R iE ST R I C T E D

,2II? ~ Report No. AF- 50

is rort was prepare' 'or use within rhe Bonk and its omlioted organizations |Theydo not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing tneir views.

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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

THE ECONOMY

OF

MALI

September 13, 1966

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CURRENCY EQUIVALENTS

1 Mali franc (M.F.) - 1 CFAF-' 04 0 fTiU.S.

247 Mali francs = 1 $ U.S.

1 million Mali francs= 4L,051 $U.S.

5Q Mali francs = 1.French franc

1/ Franc of the African Financial Community which circulated in Maliuntil 1962 and is still the legal tender in most neighbouring couRtries.

Table of ContentsPage No.

BASIC DATA

IAPS

SUMAIARY AND CONCLUSIONS

I. INTRODUCTION 1

The Physical Setting 2Political Developments 2The Economic Setting 3

II. THE BCONOI 5

Main Features 5Plain Sectors 5Investment and Savings 9

III. FINANCIAL AND MONETARY SITUATIOil 12

Current Budget 12Budgetary Pleasures taken or to be taken

under the Stabilization Plans 13State Enterprises 15Mcrnntarv Svstem and nevelonments 16

IVT nAT.A1\JGE nR PAYM1TS 1TTRM1RNAT. DEDBT AN)D PRnSPET.GT 20

Past and Present Situation 20The i4ediuxn Term Outlook 23Long Range Prospects 2

AITNZY. - Production, P-pr orts anrd Trlonen+ inthe Principal Sectors of the Economy

STATISTICAIL APPEIDIX

This report is based on the findings of Mr. Billington's missionsto Iali in October! 1963 and October 1964 and 7'f. f"e in Jte4 L965.

DBQTr' TArPA

Area: 463,ooo sq. miles; 1,200,000 square kms

Population: 4,5 million (mid 1964)

Rate of growth: 2,4%Population density (per sq. mile) : i1Population density, per sq. mile of cultivable 'Land: 23

Political status: Independent as part of Federation with Senegal - April 1960Independent as Mali - September 19b0

Gross domestic product: 75.3 billion Mali Francs (1964)

Rate of growth: 2.5% p.a. (1959-64)1.5% p.a. (1962-64)

Per capita: US$66 (1964)

Percent of GDP represented by:

Agriculture, Forestry & Fishing: 57%Mining: _MYanufacturing: 7%Government: 11%

Percent of GDP at market prices:1964 1959-63

Gross investment 12% 16%,Gross savings 2% 8%BRalance of nqvTnnnts current aCCount deficit 1IC 8%Goverrment taxation revenue 16% 10%

Resource gap as % of investment 84% 50%

Money and credit:

Conversion: 1 I' _ $0.004I $ - 247 WM'

R e la t i on. b s" to'J lr g emor.etary or custom. -area:. AsoitIe.e f' T.r.

Feb.1966 Dec.1962/65(p.a.)Total money supply iP 19.97 12%Time and savings deposits MF 0.70 22%Lending to private sector 1/ i'S- 19.39 32%

Cost of living for urban population 1956 = 100 1965 = 152

1/ Mainly State enterprises

Public sector operations 1964/65 1959-1964/65Government current receipts 17 33.1 billion 17%Government current expenditures MF 13.5 " 20%Deficit IF 0.4 " 1961-1963/64Public investment expenditures IT 10.2 " 12%Total external assistance to public sector IF 7.1 " 32%

External public debt (in million US$) Past average 1964Total debt 10', 126Total annual debt service 5.8 7.2Debt service ratio (over exports) 16% 20%

Balance of payments (in US$) 1964 1959-64Total exports 3 million 1-1/2%Total imports -63.2 n 5-1/4%Net invisibles - 4.4 it -22%Net current account balance -30.8 " 7-1/2%

Past average 1964Groundnuts and livestock as rDroDortion of

total exports 63% 63%GOross foreign exchange reserves I.5 2.0

(or 1 month's imports) (or 10 daystimnorts)

IMF Position (in US$ million) Past average 1966

Drawings 9.9 10.9

External financial assistance (in US$ million) 1960-1964Grants 2// (1961/, 6 -AO 196/I 33.2

Loans 3/ 110.9

France 33.2TICC'n I) p

UAR 16.6C-lana 13.People's Republic of China 7.3Fed. Republic of Germany 4.

2/ For Development Plan only3/ Largely on soft terms

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SUINUARY AND CONCLUSIONS

i. The limited resources and the geographical isolation of Mall,a land-locked country of 4 million people, with a per capita incomeless than $70 pea., provide one of the least promising natural settingsfor economic development in Africa. The country is largely desert,its i;conomry is based on subsistcnce a. riculture and its Lkain sourceof income has traditionally been the export of cattle on the hoof andgroundnuts; cotton is a vigorous newcomer. There are no known mineralresources of conmercial siinificance and manufacturing is largelylimited to the simple processing of local primary products.

ii. Even before independence i'iali was relying upon the outsideworld for much of its resources and goods. Upon independence in 1960,the Government set out to modify this situation by establishing a central-ly planned economy. exoanding the scope and number of public enter-prises and launching an ambitious development program which would havebeen difficult to carry out even in a much more develoned country.Meanwhile, for political, ideological and economic reasons, Yali severedmTnst of thp. links whinh it. hni with its West AfriGan neighbors and Francej

which culminated in 1962 with the withdrawal of Mali from the Frenchsupported West A.frican lnonetary Union - nlbli then ised a currencyof its own.

iii. Having thus added political and economic isolation to geogra-ph1, i c al -S oJla s la+ io n, 1`1 .J-'.ali 4encountered In-cra-ing A.L diff ^ '+i i Jout its program, in spite of substantial help from Eastern countriesw.LUtLhJL Li w ich .L s t,arteU tJi. dL.LLr,J v o VVi VJ± koJ= ba siL o Lf 1 blateral

arrangements. It resorted to large scale use of central bank borrow-| lngs an 11U.EU iI U ElJu 11At:U.LUi1 UI 'M btsLU A U ̂t;s,e r :J L;1 z U :L O t:I yOU1_cJ . UV L EJULAot,its development program but also to provide much needed consumptiongoods.

iv. These moves which resulted in little actual growth led toan acute financial crisis after llali had foregone the possibility ofassistance from the Wesb African M onetary Unlon. T hi leU tXe GovenL-

ment to approach the International Mionetary Fund for assistance in 1964.In order to qualify for a stand-by, which it obtained for one yearstarting July 1964, Miali introduced a stabilization program in agreementwith the INF. In spite of determined efforts, notably in taxation,for the better part of a year, Mali found itself unable to meet allof its commitments; little was done to improve the situation of thedeficitary public enterprises, Government spending remained high andconsequently the agreed credit ceiling was substantially exceeded.

v. Early in 1965, the Government initiated negotiations with theFrench Government concerning the various ways in which France could provideadditional assistance, including the possible re-entry of I'Mali into theWest African Mlonetary Union. In spite of agreement on most technicalmatters, these discussions were interrupted in lvlay 1965 and adjournedsine die. There is no doubt that the long run solution of Mlalits economic

and financial problems are dependent upon the strengthening of itscoi TIe rcia 1 and institutional links -with the outside world and inparticular with neighboring countries which 14ali vitally needs as amarket, as a s Juppler, as a provider of aid, or simply for access tothe sea, and probably on some form of regional monetary association.

vi. In December 1965, after consulting with the InternationalDevelopment Association, ^iNali embarked upon another set of measuresintended to solve some of its most pressing oroblems. A number ofsteos have already been taken to promote production and exports,particularly of groundnuts and cotton, to increase taxes and taxcollection and to keep current and investment expenditures within thelimit of available resources. The Government has decided not to embarkon a second development Plan for the present but simply to complete theprojects already underway and better utilize existing capacity. Never-theless credit creation has remained excessive pending much neededstructural improvements in public finance, public enterprises and otherfields.

vii. Public savings seem to have improved sligh,tly in the past sixyears, partly as a result of the Governmentls efforts at forced savingsand the results of the recent stabilization measures. Further progressto achieve a modest budget surplus will require greater efforts andsome rethinking of basic fiscal and budgetary policies. These are likelyto prove difficult if not impossible without outside technical assistance,A larger net surplus from some 20 state enterprises which cover practical-ly every sector, is possible and the Government seems determined toimprove their situation and is now embarking on a program of technicalassistance to set the main deficitarv bodies on a sound financial basis.

viii. As a result of past efforts and of the recently increased emphansison production and exports, the medium term prospects of the country aremoderately good, especially for cotton and gr-oundcnutse An impor-tantobstacle to this development however, remains the lack of incentiveprovided by the scarcity of goods on which farmers can snend their moneysTotal export growth of as much as 60% over the next five or six yearsmay be possible, However, other sectors are likelv to grow at a slowerrate so that total growth of only about 4% annually seems possiblebetween 1966 and 1970. Such a growth rate colld be obtained with alower level of investment and current public expenditures than has beenexperienced in recent years nrovided efforts to imp.rove the utilizationof present capacity are intensified.

ix. Over a longer period, prospects appear less promising. Exportgrowth is 'likely to become more difficult by the earl3y 1970s and, giventhe lack of readily available investment opportunities, and their slowvielding natirej the maintenance of a reaso.nable growt h rate wouldprobably become very difficult unless technological developments permitthe exploitation of Mnown ineral resour-ces or new resources are discovered.In any event, external assistance on a large scale, severely concentratedon productive projects, supported by appropriate technical assistance, willbe essential.

