and actions to re-launch cotton production. The Government estimates cotton output in 2010/11 at around 260,000 tons, a downward revision compared to previous projections that reflect the impact of excessive rains in some areas. This is likely to be achieved due to a combination of factors: (1) timely payment of producers; (2) increase in international cotton prices which will be reflected in domestic producer prices through the application of the pricing mechanism; (3) provision of subsidies to seeds and other inputs; (4) progress towards the adoption of a framework to resolve OPs debt overhang; and (5) increased serenity and commitment from remaining staff of CMDT given that uncertainties regarding privatization diminished. Steps are also being taken to render the Cotton Inter-professional Association (IPC) and the Service Provider for Cotton Grading (OCC) fully operational.

5.7. The Government remains committed to privatize CMDT. Some, but not all of the four lots to be privatized are now expected to be finalized by mid 2011. Seven (7) companies manifested their interest in bidding for the 4 CMDT subsidiaries, of which 6 were shortlisted using criteria specified in the bidding documents. Three short-listed companies did not submit bids, apparently for a mix of both Mali-specific (perceived risks of the sector reform framework) and non-Mali factors (internal company issues). The Malian authorities clarified that national procurement regulations permit proceeding with evaluation of financial offers on the three lots for which bids were submitted, and financial bids were opened on February 17 and evaluation of the financial offers has been completed. In conformity with clearly specified bid documentation, the evaluation committee was obliged to disqualify two of companies’ financial bids for submission of improper bank guarantees, which needed to provided by a Malian-domiciled bank and be for a minimum 5 percent of the bid value. This leaves only one firm having submitted offers that make it eligible for a maximum of two of the lots. Despite this setback that is beyond

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the control of Government, the internal government momentum to conclude this phase of the process appears strong, and indications are that the authorities intend to move on to negotiating concession details with the remaining company, so as to ensure that the 2011/12 cotton season could be undertaken by this new operator in the ceded zones. Decisions will need to be taken regarding the remaining lots for which concession agreements cannot be concluded as part of the current phase, but indications from Government are that these lots may be resubmitted to a call for bids once negotiations for the current phase are completed. When privatization is completed, the market could have up to 3 companies with monopsony power in the regions in which they intervene. The vertically integrated structure should result in cost efficiencies and economies of scale, which would contribute to the sector’s competitiveness and profitability. In practice however, this structure may also function as an inefficient monopsony, with high overheads, a lack of cost monitoring and control, misprocurement, and mismanaged investments, particularly if the framework for cost repartition with producers is inadequate. Therefore, new regulatory capacity is needed, in modalities comparable to a classic regulator of a public service monopsony.12

5.8. In addition to privatization, the Government is working on other medium-term measures to restore the cotton sector’s viability and improve its overall competitiveness. To increase the profitability of the cotton sector, the Government will continue the ongoing capacity strengthening in biosafety regulation and various research to ensure the sustainable introduction of GM cotton. Medium term plans of the Government include: (1) the creation of a cotton observatory and a disaster fund; (2) the establishment of financing mechanisms for research activities on cotton; and (3) adoption of measures to increase technology transfer and service provision to cotton producers to increase yields. A study to inform the framework for future subsidies in the agriculture sector is also being considered.

5.9. Mali could increase agricultural productivity and reduce vulnerability to weather related shocks by exploiting its irrigation potential.13 Much progress has been achieved as a result of the institutional reforms and investments made regarding the irrigable lands on the left bank of the Niger River, notably the increase in rice production. Despite considerable delay, a contract plan for the Niger River Irrigation Office (Office du Niger–ON) was adopted in early 2009.14

5.10. Private interest in investing in the ON area increased in recent years. Large investors (also contributing for the development of irrigation infrastructure) have begun operating, notably from Libya, China and South Africa. To enhance the profile of the ON, the institution is now under the control of a State Secretariat and responds to the Prime Minister’s Office. Investments in the ON region cover agriculture, livestock and agro-industrial activities.

This contract plan is a multi-year action plan which details the agreed activities to be undertaken by ON, GoM and OPs to develop irrigation, maintain existing infrastructure, improve land and water management, increase productivity and improve agricultural practices, while ensuring a sustainable management of natural resources.

12 The Government adopted in 2010 a draft policy paper on the role of the state in the cotton sector, after the privatization of CMDT, with IMF support. 13 Both the Niger and Senegal Rivers run through Mali. The Niger River runs through nine countries - Guinea, Cote d’Ivoire, Burkina Faso, Mali, Niger, Nigeria, Benin, Cameroon, and Chad. Approximately 100 million people are dependent in some way on the river for their livelihood. 14 The Contract Plan is a performance contract between the state, producers and ON.

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5.11. The Government plans to strengthen governance in the management of irrigation. This will be achieved by developing a shared vision among key stakeholders (GoM, ON, producers, private investors and donors) of irrigation development in the areas managed by the ON. Irrigation expansion will no longer rely solely on public financing. It would tap not only into private funding from domestic and foreign investors but also from OPs with access to financing from micro-finance institutions or commercial banks. It is recognized that this new investment model is required to accelerate infrastructure development and to modernize ON management and governance. In 2009, indicative planning and mapping of potential public and private investments has been published by ON to provide a more transparent vision of the on-going irrigation expansion. The framework for participation would also need to be reinforced. To take stock of the implementation of the Contract Plan and increase participation in the management of ON activities, the Government planned a mid-term review for 2010, with the contribution of key stakeholders, to review past and future ON activities and investments and to propose adjustments to better align it with key objectives.

5.12. The competitiveness of Malian firms is constrained by poor quality and costly infrastructure, notably transport. As a landlocked country, Mali's imports and exports are heavily dependent upon neighboring countries' overland routes and seaports. Reducing vulnerability and increasing the future competitiveness of Mali's economy will depend in large part on improving the operational efficiency of its transport system. However, the sector faces critical issues including: (1) insufficient resource allocation to road network maintenance; (2) axle load control; (3) continued problems with transit facilitation; and (iv) the possibility that Transrail may soon go to “Reglement preventif” (the equivalent of Chapter 11 bankruptcy). Bank’s support is being channeled through regional projects and policy dialogue in collaboration with other donors.

5.13. As the 2007 Mali Country Economic Memorandum (CEM) argues, competitiveness of Malian firms is also hampered by high costs of, and weak access to electricity. Several reform and investment programs have addressed the issues facing the energy sector in Mali but implementation did not proceed smoothly. At the end of 2000, expectations were that quality and reliability of water and electricity services would be improved with the concessioning of public water and electricity to a private operator. These expectations were not met and the concession contracts collapsed in October 2005. EDM SA emerged from this privatization experience with an investment deficit, significant internal inefficiencies and inadequate tariff levels.

5.14. With the operationalization of Manantali in 2003, Mali has expanded electricity supply rapidly.15

15 Manantali generates hydro-power.

However, since 2006, Mali has been using the integrality of its generation quota from Manantali. In order to respond to the growing demand, EDM-SA has had to rely on thermal generation. In the absence of tariff adjustments to reflect the shift in the generation mix and higher oil prices EDM-SA has experienced financial losses year after year (Table 5.1). EDM-SA financial performance improved in 2009 due to a combination of lower oil prices and an average tariff increase of 4% - the only adjustment of recent years. EDM-SA losses are expected to reach an unprecedented level in 2010. Prospects for 2011 are not much better given recent trends in oil prices. The level of EDM-SA short term financial debt (mostly with local banks) has also increased and the company has also accumulated arrears with suppliers.

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Table 5.1: EDM SA Recent Financial performance

2006 2007 2008 2009

Turnover (CFAF bn) 75.9 83.8 89.2 98.3 Net Income (CFAF bn) -1.1 -6.8 -5.7 -0.4 Operating margin % -1.4 -8.1 -6.4 -0.4

5.15. The Government adopted an energy sector policy in 2009. The policy has four axes: (1) a new institutional framework for the public provision of water and electricity services; (2) a new tariff framework to ensure the economic and financial viability of the sector; (3) measures to strengthen the production capacity and to reinforce transport and distribution networks; and (4) measures to facilitate the participation of independent power producers. On July 16, 2009, the Board of EDM SA approved a restructuring plan for the company, which has six main lines of action: (1) reducing operational costs; (2) improving commercial performance; (3) adjusting tariffs to reflect costs; (4) enhancing the company’s cash flow position; (5) improving corporate governance and strengthening EDM SA’s technical and managerial capacity; and (6) financing and implementing EDM SA's investment program.

5.16. Informed by the preliminary results of an institutional restructuring study, the Government decided in September 2009 to formalize the separation of the water and electricity operations. A decision was also taken to create an asset holding company and an operating company in 2010, specifically for the management of water operations. Similar companies (asset holding and operating companies) are planned to be created for electricity operations from 2011. The Government has also decided to maintain a single commercialization company for billing and client arrears recovery. Final results of the institutional restructuring study will provide details on the linkages between the above mentioned companies.

5.17. The Government adopted in March 2009 a strategic vision on tariffs and subsidies. The reform of the tariff and subsidy framework aims to align tariffs with production costs, notably costs associated with oil imports, while protecting lower income consumers. To operationalize the vision, work towards the preparation of a revised tariff mechanism began in 2010. This includes: (1) adoption, in consultation with key stakeholders, of an interim electricity tariff mechanism which defines key principles and the methodology for tariff adjustments; (2) simulations, using an economic and financial model, to calibrate the tariff formula; (3) adoption and implementation of the new tariff mechanism. The adoption and implementation of the mew tariff mechanism is scheduled for the second half of 2011.

5.18. There is a new mining law at an advanced stage of preparation that aims to address several issues faced by the mining industry of Mali. The 1991 Mining Code successfully contributed to attracting investment to the gold mining sector during the 1990s, while taxation under the Mining Code of 1999, focused on profits, in line with common practice as evidenced elsewhere in Africa (Ghana, Tanzania, etc.). However, as it was noted in the 2007 CEM, the IMF Country Report 08/286, and more recently, in Bank’s mission reports and activities, there is scope for improvement, notably regarding: (1) local content; (2) the redistribution mechanism of mining revenues between central and local governments; (3) revenue collection mechanism as well as procedures for recording, reconciling, and disclosing revenue streams paid by companies to the government; (4) local value added and creating incentives for nationals to be involved in

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jewelry making in collaboration with for small-scale miners; and (5) clarification of the corporate role when dealing with the need to comply with international environmental and social standards at all stages of a mining operation. The latter includes the assurance that sufficient resources are kept aside throughout the life of the project to maintain infrastructure, for clean-up operations and rehabilitation of closed mining sites for alternative uses.

5.19. The Government plans to boost actions aimed at improving governance in the mining sector. Mali became a candidate country for Extractive Industries Transparency Initiative (EITI) in 2008 and was granted 2 years to implement the activities outlined in its Work Plan. Mali’s adherence to the EITI standards was expected to result in the country reaching validation in the course of the year 2010. However, lack of timely donor’s support delayed the process. Taking this into account and in recognition of good progress made, the EITI international secretariat extended the validation deadline. Several actions have been undertaken to date that attest to the Government’s desire to improve transparency and governance in the mining sector including (1) completion and publication of the first EITI report covering revenues generated from gold activities in 2006; (2) the dissemination of information on revenues generated by the gold sector to civil society through the media, local newspapers, international and national websites, organization of road shows and workshops; and (3) the promotion of productive dialogue amongst multi-stakeholders (private sector, civil society and public sector) on issues pertaining to sustainable mining development in the country, whether directly through EITI meetings and/or national EI forum. To reach Compliance Status, the EITI Board has requested that Mali prepares a second EITI report, covering the years 2007-08. Like many other countries, the EITI Board is also expecting that Mali submits additional evidence on its public accounting system in order to fulfill Indicator 13 (out of 20 validation indicators). Substantial effort is being devoted by Mali in this direction and the country’s candidacy for compliant status should be cleared within the next six months. For the medium term, the Government plans to continue implementing EITI post-validation status and is considering publishing audited reports on mining taxation issues yearly as well as improving the institutional framework for recording gold tax revenues, notably through a separate program that is also being financed by the Bank.

5.20. Notwithstanding progress made in recent years, private enterprises continue to face severe constraints to open and expand. Research generally indicates that countries with burdensome regulation have larger informal sectors, higher unemployment rates and slower economic growth. Mali ranked 153 out of 183 countries in the 2011 Doing Business Report, an improvement of two positions compared to the previous year. However, challenges remain, notably regarding the regulatory and institutional framework which could be rendered more attractive to private investors.

5.21. The 2005 Investment Code offered generous incentives to encourage non-gold investment but it was in need of improvement. The selection of the projects which would benefit from fiscal and custom incentives is based on complex economic criteria and is, therefore, fraught with uncertainty and lack of transparency. The processing delays vary considerably, creating a negative perception of the investment climate in Mali. These difficulties are aggravated by the existence of special conventions granting particular fiscal and custom duty concessions to individual enterprises. The five-year tax holiday provided under the Investment Code also favors short-term over long-term investments.

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5.22. The Government adopted an action plan to improve the business environment which includes the revision of the investment code. The investment code, prepared in consultation with key stakeholders removes various problematic incentives and will be accompanied by the publication of the incentives granted to investors. Moreover, the Government intends to transfer all tax and customs incentives to the tax and customs codes scheduled for adoption in the medium term. While introducing major improvements, the revised code does not fully implement IMF TA guidance.16 Bank and IMF teams will work together to assist the authorities in the steps that will be needed to address this issue.

Public Financial Management (PFM) Reform

5.23. Preliminary results of the 2010 PEFA Update suggest that PFM systems in Mali improved but challenges remain. The assessment indicates overall improvements compared to the results of the 2006 PEFA in following critical dimensions of performance of the Malian PFM system: (1) credibility of the budget; (2) comprehensiveness and transparency; (3) policy-based budgeting; and (4) predictability and control in budget execution.17 No change was noted regarding accounting, recording and reporting. Indeed, the 2100 Open Budget Index (OBI) rated Mali 61st out of 94 countries on public availability of budget information. Budget documents can be consulted at no charge in the national public library. Access to copies is however constrained by the cost of copying.18

5.24. Policy measures were taken to improve the procurement function in Mali but more needs to be done.

With PRSC4 support, the Government commenced issuing quarterly budget execution reports in 2010, published in the MEF website. Another critical dimension which saw no progress is external scrutiny and audit. While the overall rating of the dimension regarding predictability and control in budget execution improved, some key sub-dimensions saw no progress at all, as is the case of competition, value for money and controls in procurement.

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16 The new code includes a VAT exemption on domestically produced capital goods for a period of up to 5 years. While this covers a limited number of goods, it is a change in the wrong direction. The authorities made this choice to mobilize stakeholder consensus while minimizing the impact on the tax base and on tax administration.

The adoption in 2008 of new procurement codes improved the legal framework for procurement. With PRSC-3 support, the Government established regional procurement control directorates and the Procurement Regulatory Agency (ARMDS). A recent review of procurement systems undertaken by Bank staff identified changes that need to be made to the 2008 procurement codes to fully align them with WAEMU guidelines. In particular, changes are needed to ensure an adequate assignment of attributions between the General Directorate of Public Procurement (DGMP) and the ARMDS. The responsibility for the definition of procurement policy, and training strategy and programs should be assigned to the ARMDS. The review also noted that planning and programming of public procurement is mostly limited to procurement related to externally-financed projects. In addition, enforcement of procurement regulations is weak. For instance, these regulations are not fully applied by statutory bodies. Other remaining issues include the absence of an official journal for public

17 PRSC-3 supported the expansion of the number of ministries with MTEFs. The Bank also provided TA for the harmonization of methodologies used by sector ministries in the compilation of MTEFs. 18 The cost of photocopying the budget law is estimated at US$100 (over 8 percent of the 2010 GDP per capita). 19 Other assessments consulted include the Country Procurement Assessment Report (CPAR) of 1998 and the 2004 update.

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procurement, inadequate IT systems, weak control measures to ascertain the validity of bids and conformity of the executed procurement, and lack of comprehensive benchmarks of the country’s public procurement system against international good practices.

