Mali: Risk Assessment
Country Risk Rating
Business Climate Rating
- Significant natural resources: agriculture (cotton, rice, maize), mining (gold, bauxite, iron)
- Stabilisation of the political situation; drive to restructure the economy
- International aid
- Economy vulnerable to weather and to commodity price fluctuations
- Geographic isolation
- Precarious security situation
- Dependence on international aid
Relatively dynamic economy
Despite a difficult security situation, activity in Mali is expected to remain firm in 2018, buoyed by public investment spending, agricultural and gold production, and international aid. Gold output is expected to be particularly dynamic, due to the start of operations at two new mines, and the extension of mine life at two others. The country is Africa’s third leading producer of this mineral and its exports account for almost 70% of GDP. Public investment is expected to continue at a more sustainable pace and will be concentrated mainly on defense equipment and transport infrastructure. Furthermore, the agricultural sector, which contributes over a third of GDP, will continue to be one of the country’s main contributors to growth. Food crops (rice, maize) and cotton (second most important export commodity) are performing much better due to an increase in land under cultivation, as well as equipment modernization. However, agricultural potential is largely under-exploited, and the lack of local processing plants for farming products or for the cotton sector is hindering the development of a powerful industrial fabric.
Household consumption is set to remain firm and should only slightly affected by the slight upturn in inflation, as the growth in agricultural revenues – on which almost two thirds of the workforce depends – will largely offset the higher prices.
Despite favorable prospects, the economic situation will still be exposed to the risks associated with the precarious security situation and agricultural production’s vulnerability to weather events. The country is counting on eventually diversifying its economy thanks to its oil potential and reserves of iron ore and bauxite. Progress in this regard could, however, be slow because of infrastructure shortcomings, weak commodity prices and a difficult business climate.
Vulnerability of the external and public accounts
The draft 2018 finance law aims to stabilize the fiscal deficit, with a sharp increase in spending that will be offset by higher revenues. This includes, notably, income tax hikes, higher taxes on goods and services, and better tax collection. Spending will increase substantially on the back of higher security expenditure, the implementation of the peace agreement, and the organization of presidential elections in late 2018. The fiscal deficit is mainly funded through recourse to the internal and regional markets, and an IMF contribution in the form of an Extended Credit Facility. A gradual reduction in the deficit towards the 3% target by 2019 will allow authorities to maintain public debt at a sustainable level, several years after the country benefited from substantial debt relief under the HIPC and MDRI initiatives.
The current account deficit is expected to fall in 2018, but will remain relatively high. Higher imports of capital goods associated with the development and reconstruction projects currently underway – with a slight rise in the oil bill and the bill for foodstuffs – will be offset by export growth. Exports of gold and cotton are set to climb, thanks to higher production and a slight upturn in prices. High levels of public transfers and private remittances (from migrants) will limit the extent of the current account deficit, which is mainly funded by foreign aid, official loans, and – to a lesser extent – foreign direct investments. Nevertheless, changes in the current account balance depend on gold and cotton exports, which are highly exposed to fluctuations in world prices.
Security environment still very fragile
President Ibrahim Boubacar Keïta, elected in August 2013 after the recapture of the northern half of the country from Islamist groups thanks to French military intervention and the mobilization of the international community, is expected to remain in power until the next presidential elections scheduled for late 2018. However, the security situation remains very fragile: the Jihadist groups did not sign up to the June 2015 peace agreement, and continue to clash with the United Nations forces (Minusma) and the Malian army, while also carrying out attacks against civilians in the north and center of the country. Moreover, the implementation of the agreement is threatened by quarrels within the member groups of the Coordination of Movements of Azawad (a separatist rebel group fighting for the independence of the northern Mali), as well as by repeated violations of the agreement by these groups and the Self-Defense Group of Imghad Tuaregs and Allies (GATIA). Ongoing insecurity could, over time, hit the confidence of consumers, businesses and financial backers. Meanwhile, the implementation of governance-related reforms is slow, especially as regards the fight against corruption.