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x. Investment and consumption needs since independence have beenlargely met by incurring about $150 million of external debt which nowconfront the country with an anmanageable debt servicing problem. Serviceon medium and long term debt alone reached 20%o of export earnings andthe same proportion of government revenue in 1964 and payments due on thelarge ($24 million) short term debt to France could not, for the mostpart, be mete Yioratoria have recently been obtained from Eastern creditorsand West Germany and re-scheduling negotiations are planned. As for shortterm debts to France, Mali enjoys a de facto moratorium, since France hasnot been pressing its claims, but formal rescheduling appears to have beenpostponed for negotiation within the framework of broader discussions betweenthe two countries.

xi. Given Eali's present inability to service its debt, even ifgensrnfls resnheduling is obtainedj it is unlikely to generate surplusesof the sort required to service further conventional debt. In fact, I1alihns, as part of its stabilization efforts, undertaken not to take on a.nysuch debt save in exceptional circumstances. Thus, practically all capitalinflow rin ++th next+ feirw " yeas b i +h form of gra++s or-- -re o -4-n

very easy terms,

THE ECONOMY OF MALI

I. INTRODUCTION

1. Mali is perhaps unique as an underdeveloped country in itse-xperjPen slc inqin epend The country, with its harsh rlimaticconditions, is poorly endowed with natural resources, land-locked andwith difficilt and e penrsive co-.unications,nr.otabl" to the ocean. Eronomicactivity is still largely organized through the traditional channels,o-perati4 ng nacross ext+ens- A v land fr ontin+4 ers, and i nv1esm-etm ent no rtupnlies

of interest to foreign private investors are practically non-existent.These factors l;mit the possible rate of development Andr any circ+nnc

0 4: _ _- _1 4 A. - I-_ 'A_ _A -A -- l r !n1; h +_or lr 1 F

and economic isolation to geographical isolation. In 1962 it withdrew4.r omI I~ r1 TTL4.y LLUL U IL LI ± U4.± L £4.- Z LLIJtdflT.1 -- 44. AP 4 -LLPro the Mor.etar1y TULI-on tuo -which a'll ofL i-L E1W-LAnch-0speakinr WestU AfricanLneighbors belong, with the exception of Guinea, thus largely severingcouxiiercuVLal links with its . oifI-Uer associates. Th1 e V devie±1l0imlent o.f Ul.raderelations through bilateral arrangements with the USSR, Eastern Europeancountri2es and hnIna compensated fo' this only to a minur uegee adiUresulted in a heavy debt burden. At the same time, the Government hasattempted to establish a centrally planned economy with an elaboratedevelopment effort involving government initiative and action throughoutthe economy,which would have been administratively very difficult to carryout by a developed country with an experienced governmient service, evenhad unlimited finance been available. However, financial resources wereless than before. As a result, efforts to achieve rapid economic indepen-dence and growth along with basic structural reforms 1.Lhave given rise to seriousfinancial difficulties since 1963, whilst little 'roiTi-2. w1aS actually obtained.

3. Its financial difficulties led the Government to apply to theInternationa:L Monetary Fund for a Stand-by Credit in early 1964 and, inJuly, the Government introduced the main elements of a program of stabi-lization drawn up in consultation and agreement with the Fund. Despitereal efforts for the better part of a year, Mali proved unable to carryout all of the provisions of its agreement with the Fund. Since then,the Government has, on its own, taken or planned furtht-Žr measures as partof its continuing effort to improve the economic and financial situation.

4. The attempt to "go it alone" by a country with Mali's handicapshas proved very difficult. The Government can, perhaps, be reproachedfor not recognizing limitations imposed by nature and its own search fora degree of independence which many soveirign nations do not have or seek.On the other hand, Mali has shown unusual political stability and hasdemonstrated courage in generally avoiding prestigious projects from thestart, in attempting to carry out the RIF program and its recent and continu-ing efforts to carry out the new one. There is no doubt that the Government haelearnt from its experience and has consciously sought to improve on thenast and to end its isolation. Negotiations to this effect were held withFrance for several months in 1965. These have been interrupted but effortsfor their rP,mptiTrin are being made.

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The Phvsical Settina

5. The Republic of Mali is a land-locked country in West Africalying to the north of the equator at an average distance of more than500 milaq frotm +.he seaand coeuring an nre2 of 1.2 million sqnare kilo-meters (465,0oo square miles). The climate is largely desertic and sub-tropical. Th.e populationi is estmated at 4i.5 m.illion, including so.mTn5,000 non-Africans, with an annual rate of growth of about 2.4% per annum;less than 2% of the total, or b rely 70,000 are in w -rra-rning eva.ploy-ment. The average density of population is very low, at about 3.5 per squarekilomeer, a.nd m.ost of -e puation is nra in the souAhw-st,%JJ Ut~ yIp J. VU.L LI .t. -WJI- ~LAV4. V~J L-S VL±'. V-LUf* -- along the rivers, and in particular, along the Niger. The rest is widely

2 s ~~~~~~~~~.WIC~ v 1 V tSIA - % _CLJ _.JC.1 LACL C, JJ .P C& .VLI_ sO U l.L;C A _ Llat 130,000; the second largest town is Kayes near the Senegalese border,

W.L ULAL .jjU.QU0~ CUUU (AJ,0'JIJ.r £id.LL jJ.Vi4 I es~ aL.LeW.lJ-Ieen 1jIewith 1 a populatior. ofabou I000 Mal providesA thel li- beQween theUlSahara desert to the north and the forest regions of the south. It isthe meeting place of Alrab and Sudanese civilizationa, of nolmlad and falmier,and of the white and black races of Africa.

6. The country is poor with a dry, arid climate and little rainfall,characterized by long distances and limited and difficult communications.There are quite rich deposits of bauxite and some of iron ore but, dueto the technical problems of recovery, and long distances from the sea,these do not appear to be commercially exploitable for the foreseeablefuture. IThe low subsistence level of production is dependent on a limitedrange of agricultural products, livestock and fishing. The soils arein general poor, and erosion excessive. Agricultural activity is critical-ly dependent on the timing and intensity of the single rainy season betweenMay and October, and on well timed and sufficient, but not excessive,flood-ing by the two large rivers, the Niger and the Senegal, and their tribu-taries. During the rainy season, the Niger forms an inland delta, inun-dating an area of some 300 km in length and from 100-150 Ian in width,which has formed the basis for a major, but largely unsuccessful, irriga-tion and settlement scheme since the early thirties.

Political Developments

7. The French Sudan,which formed part of the former French WestAfrican Federation, joined with Senegal to establish the Federation ofMali in 1959, which obtained independence within the French Community inJune 1960. Geographical and ethnical disparities, differences in degreeof development and in economic potential reinforced political differencesbetween the representatives of the two members of the Federation andthese culminated in its break-uo in August 1960. Followiing Senegal'swithdrawal, the Republic of Mali was proclaimed at -the EKtraordinaryCongress of the Union Soudanaise (of the Rassemblement l6,mocratinue Afri-cain) called by the Party's Political Bureau in September 1960.

8. The rupture of the Federation was followed by a break in thediplom.atic and com.ercial relations with Senegal and the closing of theDakar-Niger railway to traffic between the two countries, thus deprivingMaTli of its prir.cipa access +o +he ocean. Ph4 T - r TL Ma +o' -- I, fo-

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alternative outlets to the sea. Mali had to acquire a large and expensivetrucking fleet to link up with the transit facilities of the Ivory Coastand Upper Volta. The possibility of a rail link between Bamako and Kankan(Guinea), the nearest terminal on the railway to Conakry, was investigated.Following Dolitical changes in Senegal at the end of 1962, by which timeMali had developed alternative routes to the sea, the railways were re-onened to international traffic in Senteiber 1963. and friendly relationsbetween the two countries have been firmly re-established since.

9. Mali now maintains cordial relations with most of its neighbors.It was a me.ber of an idenlogrica unionw -Tth Ghana and Guine), which scnrneev

became effective. It has taken an active role in cstal)lishinga committee representing the Governments of the four riparian countries ofthe Senegal river (Guinea, Mali, Mauritania and Senegal) whose purpose isto foster, dirct and coordinate studies and mnvestments in the Senegalriver basin. The United Nations Development Program (Special Fund) andsevera.l U.1N1 agencies are a'lreaduy assisting in 'long 1-ern, studies of" waterand power resources.