5.25. External oversight remains weak. With PRSC-4 support, in 2010 the Government submitted to the National Assembly of a draft law revising the Organic Law 96-071 to eliminate limits to the number of judges in the Audit Section of the Supreme Court that can be recruited. The timeliness of the submission to the National Assembly of the Budget Review Acts has improved slightly, but opinions on them (Declaration Generale de Conformité) to be issued by the Audit Section of the Supreme Court (SCCS) continue to be delayed. External audits are the joint responsibility of the SCCS and the Auditor General Office (Bureau du Vérificateur Général, BGV). The main state accounts have not been audited since 1960 and the SCCS covers a limited number of audits each year. In 2009, the SCCS focused on audits requested by United Nations agencies and political parties. Oversight activities of the BGV in 2009 included 19 financial audits, 10 performance audits, and 10 missions to monitor the implementation of previous recommendations. While limited in scope, audits have uncovered cases of fraud and corruption, widely reported by the local media. 20

5.26. The PAGAM II continues and deepens the PFM reform agenda introduced by PAGAM-GFP. Priorities include: (1) finalize the computerized interconnections of all elements of the chain of public expenditure, and implement the new expenditure management software PRED5; (2) prepare and disseminate public buyer guidelines; (3) submit to the National Assembly a draft law on PPPs procurement in line with WAEMU directives; (4) submit to the National Assembly draft laws revising the laws that created DGMP-DSP and the ARMDS to align them with the WAEMU Directive n°005/2005/CM/UEMOA; (5) strengthen capacity to implement the new institutional and regulatory framework and the use of the new Procurement Code by training staff from DGMP, ministries and the private sector, and installing a database with integrated procurement management system in DGMP and in ministries; (6) submit to the National Assembly the draft 2008 Budget Review Act (Loi de Règlement 2008), including the opinion issued by the SCCS; (7) develop an action plan to clear the backlogs of the audit of the Accounts; and (8) adopt a road map for the creation of an Autonomous Audit Court in line with WAEMU guidelines. The PAGAM also targets capacity building notably in the areas of procurement, and internal and external controls The Government mobilized support for these efforts from a number of donors, including the Bank through the Mali Governance and Budget Decentralization Technical Assistance Project, scheduled for Board consideration on April 28, 2011.

Follow up, however, is uneven. In addition, the National Assembly’s exercise of its prerogative to check on the executive is weak. Coordinated policy dialogue between the Donor Budget Support Group has recently focused on anti-corruption and governance issues.

Improving Basic Social Service Delivery

5.27. Expanding access to and quality of basic education and health services are key priorities of the government. Long term strategies for education and health were prepared in

20 A serious fraud and corruption case is being investigated regarding a donor-financed project in the Ministry of Health.

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the late 1990s and early 2000s and were later integrated in the poverty reduction strategies of 2002 and 2006. Three investment programs were prepared for education, PISE I, PISE II and PISE III. Similarly, medium term investment programs were formulated for health, called Social Development Programs (PRODESS), the first for the period 1998-2002 and the second, initially covering the five year period since 2003, was extended while the preparation of the third medium term investment program takes place.

5.28. In the Malian context of decentralization, the implementation of education and health programs is the responsibility of sub-national administrations. However, the transfer of resources has lagged behind, in part due to capacity constraints. Political economy analysis undertaken in the context of the preparation of the Mali Governance and Budget Decentralization Technical Assistance Project identified considerable resistance to change from officials at central and regional level who stand to lose power when the capacity of local authorities is increased. Nevertheless, an instruction by the Prime Minister’s Office indicates that from 2010, budget lines in education and health should be gradually allocated to decentralized entities, for current and investment expenditure. To strengthen coordination between the national and sub-national administrations, a contractual framework has been adopted and is being piloted in the education sector. Capacity building efforts are also being intensified. In the health sector, actions include training elected officials for the correct implementation of the operational guidelines of Decree 02-314, on the transfer of financial resources to the municipalities (Collectivités Territoriales, CT), and on monitoring and oversight mechanisms at regional level.

5.29. Utilization of public health care services is low and has not improved in the last fifteen years. The number of new patients using health service units is small and hospital bed occupancy is also low. The causes of this under-utilization of health services are related to the perceived poor quality of services provided, the high cost of services and long distances. Increased quality is a must for the situation to be overturned, which in turn could be helped by the adoption of a contractual system through which providers meeting defined quality criteria are certified.21

5.30. The Government is committed to protecting access to quality social services, including through increased involvement of local authorities. Actions planned by the Government include: (1) promote Government-Local Authorities, Government-NGO/Associations, and Government-Private Sector contracts for the implementation of health sector policies, programs or strategies; (2) operationalize consultation organs in accordance with the provisions of Decree No. 08-095/PRM of 21 February 2008 as regards education; (3) adopt a framework for the preparation of regional and local education programs and definition and implementation of contracts State-Municipalities in at least 230 school districts including on teacher management; (4) build the institutional capacities of the Ministry of Health and all health structures; (5) expand social security coverage and improvement of access by the most destitute to basic social services and micro-finance; and (6) Ministry of Health trains local elected officials and technical staff on the application of decree 02-314 in at least 3 health districts.

The expansion of risk sharing schemes such as the mutuelles (community based health insurance) would also help expand access, by reducing the out of pocket expenses.

21 Human resource management issues are critical and were addressed in the previous operations of the series.

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D. PRIOR ACTIONS FOR THE PROPOSED PRSC-5

5.31. The proposed PRSC-5 would support selected reform measures in the Government’s program described in section 5C that are deemed essential for its successful implementation. The rationale for their selection has been discussed above, namely their importance to the program and expressed government commitment and feasibility. Compliance with these prior actions forms the basis for IDA to proceed with the proposed operation.

5.32. All prior actions for PRSC-5, formulated in collaboration with the Government, have been met. As detailed in Table 5.2, the PRSC-4 PD outlined 10 triggers for PRSC-5. Out of these, one was replaced due to delays in implementation (OP’s debt), one (electricity tariffs) was reformulated to reflect the actual progress achieved in the reform and to increase precision, and another (the investment code) was reformulated to better reflect the content of the reform undertaken. Reformulations were made to 6 measures to increase precision and/or scope. 22

Table 5.2 : PRSC-5 Prior Actions

Finally, a new measure was introduced (ON) given the criticality of the reform.

PRSC-5 triggers as formulated in the

PRSC-4 PD

PRSC-5 Prior Actions

Reasons for the changes

Status of Implementation

Improving the Policy Environment for Infrastructure and Private Investment

1. Conduct an audit of OP’s debt (internal and external) situation inclusive of 2009/10 activity, and finalize a plan for actions by concerned entities for treatment of outstanding debts.

1. The Government satisfactorily completes a report on the evaluation of the financial proposals for the purchase of shares of the subsidiaries of the cotton ginnery CMDT.

Delays on the finalization of terms of reference and the recruitment of a consultancy firm to undertake the audit of OP’s debt resulted in the substitution of the action by another also targeting the re-launch of cotton production.

Met. The report on the analysis of the financial proposals was prepared and submitted for Government’s decision in February 2011.

2. Adopt the legislative framework establishing the regulatory structure for the cotton sector after the privatization of CMDT.

2. Submission to the National Assembly (NA) of the draft law establishing the regulatory structure for the cotton sector.

Reformulated to increase precision.

Met. Informed by a study that discussed alternative options, a draft law creating the cotton regulatory entity was adopted by Cabinet on February 15, 2011 and was submitted to the NA.

3. Strengthen the governance of Office du Niger based on a shared vision of irrigation development at Office du Niger among stakeholders (government, Office du Niger, producers, private

Included due to the criticality of the reform.

Met. A participatory review of the Contract Plan took place in August 2010. The Final Report of the Mid-term review was prepared and adopted by the Government in December 2010.

22 The prior action on the audit of the OP’s debt was dropped due to delays in the disbursement of donor resources that would have financed the audit. Policy dialogue will continue both through DPOs and SIL (PAPAM). The action was replaced by another also targeting the re-launch of cotton production.

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PRSC-5 triggers as formulated in the

PRSC-4 PD

PRSC-5 Prior Actions

Reasons for the changes

Status of Implementation

investors and donors) and a participatory management of the Office du Niger irrigation scheme.

3. Continue the effective implementation of EDM SA's restructuring plan, as evidenced by the adoption of a revised tariff setting framework.

4. Government adopts a satisfactory interim electricity tariff mechanism.

Reformulated to reflect the actual progress achieved in the reform and to increase precision.

Met. A document containing the interim tariff mechanism was prepared in consultation with key stakeholders. The preliminary mechanism was adopted by the Ministry of Energy on February, 24, 2011.

4. Complete all validation steps and submit validation request to the EITI International Secretariat.

5. Complete all validation steps and submit validation request to the EITI International Secretariat.

No reformulation. Met. A validation request was submitted to the EITI secretariat on August 2, 2010.

5. Submit to the National Assembly a new Investment Code that shifts emphasis from administering incentives to assuring investors’ rights and obligations.

6. Submit to the National Assembly an Investment Code.

Reformulated to better reflect the content of the reform.

Met. A draft Investment Code was adopted by Cabinet on February 15, 2011. The code was submitted to the NA on February 24, 2011.

Public Financial Management Reform 6. Submit to the National Assembly draft laws revising the laws that created DGMP-DSP and the ARMDS to align them with the Directive n°005/2005/CM/UEMOA regarding the assignment of responsibility on policy definition, audits, and the training programming.

7. Submit to the National Assembly draft laws revising the laws that created DGMP-DS and the ARMDS to align them with the WAEMU Directive n°005/2005/CM/UEMOA.

Reformulated to increase precision.

Met. Draft Codes and Decrees were adopted by Cabinet on February 9, 2011. The documents were submitted to the NA in March 11, 2011.

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PRSC-5 triggers as formulated in the

PRSC-4 PD

PRSC-5 Prior Actions

Reasons for the changes

Status of Implementation

7. Submit to the National Assembly the draft 2008 Budget Review Act (Loi de Règlement 2008), including the opinion of the Audit Section of the Supreme Court, and determine the framework for the treatment of audit backlogs.

8. Submit to the National Assembly the draft 2008 Budget Review Act (Loi de Règlement 2008), including the opinion of the Audit Section of the Supreme Court (Declaration Generale de Conformite), and determine modalities for the audit of public accounts.

Reformulated to increase precision.

Met. The Draft 2008 Budget Review Act and the Opinion of the Audit Section of the Supreme Court were submitted to the NA in December 201. A document summarizing the modalities for the audit of public accounts was adopted by Cabinet on December 22, 2011.

Improving Basic Social Service Delivery 8. Sign and commence implementation of at least 230 State-Municipalities contracts on regional and local education programs, including on teacher management.

9. Sign at least 230 State-Municipalities contracts on regional and local education programs, including on teacher management.

Reformulated to increase precision

Met. By December 31, 2010, a total of 340 contracts were signed at regional, district and municipal levels.

Ministry of Health adopts and begins implementation of a training program for local elected officials and technical staff on the application of decree 02-314 covering at least 3 health districts.

10. Ministry of Health trains local elected officials and technical staff on the application of decree 02-314 in at least 3 health districts.

Reformulated to increase precision.

Met. A 3-year training plan (2010-12) on transfers of competences and resources to CT was prepared and adopted, budget was allocated for its implementation. By 31 December, 2010, training undertaken\had been completed in the districts of Bla, San, Tominian, Dejene, Mopti et Douentza.

9. Sign at least 60 additional conventions regarding the Government co-financing of at least 50 percent of the contributions of the poor who adhere to health mutual insurance organizations.

11. Create from 2011 a budget line to track budget expenditures related to the five year program of implementation of the strategy for the extension of the coverage of health insurance to the agriculture and informal sectors through the expansion of mutual insurance schemes.

Reformulated to increase scope.

Met. The National Strategy for the extension of the coverage of health insurance by the mutual insurance schemes in Mali and the Action Plan for the extension of the coverage of health insurance by the mutual insurance schemes in Mali (2011-2015) were adopted by Cabinet on February 15, 2011. The 2011 Budget Law allocates resources for the first year of implementation of the action plan.

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5.33. The PRSC-5 supports the following policy actions to improve the policy environment for infrastructure and private investment: (1) Government satisfactorily completes a report on the evaluation of the financial proposals for the purchase of shares of the subsidiaries of the cotton ginnery CMDT; (2) submission to the National Assembly of the draft law establishing the regulatory structure for the cotton sector; (3) strengthen the governance of Office du Niger based on a shared vision of irrigation development at Office du Niger among stakeholders (government, Office du Niger, producers, private investors and donors) and a participatory management of the Office du Niger irrigation scheme; (4) Government adopts a satisfactory interim electricity tariff mechanism; (5) complete all validation steps and submit validation request to the EITI International Secretariat; (6) submit to the National Assembly an Investment Code.

Improving the Policy Environment for Infrastructure and Private Investment

5.34. Privatization could help improve efficiency and put the cotton sector on a sound financial footing. A strengthened, eventually privatized ginning sector should foster a framework in which pricing signals help farmers make a rational choice between continued cotton production and crop diversification. This will be critical to strengthen the performance of Mali rain-fed agriculture and improve rural incomes. Experience elsewhere in the region has been mixed, with some cases of success and some of failure. This mixed experience underlines the importance of good design and execution in the privatization.

5.35. The establishment of a new regulatory structure, once the privatization process is completed and results in the dissolution of the MRSC and CMDT regulatory roles, is expected to foster efficiency in the operation of ginneries. The privatization of the four CMDT subsidiaries – now likely to occur in two phases within the coming year - would change significantly the structure of the sector, which requires other regulating tools than those currently in place and exercised by MRSC and CMDT. Having up to four regional companies operating in parallel will allow comparing the efficiency of ginnery operations, rendering it possible to institute formal benchmarking for company performance. Until experience is accumulated, the new regulatory entity could use information on the performance of other ginners in the region, to establish the performance frontier. The regulatory entity would also introduce measures to enhance governance (including through information sharing), solve any disputes or ambiguities that may arise in, and protect producer and consumer interest. Results of the reform supported in the cotton sector would be measured by seed cotton production.

5.36. The adoption of strengthened governance practices is critical to ensure a well managed irrigation investment program. The participatory mid-term review undertaken in 2010 provided a forum for the GoM, private investors, OPs, and donors to build up a shared vision of the development of Mali’s irrigation resources. Moreover, the review assessed the status of implementation of the Contract-Plan and made recommendations for improvements going forward, thus enhancing the accountability framework. Results would be measured by the number of meetings of the ON Surveillance Committee.

5.37. The granting to Mali of Compliance Status by the EITI International Board will be a key step in the country’s efforts to demonstrate its adherence to globally acceptable standards in managing its mining resources. Validation serves two critical functions. First, it

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promotes dialogue and learning at the country level. Second, it safeguards the EITI brand by holding all EITI implementing countries to the same global standard. Validation is also the mechanism that the EITI Board uses to determine a country’s candidate or compliant status. Mali could use this major milestone as an effective mechanism to signal a higher standard to attract global resources into the mining sector. Companies are attracted by a level playing field and increased transparency is associated with lower operational and country risk. Finally, complete adherence to the EITI framework promotes both country and companies reputational risk by making public the benefits to the public purse of their operations. Development outcomes will be measured by the public availability of audit reports on tax revenues accrued from mining activities.

5.38. Good progress in the implementation of a new electricity tariff mechanism is essential for EDM SA’s financial sustainability. The interim tariff mechanism defines key principles and methodology for tariff adjustments, essential step in the process of formulation of the electricity tariff mechanism. With the adoption of the tariff mechanism Mali will have a tool to ensure the alignment of tariffs with costs, particularly of oil prices. A proper use of the tool will contribute for the improvement of EDM SA’s financial performance and at the same time, increase the transparency of public transfers and contingent liabilities. Development outcomes associated with the supported reforms in the electricity sector will be measured by the operating margin, which would capture operating profitability (including tariff adequacy).

5.39. The adoption of the Investment Code provides a clearer framework for investors. The Code could promote investment, both domestic and FDI by shifting to transparent non-discretionary investment incentives and simplifying the application of regulations, thereby fostering good governance and contributing to the reduction of (both public and private) opportunities for corruption. Results will be measure by the number of days it takes to announce a decision on incentives (towards granting "agreement").

5.40. The PRSC-5 supports the following policy actions to strengthen PFM: (2) submit to the National Assembly draft laws revising the laws that created DGMP-DS and the ARMDS to align them with the WAEMU Directive n°005/2005/CM/UEMOA; and (2) submit to the National Assembly the draft 2008 Budget Review Act (Loi de Règlement 2008), including the opinion of the SCCS, and determine modalities for the audit of public accounts.

Public Financial Management Reform

5.41. Strengthening procurement can potentially generate significant savings, thus freeing resources that could increase poverty reducing spending. By supporting the revision of the legal and regulatory framework, the PRSC-5 contributes to supporting Mali’s adherence to good practices of separation of functions of control and regulatory bodies. The clarification of attributions regarding procurement policy for example, reduces conflict of interest and could, in the medium term, increase the use of competitive bidding perceived as important to enhance value for money. It could also reduce opportunities for corruption. Development outcomes will be measured using PEFA indicators on competition, value for money and controls in procurement.

