Mali: Risk Assessment
Country Risk Rating
|D||A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high.|
Business Climate Rating
|D||The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.|
Economic situation returns to normal, with agriculture and international aid driving activity
Following its leap in 2014, resulting from the return to normal of cereal production and a recovery in external aid and in the agri-business and clothing sectors, growth was confirmed in 2015, helped along mainly by the solid performance of the agricultural sector (increase in area under cultivation and continuing favorable rainfall) and the strengthening of the tertiary sector. Activity should remain strong in 2016, driven in particular by growing public investment and aid from donors.
Inflation increased at a moderate rate in 2015 under the impetus of slightly higher food prices and the depreciation of the CFA franc against the dollar. It should remain under control in 2016 and below the regionally agreed ceiling of 3%.The economy, however, remains fragile. Agriculture production is highly vulnerable to climatic events and foreign trade is dependent on gold exports (the leading export resource), a product that saw its price fall for the third successive year in 2015. The country is hoping that it will one day be able to diversify its sources of income, making use of its oil reserves and iron ore and bauxite deposits. Its economic development, however, continues to be hampered by a lack of infrastructure, weak institutions and a challenging business climate (inadequate protection for investors, low rate of electricity connection, high tax burden, and poor educational and healthcare standards). On top of this, the security situation remains very fragile.
The budget deficit remains under control and external accounts are improving slightly in the short term
The fiscal deficit declined in 2015 as a result of increased tax revenues, in particular from fuel, and under-spending on the capital budget. The deficit is likely to increase slightly in 2016, following the projected increase in capital expenditure. Its subsequent trajectory should, in principle, help maintain the public debt ratio below 40% of GDP in the medium term. The country was a beneficiary of a large debt relief in 2002 and 2006 under the HIPC/MDRI initiatives. Its debt is currently mainly held by multilateral creditors. The external accounts, after suffering badly from the decline in gold and cotton export earnings (linked, essentially, to the fall in international prices) and the rise in imports in 2014, improved in 2015 due to a sizable drop in the oil bill and a temporary increase in the volume of exported gold. There is likely to be a small increase in the current account deficit in 2016 as a result of another dip in gold exports, at the same time as the energy bill, at best, is expected to hold steady and imports of capital and consumer goods are expected to continue to grow. The high level of external public transfers and private remittances will limit the scale of the current account deficit, which is for the most part being financed by external aid and foreign direct investment (in particular in the gold and telecommunications sectors).
The security situation is still very fragile
The political and security situation has gradually improved since early 2013, when French military intervention in the northern half of the country succeeded in recovering the territory occupied by Tuareg rebels and jihadist groups. This enabled the presidential election to take place in August 2013, won by Ibrahim Boubacar Keïta, and the parliamentary elections to be held at the end of the same year, which strengthened his position with the emergence of a solid coalition (the next elections are not due before 2018).A peace agreement was signed in mid-May 2015 between the Malian government and a number of rebel groups, after eight months of negotiations, under the aegis of Algeria. However, despite this agreement, the situation remains unstable. Enduring tensions continue to persist between armed pro-government groups and Tuareg rebels and, whilst the “Serval” operation in 2013 helped put an end to the jihadist sanctuary in the north of the country, this led to a fragmenting of these groups and the dispersion of their attacks. The jihadists have thus launched, since the beginning of 2015, a series of terrorist attacks in the center and the south of Mali, most notably in Bamako. As a result, control of the country is hard to maintain and development projects difficult to implement.