10. The quality of Mali's relations with France has fluctuated widely.At first, the relations -were cool, o-wing to MIali's association of r'-ancewith the Senegalese decision to withdraw from the Federation, the develop-mernt of trade and aid links with Sino-Soviet countries, and Mali:s creatuionof an independent currency in July 1962. Since then, relations have improvedto the point where negotiations have been held concerning the possibleentry of Mali into thie -es5 African 1,obetary Union or som.e otl1er lind ofinstitutional association with France which, along witn other help, wouldgreatly ease Mali's difficult economic, financial and monetary situation.These negotiations have not yet yielded any concrete results. Despitefluctuations in cordiality of relations France has, since independencecontinued to assist Mali on a large scale in a variety of ways.

11. As a former dependent territory of an EEC member, Mali waseligible for and accepted associated status with the Common Mwrket andstill benefits from the general tariff preferences and substantial aidprovided by the European Development Fund .

12. Mali is ruled under a presidential system. The sole politicalparty, the UJnion Soudanaise, exercises a dominating role through its politicalbureau which is elected at a biennial Congress and is collectively respon-sible for interpreting and enforcing the Party's policy decisions. ThePresident of the Republic and head of the Government, Mr. Modibo Keita, isalso Secretary General of the National Political Bureau. Despite indicationsof tribal and regional tensions, especially in the North, any coherent andorganized opposition seems to have disappeared. The close association bet-ween the administrative structure of government and the political structureof the party, which reaches out to every village, provides an effectivemachinery for imnIlcmenting the Government's decision..

The Economic Settin2

13. The present state of econom i develorment of Mali is determinedin large part by its limited resources and its role within the former West

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Afr-;can FtedUt!.LCionU asO CZ .-kL1arkt - 1-Jt4erl and to the1 i-sri a' and comue-JalA .±j1Ir~~djU1 d ~Ii1± ,I"LLLU ±Ld.LLIU UIJ U±LU .LLLAA VL.JLdj ~LL4 i UIkJOAcenter of Dakar and a potential food granary for the coastal areas. Thisrole resulted in a structura1l deficit in Mali' s balariCe cL pUY1iu,eti wLUIother members of the Federation and with countries outside the Federationwhich was covered by transfers from the surplus members and rrance. Privateenterprise played a very unimpertant role in financing investment and thecapital inflow was almost entirely from official sources. The traditionalsector of the economy played and continues to play a very important rolein Malits conmmrcial transactions with neighboring countries.

14. The withdrawal of Senegal from the Federation, and the closure ofthe rail link, was followed some two years later by the withdrawal of Malifrom the West African Monetary Union l/. These developments led to highertransporteosts, the loss of export markets in neighboring countries, andthe virtual disappearance of income from migrant labor. The adverse effectsof these increased external costs and loss of income on the balance of pay-ments were made worse by the gradual evolution of the Government's attitudeto the private sector and its political philosophy, increasing the capitalflight and pressures on the national currency, all of which compounded analready serious deficitary position at a time when 1hiali had foregone thepossibilities of automatic assistance for balance of payments purposes,which would have been available to it as a member of the West African YMone-tary Union.

1/ which now includes seven West African countries (Dahomey, Ivory Coast,Mai tan a, Niger, Sen.egal, Togo anrd Tpper Volta), whrich share a conmemnCentral Bank (BCEAO) and currency (the CFA Franc) to which France guaranteesUrLi. 4 t e4 d cOnver t ib- J. liv4 ty -1,O-.t to cer'-in qui,- aatomaie controls ov-

credit management.

II. THE MONOMIY

Main Features

15. 161alits economy is based almost entirely on traditional agri-culture, livestock and fishing whiech occupy about 9G/J of the peoplealthough accounting for barely over half of GDPO olst agricultural andpastoral activities are of a subsistence type and production for themarket is of relatively small importance. Exports are essentially madeup of cattle on the hoof, dry fish, groundnuts and more recentlyr cotton.About half of the exportshowever, are handled by the traditional sectorand are not recorded, This is made easier by the extent of Mali'sterritoria:L borders and the quasi impossibility of policing them adequate-ly. Also there is at present much incentive to srauggle since it is aneasy way of having access to foreign exchange and consumer goods which arevery scarce in Mali indeed. The weakness of Mali's currency is a funda-mental factor in Mvali's economy. This weakness reflects a structuralimbalance which has always existed between imports and exports. At thistime exports still only represent two-thirds of imports although importshave been cut to the bare minimum and efforts have been made topromote exports.

16. Another fundamental feature of .MZalits economy is the importanceof the public sector. Public enterprises cover practically every aspectof economic activity. This prevalence of public enterprises is in parta legacy of the past: the Office du Uviger (a large settlement scheme),the railwav and electricity organizations have always been public. It isalso a matter of political philosophy and deliberate choice arising inpart only out of the failure of the private sector to provide a number ofservices deemed indispensable by the Government. Some 20 public enter-prises emnPToinn ahouit l5,OOO peonle exist in the country. Althoughon balance they have been a source of public savings,,many of them are

unpoft eand havre been a mjo cause of 0c trn't deficits.

17 The combination of the Scarcity nf' resojzrGeS and inadequaitemanagement of these resources has led to overall stagnation. GDP anoun-ting to about MNT 75 billion in 1964 has barely grown in financial termssince 1962 and probably declined in real terms, This is, of course, evenmore 90 for p r capiva GDP, hch was about $66S 0'4 e inJJ 190 .Thecontribution to GDP by public enterprises has increased from CFAF 2.6billi_ on in 1959 lo a pea'k of ' I B +i'o in1 aln o 1-v if.2billion in 1964. In 1964, agriculture, forestry and fishing represented54l- of esimte GD -shil n"e ser-vices represent ed a tllir-d of it- reflecin;,4/. V.1. estiiatLjk L% Ul- YIJf W .LL U 1 ,JI.L±LL V.1 .Lt. ± _ S.LLJ6the importance of the cormnercial sector (15%) while manufacturing, cons-truction and production of electricity only represenlted 12p of GDP.

iviain Sectors

18. The principal sectors of the economy are described in somedetail in the Annex. Livestock is one of the most irnportant resourcesof Mali. In the north it exists in the form of a nomadic activity which

follows the supply of pastures and rainfall. In the south livestock isregarded mostly as a status symbol and pasture land is not economicallyutilized. The livestock population is represented by a herd of some4 to 5 million cattle, 10 to 12 million sheep and goats, horses, donkeysand camels. According to estimates of the animal husbandry departmentover 80 thousand head of cattle are exported annually and about 120thousand are slaughtered. representing a conmaercial exDloitation of some5% per year. In the case of sheep and goats,exports are estimated at170 thnusand and some 600 thnusand are slaughtered nr an offtake of some8 to 9% per year.

19. Exports of cattle on the hoof represent a substantial (17W 2 to3 'hi I I i r%n) bhii+_ I r l ynr r soi-et rof ircome Tai in tuirn is used

to bring back various consuwer items in short supply in Ifali or for illegal

Five slaughter houses were planned which was far in excess of possibi-n 4 ; nn v y 4 hav be A n om,A Aete A _ A A 4 nBa Xako n ao n r 4 in Bam ran

L. . . tL . JJ L IJWV 1=V' Ua .I U IIA*J Id.V WcI.U * L A 0. *$a U tJAj J Lt % *

is the operation underway. MIeat exports handled by SEPAM 1/ which are aUef-iniLJ±Ut pJUQD.Lb 'iLty are Lha,.1jJeUd by a UUtI1UL of prbeL JU1iI hiav e to

be solved before further progress can be made. Herdsmen are reluctant tod-rive the±u cattle long distances to obtain Mali francs when they could atleast as easily obtain payment in convertible currency and import goodssimultaneously. Refrigeration and transport difiiculties represent seriousadditional obstacles while the quality of animals and meat limit marketoutlets to neighboring countries.

20. Fishing essentially in the Niger River is an important activityand exports of dried or smoked fish by the traditional sector probablyapproximate IIF 15 billion a year

21. Groundnuts were until 1964 the principal export crop butproduction has at best remained practically unchanged during recent yearsamounting -to approximately 110 thousand tons per year unshelled. Of thisamount some 73 thousand tons were marketed in 1964, equivalent to about50 thousand tons shelled the balance being taken up by subsistence consump-tion and for seeds. Out of the 50 thousand tons of shelled nuts, 43thousand tons were exported versus 56 thousand tons in 1959 and about 7thousand tons sold for local consumption. In 1965 marketed productionand recorded exports declined to 47 thousand tons and 37 thousand tonsrespectively. The decline would have been worse had it not been fordisposal of stocks. Stagnation of groundnut production and decline inyields and exports are mainly due to poor cultivation techniques and lackof incentive for farmers. The price paid to them, XF 13 per kilo wascomparatively low and goods on which to spend their income in I5ali francsvery scarce. The Government has recently embarked on an emergency programfor increasing the output of groundnuts by distributing fertilizers,insecticides, improved seeds and small agricultural implements at cost tothe buyer. Comnrehensive technical assistance in the management of groundnut

1/ Sacift6 dcExportation des Produits Animaux du ISELai.