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5.42. A high quality external audit is an essential requirement for creating transparency in the use of public funds. The PRSC-5 contributes for the creation of a quality external audit function in Mali by supporting the timely submission to National Assembly of the Budget Review Act, accompanied by the opinion of the SCCS. Timely review of the Budget Review Act by the SCCS provides much needed information to the legislature, highlighting weakness in the management of resources contributing for the identification of corrective measures. The PRSC-5 also supports the definition of the modalities for the audit of public accounts. Decisions under implementation in this context include: (1) the preparation and submission to the National Assembly of a law that exceptionally approves audits from 1960 (independence of Mali) to 1991, taking into account the lack of evidence for that period; (2) implementation of a program for the accelerated audit of the accounts from 1992 to 2008. With these actions, the audit backlog could be cleared by 2012. Audits for the accounts from 2009 will gradually be undertaken according to the timeline established by law. The Cabinet also decided on steps needed for the creation of an autonomous Audit Court, scheduled for 2012. Development outcomes will be measured using PEFA indicators on timeliness of submission of audit reports to legislature and on scope of audits.

5.43. The PRSC-5 supports the following policy actions to improve basic social service delivery: (1) sign at least 230 State-Municipalities contracts on regional and local education programs, including on teacher management; (2) Ministry of Health trains local elected officials and technical staff on the application of decree 02-314 in at least 3 health districts; and (3) create from 2011 a budget line to track budget expenditures related to the five year program of implementation of the strategy for the extension of the coverage of health insurance to the agriculture and informal sectors through the expansion of health mutual insurance schemes (mutuelles).

Improving Basic Social Service Delivery

5.44. Contracts for the management of education programs are important for clearer definition of responsibilities and improved coordination. The contracts specify the duties of the various entity involved at different administrative levels and define in detail the functions and responsibilities for the decentralized services. Responsibilities of decentralized entities will include the development and implementation of education action plans, consistent with the overall education strategy for the country. In particular, these plans will include local interventions to increase access and retain girls in school, and to provide literacy programs focusing on women involved in productive activities. The contracts establish that the Government should channel resources in line with agreed targets, including trained teachers. The contracts will therefore increase the predictability of budgetary resources at local level while encouraging realism in the formulation of local budgets. Technical assistance and monitoring and evaluation procedures are also spelled out in the contracts. Adequate implementation of the contractual framework could gradually improved service delivery through an effective transfer of competencies to decentralized levels and fostering community participation and scrutiny. Development outcomes will be measured by the average pupil teacher ratio.

5.45. Training elected officials and technical staff on the implementation of the decree 02-314 and its guidelines will help management at decentralized level and reinforce accountability. With PRSC-5 support, a three year training program was adopted and

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implementation began with the training of public servants and selected officials in selected districts. Beneficiaries of the training were given instruments they needed for the management of public monies at local level. By increasing capacity, fiduciary risks involved in the effective transfer of resources to local municipalities could diminish. Development outcomes will be measured by the health current spending budget transferred to decentralized entities because the pace of transfers will be gradually increase with management capacity at sub-national level.

5.46. The creation of a budget line to track budget expenditures related with the strategy for the extension of the coverage of health insurance to the agriculture and informal sectors enhances the visibility of this reform. The measure consolidates a reform supported by PRSC-4, which introduced Government’s co-financing of contributions of the poor who adhere to health mutual insurance schemes. The majority of the members of these schemes are rural dwellers and people working in the informal sector, most of which are poor. Data from Mali also shows that adherence is higher among women. Studies have shown that access to health insurance expands the use of available health services since households that belong to health insurance schemes do not have to pay out of the pocket for all their health service needs. The increased visibility of budget allocations could enhance community oversight on their use. Increased access to mutual insurance schemes could be particularly important to gradually improve maternal and child health outcomes given the strong adherence of women. Development outcomes will be measured by the number of beneficiaries of mutual insurance schemes.

E. FOLLOW UP OPERATIONS

5.47. The Bank's decision to proceed with a follow-on PRSC series will be informed by the degree of progress towards in the implementation of the reform agenda supported by the Bank. As per any development policy framework, an adequate macroeconomic framework will have to be maintained during the program period. The choice of triggers for the third PRSC series will be guided by the priorities that will be defined in the third PRSP, now under preparation.

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6. OPERATION IMPLEMENTATION

A. COUNTRY OWNERSHIP

6.1. The proposed operation is supported and owned by the authorities. As indicated in the Letter of Development Policy (Annex 1), the specific reforms it supports are critical elements of the Government’s strategy to continue the re-launch of the cotton and the energy sectors, improve transparency in the mining sector, strengthen public financial management, and enhance social service delivery. These reforms were designed with the wide involvement of the Government’s relevant ministries and agencies under the leadership of the Ministry of Economy and Finance. The Third Progress Report of the GPRSF was prepared though a participatory process, which culminated in a review meeting held in Bamako in July 2010. The review meeting provided a key dialogue framework for a thorough and shared appraisal of the quality of policy reforms and actions needed to improve the policy stance. Participants in the review included representatives of the central and sub-national government, private sector, civil society and the donor community. Recommendations of the review were taken into account in the preparation of the budget.

6.2. Specific consultations on the policy reforms supported by the PRSC series were undertaken, including in coordination with other donors. In October 2010 consultations between donors, government and civil society organizations were centered on the matrix of policy actions jointly supported by the Donor Budget Support Group. In December 2010 consultations were undertaken with the Finance Commission of the National Assembly, representatives of the Chamber of Commerce, women’s groups, and health and mutual insurance non-governmental organizations. These entities indicated their support to the agenda supported by the PRSC series but emphasized the need to increase the focus on social development and environment related issues.

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Box 6.1: Good Practice Principles on Conditionality

Principle 1: Reinforce ownership The operation supports implementation of Mali’s Growth and Poverty Reduction Strategy Framework (GPRSF) adopted by the Government in December 2006 and reviewed by National Assembly in the context of the 2007 budget discussions, following an extended consultation process. The GPRSF, which benefits from broad-based consensus, is Mali’s second poverty reduction strategy, the first dating to 2002. Mali has an established track record of progressively strengthening implementation of its PRS. Extensive analytical work undertaken through Bank-supported projects (notably on cotton, irrigation and banking) or Economic and Sector Work (such as the Country Economic Memoranda on growth, transport sector studies, health and education studies) have suggested policy options for the Government and have contributed to the country’s strategic framework. The operation supports a number of recommendations from the GPRSF three progress reports, including the increased focus on actions to accelerate growth and make progress in the decentralization process. Principle 2: Agree up front with the Government and other financial partners on a coordinated accountability framework The Bank has been an active participant in the budget support donor group. The Bank and the six other budget support donors signed a MoU with the Government in July, 2010. Joint reviews are undertaken every year. To ensure that they are informed by the participatory evaluation of the GPRSF, these reviews are scheduled to take place after the review of the GPRSF. Principle 3: Customize the accountability framework and modalities of Bank support to country circumstances The policy matrix is customized to the country circumstances. Elements of its reform program are drawn from existing country analytical work, the GPRSF and the preparation of sectoral strategies (e.g., PAGAM II, agriculture, education, health and social development). At the Government’s request, the Bank’s financial support through the PRSC aims to be disbursed in the first half of Mali’s fiscal year. Principle 4: Choose only actions critical for achieving results as conditions for disbursement The policy matrix uses a selected set of eleven prior actions for Board presentation. The chosen policy measures were identified jointly with the Government and in close consultation with other development partners (notably the budget support donor group and the IMF). Conditionality is focused only on key actions which would help move the Government’s agenda forward. Principle 5: Conduct transparent progress reviews conducive to predictable and performance-based financial support As agreed with the Government, processing of the PRSC-5 is timed to the country’s budget cycle, which coincides with the calendar year. The PRSC amount is announced to the Government in the course of the preceding year to enable its incorporation in planning the subsequent year budget. Regular performance reviews are undertaken and are progressively being aligned with Mali’s evaluation cycle in the context of the donor harmonization agenda.

B. POVERTY AND SOCIAL IMPACTS

6.3. The specific GPRSF policies supported by the proposed PRSC-5 are likely to have positive impacts on poverty reduction. The PRSC-5 supports actions that contribute to private investment and growth, including through improved conditions for cotton production, of doing business, as well as enhanced performance and transparence of the energy and mining sectors. Analysis of the recently conducted household survey will allow for a deeper understanding of the impact of these actions on poverty.

6.4. Strengthening the management of the cotton sector as intended by the current reform process is likely to improve livelihoods of producers. Government reforms in the cotton sectors supported by the PRSC-3 and the PRSC-4 were informed by results of the draft 2006 Cotton PSIA, which indicated that an improved pricing setting mechanism and stronger

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producer organizations would yield positive effects on poverty in the cotton producing regions. 23

6.5. Strengthening governance in the ON region could increase equity in access to developed land and reduce uncertainties for business investing in the area. PRSC-5 supports governance by fostering actions that build up a common vision of irrigation development in Mali which strengthening the framework for participation and accountability. Enhanced governance could help attract private investors and donor support while protecting the interests of smallholders. Increased oversight of the implementation of the Contract Plan would increase the likelihood that actions taken are in line with stated objectives, which target poverty reduction though increased opportunities of employment and increased productivity including of smallholder farms. Social impact assessment of the reforms in the ON region, undertaken in the context of the PAPAM, concluded that by enhancing productivity, investments in the left bank of the Niger River increased incomes and reduced poverty.

PRSC-5 supports key actions of the privatization of CMDT and the establishment of the regulatory body for the cotton sector after privatization. The new regulatory entity would help efficiency gains by instituting formal benchmarking for company performance in the medium term. In addition, it would enhance governance in the sector while protecting producer and consumer interests. Other things remaining the same, the new entity would foster conditions for increased output and profitability, which would benefit cotton households, in a setting of rising cotton prices. Improved efficiency with the entry of private operators may encourage larger cotton producers who had exited the market to return, and with them, opportunities for employment for less competitive households. Other ongoing reforms including supported by IDA (PAPAM), targeting increased agriculture productivity and diversification (e.g. to produce grains), including by facilitating access to key inputs through sources that are not associated with cotton production, would provide opportunities for the diversification of agricultural production towards profitable crops such as rice. These positive effects could be reinforced by resolving the internal debt overhang of OPs. Additional empirical work needs to be done to assess the impact of reforms introduced in the cotton sector. A new household survey was completed in August 2010. Although the 2010 survey should update regional poverty figures, it is unfortunate that no specific information has been collected on cotton. Therefore additional household survey focusing on cotton-producing regions needs to be undertaken. Such survey – having cotton-producing and non-producing households – would be crucial to assess the relative importance of cotton in household income and hence evaluate the expected impact of reform or market price variations in both output and input. This work, planned under the Mali Poverty and Gender Notes, scheduled for FY12, should provide a good baseline to evaluate over time the actual impact of reforms including privatization.

23 Most of the Malian cotton is produced in the Sikasso region, a populous region in south-east Mali and bordering another cotton-producing region in Burkina Faso. Although cotton has been a major export commodity in Mali, the Sikasso region experiences the highest poverty headcount rates according to available household surveys of 2001 and 2006. Most recent figures based on ELIM 2010 survey are not available yet. PRSC-3 supported the re-introduction of the cotton pricing mechanism, aligning Mali’s prices to world prices and defining the repartition of cotton revenues. This measure was informed by the 2006 PSIA, which indicates that a more equitable repartition of cotton revenues between CMDT and producers as well as reduced uncertainties have positive effects on livelihoods of cotton producers. PRSC-4 supported the creation of the inter-professional cotton organization key to give producers a voice on key decisions such as the pricing mechanism. Again, the 2006 PSIA indicates that empowering producers to influence decisions in the sector has positive effects on their livelihoods.

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6.6. Analysis of the poverty impact of changes in electricity tariffs was undertaken in anticipation of the PRSC-5. The analysis assessed how different categories of households, specifically the poor, are affected by changes in tariff level and structure. The tariff increase that took place in July 2009 (4 percent) did not affect the tariff bands associated with consumers of the poorest income levels. In addition, simulations of tariff increases of 8 and 11.9 percent indicate that, given their very low electricity access rate, consumers in the poorest five income deciles would not be significantly affected. Simulations were also based on a new structure and bands recommended in a study commissioned to inform the change in tariff policy. Results show that the proposed changes would be desirable, not only to enhance the viability of EDM SA, but also to render the public provision of electricity more pro-poor. Results of the analysis were shared with the authorities as inputs for the formulation of the tariff reform and contributed for the decision to prepare and adopt new principles and methodology for tariff adjustments. Impact analysis will be undertaken again to inform decisions on specific tariff adjustments.

6.7. By supporting increased transparency in the mining sector through the EITI validation process, the PRSC-5 would contribute to a better use of public revenues from mining. The main macroeconomic impact of gold mining in Mali is through the fiscal channel. Gold production contributes to government revenues in three main ways: (1) royalties; (2) corporate income tax; and (3) dividends. Mineral resources can contribute to poverty reduction and growth if exploited and managed adequately. Experience elsewhere shows that revenues from mining companies can be an important engine for economic growth and social development. Some countries achieved these results by channeling incomes from natural resources to help finance social outlays, infrastructure, and productive capacity. Availability of information on contributions to the public purse from mining activities could increase demand for improved budget management thus gradually contributing for allocations conducive with growth and poverty reduction. The implementation of the Investment Code would promote private investment, enhance opportunities for employment and incomes, and poverty reduction.

6.8. The strengthening of public financial management is expected to enhance the efficiency and effectiveness of public resources in the delivery of development services. The PRSC-5 supports a measure that would promote discrimination of attributions between control and regulatory procurement agencies. In the medium term, this could help increase the efficiency of procurement control and oversight functions, ultimately resulting in increased value for money by emphasizing open and transparent bidding rather than opaque single source contracting. The PRSC-5 also supports the timely submission to the National Assembly of the 2008 Budget Review Act, and the definition of the modalities for the audit of public accounts including a framework to clear external audit backlogs. These actions, complemented by actions to strengthen the capacity of the audit entity, supported by the IDA financed ML- Governance and Budget Decentralization TA, would contribute to improved management of public funds, in line with authorized expenditures and poverty reduction priorities, thus increasing the effectiveness in public spending and benefitting the entire population.

6.9. Strengthening PFM capacity for basic service delivery at decentralized level would improve education and health outcomes. For education, PRSC-5 supports the signing of contracts for the delivery of basic education services at decentralized level. These contracts assign responsibilities at central and decentralized level to meet objectives in line with the MDGs. Complemented by sector budget support and IDA provided technical assistance for

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improved PFM management, this reform is expected gradually increase equity in the allocation of budgetary resources, reduce the costs incurred by poor families who have access only to fee based community schools. Moreover, an adequate implementation of the contracts, which target primarily poor rural communities, would improve the availability of trained teachers and textbooks at local level, hence increasing the changes for improved education quality. By including local initiatives to encourage school enrollment and retention of girls, and offering literacy programs targeting women working in agriculture and informal activities, the contractual framework could also help address gender imbalances.

6.10. The PRSC-5 would also contribute to improved living standards of the poor by supporting policies that improve the management of public resources at local level and foster the use of health services. The operation supports actions to strengthen the capacities of public employees and elected officials to generate and use information for improved budgetary decision-making in the health sector. Together with sector budget support provided by many other donors and IDA, this action would contribute to improved effectiveness in public spending, hence benefitting the communities involved, in which poverty rates are above 50 percent. In addition, by supporting the creation of a budget line for the allocations for the implementation of the strategy to expand health insurance mutual schemes, the operation contributes for increased membership of rural and informal sector households, particularly women. Removing the constraint to the use of public services imposed by the need to pay out of the pocket would complement ongoing efforts to expand the network of health centers, and to increase the availability of skilled personnel thus contributing to improved health outcomes of the poor and vulnerable.

C. ENVIRONMENTAL ASPECTS

6.11. Mali has a relatively comprehensive environmental legislation. However, due to the intense creation of new laws and decrees in recent years, coherence between legal texts on the environment is lacking and application is not consistent.24

6.12. The specific reforms supported by the proposed development policy credit are not likely to have significant negative effects on the country’s environment, forests and other natural resources. The reforms supported aim primarily to strengthen regulatory, institutional and public finance management at the national, regional and local government level. Nevertheless, the PRSC-5 covers certain aspects of improving the policy environment for infrastructure and private investment, including in the agriculture (cotton, ON), and mining sectors. The overall Government reform agenda in these sectors may have significant associated environmental risks. Bank-supported investment projects in these areas are providing the necessary support to enhance capacity to the address potential risks.

In addition, limited capacity hinders environmental management in Mali.

24 The National Policy of Environmental Protection (NEPP), adopted in 1998 provides the policy framework in this area. It concerns the fight against desertification, pollution prevention, promotion of food security and the fight against poverty. Meanwhile, the Government of Mali has developed a National Plan of Environmental Action Plan (NEAP), which takes into account all environmental problems. Regional and local action plans (RAP, PAL) were also elaborated.

