Mali’s Economic Challenges Persist Amid Tightening Financing Conditions

Despite some progress in governance reforms, Mali continues to face significant economic challenges. The country is grappling with insufficient access to education and health services, a fragile social safety net, and climate-related vulnerabilities.

Fiscal Deficit Remains a Concern

According to the International Monetary Fund (IMF), Mali’s fiscal deficit remained broadly in line with revised targets under the 2019-2022 Extended Credit Facility arrangement. However, the country’s public wage bill has grown significantly, reaching 55 percent of fiscal revenues, far above the West African Economic and Monetary Union (WAEMU) norm.

Sanctions Impact on Arrears

The sanctions imposed on Mali in the first half of 2022 led to a buildup of payment arrears to external creditors and regional bondholders. Although the authorities made significant efforts to repay these arrears once sanctions were lifted, some domestic arrears to suppliers remain outstanding.

Public Debt Rises

Mali’s public debt rose to 52.5 percent of GDP in 2022, mainly due to the depreciation of the euro and on-lending by the WAEMU central bank (BCEAO) of the 2021 general Special Drawing Rights allocation.

Banking System Remains Stable

The country’s banking system appeared stable throughout 2022, supported by regulatory forbearance during the pandemic. However, risk-weighted capital ratios declined slightly from 12.8 percent in 2021 to 12¼ percent in the first half of 2022. Credit growth remained strong at around 20 percent, while deposit growth slowed significantly in the first half of 2022 but rebounded in the second half.

Addressing Fiscal Challenges

The IMF has emphasized the need for Mali to address its fiscal challenges, including broadening the tax base and improving compliance. The country’s authorities have introduced measures to achieve these goals, including electronic tax declarations and digital invoicing systems.

Mali faces significant climate-related vulnerabilities, including droughts and floods that have affected agricultural production and livelihoods. The country has been working to address these challenges through the development of a climate-resilient agriculture strategy.

Conclusion

While Mali has made some progress in addressing its economic challenges, the country still faces significant hurdles in achieving sustainable economic growth and poverty reduction. Addressing these challenges will require continued efforts to improve governance, broaden the tax base, and build resilience to climate-related shocks.