- 7 -

production is being secured for the pilot area of Bamako from the FrenchBDPA 1/. If the experiment is successful it is to be extended to otherareas.

22. In addition,the Government has recently taken a number of stepswhich should somewhat improve the position. The price paid to farmersfor groundnuts is to be raised from 11F 13 to iiF' 16 per kilo for the 1966/67campaign. This increase is to be entirely financed by reducing charges ofintermediaries, Also the intake of the oil refinery at Koulikoro whichhas capacity to process 30 thousand tons of unshelled nuts is to be limitedto the oil requirements of the local market, i.e. about 10 thousand tons ayear as long as it is unable to export its production. Construction ofanother oil m-ill at Toukouto for which plans exist is postponed indefinite-ly.

23. The Government's current target is to increase output to 210thousand tons bv 1969/70 as compared with an estimated actual of 115thousand tons in 1964/65. This target seems far too optimistic but itshould he possihle to inrease outnut to around 150 thousand tons by 1970.This should make possible an increase in the exportable surplus of shellednuts to rn thousand tons by that vear= No mTajor difficlulties should arisein marketing such quantities since important markets exist in the Sino-Soviet countries which presentlv ahsorh Almrst ql- eynorts= Prices inneighboring countries are supported by France and exports to other countrieswere bnsed on the French support price. 1TLowever- recently the world9 mTrketprice has exceeded the French guaranteed price which is to disappeargrad-l,1y -inr anccord-ance --t +the pro of' the Y+an^nrl Grn%rnn+vetion

regarding trade between EBC members and associated countries. PricesAhbt ainQd zFroim SzLn_; o~- A ^sDQIou-+ t; .r -411 +1 h"noP^_n In -N;n Ie srh 1u+ t

negotiations each year. These negotiations may be affected by an expectedLdrop in -vwor.Ld II pLrA-Vi LIs.Lics.

2L4, L1UUUU P ±roduU[1 of I t UJI. UUUUL ULnUde ir on L)y tIhe oLLU eU±LiLsLeU

Office du Niger increased from 5 thousand tons in 1960/61 to over 9 thousand4.~ ~ n 1 I n4/ n X/ 1. .1__ -v2- m4- 4 b_v _ n no1^_. . A 4i- 4- _A

.uons ±LJ n FJ/ U4o r.XVUuiJ.Lo oUs. thwi ULIA X fe. 1 to 2 vli;u eosarj ¢JUULJ. .1.iJ

1965/66 due to poor quality. axpansion of production has been limited bythe domestic need for rice and subsequent shifts in acreage un-der each crop.It has however been decided that there would be no further replacement ofcotton by rice and that production from the Office du Niger should remainaround 750C tons a year.

25. By far, the largest share of cotton production and exports nowcomes from the areas of Sikasso, Segou and Bamako in the south wnere dryland cultivation has been organized quite successfully and at a much lessercost by CKDrT 2j. rNarketed production most of which is presently exportedhas increased7from 3 thousand tons in 1960/61 to some 21 thousand tons in1964/65 bringing the total for the country to about 35 thousand tons.Total output is planned to reach a figure of some 80 thousand tons by 1970of which 52 thousand tons would be exported. It is hoped to obtain this

1/ Bureau pour le Developpement de la Production Agricole.7Z/ Compagnie Franoaise pour le D6veloppement des Fibres Textiles.

- 8 -

quite spectacular result by some increase in acreage cropped but mostlyby improved methods of production including the distribution of seeds,fertilizer and continued demonstration and supervision in the use ofcredit. Suich targets seem possible although there are signs of productionleveling off and even declining in 1966. Export prices are expected toremain fairly constant at a level of about IMF 1415 thousand per ton,

26. The manufacturing sector is still very rudimentary and productionis likely to continue to be restricted to the processing and simple trans-formation of primary products and the manufacture of metal furnitureand similar goodis for 1oca1 consumption. Total outplit has grown at avery slow rate of about 1 to 2% per year in recent years. Fbllowing theexpected rise in cotton output. n+. at la a est imrprovement may he enpectedin the production of textile products for which an investment is planned.

27. A rather important industrial investment in the country is thepublicly owned oil press at ouloro built w-ih Gean -na r.d wT1seannual intake has been limited to 10 thousand tons yielding about 4 thousand4U. UJ ± .U U.J. L.L UIAJZ ." LJUIJL.LLO ±. .dJJLL 6 JO.UJ. LJJf1n l.A ILtonls oIL cr-.LU'e oil 'or domestic consumption . A canning flact-or QC1A1built with Yugoslav aid is having somle financial difficulties while acigarette and match factory built With Chinese assistance are operatingprofitably. Industrial development in rali is proving very difficult sincethI-e local riEirKet is r-iamll and Uali' s Uoiplarative advantages or- world r,-rketvery few indeed.

28. The total installed electrical generating capacity in Mali isabout 17 thousand kva (1966). Of this, 3 thousand kva is hydro capacityand the baLance diesel plant. Total generation in 1964 amounted to 25million kwh and has increased at an annual rate of about 20% during thelast seven years. Consumption is about equally divided between industrialand comnercial users on the one hand and households and public lightingon the other. YIali has substantial potential hydroelectric resources;the principal possible sites for development are located on the upperreaches of the Senegal River including that at Gouina which is now understudy by the UNDP as part of the river basin development studies. However,in the absence of any new large scale power consumers,the potential capacitywhich coull be installed at these sites far exceeds the demand for powerin the foreseeable future. A small hydro project has however been construc-ed on the Niger at Sotuba near Bamako. One unit of 2500 kva is in operationand a second unit is to come into operation soon. The cost of this projectis stated to be li' 2,5 billion and it has been financed by France.

29. Power generation is the responsibility of Energie du Iiali,a mixedcompany owned 55% by IIali and 45% by France. Total revenues in 1966were reported to be IIF 579 million and profits I'IF 60 million, Thecompany's cash position however was difficult because of large arrearsin payment by government consumers,

1/ Societe des Conserveries du ilali.

30. Apart from a negligible volume of gold and some salt miningnone of the known mineral reserves of the country presently appearcommercially exploitable.

31. Comrerce has virtually become the monopoly of S01MEX 1/, thestate trading agency wnich is the official trader for imports ana saleof 11 basic items, exports of groundnuts and trade under bilateral paymentsagreements. Profits of SOMLEX reached 1i. 1 billion in 1963 but couldcertainly be greater with some improvements in management and distributionpolicy and efforts in this direction are being made. Cereal and fruittrade is handled by OPAM 2/.

32. Transport represents 5% of YMalits GDP. The transport systemover a country more than twice the size of France is not well developed andthe economy is handicapped by high transport costs. The system consistsof: (a) a 642 kilometer meter gauge railway connecting the Niger Riverand Bamako to the Senegalese line to Dakar (another 586 kilometers).]i'ali traffic on the railway was 108 million ton kilometers in 1964/65.This line is the most direct route to and from the sea for much of Miali'strade. When traffic on it was interrupted (1960-63) iiali found itself ina very difficult situation and the development of al.ternative transportmeans have proved very costly; (b) a road network of about 11 thousandkilometers of which 500 kilometers are asphalted and. on which a stateowMed trucking company (RT1M) 3/ created during the emergencysituation referred to above orerates at considerable loss. These roadslink Mali to the Ivory Coast and Upper Volta and hence by rail to Abidjan;(c.) Air Mali which serves; at considerable cost, internal and internationalroutes. While the rate of occupancy is good on the internal and charterro utes M (to ;teca it is gepynerlly lowT. on Jn+ternnAtir)n onnes (d)~ twostretches totaling 1800 kilometers on the Niger River which are navigablehalf the year and which linlk -Ba7..ko +.Ith the\neany raLha a anaand on which barges are operated by another public enterprise ACMi 4/ whichcombines th,ese activi+ties w.ih induistrial ones.

33. n,- un pia+e ir.m n.a ent b,s never pla,yed a very4 4--orta part

in the development of liali, averaging less than CFAF 300 million per yearuap to the early nens, rising to about three -four..4t ofP atbiio:n C1 A peu 1'IK tiv wsswo .YX7,)% -L s Jt wv ctv uw VLI LVvA-JA11 as O | a u. | Lo ul rmx Hvssyear in 1959. Private investments have been made in the traditionalagricultural sector by African enterpri ses but thls aga'in has been only afraction of the already small investment by foreign private enterprises.