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6.13. Land devoted to cotton production is anticipated to respond to net income prospects for the crop associated with the reforms supported by the PRSC-5. Although cotton area may expand beyond levels of the last two years, this will be on already cultivated arable land, and it is unlikely that land used for cotton productions returns to the levels reached during the peak years. Fertilizer use in aggregate and per hectare on cotton is not anticipated to increase as a result of PRSC-5 supported actions. The fertilizer subsidy provided by the Government is expected to be reduced in 2011, in line with declining fertilizer costs. Moreover, with adequate intervention both from the new private operators and the Inter-Professional Cotton organization, planning for input provision is expected to improve and actual fertilizer application made within technical norms. The Government, with support from donors including IDA (PASAOP, PAPAM) is aware of potential environmental risks associated with cotton reform and is addressing them.

6.14. The adoption of the new investment code could encourage an increase in new investments, which could have environmental effects. Risks identified by the environmental assessments undertaken under the Growth Support project include diversion of water resources, air and water pollution from agro-industrial activities, soil contamination, noise, tree destruction and electromagnetic radiation. Mitigation measures were addressed in the design of the Growth Support Project. Another issue of concern relates to legal provisions on infrastructure at mine closure. This is being addressed in detail in the new Mining legislation under preparation.

6.15. The adoption of a new tariff framework is not expected to result in direct environmental effects. Given that poor households have a very limited access to electricity and the adjustment framework protects lower income users from tariff increases, it is not expected that consumers will substitute electricity for more polluting sources of energy.

D. IMPLEMENTATION, MONITORING AND EVALUATION

6.16. The Ministry of Economy and Finance will be responsible for overall coordination of supervision and monitoring of the reform program supported by the proposed operation. The MEF will liaise with focal points in the Ministries, departments and agencies involved in the PRSC program. The participating ministries, departments and agencies will furnish relevant information and documentation on implementation and monitoring of their respective programs to MEF, which will oversee progress in achieving program objectives. The main sources of data will be the 2010 household survey, the population census that took place in April 2009, administrative statistics collected annually by the sectoral ministries’ planning and statistical units, economic statistics produced by the National Statistics Institute (INSTAT), PAGAM II reports and budget data from the MEF.

6.17. The monitoring of the PRSC-5 outcomes will be conducted within the GPRSF M&E framework, supervision missions, including jointly with other donors. The GPRSF includes a results matrix, which informed the results expected for the PRSC series. The institutional structure for managing the overall implementation of the GPRSF is well established. The Government will provide quarterly reports to IDA on implementation progress measured against the agreed performance indicators detailed in Annex 4. The overall reform effort will be reviewed by the Government in close coordination with regular IDA missions to ensure continued implementation of the program within an adequate macroeconomic policy framework.

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E. FIDUCIARY ASPECTS

6.18. The Government has adopted a public finance management action plan (PAGAM) based on the last CFAA (2002) and CPAR update (2004), and the plan addresses the main risks highlighted in the assessments. The PRSC-5 supports the implementation of the PFM action plan, building on achievements made under the PRSC-1 to 4 and Economic Policy and Public Finance Management Credit (EPPFMC) operations. In addition, the Government established baseline indicator values through the 2007 PEFA, to be able to monitor progress on public finance management over time. Key findings of the recent Public Expenditure Management and Financial Accountability Review were incorporated into the design of the PRSC series. Preliminary results of the 2010 PEFA Update indicate that: (1) budget credibility is satisfactory, except for arrears management; (2) budget comprehensiveness and transparency are rated to be average, but budget information is weak; (3) budgeting is based on sectoral policies and multi-year policies; (4) predictability and internal controls have some weaknesses, notably on procurement and general internal control; and (5) accounting and reporting, as well as external scrutiny and audits, are reported to be fairly weak. Overall, the Bank has judged implementation performance of the public financial management reform program to date and Government’s commitment to its improvement as satisfactory. It further finds the fiduciary environment to be adequate to proceed with the proposed operation.

6.19. The Central Bank of the West African States (BCEAO) is the common central bank of the West African countries, including Mali. In 2005, the IMF staff carried out an on-site safeguards assessment of the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) and found that progress had been made in strengthening the BCEAO’s safeguards framework since 2002 when the last safeguard assessment was undertaken. The BCEAO now publishes a full set of audited financial statements, and improvements have been made to move financial reporting closer to International Financial Reporting Standards (IFRS). IMF staff noted that the BCEAO has improved the explanatory notes to the financial statements and further changes are scheduled for the next fiscal year, with a view toward a gradual alignment with IFRS, as adopted internationally by other central banks. Furthermore, an international audit charter has been put in place, mechanisms have been established to improve risk management and risk prevention, and follow-up on internal and external audit recommendations has been undertaken. The assessment identified a number of areas where further steps would help solidify the progress made in recent years. The main recommendations relate to: (1) improving the external audit process by adopting a formal rotation policy and further enhancing the transparency of the financial statements by adopting IFRS in full; and (2) enhancing the effectiveness of the internal audit function by further strengthening the reporting to management of the BCEAO. The status report of the implementation of recommendations, received in March 2007, indicates that some progress was achieved in corporate governance, and strength and transparency of internal financial reports.

F. DISBURSEMENT AND AUDITING

6.20. Disbursement and accounting. The borrower is the Republic of Mali, represented by the Ministry of Economy and Finance. The credit will be released in one tranche of SDR […] million (US$70 million equivalent) upon effectiveness. The closing date of the operation will be December 31, 2011. The proposed operation will follow IDA’s disbursement procedures for development policy operations. Upon approval of the Credit and effectiveness of the Financing

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Agreement, the proceeds of the Credit will be disbursed by IDA into a dedicated account of the Government for budget support. The proceeds of the Credit will not be used to finance expenditures excluded under the Agreement. The Borrower shall ensure that upon the deposit of the Credit into said account, an equivalent amount is credited in the Borrower’s budget management system, in a manner acceptable to the Bank. Based on previous experience, the execution of such transaction from the Central Bank to the Treasury (Ministry of Economy and Finance) does not require more than four days. The Borrower will report to the Bank on the amounts deposited in the foreign currency account and credited in local currency to the budget management system. Assuming that the withdrawal request is in Foreign Exchange, the equivalent amount in CFAF reported in the budgetary system will be based on the market rate at the date of the transfer. The Borrower will promptly notify the Bank by fax or email that such transfer has taken place, and that proceeds have been credited in a manner satisfactory to the Bank.

6.21. Auditing. Dedicated deposit accounts could be audited on terms of reference acceptable to IDA. If, after being deposited in this account, the proceeds of the Credit are used for ineligible purposes as defined in the Financing Agreement, IDA will require the recipient to either: (a) apply the corresponding amount to eligible purposes, or (b) refund the amount directly to IDA.

G. RISKS AND RISK MITIGATION

6.22. The operation faces significant external risks. These risks stem from a slower than expected recovery from the global crisis, a reversal of the terms of trade gains, a further drop in remittances and tourism revenues, and a decline in external aid remain major risks for the country. The ongoing political crisis in Côte d’Ivoire and the political turmoil in the MENA countries add to the uncertainties emerging from global developments. Other exogenous factors such as Mali’s vulnerability to natural shocks (drought, locust invasion) could compound the situation. Mitigating factors are Mali’s strong track record in macroeconomic management and the government’s renewed focus on growth-enhancing structural reforms while giving attention to key social programs. The proposed operation would contribute to the mitigating measures by supporting policy actions that contribute to economic growth and diversification, and further strengthen public finance management including at decentralized level. In addition, the Disaster Risk Reduction and Climate Adaptation country programming and ongoing Disaster Risk Reduction (DRR) projects in Mali could help reduce the chances of disasters and help households cope in the event of disasters.

6.23. Implementation capacity risk is also significant. This risk stems from the very limited capacity in the public sector at central, regional and local levels, which could slow down project implementation. The proposed operation seeks to mitigate the risk by accompanying key reforms with technical assistance provided through Bank projects and by other donors.

6.24. The operation faces moderate budget risks. Ongoing financial difficulties facing the cotton and electricity/water parastatal companies (CMDT and EDM SA), the Malian Housing Bank (BHM) and the social security fund CRM, could potentially require larger government transfers than those included in the 2011 budget to cover larger financial shortfalls in those sectors. These risks are mitigated by close monitoring of the financial positions of BHM, CMDT, EDM SA and CRM, and ongoing restructuring efforts. Continued high food prices and

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prolonged political instability in Cote d’Ivoire and the Middle East and North Africa countries could also have significant budget implications. Specific mitigation actions will be identified in the context of the policy dialogue with the Government and could include some budget flexibility to address crisis-related expenses within the context of a prudently managed budget that supports priority growth and poverty reduction programs. Reinforced overall donor coordination will also be critical to ensure external financial and technical assistance to help address the challenges these crisis may impose.

6.25. Political and security risks are low. Political risks are related with the run up to the 2012 presidential and legislative elections. The pace of reform, including for fiscal consolidation, could slow down. In addition, continued security concerns linked with the activities of al-Qaida in the Islamic Maghreb (AQIM) in the north of the country could adversely affect tourism and require higher budget allocations than anticipated in the 2011 budget law submitted to the National Assembly. No mitigation measures are considered in the context of the operation, since these issues are beyond its scope.

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Annex 1: Letter of Development Policy

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Letter of Development Policy (Unofficial translation)

UNOFFICIAL TRANSLATION OF LETTER FROM MIN. FINANCE TO PRESIDENT, WORLD BANK

MINISTRY OF THE ECONOMY REPUBLIC OF MALI AND FINANCES One people, One Aim, One Faith SECRETARIAT GENERAL Bamako, March 18, 2011 The Ministry of the Economy and Finances To No. 00844/MEF-SG Mr Robert ZOELLICK President of the World Bank Washington DC United States of America Subject: Letter of Development Policy of the fifth Poverty Reduction Support Credit (PRSP-5) Mr. President, I have the honor to submit to you the attached Letter of Development Policy which supports the Government of Mali’s request for assistance from your Institution pour the fifth Poverty Reduction Support Credit of a sum of US$70 million. This support will allow the Government to pursue its program of economic, financial and social reforms, particularly in the following areas: reinforcement of the agricultural sector through a privatization in the cotton sector and the establishment of a regulatory authority in this sector; the adoption of a provisional tariff mechanism in the electricity sector; transparence in mining sector information and the adoption of a new Investment Code; improvement in the public procurement system and external verification of financial information; reinforcement of access to basic social services such as health, education and social development. This Credit allows, despite the negative effects on Mali of increases in food and petrol prices, for the safeguard of the Government’s efforts to maintain budgetary allocations targeted towards the most vulnerable sections of the population. Please accept, Mr. President, the assurance of my high consideration. Sanoussi TOURE Attached: Letter of Development Policy, PRSP-5

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REPUBLIC OF MALI

REFORM PROGRAM SUPPORTED BY THE FIFTH POVERTY REDUCTION SUPPORT CREDIT – PRSC-5

1. In 2010, implementation of the President of the Republic’s Economic and Social Development Plan and the 2007-2011 Growth and Poverty Reduction Strategy Paper (GPRSP) was continued and public finance reforms were strengthened. Since Mali also celebrated the fiftieth anniversary of its independence in 2010, assessments were done of the economic, social, and cultural sectors.

2. In the context of implementation of the reform program supported by the fourth Poverty Reduction Support Credit for Mali in 2010, the Government continued its efforts to safeguard macroeconomic stability and continue implementation of important structural reforms. This Letter of Development Policy describes the current socioeconomic situation in Mali as well as the outlook for the next few years. It highlights the strategic and policy objectives set by the authorities in the context of implementation of the 2007-2011 Growth and Poverty Reduction Strategy Paper (GPRSP). To facilitate financing and ensure the implementation of this strategy, the Government of the Republic of Mali is requesting the assistance of the development partners, in this case the World Bank, through the Fifth Poverty Reduction Support Credit (PRSC-5).

A. Political, Social, and Economic Context

3. Since the introduction of multi-party democracy in the early 1990s, the sociopolitical situation in Mali has been relatively stable. Efforts to foster this stability and lay a solid economic foundation paved the way for the start of a political transition process in 1992. Since that time, Mali has had two democratically elected Presidents. Four presidential elections have been held, with the most recent taking place in April 2007, which resulted in the reelection of Mr. Amadou Toumani Touré, who received 72.2 percent of votes cast during the first round.

4. The ongoing revision of the 1992 Constitution ought to take into account Mali’s international commitments, particularly with respect to the Supreme Audit Institution. A national commission has already produced a draft Constitution which is being reviewed by the various sociopolitical actors. Amendments to the draft Constitution include the establishment of a Senate to replace the High Council of Local Governments, the creation of an Audit Office with autonomy and independence vis-à-vis the Supreme Court, and the establishment of the agency responsible for managing elections to replace the National Independent Electoral Commission (CENI) and the General Delegation for Elections (DGE).

5. In recent years, sociopolitical and economic stability and the willingness of the most senior authorities to institute social dialogue as a mechanism for resolving disputes has bolstered the confidence of friendly countries and bilateral and multilateral partners in the Government. Consequently, the main problems, in particular the security situation in the north of the country, have eased as former combatants have laid down their weapons and major development programs have been implemented in the north, including the Ten-Year

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Development Program for the Northern Regions of Mali, the Integrated Program for the Development of the Regions of Northern Mali (PIDRN), the Program for the Socioeconomic Reintegration of Former Combatants, and the Integrated Program for the Rural Development of the Kidal Region (PIDRK). Cognizant of the international dimension of the security situation in the northern part of the country, the Government of Mali is collaborating with the countries of the subregion to control the unrest caused by armed bands of traffickers and terrorists who are wreaking havoc in the Sahara.

6. The third review of the Growth and Poverty Reduction Strategy Paper (GPRSP) took place on June 7, 2010. This third review was particularly important owing to the fact that it was a mid-term review of the five-year program. Moreover, the review facilitated launching of the preparatory work of the 2012-2016 PRSP. The review exercise was organized around three key thematic areas, namely (i) rapid growth and the issue of demographic growth; (ii) poverty trends and assessment of MDG achievement; and (iii) problems associated with aid financing and effectiveness.

7. The Accelerated Growth Strategy (AGS), which was drafted and adopted in 2008 by the

Government, received broad endorsement from the technical and financial partners (TFPs) at the Donor Round Table held June 12-13, 2008. At this event, the technical and financial partners expressed their interest in and willingness to assist the Government with the implementation of this strategy through the activities set forth in the Action Plan for the Accelerated Growth Strategy (PASCA).

8. The Action Plan for the Accelerated Growth Strategy is supported by the following five main areas: (i) macroeconomic framework and fiscal policy; (ii) governance and combating corruption; (iii) structural reform; (iv) development of the productive sectors; and (v) development of the private sector. Close to half of the 93 Accelerated Growth Strategy (AGS) activities target infrastructure and productive sector development. Of the 93 activities described in the AGS, 14 were fully completed and 71 were under way in June 2010.

9. The 2010 joint budget review of overall budget support took place October 18-19, 2010. The

review facilitated a joint assessment of the results of the budget support provided in order to implement the Growth and Poverty Reduction Strategy Paper (GPRSP). It should be noted that a significant portion of the work focused on procedures for public finance management oversight, the action plan for combating corruption, and the problem of building the capacity of the Accounts Section of the Supreme Court and transforming it into an Audit Office.

10. Based on the provisional results of the 2009 General Population and Housing Survey, the annual demographic growth rate stands at 3.6 percent. The Malian population increased from 3.5 million inhabitants in 1960 to 14.5 million in 2009. This rate could triple or quadruple by 2050 to 45 million to 60 million inhabitants. This strong demographic growth may be attributable to lower rates of emigration and higher rates of immigration in recent years. Measures that can slow demographic growth such as ensuring the education and literacy of girls, distributing contraceptives at the community level, and building awareness of health-related issues are set forth in Mali’s National Population Policy and its third implementation program for the 2010-2014 period.

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11. The outcomes achieved by the Government in the social sectors, in particular with respect to maternal and infant health, remain modest, thus raising concerns with respect to achievement of the MDGs in these areas. However, outcomes in the area of education, access to potable water, and HIV/AIDS are very encouraging. In fact, the gross school enrollment rate rose from 75 percent in 2006 to 82 percent in 2009. In addition, the percentage of the population with access to potable water climbed to 73.1 percent in 2009 compared to 70.1 percent in 2007, with the MDG being 80.4 percent in 2015. Not only has the latter indicator improved at the national level, but the gap between urban and rural areas has been cut in half. The rate of prevalence of HIV/AIDS among pregnant women was estimated at 2.7 percent in 2008 compared to 3.5 percent in 2006. For the population as a whole also, the prevalence rate seems to be trending downward.

12. In conjunction with technical and financial partners as a whole, the Government undertook very ambitious public finance reforms that led to the adoption, in April 2005, of the Government’s first Action Plan to Improve and Modernize Public Finance Management (PAGAM/GFP). Implementation was considered broadly satisfactory following an external independent evaluation during the first half of 2009. With the aim of consolidating the gains of this first plan and deepening the public finance reform process as much as possible, a decision was made to formulate a second plan covering the 2011-2013 period. Consequently, the second phase of the PAFAM/GFP, built on a participatory approach and incorporating results-based management (RBM) principles was oriented toward (i) greater mobilization of public resources; (ii) improvement of the budget preparation and execution process; (iii) a strengthened public finance management governance system in Mali; and (iv) acceleration of the decentralization and deconcentration process already under way.

