Mali: Risk Assessment

Country Rating¹

Rating: C

Business Climate Rating¹

Rating: C

Risk Assessment²

Growth driven by the primary sector and gold production
Adequate rainfall and a good preparation of the agricultural campaign drove growth in 2010. Food crop production improved, not only of rice, which continued to benefit from the effects of the "rice initiative" - including subsidies for the purchase of seeds and fertilizers - but also of millet, fonio, sorghum and corn. The performance of the cotton sector, also subsidized and undergoing restructuring, moreover improved. As regards extractive industries, gold production exceeded expectations, driven by the rise of gold prices. Conversely, drought in the Northeast affected cattle breeding, which constitutes the third largest export resource after gold and cotton. Economic growth is expected to undergo a sharper acceleration in 2011 thanks to a rebound in gold production fuelled by soaring prices. The sector's medium-term outlook appears brighter than expected as a result of a major gold strike especially with the principal active mines nearing depletion. Mali has, however, remained focused on the need to diversify the mining sector. Projects involving silver, uranium, iron ore and phosphates could offer good potential on that score. Inflationary pressures eased in 2010, reflecting the primary sector's good performance, and are expected to remain moderate in 2011.

Struggle to reduce public and external deficits
The government has, overall, met the objectives set in its programme, supported by an IMF Extended Credit Facility. Progress has been made on reducing payment arrears and implementing fiscal reforms. The increase in health and education spending drawn from own funds is propitious to poverty reduction, while revenues from the Sotelma privatisation (telecommunications) have funded Mali's economic and social development plan. The public sector deficit, although held within planned limits, remains high in relation to a low tax burden. And external accounts have been undermined by the volume of oil product, foodstuff and capital goods imports and of profit repatriation by mining companies, which the rise of prices for staple commodity exports does not suffice to offset. Although the risk of overindebtedness has been limited thanks to the HIPC and MDRI initiatives, it remains subject to the development of mining exports. Before the outlook for this sector is improved sustainably, a prudent debt management is to be maintained, with Mali continuing to cover its deficits essentially via grants and non-concessional loans.

A deteriorated security situation in northern Mali
Although a referendum on constitutional reform intended to strengthen the country's democratic institutions was scheduled to be voted on late 2010, the focus was already on the upcoming presidential election in 2012 with President Touré unable to run again. Adema, the main party in the government coalition, has gotten ahead of its allies in announcing the candidacy of its leader, positioned with a view to retaking an office he held before the terms served by the incumbent. The Touareg rebellion seems weakened as a result of the defeats inflicted on it by regular forces. The security situation in the north has deteriorated, however, due to the terrorist threat posed by Al Qaida in the Islamic Maghreb, as reflected by the growing frequency of the attacks and kidnappings it has perpetrated since 2007 in the Sahel region.

Strengths

• Auriferous and agricultural (cotton) resources
• Debt cancellations under the HIPC and MDRI initiatives
• Consolidated democratic process and good relations with the seven neighboring countries

Weaknesses

• Economy vulnerable to energy and food shocks
• One of the poorest countries in Africa and the world (168th out of 177 in the UNDP human development index)
• Instability and insecurity in the Sahel-Saharan zone
• Heavy dependence on gold (8% of GDP, 20% of fiscal earnings, over 70% of exports)
• High demographic growth and rural poverty