34. Prior to 1960, investment from external public sources, entirelyfro,,. Vrcalnce, has- b-een.susatl osbyCu3. .sna urn.L.LJAh ddJ'l) UdC&)O~L V UVUauLJU.LcL; PV!JU~.L U±y t.J )U.1.J UL ILQLL[ dbt UW.WVt&JUprices. Of the total involved, possibly CFAF 12 billion, or 40h%, has beenin the Office du Niger, some CFAF 6 Dillion, or about 2ev,, in the Malisection of the railway, and the bulk of the remainder in the development ofagriculture, roads and social services. The domestic contribution to the

l/ Societe M laliienne li'mportation et Exportation.2/ Office des Produits Agricoles du Hali.3/ Regie des Transports du Mali1T/ Ateliers et Chantiers du M5ali

-, r

total of official investment has been negligible, The share of grossinvestment in GDP was estimated at 9 in i956, 8% in 1959 and 13% in i196.

35e In an effort to improve ivialils self-sufficiency and productivecapacity, the Government launched a first five-year development Plancovering the period 1961-a965. This provided for a total investment ofMF 78 billion over a five-year period or an annual average of 1W 16 billionper year, roughly four times the pre-independence level. About half thetotal was earmarked for investment in state enterprises. In fact, the totalrose from ]1F 8e5 billion to some NIF 10 billion in 1964/65, which representsan almost stable proportion of GDP of 12-13%, Most of the investment hasbeen made possible by a substantial inflow of official capital whichi hasincreased from vIF 3.8 billion in 1959 to M-F 7.8 billion in 1964. Domesticsavings, on1 the other hand, have tended to fall after reaching a peak in1962. Net savings by Government throughout this period have been eitherzero or negative, and Government enterprises began to make a net contri-bution only in 1963 and 1964. Revenues from taxation representabout 17% of GDP and given the poverty and structure of the economy, thereis little prospect of improving the tax base much above the present level.Mos'.-of the savings have, therefore, been made in the private sector of theeconomy and chiefly by households. The increase in 1962 reflects thesubstantial monetary inflation in that year which did not have its fullimpact on demand until 1963 when savings fell signil'icantlv-

YP1ThIMTRT OFN rMT n DMO.TSPTIG PPRnT)TTGT

( in billions )

lIali Francs

1959 1962 1963 1964 1964

Government consumption 7.8 12.5 14.4 14.9 18TL) oU iLL LI .Li & _.e. _ _ : ................... e ( A.'~ '.A , .

Investment in Government 2.3 3.4 3.6 3.9 5±UDL 4 L-I e b1j t_LiL, 2.U gJ. 0. ±U'I .I- 1 Tota.l i,ivest Lwn ;b 5.6 9.1 9.8 lo. 12OV

Plus export of goods and services 9.8 10.1 9.7 11.1 12Less imports of goods a-nd services -12,3 -15e2 -17.0 -18.8 -20

Gross domestic product 66.5 7209 74.8 75.3 100of wnich: Plonetary sector 4uo7 48.3 67

Subsist, sector 25.8 27.0 33

Savings and Investment

Gross Investment 5.6 9.1 9.8 10.0Net borrowing from abroad 5.3 4.9 7.1 7.6Domestic savings 0.3 4.2 2,7 2.4Government savings -0.9 -1.2 -0.9 - o.bPublic enterprises -0.3 - o.6 0.8Private savings 1.5 5.4 3.0 2.4

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36. The initial financial imbalance in the icali economy has beenfurther complicated by the over-ambitious development Plan, and thelack of basic information and prelininary feasibility studies on prcqctsundertaken. The pattern of expenditure of the plan appeared to be relative-ly realistic. 25% was to be invested in agriculture, 16% in industries,22% in road and transport, 9%o in river works, dams and other infrastruc-ture, 81 in a nining survey and the balance of 20% in public administra-tion and social services. However, the Plan overlooked the slow yieldingnature of the investments proposed even in the productive sectors, and thelong period necessary to obtain any sizeable contribution to exportearninps and (ThvernmTnt rvsenue. Tn addition, the key investments inindustry were undertaken, frequently at the lender's or supplier's initia-tive- nnt nnly uthout adequate studies of the prniects themselves butalso of the market prospects on which the schemes depended. This is parti-e~~¶,1 ~lT'1rT p tu P o .fH the me2t arindrlmi+. nil - and food canninn nriprts onwhich a great deal of reliance was placed.

37. The Government recognized the weaknesses of its first Plan andthe .mi,stakes ,4ch have been. made and reduced thue exvennr;+ io onv projectwhich were to be financed from domestic resources, from over i'F 4 billion

1.4 billion in 1965/66. It was intended to delete all projects which wouldnot 4b1e rap,'dly an d- ecl Ardcie Asuch -- A housin andoter 4oiaLIJu LJ J. 0.J LJ%L kA.L.LJ. kUJ.JY L1J'..LU%AUk .LVV QW-LI± C"~ 11UUQ~.LLJr, CLLJ~ VVIAJJ.~ h. J.O.J4services, and road construction, and to restrict new projects to befi-anced do.Lestic al1y- to Iu-noet whLiC.II1 WOcUh wo-uld :A an ±%LV early cnriAUbLUL1

to increased output. Unfortunately, the Government is already committedto proceeding with a. n-uffber of loow priority and doubtOfUul proJects financedfor the most part from abroad, which add substantially to the externaldebt buurder, and finds it impossible to limiti education expenditures.Moreover, too much reliance is still being placed on. direct contributionsfrom state enterprise resources and central bank credit, and too littleattention is being paid to the concept of an overall current surplus fromthe public sector as a whole, including all state enterprises. In viewof this situation, the Government has decided not to embark on a secondPlan, ant to limit its action to completing projects under way and tobetter utilize existing capacity.

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III. FITANCIAL AND riONETARY SITUATION

Current Budget

38. Since the creation of an independent currency in 1962, iMali hashau no ioreign assistance to finance its current budget. There [ae howeverbeen substantial amounts in wages and salaries paid by the French and othergovernments to technical assistance personnel, particularly in the fieldsof education and civil aviation. This assistance, which has totaled appro-ximately IvjF 1 billion per annum since 1962, continues to be excluded fromthe budget.

SU1M'ARY OF MALI GOVERN1MNT BUDGETSBillion Mali Francs

(estimated actual)Central Gov't

Current Budget Total BudgetSurplus Surplus

Receipts Expenditure Deficit Receipts Expenditure Deficit

1958 5.42 4.54 +0.88 6.28 5.94 +0.341959 5.89 5.34 +o.55 6.70 6.28 +o.421960 6.64 7.66 -1.22 6.44 7.66 -1.221961 8.79 12.09 -3.30 8.79 12.09 -3.301962 9.78 13.42 -3.64 9.78 13.42 -3.641963 7.79 9.69 -1.90 10.94 12.67 -1.731964(6 mo.) 3.86 5.61 -1.75 5.98 7.11 -1.131964j65 10.52 10.53 -0.01 13.07 13.45 -0.381965/661st quarter 2.16 2.50 -0.34 2.43 3.05 -o.62

Cumulative deficit 1960-62 -8.16Januarv 196i-March 1966 -5.17

't 1960-Mkarch 1966 -13.33

Financing: 1960-1962Short-term advances from French Treasury +3.05Use of deposits of postal checking system +2.51Centvnl Ba~nk eredic-t +3 , 00Change in cash balances (increase -) -0.40

Cumulative deficit January 1963-March 1966 -5.17rC.n~ n4- nz~+ r- n4mc n-P I- r4 ino q% -on r Inr t rarnmon~.+50C>nge ir. net cl;sof banking sytmon -vr..e 5o

Other sources +0.11

Source: .Dat.a s upplliied bLJ t1VJe El d.LU authorities.

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39. r.s long. as iiail reimained in the CF31; EIranc none, bud&et deficitswere covered essentially by the French Treasury whlichj provided over MHP 3billion in reirabursable, but not yet reimbursed advances. Since monetaryindependence, -the Central Dank has directly, and indirectly through thepostal checking system, been the ,nain source of fun-ds for this purpose.

40. CGovernment revenue relies heavily on indirect taxes, particularlyimport duties and taxes on production and turnover. Since independence,the rates and basis of practically all indirect taxes and particularly thoseon imports have been increased sharply several times. At present, the aver-age rate of tax on imported goods is over 50p%. There has also been greatimprovement in tax collection. In recent years, inport and turnover taxesprovided 66% of total government revenue, direct taxes 18% and all otherrevenue about 16%. This heavy dependence of government revenue on importshas created serious budgetary problems for Mali, in view of its very diffi-cult balance of payments position and the need to drastically reduce imports.