13. As early as May 25, 2005, when the first PAGAM/GFP Round Table was held, emphasis was placed on the need to establish a public finance management benchmark system in order to assess, in a timely manner, the impact of the implementation of this plan on the performance of the public finance management system. Mali’s first Public Expenditure and Financial Accountability (PEFA) assessment was done in 2006. The 2010 PEFA sought mainly to assess progress made with improving public finance management relative to the benchmark established in 2006. In general terms, the provisional assessment report submitted to the Government in September 2010 noted significant progress in several public finance management areas. However, work remains to be done with respect to external supervision, in particular in the area of the certification and public account audits.

B. Recent Macroeconomic Developments

14. The Government’s reform program includes activities to boost the contribution of the agricultural sector to pro-poor growth. To this end, efforts will be aimed at achieving higher productivity and greater diversification. The Government plans to strengthen the already significant results obtained in the area of grain cultivation, in particular rice. Cotton production started to pick up since the 2008/2009 agricultural season. The Government’s objective is to quicken the pace of this recovery during the 2009/2010 season. On February 22, 2010, the Government launched a competitive bidding process to privatize the Malian

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Textile Development Company (CMDT) and remains committed to restoring the viability of the cotton sub-sector by enhancing its global competitiveness.

15. The Government is cognizant of the fact that Mali can boost agricultural productivity by tapping into its irrigation potential. A great deal of progress was made following the institutional reforms and investments in the area of irrigation, in particular higher rice production. Taking into account the recent interest shown by the private sector in investing in the Office du Niger zone, the Government will continue to encourage private investment, in particular, foreign direct investment, while protecting the position of small producers, including the poor and other vulnerable groups, and paying special attention to environmental issues.

16. A project to promote agricultural productivity, namely the Program to Support Agricultural Productivity in Mali (PAPAM), the cost of which is CFAF 72 billion, has just been launched with World Bank assistance. The PAPAM seeks to contribute to achievement of the objectives set forth in the GPRSP, in particular those related to guaranteeing food security and increasing production and thus the income of rural producers.

17. While the marked and projected decline in gold production was not offset by the exploitation of a new mine (start-up activities have been postponed) in 2010, the robust growth of the agricultural sector should more than compensate for this, given the favorable rainfall and sound measures implemented to start the season, including the financial support of the State for farmers in the form of input subsidies. This favorable agricultural season should help keep inflation at 1.2 percent for the entire year. Real GDP growth for 2010 is estimated at 4.5 percent.

18. Preliminary information indicates that the balance of payments current account deficit, including grants, is expected to reach a deficit of 8.5 percent of GDP. This deficit will be funded in large measure by net capital inflows, mainly in the form of foreign aid and foreign direct investment. Consequently, a deficit of the order of CFAF 35.4 billion (US$71.7 million) is recorded in the overall balance of payments, to be funded by a withdrawal of foreign exchange reserves from the Central Bank of West African States (BCEAO).

19. The money supply is estimated to have increased by 13.4 percent during 2010 driven by credit to the state. While private sector credit increased by a mere 1.5 percent during the same period. Most recent available data on the stability of the financial sector (end-December 2009) indicate that the capitalization ratio of the banking sector remains above 8 percent. However, it should be noted that the capital of two banks still has not reached the legal minimum of CFAF 5 billion (US$ 10 million).

20. Provisionary data indicates that the basic fiscal balance posted a deficit of CFAF 92.8 billion (2.0 percent of GDP), while a deficit of CFAF 111.6 billion (2.4 percent of GDP) had been programmed. The underlying basic fiscal balance (basic fiscal balance excluding expenditures funded with revenue from the privatization of SOTELMA) was also markedly different (deficit of CFAF 38 billion or 0.8 percent of GDP) from the amount programmed

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(CFAF 48.0 billion or 1.0 percent of GDP). All outstanding 2009 payments, amounting to CFAF 129 billion, were settled during the first eight months of 2010. Preliminary indications are that all performance criteria and quantitative indicators are broadly in line with the program supported by the International Monetary Fund’s program.

21. Compared to 2009, the 2010 budget law reflected a 10.8 percent increase in recurrent costs on education and 12.9 percent on health, reflecting the Government’s efforts to achieve the Millennium Development Goals. At the same time, an upturn is expected in investment expenditure with the creation, inter alia, of a National Fund to Support Development, funded with revenue derived from the privatization process and the increase in the construction of roads and bridges. The 2010 budget also provides for the granting of an advance to the CMDT to fund inputs and to the Banque de l’Habitat du Mali (BHM) for purposes of implementing the restructuring plan adopted December 30, 2009 targeting State divestiture from the Bank in 2012.

22. A growth rate of 6 percent is forecast for 2011 based largely on higher gold and agricultural production together with favorable conditions in international gold and cotton prices. Preliminary projections set inflation below the WAEMU convergence criteria threshold of 3 percent, but this projection may have to be revised in light of recent food and fuel price trends. The Budget Law adopted by the National Assembly in December 2010 authorizes a basic underlying deficit balance of 1.3 percent of GDP or CFAF 64 billion. 2011 budgetary policy will be prudent but exceptional measures may need to be considered if food and oil prices continue to increase, to minimize the impact on vulnerable Malians. Fiscal and financial indicators may be revised in order to better reflect potential effects of fuel and food prices on the fiscal accounts. IDA resources will help the financing gap create fiscal space needed to moderate the effects of price increases on the populations whilst maintaining investment in domains such as infrastructure, education or health, which are important in order achieve higher growth, reduce poverty and continue progress towards achieving the MDG targets.

C. 2011-2012 Reform Program

Improving the Political Environment for Infrastructure and Private Investment 23. There is little chance that poverty can be reduced in Mali without promoting sustained

agricultural production and diversification. Agricultural performance drives production and inflation trends and agriculture is the main economic activity of the majority of Malians. However, the sector’s productivity remains anemic and, with the exception of rice and a few horticultural crops, growth is essentially dependent on land areas sown. Moreover, agriculture is highly vulnerable to rainfall patterns, locust invasions, plant diseases, and price volatility on the global market, particularly in the case of cotton.

24. The Government is in the process of implementing the transition plan and other measures with the aim of stabilizing cotton production. Projected production for 2010-2011 stands at roughly 260,000 metric tons, following the downward revision of previous projections in order to take into account the impact of excessive rainfall in certain areas.

63

25. The Government remains committed to privatizing the CMDT. The bidding process was launched in February 2010 and the offers were evaluated at the start of 2011. The privatization process should be completed by mid-2011. A new policy for the cotton sector was adopted in 2009 and we plan to approve a law that creates a new regulatory entity for the cotton sector.

26. Mali could increase agricultural productivity and reduce vulnerability to climate shocks by taking advantage of its irrigation potential. Progress has been noted in the aftermath of institutional reforms and investments made in irrigable land, aimed at boosting rice production in particular. Despite a long delay, a contract for the Office du Niger was concluded in early 2009. Actions are ongoing to strengthen further the governance of this critical sector. These include the creation of a framework for the development of a shared vision of irrigation development in Mali, as well as a mechanism for meaningful participation of key stakeholders in the planning and oversight of irrigation activities in the Office du Niger region.

27. Strengthening infrastructure and improving the business climate continue to be priority actions of the Government. The positive outcomes obtained in the area of construction and road maintenance will be continued and deepened. The Government continues its efforts to improve the Business Climate. Following a consultative process, a new Investment Code has been adopted by Cabinet and has been submitted to the National Assembly. The Government also aims to improve governance in the mining sector. Based on the preliminary results of a study on institutional restructuring, the Government decided, in September 2009, to formalize the separation of operations of the water and electricity companies. The Government has just adopted legislation establishing the asset ownership company and the service provision company of the water supply company. Plans are under way to establish similar companies (asset ownership and service provision), beginning in 2011, for the electricity company.

28. Reform of the tariff and subsidy mechanism is aimed at bringing tariffs in line with production costs, in particular oil importation costs, while protecting low-income consumers.

29. The Government plans to boost efforts to improve governance in the mining sector. Mali became a candidate country for the Extractive Industries Transparency Initiative (EITI) in 2008 and was granted two years to implement the activities set forth in its work plan. Mali’s adherence to EITI standards should be confirmed by the validation process in 2010. Several measures have been adopted thus far, including (i) completion of the first EITI report on the revenue derived from gold-related activities in 2006; and (ii) Organization of seminars and participation in international training programs attended by civil society representatives. According to the EITI Council, while significant progress has been made, Mali must step up its work if the country is to be declared in compliance with standards. Specifically, it must produce a second EITI report for the2007-2008 period. In the medium term, the Government plans to continue to publish verified annual reports on issues related to taxation in the mining sector and to improve the institutional framework for registering income for purposes of gold taxes, in particular through a program currently financed by the World Bank.

64

Strengthening Public Finance Management

30. Progress has been made in the area of public finance management reform, as indicated in the independent evaluation report on the Government’s First Action Plan to Improve and Modernize Public Finance Management (PAGAM/GFP I) and the preliminary findings of the 2010 PEFA. However, challenges remain, particularly with respect to procurement optimization and oversight, the quality and timeliness of annual financial reports, and external supervision and auditing.

31. The PAGAM-GFP II continues and deepens the reforms of the Government’s First Action Plan introduced by the PAGAM-GFP I. Priorities include (i) finalizing computerized connections of all items in the public expenditure chain and applying the new expenditure management software (PRED5); (ii) drafting and circulating guidelines related to public procurement agents; (iii) submitting to the National Assembly a draft law on public procurement for Public-Private Partnerships (PPPs), in accordance with WAEMU directives; (iv) submitting to the National Assembly draft legislation amending the laws creating the General Directorate of Public Procurement-Delegation of Public Services (DGMP-DSP) and the Regulatory Procurement Public Service Delegation Authority (ARMDS) in order to bring them in line with Directive No. 005/2005/CM/UEMOA; (v) building capacity to implement the new institutional framework and using the new procurement code by ensuring the training of staff in the DGMP, ministries, and the private sector, and establishing a database equipped with an integrated procurement management system in the DGMP and ministries; (vi) submitting the 2008 budget review law to the National Assembly, in particular the opinion issued by the Accounts Section of the Supreme Court; and (vii) drafting an action plan with the aim of settling the arrears for auditing the books of public accountants. The main activities of the PAFAM-GFP II are in line with the Government’s reform agenda set forth in the Economic and Social Development Plan and the Institutional Development Program.

Improving the Provision of Basic Social Services 32. In the context of decentralization in Mali, subnational governments are responsible for the

implementation of education and health programs. Although responsibilities have been clearly defined, the transfer of resources is slow, owing in part to capacity constraints. A recent directive from the Office of the Prime Minister stipulates that, beginning in 2010, budgetary line items for education and health must gradually be allocated to the decentralized entities for purposes of current and investment spending. In order to improve coordination between national and subnational governments, a contractual framework was adopted and is being piloted in the education sector. Capacity building work is also being stepped up. In the health sector, measures include the training of government officials in the sound implementation of the operational guidelines of Decree No. 02-314 on the transfer of financial resources to subnational governments and on the regional monitoring and supervision mechanism.

33. The Government is committed to ensuring access to high-quality social services through, inter alia, greater participation by local governments. Measures envisioned by the Government include (i) promoting contracts between the Central Government and local governments, the State and NGOs/associations, and the State and private sector, with a view

65

to the implementation of health sector policies, programs, and strategies; (ii) establishing consultative entities, in accordance with education Decree No. 08-095/PRM of February 21, 2008; (iii) adopting a framework for drafting regional and local education programs, as well as drafting and executing contracts between the State and local governments in at least 230 district schools, including teacher management; (iv) building the institutional capacity of the Ministry of Health and all the health services; (v) expanding social security coverage and improving access to basic social services and microfinance for the majority of disadvantaged population groups; and (vi) adopting and starting implementation of a training program (health sector) for local government officials and technical staff related to the application of Decree No. 02-314 in at least four health districts.

34. With the aim of specifically improving social services delivery, special attention is being paid to a number of measures. They include (i) conclusion of at least 230 contracts between the State and local governments related to regional and local education programs, in particular for the management of teachers; (ii) adoption and implementation by the Ministry of Health of a training program for local government officials and technical staff related to the application of Decree No. 02-314 in at least three health districts; and (iii) adoption by the Government of a national strategy and program to expand health mutual insurance systems. Measures in the education and health/social development sectors are fully covered in the financial and technical support programs for these sectors, namely the Third Education Sector Investment Program (PISE III) signed in December 2010 and the Health and Social Development Program (PRODESS).

35. Contracts for the management of education programs are important in order to define responsibilities more clearly and improve coordination. Contracts stipulate the duties of the various actors and administrative levels involved, and spell out in detail the duties and responsibilities of decentralized services. Contracts also foster a realistic approach to local budget preparation, given that they include financing commitments on the basis of global budgetary benchmarks and expected results. Development outcomes will be measured by the average student-teacher ratio.

36. Training of government officials and technical staff related to application of Decree No. 02-314 and its guidelines will help improve management at the decentralized level and strengthen accountability. Trainees will receive the necessary tools to manage public funds at the local level. Capacity building could reduce the fiduciary risks associated with the actual transfer of resources to local governments. Development outcomes will be measured by the budget share of health-related current expenditure transferred to decentralized entities.

37. The expansion of health mutual insurance systems is key to a more rapid increase in the use of health services. Studies have shown that access to health mutual insurance encourages the use of available health services, given that the households belonging to the health mutual insurance systems do not have to pay out of pocket for all necessary health services. This measure strengthens a reform supported by the PRSC-4, which introduced State co-financing of contributions for the poor belonging to health mutual insurance systems. Development outcomes will be measured by the number of beneficiaries of health mutual insurance systems.

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D. Monitoring and Evaluation

38. The Ministry of Economy and Finance (MEF) will be responsible for the overall coordination and the supervision and monitoring of the reform program to be conducted in the context of the GPRSP. To this end, it will liaise with the focal points in the ministries, directorates, and agencies involved in the program. These ministries, directorates and agencies will provide the Ministry of Economy and Finance with the relevant information and documentation on the implementation and monitoring of their respective programs. The MEF will oversee progress made with achievement of the objectives of the program. The main sources of data will be the household survey (Streamlined Household Survey (ELIM) – a joint survey), the General Population and Housing Survey, government statistics compiled annually by the planning and statistics units of the sectoral ministries, the economic statistics produced by the National Statistics Institute, and the budget data obtained from the Ministry of Economy and Finance.

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Annex 2: Government Matrix of Measures for the period 2009-11 (Prior actions for PRSC-3 to 5 are in bold)

Reform objectives Actions to be completed by March 2009

Actions to be completed by early 2010

Actions to be completed by early 2011

Links with CAS

1/

Links with

GPRSF 2/

Main donors

Improving the Policy Environment for Infrastructure and Private Investment Improve agricultural productivity and competitiveness.

A joint working group (government, producer organizations and development partners (PTF)) is formed and the preparation of the sector wide investment program launched.

Undertake the first joint GoM - donor review of the agricultural sector.

Complete a first sector wide public expenditure review.

O1.3 P1 AFD, AfDB, Denmark, Netherlands, EU, IFAD, MCC, Switzerland, FAO, WB. Transfer budget resources to

CMDT to pay arrears due by CMDT to producers (CFAF 3.7 billion) and adopt a price mechanism aligning the seed cotton price to the international lint market price for the 2009/2010 campaign.

Establish the Cotton Interprofessional Association (L’interprofession du Coton Mali) and the Service Provider for Cotton Grading (Office de Classement de Coton) for the private management of the cotton sub-sector.

The Government satisfactorily completes a report on the evaluation of the financial proposals for the purchase of shares of the subsidiaries of the cotton ginnery CMDT.

O1.3 O2.1

P1

Adopt a policy paper on the support to the cotton sector after the privatization of the CMDT

Submission to the National Assembly of the draft law establishing the regulatory structure for the cotton sector.

Q1.3 P1

Adopt the Contract Plan 2008-12 of the ON.

Approval by the Board of the ON of the program and cartography of public and private investments for the ON zone during the period of the Contract Plan (2008-12).

Strengthen the governance of Office du Niger based on a shared vision of irrigation development at Office du Niger among stakeholders (government, Office du Niger, producers, private investors and donors) and a participatory management of the Office du Niger irrigation scheme.

O1.3 P1

68

Reform objectives Actions to be completed by March 2009

Actions to be completed by early 2010

Actions to be completed by early 2011

Links with CAS

1/

Links with

GPRSF 2/

Main donors

Increase power reliability, access and affordability.

Adoption by the Ministry in charge of Energy of the draft EDM SA restructuring plan, the draft letter of sector policy, and the draft government note on electricity tariff and subsidies.

Effective implementation of EDM SA's restructuring agenda, as evidenced by satisfactory progress in the formulation of the model that will be used in the determination of tariffs.

Government adopts a satisfactory interim electricity tariff mechanism.

O1.2 O2.1

P7 Aga Khan, BOAD, ECOWAS, EC, India, KfW, WB

Improve the legal and institutional framework for key sectors.

Nominate members of the council of the Telecommunications Regulatory Agency (the CRT).

Draft telecommunication law finalized by the Ministry and submitted for Cabinet approval.

Submit to the National assembly the new Communications Code.

O1.2 P5 P7

Improve the investment climate and strengthen viability, competitiveness and performance of the private sector.

Adoption of framework for the revision of the investment code based on the recommendations of the assessment made by the consultancy firm ECOPA.

Submit to the National Assembly an Investment Code.

O1.2 P2 AfDB, Denmark, EU, IMF, MCC, WB.

P5

Complete the first audit report (of 2006 mineral taxation).

Sufficient progress on the drafting of the EITI validation report and towards completing the EITI validation process.

Complete all validation steps and submit validation request to the EITI Secretariat.

O1.2 O2.1

P4 P5

Adopt an inter-ministerial decision establishing the period of validity of import and export licenses issued by National Directorate of Commerce and Competition at twelve (12) months.

Adopt, through a ministerial decision, a procedure manual on the organization and functioning of the one stop window.

Operationalize the unique firm identification number (NINA) by ensuring interconnection of the service providers involved and training staff.

O1.2 P5 P2

Strengthening Public Financial Management Improve the efficiency, transparency and control of Government operations and reduce

Expand the MTEF to 4 additional ministries (Ministry of Finance, Ministry of Economy, Industry and Trade, Ministry of Domestic Security

Prepare a harmonized framework for future MTEFs and share a diagnostic of strengths and weaknesses of current MTEF processes with

Improve the quality of program budgets and revise the MTEF for education, health, agriculture, livestock and fisheries, and hydraulic for the planning cycle

O 2.1 P4 AfDB, Canada, EU, France, IMF, Netherlands, Sweden

69

Reform objectives Actions to be completed by March 2009

Actions to be completed by early 2010

Actions to be completed by early 2011

Links with CAS

1/

Links with

GPRSF 2/

Main donors

opportunities for corruption.

and Internal Protection, Ministry of Youth and Sports), consistent with the ministries' implementation capacity and the macroeconomic framework.

all concerned ministries. 2011-2014 using the harmonized framework.

Germany, WB.

Finalize the interconnection of the chain of expenditure using the computer application PRED 4 (DGB-DNCF-DNTCP- DAF of Sectoral Ministries and regions).

Issue quality quarterly budget execution reports for the last quarter of 2009 and first quarter of 2010 and publish them in the Ministry of Economy and Finance’s website

Implement the new expenditure management software PRED 5.

O2.1 P 4

Establish the regional procurement control directorates (Directions Régionales des Marchés Publics) and the independent procurement regulatory body (Autorité de Régulation des Marchés Publics et de Délégation des Services Publics) including by nominating the regional procurement control department managers and nominating the members of the independent procurement regulatory institution.

Adopt and publish regulations to render compulsory the application of the public procurement laws to all procurement activities of the State.

Submit to the National Assembly draft laws revising the laws that created DGMP-DS and the ARMDS to align them with the WAEMU Directive n°005/2005/CM/UEMOA.

O2.1 P4 France, IMF, Netherlands, Sweden Germany, WB.

Prepare and publish an assessment of the country’s procurement systems (OECD indicators) and adopt an action plan to address key weaknesses.

Submit to the National Assembly a draft law on PPPs procurement in line with WAEMU directives.

O2.1 P4

Adopt the action plan to strengthen the institutions

Submit to the National Assembly a draft law

Change the minimum qualification required to be

O2.1 P4

70

Reform objectives Actions to be completed by March 2009

Actions to be completed by early 2010

Actions to be completed by early 2011

Links with CAS

1/

Links with

GPRSF 2/

Main donors

responsible for control functions of the budget and their coordination in line with the PAGAM.

revising the Organic Law 96-071 to eliminate limits to the number of judges in the Audit Section of the Supreme Court that can be recruited.

auditor at the Audit Section of the Supreme Court from the obligation to be in first category of civil servants to the requirement to have relevant experience and qualification in accounting and auditing.

Submit to National Assembly the draft 2007 budget executing report "Loi de Règlement 2007" within the deadline established by law.

Submit to the National Assembly of the draft 2008 Budget Execution Report (Loi de Règlement 2008) within the deadline established by law.

Submit to the National Assembly the draft 2008 Budget Review Act (Loi de Règlement 2008), including the opinion of the Audit Section of the Supreme Court, and determine the modalities for the audit of public accounts.

O2.1 P4 EC, AfDB, CIDA, WB

Improving Basic Social Service Delivery Improve access to and quality of basic education.

Complete a national survey of education sector staff, at central and decentralized level of the MEALN.

Adoption by the Ministry of Education of its Human Resource Management Strategy, among others, to retain trained teachers in remote areas.

Sign at least 230 State-Municipalities contracts on regional and local education programs, including on teacher management.

O2.3 O2.1 O2.2

P12 P4

UNICEF, UNESCO, AFD, Netherlands, Sweden, Belgium, Swiss, WB.

Allocate in the 2009 budget resources for the integrated school feeding program (Cantines Integrées), for an amount of CFAF 1.6 billion to be allocated to the poorest regions of the country.

Allocate in the 2010 budget of resources for the expansion of the school feeding program (Cantines Integrées) in line with the school feeding strategy.

Allocate in the 2011 budget of resources for the expansion of the school feeding program (Cantines Integrées) in line with the school feeding strategy.

O2.3 O2.1 O2.2

P12 P4

Improve access to and

quality of health Validate the ToR for the evaluation of the financial

Adoption of the operational guidelines of Decree 02-314

Ministry of Health trains local elected officials and technical

O2.3 P12 Belgium, Canada, EU, O2.1 P4

71

Reform objectives Actions to be completed by March 2009

Actions to be completed by early 2010

Actions to be completed by early 2011

Links with CAS

1/

Links with

GPRSF 2/

Main donors

services. resources to be transferred to municipalities.

on decentralization in the health sector, including the framework for the transfer of financial resources to the local communities and monitoring and oversight mechanisms at the regional level.

staff on the application of decree 02-314 in at least 3 health districts.

O2.2

France, Global Fund, Netherlands, UNICEF, USAID.

Adoption by the Ministry of Health of a Health Human Resource Policy aimed at improving the availability of staff in health services, with emphasis on peripheral services.

Establishment of the National Directorate of Human Resources in the Ministry of Health and allocation in the 2010 budget law sufficient resources to finance the deployment of at least 20% of the annual needs of midwives and medical doctors in Mopti, Kayes and Timbuktu regions.

Allocate in the 2011 Budget of resources to finance the deployment of at least 25 percent of the needs/per year of midwives and Medical Doctors in Mopti, Kayes and Timbuktu regions.

O2.3 P12

O2.1 O2.2

Adoption by cabinet and submission to the National Assembly of the legal text to create AMO (Health Insurance) and RAMED (Insurance for Medications).

Operationize the administrative bodies of AMO and RAMED.

O2.3 P12

Signing of at least 50 conventions regarding the co-financing of at least 50% of the contributions of the poor households who adhere to health mutual insurance schemes and reflect corresponding resources in the 2010 Budget Law.

Create from 2011 a budget line to track budget expenditures related to the five year program of implementation of the strategy for the extension of the coverage of health insurance to the agriculture and informal sectors through the expansion of health mutual insurance schemes (mutuelles).

O2.3 P12 O2.1 O2.2

72

Reform objectives Actions to be completed by March 2009

Actions to be completed by early 2010

Actions to be completed by early 2011

Links with CAS

1/

Links with

GPRSF 2/

Main donors

Develop information on SSN programs.

Set-up of a steering committee for elaboration of SSN action plan

Launch preparation of feasibility analysis for two safety net programs schemes to provide income support to the chronic poor and most vulnerable population

O2.3 P12

Improve health outcomes through access to clean drinking water.

Delegate the management of five (05) drinking water supply (AEP) systems to private operators.

Delegate the management of 15 systems AEP to private operators.

Delegate the management of 30 systems AEP to private operators.

O2.3 P 12 Denmark, WB

1/ CAS Objectives (O) (1) Help Mali integrate with regional and global markets; (2) Contribute to improve provision of basic services and critical production factors; (3) Undertake targeted sector interventions to accelerate growth; (4) Advance the public expenditure reform agenda; (5) Support decentralization; AND (6) Deliver results in key social sectors. 2/ GPRSF Priorities (P): (1) Food security and rural development; (2) Development of small and medium size enterprises; (3) Protection and sustainable management of natural resources; (4) Consolidation of public administration reform; (5) Pursuance of reform of the business environment; (6) Development of the financial sector Development of infrastructures; (7) Promotion of democratic governance and public freedoms; (8) Capacity building for the civil society; (9) Strengthening of regional and sub-regional integration initiatives; (10) Creation and promotion of long-term jobs; (11) Development of access to basic services; (12) HIV/AIDS control.

73

Annex 3: PRSC-5 Results Framework PRSC-3 PRSC-4 PRSC-5 Prior

action PRSC

Indicator PRSC

Baseline 2009

Target 2009

Actual 2010

Target 2010

Actual 2011

Target

Transfer budget resources to CMDT to pay arrears due by CMDT to producers (CFAF 3.7 billion) and adopt a price mechanism aligning the seed cotton price to the international lint market price for the 2009/2010 campaign.

Establish the Cotton Interprofessional Association (L’interprofession du Coton Mali) and the Service Provider for Cotton Grading (Office de Classement de Coton) for the private management of the cotton sub-sector.

The Government satisfactorily completes a report on the evaluation of the financial proposals for the purchase of shares of the subsidiaries of the cotton ginnery CMDT

Seed cotton production (tons)

201462 (2007/08)

200000 (2008/09)

201462 220000 (2009/10)

230000 260000 2010/11

Submission to the National Assembly of the draft law establishing the regulatory structure for the cotton sector.

strengthen the governance of Office du Niger based on a shared vision of irrigation development at Office du Niger among stakeholders (government, Office du Niger,

Number of meetings of the ON Surveillance Committee convened by the Ministry of Finance.

0 (2008) - - - 0 2

74

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

producers, private investors and donors) and a participatory management of the Office du Niger irrigation scheme.

Nominate members of the council of the Telecommunications Regulatory Agency

Publication by CRT of yearly report reflecting including Board decisions and the general performance of the sector.

None (2008)

2008 report published.

2008 report published (see www.crt-mali.org )

2009 report published

2009 report published (see www.crt-mali.org)

2010 report published

. Submit to National Assembly an Investment Code.

Number of days it takes to announce a decision on incentives

30 (2008) - - - - 3

Government adopts a satisfactory interim electricity tariff mechanism.

Operating margin (%)

-6.4 (2008) - -0.4 - -12.7 tbd

75

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

Sufficient progress on the drafting of the EITI validation report and towards completing the EITI validation process.

Complete all validation steps and submit validation request to the EITI International Secretariat

Public availability of audited reports on tax revenues accrued from mining activities.

None (200)

- - Public information available for FY 2006

2006 report published (www.eiti.org/Mali)

Public information available for FY 2007-2008.

Adopt an inter-ministerial decision establishing the period of validity of import and export licenses issued by National Directorate of Commerce and Competition at twelve (12) months.

Number of documents to export.

9 (2008) 8 7 7 7 7

Time to export (number of days)

38 (2008)

37 32 32 26 26

Expand the MTEF to 4 additional ministries (Ministry of Finances, Ministry of Economy, Industry and Trade, Ministry of Domestic Security and Internal Protection, Ministry of Youth and Sports), consistent with the sector's implementation capacity and the macroeconomic framework.

Share of primary expenditure of sectors for which statements of sector strategies exist and are fully costed, broadly consistent with fiscal forecasts.

48.2 (2005)

60% 68% 70% 75% 76%

76

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

. Issue quality quarterly budget execution reports for the last quarter of 2009 and first quarter of 2010 and publish them in the Ministry of Economy and Finance’s website.

PEFA indicator on timeliness of intra-year budget reports.

D (2008) D D+ C+ B B

PEFA indicator on scope of reports in terms of coverage and compatibility with budget estimates

C (2008) C C B C B

Establish the regional procurement control directorates (Directions Régionales des Marchés Publics) and the independent procurement regulatory body (Autorité de Régulation des Marchés Publics et de Délégation des Services Publics) including by nominating the regional procurement control department managers; and nominating the members of the independent procurement

Submit to the National Assembly draft laws revising the laws that created DGMP-DS and the ARMDS to align them with the WAEMU Directive n°005/2005/CM/UEMOA.

Open competitive bidding procedures as percentage of total recorded government contracts (Number, combining all sources of financing).

67.5% (2007)

75.0% 75.9% 80.0% (Revised

to 77% by the

GoM in 2010).

76.6% 78.0%

77

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

regulatory institution.

Submit to National Assembly the draft 2007 budget executing report "Loi de Règlement 2007" within the deadline established by law.

Submit to the National Assembly a draft law revising the Organic Law 96-071 to eliminate limits to the number of judges in the Audit Section of the Supreme Court that can be recruited

Submit to the National Assembly the draft 2008 Budget Review Act (Loi de Règlement 2008), including the opinion of the Audit Section of the Supreme Court, and determine the modalities for the audit of public accounts.

PEFA indicator on scope of audits.

D (2007) D D D D C

PEFA indicator on timeliness of submission of audit reports to legislature.

D (2007) C D C+ D B

78

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

Adoption by the Ministry of Education of its Human Resource Management Strategy, among others, to retain trained teachers in remote areas

Sign at least 230 State-Municipalities contracts on regional and local education programs, including on teacher management

Budget allocations for co-payment of teachers in community schools. CFAF bn)

2.2 (2008) 2.2 2.03 3.0 2.5 2.9

Teacher pupil ratio

64.0 (2008)

62.0 62.0 60.0 58.0 58.0

Allocate in the 2009 budget resources for the integrated school feeding program (cantines integrées), for an amount of CFAF 1.6 billion to be allocated to the poorest regions of the country.

Number of children benefit from school feeding programs in the 166 poorest communes.

13,544 (2008)

110000 114000 170000 170095 200000

Primary school enrolment rates (166 poorest communes)

68.8 (2008)

70 70 73 73.0 75

Girls primary school enrolment rates (166 poorest communes)

61.0 (2008)

64 64 66 66.1 69

79

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

Adoption of the operational guidelines of Decree 02-314 on decentralization in the health sector, including the framework for the transfer of financial resources to the local communities and monitoring and oversight mechanisms at the regional level.

Ministry of Health trains local elected officials and technical staff on the application of decree 02-314 in at least 4 health districts.

Health budget resources transferred to decentralized entities (billion CFAF).

0.8 (2008) 0.8 2.9 2.7 2.73 2.9

80

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

Adoption by the Ministry of Health of a Health Human Resource Policy aimed at improving the availability of staff in health services, with emphasis on peripheral services.

Establishment of the National Directorate of Human Resources in the Ministry of Health and allocation in the 2010 budget law sufficient resources to finance the deployment of at least 20% of the annual needs of midwives and medical doctors in Mopti, Kayes and Timbuktu regions.

Number of midwives recruited in the regions of Mopti, Kayes and Timbuktu

21 (2008) - 13 13 (Targets set in 2010)

33 13

81

PRSC-3 PRSC-4 PRSC-5 Prior action

PRSC Indicator

PRSC Baseline

2009 Target

2009 Actual

2010 Target

2010 Actual

2011 Target

Signing of at least 50 conventions regarding the co-financing of at least 50% of the contributions of the poor households who adhere to health mutual insurance schemes and reflect corresponding resources in the 2010 Budget Law.

Create a budget line to track budget expenditures related to the five year program of implementation of the strategy for extension of the coverage of health insurance to the agriculture and informal sectors through the expansion of health mutual insurance schemes (mutuelles).

Beneficiaries of mutual insurance schemes.

234000 (2008)

264000 285835 396000 360331.0 (July 2010)

400000 (Revised in 2010)

Delegate of the management of five (05) drinking water supply (AEP) systems to private operators.

Access rate to drinking water in Kayes, Koulikoro, Mopti, Gao and Timbuktu).

56.4% (2008)

60% 61.36% 61% na 63%

82

Annex 4: Definition and Measurement of Indicators

PRSC Indicator Description Source of information

Periodicity Indicative date of information availability

Cotton seed production (tons)

Tons of seed cotton produced in the year.

Ministry of Agriculture

Yearly. Reference: December 31 of year t.