),1- Since 1960. the Government has incurred not onlv an overall budgetdeficit of about i'F 13 billion but also a significant although decreasingcuirrent deficit. This has arisen largely as a result of the ranid expansionof government expenditure on administration, foreign representation anddefense, com.bined wit.h tih failiire of revenue to) cnrnannd as qntTh.inted_Although new taxes have been introduced and existing tax rates increasedto relat; +.e -raly -r 'hig e,h 1 c.vrol. revenuespTf haveri no+t provlreTdr -tch prnoc

expected. There has nevertheless been significant iriprovements since 19652,-lue to thne a-usteri-y Cne-'u- -lopte- by th- GCovernnn-u-- +- +est+ric +l,.

growth of expenc'iture and th.e continued increases in the tax base.

Budgetary Pleasures taken or to be taken under the Stabilization Plans

42. The first stabilization program introduced in July 1964 by ther.li Govers-rmnb in agreement with thle IPI, provided for a numb-er of ,,,easuresdesigned to improve the financial position of the central government bychecking the growth of expenditure and increasing revenue by a further AT2.2 billion. These included:

(i) an "exceptional contribution", or special levy, amountingto 10% of all wages and salaries;

(ii) an increase in existing turnover and services taxes rangingfrom 5% to 20%;

(iii) an increase from 35% to 50% in the existing tax on profits

(iv) measures designed to reduce expenditure on personnel, byrestricting recruitment and enforcing earlier retirement,and to reduce expenditure on supplies and material by 10%,/.

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L3. The budget for 1964-65 provided for revenue and expenditurebeing balanced at IK' 12.84 billion. On the revenue s-ide aDn jnrease indirect tax receipts of IT 1.2 billion over actual receipts in 1963 wase ',ect- d epresenting the deld from? the snpreinl levymr on wTTages1 and sal-ri esISh o.6 billion, and increased taxes on profits IT 0.4 billion, plus ananticipated increase Jn other' di,rect t,-es of" ,a 0.3 bidlion. *6.oever,the "exceptional contribution", which was to levy 10%/' of all salariesandu wages was applied afe yd.J1Ii LJ of1. the1 -- - -I andL sociaV. lsecurity taxes. The net contribution actually provided for, was in fact,only 6p of -wages and salaries, yielding only 1i 0.6 m-llion compared withMF 1 billion originally anticipated in the stabilization program. Thes-i-arp increases in direct taxes, ,u[noJver and production taxes U.LU noUproduce the anticipated results owing largely to the lower level of activitywrhich resulted from the need for stabilization and control on imports.The Government managed to formally balance its current budget for theyear, essentially by collecting iM 1.7 biilion in tax arrears largelyfrom Somiex and by not including important elements of current expendi-tures, such as subsidies to public enterprises, in the current budget. Thesewere financed by Treasury drawings on the postal checking system increasingthe assets of the Central Bank by an equivalent amount. The 6 regionalbudgets, accounting for roughly one third of central government expenditures,incurred on the aggregate a deficit of almost NP 0.4 billion wJhich wasfinanced by the Central Government.

44. In December 1965, iali undertook, after consulting with the Inter-national Development Association, to carry out,in effect, a second stabi-lization program. In the budgetary field, the Government intends to reduceits real current deficit until it has disappeared and to turn it into asurplus to be used for public investment.

45. The tax on imports which used to be levied on the c.i.f. port ofentry price will, from now on, except for 10 basic items, be levied onthe c.i.f. border price, which is equivalent to an 8% increase in therate. The base of the tax on industrial and commercial profits has beenbroadened and the rate of that on some consumption goods increased. Thesemeasures should produce, wiith a few other lesser ones, about NP 1.5 billionin additional revenue. Efforts to collect tax payments in arrears will bepursued. On the other hand, tax on groundnut exports had to be reducedfrom 12% to 10% to encourage exports and the 10%< exceptional contributionon wages producing about MF 700 million has been cancelled.

46. On the expenditure side too, some further efforts have beenmade. Six embassies have been closed, and all expenditures of publicenterprises are now centrally controlled, although this may somewhat hemperoperations. Salaries in the public sector are frozen since 1956, but theoverall Government wage bill is increasing. The Central Bank is attemptingto administer the Dostal checking system in order to make it more difficultfor the Government to draw on it.

47. The financial prospects of the public sector are not particularlyhright under any reasonable forecast. of ;imTnnnt and export trends. Tax reve-nues already represent about 17% of GDP. On the assumption that the growthof imports of consumption goods willbe kept under control and restricted to3-4% p.a. compa-tible with the probable rate of growth of GDP,there wzould be sor

- 15 -

prospectu of increasing revenuae lfro,, tJes Lon JjJUJ. L, LJy .Lt U-IPI U,rVn.kJAtaxation procedures, by increased control of imports through the traditionalsect-or, and by increased revenue from the export sector. It shio-ulU be pos-sible, therefore, for government receipts to reach a total of about iT 17biilion by 1969/70 or aoout iG ,%OI projected GDP in 1969/70. It is unlikelythat any significantly larger increase would be possible.

48. On current expenditures, there is scope for further savings which,if made, would make room for essential increases in some services, and stillpermit the total to be held at the 1964/65 level for another year or two.After that, some growth in the total would probably be inevitable. This pat-tern might make possible moderate current surpluses in the 1968-70 period inthe range of MF 1-2 billion. But this is probably the maximum that can bereasonably expected in Mali's difficult circumstances.

State Enterprises

49. State enterprises have,on balance,been a source of positive savingsin the past few years. The main contribution has comae from Som.iex whichenjoyed a profit of about MF 1 billion in both 1963 and 1964. This was sup-plemented by net cash surpluses from the operation of a large number of otherenterprises yielding about MF 0.2 billion and MF 0.7 billion respectively in1963 and 1964. Part of these combined surpluses was offset by the deficitsof the principal deficitary enterprises: the state road transport monopoly(RTM), Air Iali, the railway and the Office du Niger. The accounting deficitof these enterprises probably totaled r,-5 1.9 billion and IS 2.0 billion in1963 and 1964 respectively, but of this amount, some iv!F 0.9 billion representsdepreciation. leaving a cash deficit of apnroximatelv I[F 1.0 and IMTF 1.1 bil-lion, respectively. On balance, grosssavings of all enterprises taken togethermight be estimated at about YTN 0o6 billion in 1963 and ?VF n.8 billion in 196h.The balance sheets of many public enterprises show substantial amounts inreceivh1es nver byiiu v the rnurnm%nt and itS agenc-es.

5°. TIn order t-o 6-nerate alditional P--- -Sfonpbi-4 trpiss- . ~~~~~~~ ~~~ ~13'- -V 1 C 4L"" .LkLLJa.L .. LULJ'~4. _Li. U1L PLLJ..L.LL, C;4JUCL .- J. L)K0

the Government has initiated a review of all of its enterprises except theOffice du Niger. Pu blic enterprises have been nn classified in t.hree ctoriesa) already profitable; b) profitable provided reorganized; c) not profitablefor the foreseeable fut,v-e. Enterprises in the first Cate+r i ncl 1e nprac-tically all those in the trading sector, in particular Somiex, and thec4 nn__.A++ .amnd .n..4-1, qoh ne C.n4 -_AA14 . nl lv c- n_A A6 U Uw u O.& ^1¼ ,SflU9,, iCL_.' UVL . , * VV LLaO. WVb WJA.L .- A .LI CL *CLAI. Jfr .J VLILA .IIJt U- C- L Aports of key commodities should be able to expand its current surplus atleast- modeorat-ely as a resu"4 't of' .,ore effcetora;n, 4-------- _-an increased acti-~ U AiLLI~J. 0.U~J..y ~ d A. ~vALU V J. V uA. A tLV V ±J.A.L 4i %* jJF.L aLU.LLJ I ~LA CLLA% .I.LI. C L'L OA UJ.vity. It has already been given more latitude in managing its inventoriesanJd stI ores. L U profitLU i.s UVc t .o41LU "VLA.duJ.l Uethis yea.r , iLLI spiJ.Lte Uthe reduced margin on groundnuts (see para 22).

51. Enterprises in the second category include the railway, the roadtransport organi-za-u-ion (TiJ, IiLr Miali, L41U cereal aLu frUitb UUcor-,cerll Iuri)the canning factory (SOCOMA), the slaughter house uncdertaking (SONEA), andthe oil refiner-y (Tiuileries du iiali).

4, The Government has indicated its wilingne.ss to reorganize theseenterprises in order to place them on a sound financial basis, and thisincludes a possible curtailment of activity.