January of year t+1

Operating margin Net Profit / Net Sales. EDM SA/ DNE Yearly. Reference: December 31 of year t.

March of year t+1

Publication by CRT of yearly report reflecting including Board decisions and the general performance of the sector.

Report prepared by CRT summarizing its key decisions and main developments in the sector is available to the general public. .

CRT, Min Tel. Yearly. Reference: December 31 of year t.

July of year t+1

Number of days it takes to announce a decision on incentives.

Average number of days between the drop off of dossier (as recorded by the agency) and the date the agreement is granted.

API Mali Yearly. Reference: December 31 of year t.

April of year t+1

Public access to information on financial contribution of mining companies, based on audited accounts, to public revenues.

Year for which reports on audited public revenues from mining activities are made available to the general public.

EITI Secretariat, Mining Ministry

Yearly. Reference: December 31 of year t.

April of year t+n

Number of documents to export.

All documents required per shipment to export goods (documents required for clearance by government ministries, customs authorities, port and container terminal authorities, health and technical control agencies and banks are taken into account).

Doing Business Yearly September of year t+1

Time to export Time is recorded in calendar days. The time calculation for a procedure starts from the moment it is initiated and runs until it is completed.

Doing Business Yearly September of year t+1

Share of primary expenditure of sectors for which statements of sector strategies

Amount of primary expenditure in sectors that have prepared fully costed sector strategies as a percentage of total

MEF Yearly April of year t+1

83

PRSC Indicator Description Source of information

Periodicity Indicative date of information availability

exist and are fully costed, broadly consistent with fiscal forecasts.

primary expenditure during the last year

PEFA indicator on scope of reports in terms of coverage and compatibility with budget estimates

(A): Classification of data allows direct comparison to the original budget. Information includes all items of budget estimates. Expenditure is covered at both commitment and payment stages. (B) Classification allows comparison to budget but only with some aggregation. Expenditure is covered at both commitment and payment stages. (C) Comparison to budget is possible only for main administrative headings. Expenditure is captured either at commitment or at payment stage (not both). (D) Comparison to the budget may not be possible across all main administrative headings.

MEF Quarterly May, 15, August. 15, November 15 and February 15.

PEFA indicator on timeliness of intra-year reports.

(A) Reports are prepared quarterly or more frequently, and issued within 4 weeks of end of period. (B) Reports are prepared quarterly, and issued within 6 weeks of end of quarter. C) Reports are prepared quarterly (possibly excluding first quarter), and issued within 8 weeks of end of quarter (D) Quarterly reports are either not prepared or often issued with more than 8 weeks delay.

MEF (DNB) Quarterly May, 15, August. 15, November 15 and February 15.

Competitive bidding procedures as percentage of

Contracts awarded on the basis of open competition as a percentage of all

MEF (DNMP) Yearly January, Year t+1

84

PRSC Indicator Description Source of information

Periodicity Indicative date of information availability

total recorded government contracts (Number, combining all sources of financing).

contracts awarded for the last fiscal year or other recent period (only include contracts above the national small purchase threshold).

PEFA indicator on scope of audits..

(A)All entities of central government are audited annually covering revenue, expenditure and assets/liabilities. A full range of financial audits and some aspects of performance audit are performed and generally adhere to auditing standards, focusing on significant and systemic issues. (B) Central government entities representing at least 75% of total expenditures12 are audited annually, at least covering revenue and expenditure. A wide range of financial audits are performed and generally adheres to auditing standards, focusing on significant and systemic issues. C) Central government entities representing at least 50% of total expenditures are audited annually. Audits predominantly comprise transaction level testing, but reports identify significant issues. Audit standards may be disclosed to a limited extent only (D) Audits cover central government entities representing less than 50% of total expenditures or audits have higher coverage but do not highlight the significant issues.

Accounts Section, Supreme Court (SCCS)

Yearly June, Year t+2

85

PRSC Indicator Description Source of information

Periodicity Indicative date of information availability

PEFA indicator on timeliness of submission of audit reports to legislature.

(A) Audit reports are submitted to the legislature within 4 months of the end of the period covered and in the case of financial statements from their receipt by the audit office. (B) Audit reports are submitted to the legislature within 8 months of the end of the period covered and in the case of financial statements from their receipt by the audit office. (C) Audit reports are submitted to the legislature within 12 months of the end of the period covered (for audit of financial statements from their receipt by the auditors). (D) Audit reports are submitted to the legislature more than 12 months from the end of the period covered (for audit of financial statements from their receipt by the auditors).

SCCS Yearly June, Year t+2

Budget allocations for co-payment of community teachers.

Resources allocated in the voted budget for the co-financing of teachers recruited by communities.

MEF (DNB) Yearly January year t

Teacher pupil ratio Average numbers of pupils per teacher.

Min. Education Yearly June Year t+1

Number of children benefit from school feeding programs in the 166 poorest communes.

Total number of children benefiting from budget financed school feeding programs in the 166 poorest communes.

Min. Education Yearly June Year t+1

Primary school enrolment rates (166 poorest communes)

Number of pupils (total, male, female) enrolled in primary, regardless of age, expressed as a percentage of the population (total, male, female) in the

Min. Education Yearly June Year t+1

86

PRSC Indicator Description Source of information

Periodicity Indicative date of information availability

Number of pupils (total, male, female) enrolled in primary, regardless of age, expressed as a percentage of the population (total, male, female) in the theoretical age group for primary education age group for primary education.

. Girls primary school enrolment rates (166 poorest communes)

Number of pupils (female) enrolled in primary, regardless of age, expressed as a percentage of the population (total, female) in the theoretical age group for primary education.

.

Min. Education Yearly June Year t+1

Health budget resources transferred to decentralized entities (billion CFAF).

The amounts include allocations for current spending and allocations for investments channeled through ANICT.

MEF, Min Health

Yearly June, Year t+1

Number of midwives in Mopti, Kayes and Timbuktu.

Average number of midwives recruited in Mopti, Kayes and Timbuktu.

Min. Health Yearly June, Year t+1

Beneficiaries of mutual insurance organizations.

Total number of beneficiaries of mutual insurance organizations from agriculture and informal sector households

Min Social Dev.

Yearly January, Year t+1

Access rate to drinking water in Kayes, Koulikoro, Mopti, Gao and Timbuktu).

Average access rate (proportion of the population with access to drinking water) in rural areas in Kayes, Koulikoro, Mopti, Gao and Timbuktu.

DNH Yearly April, Year t+1

87

Annex 5: IMF Assessment IMF Executive Board Completes Fifth Review Under ECF Arrangement for Mali and Approves US$3.12 Million Disbursement Press Release No. 11/20 January 26, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Mali’s economic performance under a program supported by the Extended Credit Facility (ECF). The Board’s decision enables the immediate disbursement of an amount equivalent to SDR 2 million (about US$3.12 million), bringing total disbursements under the ECF for Mali to an amount equivalent to SDR 25.99 million (about US$40.52 million). The Executive Board also approved an extension of the arrangement from May 27, 2011 to December 31, 2011, and a rephasing of the last disbursement into two equal tranches.

The arrangement under the Extended Credit Facility (ECF) was approved on May 28, 2008, in the amount equivalent to SDR 27.99 million (See Press Release No. 08/126).

At the conclusion of the Executive Board's discussion on Mali, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“Macroeconomic developments in Mali have been favorable, helped by the able fiscal stewardship of the authorities. Growth is expected to remain at 4.5 percent in 2010 and inflation is low. Performance under the ECF-supported program continues to be good, reflecting the authorities’ commitment to the program objectives. The 2011 economic outlook is positive, with a projected strengthening of economic activity. Continued prudent macroeconomic policies and a prompt implementation of structural reforms will be necessary to reduce vulnerabilities, diversify the economy, further raise economic growth, and reduce poverty.

“Fiscal policy continues to be cautious and more emphasis is given to directing adequate resources to social spending. The 2011 budget is well aligned with the authorities’ growth and poverty reduction strategy and their program’s macroeconomic objectives. However, the need for VAT credit refunds has been underestimated. Additional resources will be required to meet the deficit target and the authorities have committed to adopt a supplementary budget with measures to increase revenue or cut expenditure.

“While public financial management has been strengthened, further progress is needed. The authorities have committed to simplifying the tax code and modernizing tax and customs administration in order to increase domestic revenue mobilization and improve the business environment. The authorities also plan to reduce the excessive number of accounts held by the government entities in commercial banks, implement the directives of the West African Economic and Monetary Union to increase fiscal transparency, and strengthen oversight in order to improve revenue collection and budget execution.

“To reduce external vulnerabilities stemming from the exports’ concentration on gold, the authorities need to continue implementing a prudent debt management and step up efforts to diversify the economy. Ongoing efforts to privatize the cotton ginning company and develop the financial sector development will be particularly useful,” Mr. Shinohara said.

IMF EXTERNAL RELATIONS DEPARTMENT Public Affairs

Media Relations

Phone: 202-623-7300 Phone: 202-623-7100 Fax: 202-623-6278 Fax: 202-623-6772

88

Annex 6: Government Consolidated Financial Operations

2010 2011 2012 2013 2014

Revenues and grants 20.6 20.5 21.1 21.2 21.4 Total expenditure and net lending 24.2 25.3 24.6 24.3 24.4

Overall fiscal balance (excluding grants) -7.2 -9.4 -7.8 -7.1 -7.0 Overall balance (including grants) -3.6 -4.7 -3.5 -3.1 -3.0

Adjustment to cash basis -1.1 0.0 -0.5 0.1 0.1

Overall balance (cash basis, including grants) -5.5 -4.9 -4.0 -3.0 -3.0

Financing 5.5 4.9 4.0 3.0 3.0 External financing (net) 3.0 3.5 3.2 3.1 3.7

Project loans 2.4 2.9 2.9 2.9 2.9 Budgetary loans 1.1 0.7 0.7 0.7 0.7 Amortization -0.7 -0.5 -0.5 -0.5 -0.5 Debt relief 0.3 0.3 0.0 0.0 0.0

Domestic financing (net) 2.5 1.4 0.8 -0.2 -0.2 Banking system 2.9 2.1 0.8 -0.2 -0.2 Privatization receipts 0.0 0.1 0.0 0.0 0.0 Other -0.4 -0.7 0.0 0.0 0.0

Financing gap 0.0 0.0 0.0 0.0 0.0

Sources: Malian authorities and IMF staff estimates and projections

(as percentage of GDP)

89

Annex 7: Summary of Relevant Lending Operations and Key Analytical Underpinnings

PRSC Policy area

Lending Operations Analytical Work Government Studies

Enhancing the Regulatory and Institutional Framework for Infrastructure and Private Investment

Second Transport Sector Project (planned FY07) EPPFMC (FY06) Mali - First Poverty Reduction Support Credit (PRSC-1) Mali - Second Poverty Reduction Support Credit (PRSC-2) Mali - Second Poverty Reduction Support Credit Supplemental Loan - Food Price Crisis Response (FPCR) Agricultural Competitiveness and Diversification Project (FY06) Growth Support Project (FY05) Financial Sector Development Project (FY00) Transport Corridors Improvement Project (FY04) Agriculture Services and Producer Organizations (FY02) National Rural Infrastructure Project (FY01) Energy Sector Development Project (FY09) Fostering Agricultural Productivity Project (FY10)

Country Economic Memorandum (FY06), covering overall growth diagnostics and sector assessments on transport and transit facilitation, financial sector, industry, agriculture and energy. Investment Climate Assessment (FY06) Integrated Trade Diagnostic Study: Expanding and Diversifying Trade for Growth and Poverty Reduction (FY04) Transport Support to Sustainable Economic Growth (FY04) Aw, Djibril and Geert Diemer (2005). Making a Large Irrigation Scheme Work: A case Study from Mali. World Bank, Directions in Development Series. (This documents the success of the WB supporting irrigation reforms in Mali’s Office du Niger zone). Integrated Value Chain Analysis (textiles/garment, cotton, livestock) (2004 background paper for the Growth Support Project) Strategies for cotton in West and Central Africa : enhancing competitiveness in the Cotton-4 - (2007) Doing business 2008 Mali : a project benchmarking the regulatory cost of doing business in 178 economies WAEMU FSAP (FY09) Rural Finance Study (FY09) Doing business 2009 : country profile for Mali - comparing regulation in 181 economies – Working Paper Mali-ICT Policy Dialogue TA Ongoing or Planned Policy Notes on Growth (FY10) Mali Investment Climate Assessment using panel data (FY10) Mali - ICT Policy Dialogue (FY10) Improving Governance for Scaling up SLM in Mali (FY10) Fostering Agricultural Productivity in Mali (FY10)

Le Mali: Proposition pour une stratégie de Croissance et Développement à l’Horizon 2010, Rapport du Synthèse » (November 1997). Le code des investissements du Mali : analyse et recommandations, Octobre 2008 Contribution du coton à la croissance économique au Mali, (en cours). Etudes Tarifaires ses Services Publics de l’Electricité et de l’Eau (Rapport Final, 2008)

Improving Mali Education Sector Education Sector Expenditure

90

PRSC Policy area

Lending Operations Analytical Work Government Studies

Basic Social Service Delivery

Investment Program (FY07)

Program Project - Implementation Completion and Results Report - Adama Ouedraogo (FY08) L'éducation au Mali: Diagnostic pour le renouvellement de la politique éducative en vue d'atteindre les objectifs du millénaire - Africa Human Development series – (FY08) 2006 : 2009: Mali Health Country Status Report – Technical Assistance - Tonia Marek 2007: Mali - Health Sector Development Program - Implementation Completion and Results Report -Tonia Marek Mali - Socio-economic differences in health, nutrition, and population (FY08) Using primary health services in Mali : an analysis and perspectives - Africa human development working paper series ; no. 87 (FY06) Mali - Rural water and sanitation sector : public expenditures review (2008) Evaluation of the World Bank assistance to primary education in Mali (2007) Ongoing or Planned Skills Development Study (FY10) Social Safety Nets Programs in Mali (FY10)

91

PRSC Policy area

Lending Operations Analytical Work Government Studies

Other relevant Studies

Gender Assessment (FY06) Poverty Assessment (FY05) Cotton and Poverty in Mali (FY06) Oil price increase impact study (FY06) Support to household survey (FY01) Health Country Status Report (FY04) Assessing the potential impact on poverty of rising cereals prices : the case of Mali - Policy Research Working Paper, George Joseph and Quentin Wodon 2008: Impact of rising rice prices and policy responses in Mali : simulations with a dynamic CGE model - Policy Research Working Paper - Kofi Nouve and Quentin Wodon Legal Reform and Legal Aid for Advancement of Women (FY07) Development of the cities of Mali : Challenges and priorities (FY08) Migration in Africa: a review of the economic literature on international migration in 10 countries (2007)

Profil de pauvreté des communes du Mali - Indice de pauvreté communale (IPC), ODHD, 2009, en cours Enquête de référence de l’Initiative des 166 communes, ODHD/DNSI, en cours Transferts de revenus et réduction de la pauvreté au Mali, ODHD Tendances et déterminants de la pauvreté au Mali (2001-2006), ODHD/DNSI Pauvreté alimentaire au Mali, ODHD, 2007 Profil de pauvreté des communes du Mali - Indice de pauvreté communale (IPC), ODHD, 2006 Gestion de l’environnement pour un développement humain durable, ODHD Dynamique de l’Analyse de la Pauvreté au Mali de 1993 à 2003 Décentralisation et réduction de la pauvreté, ODHD, 2003

Environmental Management

Agricultural Competitiveness and Diversification Project (FY06) Growth Support Project (FY05) Agriculture Services and Producer Organizations (FY02) Mali - Additional financing for the Household Energy and Universal Access Project (FY09)

Public Financial Management (PFM) Reform

Technical Assistance (TA) Governance and Budget Decentralization

Mali Country Systems Review for Project Financial Management (FY09); Public Expenditure Management and Financial Accountability Review (PEMFAR, FY09); CPAR Update (FY04)

Independent Assessment of the PAGAM-GFP (GoM); Other studies include: Audit of Reform Implementation to improve Public Finance Management Procedures (EC, FY09); International Budget Partnership (IBP, FY10); Open Budget Survey (OBS, FY10)

92

Annex 8: Mali at a Glance

Mali at a glance 3/3/11

Sub-Key Development Indicators Saharan Low

Mali Africa income(2009)

Population, mid-year (millions) 14.5 819 828Surface area (thousand sq. km) 1,240 24,242 17,838Population growth (%) 3.6 2.5 2.2Urban population (% of total population) 33 36 28

GNI (Atlas method, US$ billions) 8.9 887 379GNI per capita (Atlas method, US$) 680 1,082 457GNI per capita (PPP, international $) 1,190 1,973 1,137

GDP growth (%) 4.5 5.2 6.2GDP per capita growth (%) 0.9 2.7 3.9

(most recent estimate, 2003–2009)

Poverty headcount ratio at $1.25 a day (PPP, %) 51 51 ..Poverty headcount ratio at $2.00 a day (PPP, %) 77 73 ..Life expectancy at birth (years) 48 52 57Infant mortality (per 1,000 live births) 101 83 77Child malnutrition (% of children under 5) 28 25 28

Adult literacy, male (% of ages 15 and older) 35 72 73Adult literacy, female (% of ages 15 and older) 18 54 59Gross primary enrollment, male (% of age group) 100 105 107Gross primary enrollment, female (% of age group) 83 95 100

Access to an improved water source (% of population) 56 60 64Access to improved sanitation facilities (% of population) 36 31 35

Net Aid Flows 1980 1990 2000 2009 a

(US$ millions)Net ODA and official aid 262 479 288 964Top 3 donors (in 2008): European Commission 42 42 10 149 Canada 13 21 13 99 France 45 129 98 82

Aid (% of GNI) 14.8 19.9 12.0 11.0Aid per capita (US$) 37 55 27 76

Long-Term Economic Trends

Consumer prices (annual % change) .. 0.6 -0.7 2.2GDP implicit deflator (annual % change) 16.3 4.9 5.6 3.6

Exchange rate (annual average, local per US$) 211.3 272.3 712.0 472.2Terms of trade index (2000 = 100) 102 144 100 114

1980–90 1990–2000 2000–09

Population, mid-year (millions) 7.2 8.7 10.5 14.5 1.9 2.0 2.4GDP (US$ millions) 1,787 2,421 2,422 8,996 0.8 4.1 5.3

Agriculture 48.3 45.5 41.6 36.5 3.3 2.6 4.8Industry 13.2 15.9 20.6 24.2 4.3 6.4 4.5 Manufacturing 6.5 8.5 3.8 3.1 6.8 -1.4 5.1Services 38.5 38.6 37.9 39.1 1.9 3.0 6.5

Household final consumption expenditure 87.4 79.8 79.4 76.8 0.6 3.2 0.7General gov't final consumption expenditure 11.6 13.8 8.6 10.3 7.9 3.2 22.2Gross capital formation 15.5 23.0 24.6 22.4 3.6 0.4 6.2

Exports of goods and services 14.7 17.1 26.8 26.6 4.8 9.9 6.3Imports of goods and services 29.1 33.7 39.4 34.6 6.6 3.5 3.9Gross savings .. .. .. ..

Note: Figures in italics are for years other than those specified. 2009 data are preliminary. .. indicates data are not available.a. Aid data are for 2008.

Development Economics, Development Data Group (DECDG).

(average annual growth %)

(% of GDP)

10 5 0 5 10

0-4

15-19

30-34

45-49

60-64

75-79

percent of total population

Age distribution, 2008

Male Female

0

50

100

150

200

250

300

1990 1995 2000 2007

Mali Sub-Saharan Africa

Under-5 mortality rate (per 1,000)

-6-4-202468

101214

95 05

GDP GDP per capita

Growth of GDP and GDP per capita (%)

93

Mali: at a Glance (continued)

Mali

Balance of Payments and Trade 2000 2009

(US$ millions)Total merchandise exports (fob) 547 2,391Total merchandise imports (fob) 595 3,110Net trade in goods and services -324 -723

Current account balance -227 -674 as a % of GDP -9.4 -7.5

Workers' remittances and compensation of employees (receipts) 73 294.1

Reserves, including gold 381 1,528

Central Government Finance

(% of GDP)Current revenue (including grants) 15.7 21.7 Tax revenue 13.1 14.7Current expenditure 11.6 13.0

Technology and Infrastructure 2000 2008Overall surplus/deficit -6.6 -4.2

Paved roads (% of total) 12.1 18.0Highest marginal tax rate (%) Fixed line and mobile phone Individual .. .. subscribers (per 100 people) 0 28 Corporate .. .. High technology exports

(% of manufactured exports) 14.8 2.7External Debt and Resource Flows

Environment(US$ millions)Total debt outstanding and disbursed 2,960 1,904 Agricultural land (% of land area) 32 32Total debt service 93 97.5 Forest area (% of land area) 10.7 10.1Debt relief (HIPC, MDRI) 797 27.6 Terrestrial protected areas (% of surface area) .. 2.1

Total debt (% of GDP) 122.2 21.2 Freshwater resources per capita (cu. meters) 5,449 4,722Total debt service (% of exports) 12.9 2.5 Freshwater withdrawal (billion cubic meters) 6.5 ..

Foreign direct investment (net inflows) 82 427.6 CO2 emissions per capita (mt) 0.05 0.05Portfolio equity (net inflows) 0 9.3

GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) .. ..

Energy use per capita (kg of oil equivalent) .. ..

World Bank Group portfolio 2000 2009

(US$ millions)

IBRD Total debt outstanding and disbursed – – Disbursements – – Principal repayments – – Interest payments – –

IDA Total debt outstanding and disbursed 957 698 Disbursements 49 160

Private Sector Development 2000 2009 Total debt service 14 5

Time required to start a business (days) – 15 IFC (fiscal year)Cost to start a business (% of GNI per capita) – 89.2 Total disbursed and outstanding portfolio 78 9Time required to register property (days) – 29 of which IFC own account 57 9

Disbursements for IFC own account 0 0Ranked as a major constraint to business 2000 2009 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 9 0 Access to/cost of financing .. 63.6 Corruption .. 48.7 MIGA

Gross exposure 0 16Stock market capitalization (% of GDP) .. .. New guarantees 0 0Bank capital to asset ratio (%) .. ..

Note: Figures in italics are for years other than those specified. 2009 data are preliminary. 3/3/11.. indicates data are not available. – indicates observation is not applicable.

Development Economics, Development Data Group (DECDG).

0 25 50 75 100

Control of corruption

Rule of law

Regulatory quality

Political stability

Voice and accountability

Country's percentile rank (0-100)higher values imply better ratings

2009

2000

Governance indicators, 2000 and 2009

Source: Kaufmann-Kraay-Mastruzzi, World Bank

IBRD, 0IDA, 534

IMF, 40

Other multi-lateral, 556

Bilateral, 983

Private, 5Short-term, 7

Composition of total external debt, 2008

US$ millions

94

Annex 9: Mali – Key Economic Indicators

Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014National accounts (as % of GDP)Gross domestic producta 100 100 100 100 100 100 100 100 100 100 Agriculture 37 37 36 40 39 40 39 39 40 40 Industry 24 24 23 20 21 21 23 23 23 23 Services 39 39 41 40 40 39 38 38 37 37

Total Consumption 89 85 87 97 91 92 88 87 85 85Gross domestic fixed investment 23 23 22 19 20 19 22 22 23 24 Government investment 8 9 8 8 11 9 10 10 10 10 Private investment 15 14 14 12 10 11 12 13 14 15

Exports (GNFS)b 26 32 26 29 27 25 32 31 29 28Imports (GNFS) 37 40 36 43 35 34 38 37 35 34

Gross domestic savings 11 15 13 3 12 10 16 16 17 18Gross national savingsc 11 13 13 4 13 11 14 15 15 16

Memorandum itemsGross domestic product 5305 5866 7146 8722 8996 .. .. .. .. ..(US$ million at current prices)GNI per capita (US$, Atlas method) 440 460 530 610 680 .. .. .. .. ..

Real annual growth rates (%, calculated from 87 prices) Gross domestic product at market prices 6.1 5.3 4.3 4.9 4.5 4.5 6.0 5.4 4.8 4.9

Real annual per capita growth rates (%, calculated from 87 prices)

Balance of Payments (as % of GDP) Exports (GNFS)b 26 32 26 29 27 25 32 31 29 28 Merchandise FOB 21 24 22 21 28 27 26 25 Imports (GNFS)b 37 40 36 43 35 34 38 37 35 34 Merchandise FOB 25 31 25 25 27 26 25 24 Net current transfers 6 5 5 4 4 4 4 3 Official (net) 3 2 1 1 1 1 1 1 Private (net) 2 6 3 3 3 4 4 3

Current account balance (including official transfers) -8 -13 -8 -9 -8 -8 -8 -8Overall balance 0 0 5 -1 1 0 0 1

(Continued)

Actual Estimate Projected

95

Mali - Key Economic Indicators (Continued)

Actual Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Public finance (as % of GDP at market prices)d

Current revenues 17.9 51.8 16.9 16.0 17.1 17.0 15.9 16.8 17.2 17.4 Current expenditures 13.5 13.4 13.6 12.9 13.0 13.4 13.4 13.3 13.3 13.4 Current account surplus (+) or deficit (-) 4.5 38.4 3.3 3.1 4.1 3.6 2.5 3.5 3.9 4.0 Capital expenditure 10.4 9.2 9.7 9.8 10.8 8.7 10.3 9.9 9.6 10 Foreign financing 6.6 -26.6 6.6 5.5 7.2 4.9 6.7 6.3 6.0 6.0

Monetary indicators M2/GDP 30.0 30.4 29.4 27.9 28.1 29.4 30.3 30.8 18.5 31.1 Growth of M2 (%) 9.5 10.9 8.0 8.4 16.0 13.4 14.6 9.0 7.1 8.4 Private sector credit growth (%) 4.6 5.2 7.2 1.5 2.9 4.7 6.7 5.7 Government credit growth (net, %) 0.5 -3.2 -13.9 11.4 7.8 2.8 -0.5 -0.6

Price indices( YR87 =100) Merchandise export price index .. .. 3.4 .. .. .. .. .. .. .. Merchandise import price index .. .. 3.4 .. .. .. .. .. .. .. Merchandise terms of trade annual % change (deterioration - ) .. .. 0.0 36.7 27.7 10.4 14.3 2.2 -1.3 -0.2 Real exchange rate .. .. 0.5 8.0 0.3 .. .. .. .. ..

Consumer price index (% change) 6.4 1.5 2.0 2.5 2.2 3.6 4.9 1.9 2.2 2.4 GDP deflator (% change) 2.4 4.1 7.1 8.7 3.6 1.2 4.5 2.7 2.7 2.8

a. GDP at factor costb. "GNFS" denotes "goods and nonfactor services."c. Includes net unrequited transfers excluding official capital grants.d. Consolidated central government.

ProjectedEstimate

96

Annex 10: Mali – Progress toward the Millennium Development Goals

Millennium Development Goals Mali

With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years)

Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2008 Poverty headcount ratio at $1.25 a day (PPP, % of population) 40.1 86.1 61.2 51.4 Poverty headcount ratio at national poverty line (% of population) .. .. 63.8 .. Share of income or consumption to the poorest qunitile (%) 7.0 4.6 6.1 6.5 Prevalence of malnutrition (% of children under 5) .. 38.2 30.1 27.9 Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) 23 31 44 80 Primary completion rate (% of relevant age group) 12 15 31 54 Secondary school enrollment (gross, %) 7 11 18 35 Youth literacy rate (% of people ages 15-24) .. .. 24 39 Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 58 64 69 79 Women employed in the nonagricultural sector (% of nonagricultural employment) .. .. .. 35 Proportion of seats held by women in national parliament (%) .. 2 12 10 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 250 233 217 194 Infant mortality rate (per 1,000 live births) 139 132 120 103 Measles immunization (proportion of one-year olds immunized, %) 43 52 49 68 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) 1,200 1,100 980 830 Births attended by skilled health staff (% of total) .. 40 41 49 Contraceptive prevalence (% of women ages 15-49) .. 7 8 8 Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases Prevalence of HIV (% of population ages 15-49) 0.2 0.8 1.4 1.5 Incidence of tuberculosis (per 100,000 people) 270 290 300 320 Tuberculosis case detection rate (%, all forms) 12 11 13 15 Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 29 36 44 73 Access to improved sanitation facilities (% of population) 26 29 32 36 Forest area (% of total land area) 11.5 11.1 10.7 10.1 Terrestrial protected areas (% of surface area) .. .. .. 2.1 CO2 emissions (metric tons per capita) 0.0 0.0 0.1 0.0 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) .. .. .. .. Goal 8: develop a global partnership for development Telephone mainlines (per 100 people) 0.1 0.2 0.4 0.6 Mobile phone subscribers (per 100 people) 0.0 0.0 0.1 27.1 Internet users (per 100 people) 0.0 0.0 0.1 1.6 Personal computers (per 100 people) .. 0.0 0.1 0.8

Note: Figures in italics are for years other than those specified. .. indicates data are not available. 1/5/11 Development Economics, Development Data Group (DECDG).

Mali

0 25 50 75

100

2000 2002 2004 2006 2008 Primary net enrollment ratio Ratio of girls to boys in primary & secondary education

Education indicators (%)

0

10

20

30

2000 2002 2004 2006 2008 Fixed + mobile subscribers Internet users

ICT indicators (per 100 people)

0 25 50 75

100

1990 1995 2000 2007 Mali Sub - Saharan Africa

Measles immunization (% of 1 - year olds)

HomboriHomboriTondoTondo

(1,155 m)(1,155 m)

S a h a r a D e s e r t

M O P T IM O P T I

S É G O US É G O U

S I K A S S O S I K A S S O

T O M B O U C T O UT O M B O U C T O U

K I D A LK I D A L

G A OG A O

K AY E SK AY E S

KOU

L IK

OR

O

Baoulé

Niger

Niger

LacLacDéboDébo

Lac NiangayLac Niangay

Vallé

e du

Tile

msi

Vallé

e de

L’Aza

ouak

KoulikoroKoulikoro

SikassoSikasso

SégouSégou

MoptiMopti

GaoGao

KayesKayes

TombouctouTombouctou(Timbuktu)(Timbuktu)

KidalKidal

BAMAKOBAMAKO

BougouniBougouni

SanSan

NionoNiono

NampalaNampala

KolokaniKolokani

NioroNiorodu Saheldu Sahel

KitaKita

NaraNara

Kéniniébaba

KoutialaKoutiala

BandiagaraBandiagara

NiafounkeNiafounke

AraouaneAraouane

DouentzaDouentza

GourmaGourmaRharousRharous

AnsongoAnsongo

MenakaMenaka

BouremBourem

TessalitTessalit

TaoudenniTaoudenni

M A U R I T A N I AM A U R I T A N I A

A L G E R I AA L G E R I A

B U R K I N AB U R K I N AF A S OF A S O

N I G E RN I G E R

G H A N AG H A N A

B E N I NB E N I N

TO

GO

TO

GO

G U I N E AG U I N E A

S I E R R AS I E R R AL E O N EL E O N E

To To El MreîtiEl Mreîti

To To ChenachaneChenachane

To To Poste MauricePoste Maurice

CortierCortier

To To AbalessaAbalessa

To To AbalaAbala

To To OuahigouyaOuahigouya

To To NounaNouna

To To BoboBobo

DioulassoDioulasso

To To KorhogoKorhogo

To To KankanKankan

To To SiguiriSiguiri

To To KédougouKédougou

To To GoudiryGoudiry

To To KifaKifa

To To Ayun Ayun

el ’Atrousel ’AtrousTo NémaTo Néma

To NiameyTo Niamey

To To El MreîtiEl Mreîti

C Ô T E D ’ I V O I R EC Ô T E D ’ I V O I R E

DISTRICTDISTRICTDE BAMAKODE BAMAKO

Bougouni

San

Niono

Nampala

Kolokani

Niorodu Sahel

Kita

Nara

Kéniéba

Koutiala

Bandiagara

Niafounke

Araouane

Douentza

GourmaRharous

Ansongo

Menaka

Bourem

Tessalit

Taoudenni

Koulikoro

Sikasso

Ségou

Mopti

Gao

Kayes

Tombouctou(Timbuktu)

Kidal

BAMAKO

M O P T I

S É G O U

S I K A S S O DISTRICTDE BAMAKO

T O M B O U C T O U

K I D A L

G A O

K AY E S

KOU

L IK

OR

O

M A U R I T A N I A

A L G E R I A

B U R K I N AF A S O

N I G E R

G H A N A

B E N I N

TO

GO

C Ô T E D ’ I V O I R E

G U I N E A

S I E R R AL E O N E

Baoulé

Niger

Niger

LacDébo

Lac Niangay

Vallé

e du

Tile

msi

Vallé

e de

L’Aza

ouak

Bani

Bafing

To El Mreîti

To Chenachane

To Poste Maurice

Cortier

To Abalessa

To Abala

To Ouahigouya

To Nouna

To Bobo

Dioulasso

To Korhogo

To Kankan

To Siguiri

To Kédougou

To Goudiry

To Kifa

To Ayun

el ’AtrousTo Néma

To Niamey

To El Mreîti

S a h a r a D e s e r t

HomboriTondo

(1,155 m)

5°W 0°

10°W 5°W 0°

10°N

15°N

20°N

10°N

15°N

20°N

25°N

MALI

IBRD 33443R

MAY 2009

MALISELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

REGION BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

0 100 200

0 50 100 150 300 Miles

300 Kilometers