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53. lith the assistance of IDA, it is expected that the railway'sdeficit would be replaced by a small surplus of about i'F 100 million in1967/68. The Government has undertaken to appoint consultants to makerecommendations on public enterprises in the transport sector (exceptthe railway, which would be dealt with in connection with the proposedIDA credit). The road transport undertaking created during the emergen-cy situation caused by the closing of the railway to Senegal in 1960,sholnd prohbly hp nrganized on a tmich smaller scale. This would keepin being the nucleus of a transport undertaking which could be expandedas circmstances required to me-et any futuire emprgen needs or anynormal development needs. Air lNiali will investigate the need for, andprfitabil;ity of, SOr. ofP its- ex-er+ny- routes and other activitiJes. As

for the other enterprises in this category, profitability is likely tobe deferred for some time. The oil refinery n.ust hbe able to cxpport itsoil before it can operate at fuller capacity, while the slaughter housesmust solve the problems mentioned in para. 19. All enterprises sufferfrom import difficulties and the fact that the Governfment and other publicbodies are so m-uch in arrears in their paymwents.

)~40I iiTnhe Goverrnrmient has indicated its willingness 0o consider closi-ngenterprises in the third category (except the Office du Niger), whichincludes: the Bamako BuS Transport System (TUB), Ate:Liers et Chantiers duMiali (ACPI) which groups a wide variety of industrial and handicraft acti-vities and handles river transport, Societ6 dtEquipement du Mali (SEai),the Printing works, the hotels, cinemas and mining ventures.

55. Although the Office du Niger does not seem likely to becomeprofitable in the near future, its financial situation could be somewhatimproved given firm policies and guidelines and some improvement in orga-nization. As for the puiblic enterprises in the transport sector (exceptthe railway), and in industry, Mali has requested, or intends to requesttechnical assistance from the appropriate international institutions inorder to improve their operations and management.

56. As noted earlier, the total investment outLays of the state enter-prises have considerably exceeded their current surpluses in the past fewyears. The gap has been financed by equity investment or grants from theCentral Government (usually equal to the value of foreign loans contractedby the Government for equipment imported for the enterprises) and by largescale borrowing from the banking system. The rate of increase however,which was very large in 1963 has substantially declined in 1964 and 1965.The Government has stated its determination not to have recourse to theCentral Bank to finance new public investment.

M4onetary System and Developments

57. Prior to June 30th., 1962, Mali was a member of the "BanqueCentrale des Etats de l'Afrique de l'Ouest", which acted as the Central Bankfor 8 member countries of the former French West African Federation.

58. On July 1stj 1962, anli created a national currency, the ILTali franc,.and established a central bank of its own, "La Banque de la R6publique duImmIliII (BpR') whi-h a-lso1- fulf9i1l +s th-e rvole of a commercial, rcnltiral and

development bank. The rate of exchange of the new Ikali franc was fixed atpar w^ith that of the CFA franc, al+though it did not have the sme support; and

- 17 -

CFAF notes in circulation were withdrawn in exchange for Mali francs ona one-for-one basis.

59. The decision to establish an incependent currency appears to havebeen made without adequate allowance for the probable magnitude of theforeign exchange assets which might accrue to Mrali from the BCEAO, or of theforeign exchange resources likely to beessential to t;he maintenance of Mali'sexternal liquidity, and without adequate appreciation of the value of thebenefits derived from the automatic assistance and controls provided underthe operation of the CFA franc system, which were thus sacrificed. 1he totalforeign exchange resources transferred to Hali by the BCEAO in July 1962amounted to MF 2.4 billion, of which MF 0.4 billion, Mali's share in the lia-bility of Guinea to the BCEAO. was not initially conrertible. In addition,lMali has an unknown volume of other convertible balances in accounts abroad;on October 30, 1962. these amounted to about 'F 1 bil]lion. bringing totalassets at that date to IF 3.0 billion or only about 20% of a year's currentiomT ports .

60. At the time of independence fonir French cohqmreil banks hadbranches in MIali and only two of these now continue in operation; in onenf thpm ;the Mali Government isa 2manjor shareholder. Th.e activities of thecorrmercial banks in Mali have diminished considerably since the establishmentof the B TRM tC which' were transfe Y---"nts of state enterprises, in--cluding the accounts of large concerns subsequently converted into state

Qn^A;a r -A; us+!aUsA;LA 5r 4b_m* sUQ nArnn al Walr

controls and increased taxation, there was evidence of significant infla-tionary pressures by the first half of 1964, and there has oeen growing cConcern over the financial and monetary situation ever since.

HONETARY SURVEYBillion hali Francs

Change2 yrs. lo mo.

1962 1963 1964 1965 June 62 June64-1June Dec. June Dec. June Dec. June Dec. June 64 Dec.65

Foreign assets (net) 2.4 1.1 -0.4 -2.1 -3.5 -6.4 -6,7 -8.2 -5.9 -4.7Claims on Govt (net) 3.6 6.3 7.2 8.3 9.1 10.7 10,2 11.9 +5.5 +2.8Claims on economy 1/ 7.5 7.6 10.3 10.3 14.6 15.3 17,2 17.6 +7.1 +3.0Unclassified assets o.6 0.5 0.7 o.6 1.0 0.8 0o9 1.0 +0.4 0

Total assets 14.0 15.4 17.8 17.1 21.2 20.4 21e6 22.3 +7.1 +1.1

M'oney 2/ 11.9 13.0 15.3 14.6 18.0 17.0 18D5 18.4 +6.1 +0.4Time deposits 0.2 0.4 0.4 0.4 o.6 o.6 0.,7 0.7 +0.4 +0.1Capital & reserves 1.6 1.6 1.4 1.5 1.4 1.4 1.4 1.4 -0.2 0Unclassified 0.2 0.4 0.7 o.6 1.3 1.4 1D0 1.8 +1.1 +0.5

1/ ivlainly state enterprises2/ Includes postal checking deposits7/ Date of effect of first stabilization program

-2 The first efforts to correct. the situation led to the stabilizationprogram introduced in July 1964 in cooperation with the IMP. The key controlfeature of this programwas a lim.it on expansion of gross domestic assetsof the BRM of MS 1.25 billion above the level of !NF 22.6 billion reportedat June 30, 1964. ' To Jul"y 1 to Nover.n'er 1964, the expansion in t-he totaldomestic assets in the BRM was brought to a halt in spite of some expansionof credit t.o the Goverr^Y.ent .owever, owing mainly to a sharp increase inclaims on the Government, domestic assets resumed their upward movement afterTa.uary 1°6'5, breal ang +hrough +he ceil ng areupn -_T4Jh t .IiT in A--il,WIay and June, the peak of the seasonal requirements, and showing an increase

P TmI 1. o 4, -41-. -1-n_ - - VAw_- +1- 1 4-h n1vron _rsh - mT,.inn 1 OA(1.L Y. jJ 4 .) L.L...ULA J.LI UL1V X;VJ.LU. L 'Ui , * X VJ L vJ.'-s V - A va.. v .j 'to ray 1966, domestic assets increased by I-TI 2.9 billion of vwhich MF 2.2

bi''ion occ--re betee Dee-, 196 Tri ii 16. s -increase LSslL).L.L±±LULl U%~.;UL L±)U U~ WtVt71 ee m 1IUJe. ._7U,J CLJL.Lk 1±J.J .L7 %-JO LJL LLJId U.Lsubstantial, though lower than in previous years, and in excess of the

-r Ae. £it Ce iJ."L.J.VLJ of 2.bVLilion aLUIre .LUV IDl foiC 1m1oint'Ls Irorri

July 1965. This was due mainly to the need to finance the deficit of publicenterprises and, to temporary advances tu Soii-iex for Durchasing the ground-nut crop to be exported.

63. In July 1966,the Government of M4ali and ID.A agreed on anotherceiling of 1F 2.6 billionfor 1966/67. This,in fact, represents a ceilingof MF 2 billion adjusted to take account of the settlement of debts arisingfrom the railway's past operations, The amount of MF 2 billion is brokendown into MF 005 billion for the financing of the Government's budgetarydeficit (excluding that of public enterprises) and MIF 1.5 billion to coverthe deficit of oublic enterprises.

- 19 -

DEVELOPP1vNT OF CEN\TRAL BANK CREDIT TO STATE ENTERPRISES( 'hil IioA vn I i vRytzn n )-

Dec0 Dec June Dec. ;- J ne p Dec1962 1963 1964 1964 1965 1965 1965 1965

Bills of exchange+ __% 1. -I ' Lo ,. Xf e e c t ()I. Ar no e.4n e. rn

voLJW4 V-VVI1X .IL / @40 Lj v4 474 Jv 774 vS pvv; 7

B's of=^,P g.UL.L _JL e.xchangeI~

(medium-term) .... 1.60 3.14 2.94 3.05 2.53 2.21 2.20

Advances on current account 0.05 2.08 3.70 3.94 3.36 5.47 5.94 6.57

Total BRM credit tostate enterprises (0.05) 7.83 11.78 12.43 12.35 14.03 13.75 14.36

Source: Based on data supplied by the Banque de la R6epublique du hiail.

64. Throughout 1964 and 1965,net foreign assets continued to dropsharply; they fell by M;' 3.2 billion from June 1964 t;o June 1965, reflectingthe import demand created by the large credit expansion in the precedingtwo years. lIoney supply declined by about IF 1 billion during the secondhalf of 1964 under the June 1964 level of IiF 18 billion, has shown littlegrowth in 1965 and was under !T 20 billion in April 1966.

6,. No precise or accurate information is available on the course ofwages or prices. The policy of the Miali Government has been to keep pricesand wages down and price controls have been enforcecd for many years. Therehave been no increases in wages in the public sector since 1956 and in theprivate sector since 1959. Price control regulations have been in force onall commodities, domestic or imported; however, there is an unofficial marketwhere prices fluctuate widely but are very generally well above official prices.In recent years, official prices have increased by about 5-6% p.a. but blackmarket prices have risen much more. The reliance on bilateral trading ar-rangements leads to rather erratic price fluctuations since goods arrive onthe market in spates and do not always meet consumer preference.

66. The efficacy of these controls has been soinewhat varied, beingmore successful in the urban areas than elsewhere but they have certainlyhad a disturbing effect on nroduction. of groundnuts for instance. and dis-tribution. The restriction on wage increases in the public sector has,for themost part.hben offset. dtii tn regrading or promotions which hnve increased theeffective cost of wages and salaries. Nost of the increase however, is dueto larger numbers inemployment sinnce the .Mali bdget or public enterpriseshave taken on a number of civil servants who,before independence, were onthp FederationeS gl the Fren.ch budge+ a - f r- w -. oke- w.hw-ployed in Senegal.

IV. BALANCE OF PAYiE'NTS EXTERINAL DEBT AND PROSPECTS

Past and Present Situation

67. Balance of pavments information for Mali is unusually diffi-cult to obtain and unusually sketchy. Prior to 1961 import and exportfiLures were included with those for Senegal and Mauritania. Unrecor-ded border trade, duty exempt imports and capital outflow, as well asnoorlv recorded transactions introduce a larze element of uncertaintvin what have to be rough estimates. However, such estimates of thehalance of naimnnts have been nrenared; these are subiect to a consi-derable margin of error.

68. Exports in 1965 have probably, at best, remained stable,^w4noy +rn lTwet r-r n inii+. DYn-rq c 1P'ho f;i y¶irc f'nr 1 QI;A mn-%r lq bhpt_,, , wvr ny - -D - - -

affected by a likely decline in exports of cotton. Exports of ground-nut irs h aco forl approx mtl O 50a- of- ^ recorded e rts 9o 25%

of the total. Next in importance comes cotton which has only recently`becom'e an im.p ortJantj export. coonodiJAW'ay, with a n e st.lrm M t e d valtue of LU.1.2 billion in 1964. It is essentially on these two export productsthat iIali has to rely for improving its export earnings and -oreignexchange position. There may be possibilities of developing an exportrm,arket for meat, but selling through official channels would have to bemade profitable and transportation and conservation problems solvedfirst. Until then, the new slaughtelhouses will continue to Lwork wellbelow capacity.

69. France and franc area countries used to absorb the bulk ofNlali's exports before creation of the Niali franc. Since then, theshare of the 23 countries with which i4ali trades on a bilateral basis,has increased to the point where they absorb 70% of the exports ofthe modern sector, including 88% of the groundnut exports. In 1965,the People's Republic of China became the chief importer of iHlalilsgoods, preceding France and the USSR. These exports are in fact tradedfor imports financed under bilateral credit arrangements. N1alils imports,are chiefly made of manufactured goods (textiles), vehicles, and food(sugar).

70. In spite of a sharp expansion of investment and domesticcredit during the past several years, overall imports have grownby only 20% since 1959. Some investment imports, however, are not recordedbecause they are exempted from impoft duties and there is a natural tendencyto assume that unrecorded trade is limited to the traditional sector. A.lso,

despite the introduction of comprehensive import controls in 1962, therehas been widespread evasion of controls by traditional traders, reflectingin part the desire to avoid payment of the high import duty. With exportsdeclining in this period, however, the current deficit rose from IK 2,3billion in 1959 to an estimated IS 5e8 billion in 19650 Mloreover, therewere apparently large outflows of private capital, particularly in 1962when Mali withdrew from the monetary union, and these seem to have continuedsince, although on a declining scale reflecting exhaustion of the funds seek-ing repatriation. At the same time, grants received declined from IIF 5 bil-lion in 1959 to a low of MTh 2,9 billion in 1962, but recovered to NP 4.6 bil-lion by 1965. The rest of the mounting deficit was met by increased use ofmedium and long term loan funds, by a large drawdown of foreign exchangereserves and by a substantial increase in short-term liabilities.

SUl'!ARY OF ESTIMATED BALANCE OF PAYIENITS

1959 1962 1963 1964 1965Cr. Dt. Cr. Dt. Cr. Dt. Cr, Jt, Cr. Dt,

Controlled trade: 3.2 9.8 3,3 11.0 4.1 11.0 4.1 11.6 4.1 12.3Other trade 6 26 2-3 55 3X0 4.3 3'A )4.o 2.) )4. 2,.C)Balance of trade 2.3 5.2 5.9 5.5 6.2let. i nvisible - 3l 0X3 - 1.2 - 1-6 2.3Nqet current account 5.3 4.9 7.1 7*1 865

Official transfers:fluivre.nt 1. - 1. =~ 1. = - ) C9 = 1 t5

Capital 3.6 - 1.9 - 1.9 - 2.9 3.1oans 0.2 1.0 0.6 7 1 L e | 1 A . A iOther capital net - - - 5.1 - 2.2 - 4.o - 2.1TIr.cras in shor + er^.

.LLS'.J-~O.bJ .LjA LU~J U 'J~± AI

liabilities - - 5.6 - 1.5 - 3.8 - 3.1 0.7Decrease in res±V - -e.1es _ 2.0 - .Le4 -

71. As a-es'to s.w,s4ta,4-_ia- borrowJns *Is -s-,atd wd-4-mI JO 4 ± resuLLL U .L WJ UL,dLiLD.L4J.L LU1LV±± WJ.h4r,0 JJ4.LJ - 0 1UQLLI1b:L,U ±iLL =.LLL LI U 11long term external public debt, much of it serviceable in otherwise export-able rnmrchaudise, rose f-ros arounld ri 12 bilion at thre end Of 1961 to aboutMF 34 billion by the middle 1965, i.e., over 4 times annual exports. Ofthis amount, about 20% consists of deDt to the USSR, 20%$ to France, 18% tothe People's Republic of China, 12% to Egypt, and 10% to Ghana, while theremaining i;i 4 billion consists of loans from Western Germany, Yugoslavia,Eastern European countries, and suppliers' credits, mostly from WesternEurope. The. latter represent only about 'IP 1 billion. In addition,short term debts amounting to over F 5 billion are due to France, represen-ting mainly treasury advances (CP 1.55 billion) and debt on account of postaltransfers. This short term debt is overdue. Out of nearly i'? 9 billiondue in 1964, i.e. ITF 1 billion more than central government revenue thatyear, Hiali paid only ID? 1.8 billion; out of MF 6.4 billion due in 1965, onlyHF 1 billion was repaid. The terms of the aid are generally not unreasonable,but the total amounts of debt are so large as to make service payments un-manageable. Service on medium and long term debt alone amounted to IF 1.7

^2

billion in 1965 or about 20%o of earnings from both controlled and un-controlled exports, and 13% of earnings from exports of goods and services,This also represents 16% of central government revenue. Service paymentsare so poorly scattered that they would reach IMF 2.8 billion by 1972, thepeak year, or about 17% of projected export earnings.

72. As part of its first stabi-lization programs the Government initia-ted negotiations with its creditors to reschedule its external debt. Itobtained some success with Germany and a de facto moratorium from its lar-gest creditor: France. However, any forirgI rescheduiling by the latter hasbeen made dependent upon Hialits re-entry into the West African lIonetaryUnion. Talks were held in Paris on this subject during the first months of1965, and agreement was reached on most technical issues. The negotiationswere, however, adjourned sine die in Iviay 1965. France, nevertheless, hasnot been pressing for repavments of the debts owed it. except for the postaldebt where part of the amounts outstanding have been used for local Frenchexpenditures. including pension navments which account for over 1MF 1 billiona year. The Government also largely adhered to its commritment not to con-tract new debts which woumld place an fiditionnl bhurden on the bhqTnce ofpayments in the immediate future, except for normal short-term credit forinmnedliatePly nprA~11o+tAr pnronets.. Alco n in an effort. ton rediuen enxVrrnm'Ont.expenditures abroad, it has closed a number of embassies and official mis-

,3. As --ar+ of tsq sc^ond stab41;lza'ion efforts, 'he C-ov ------- under=I - flL Jt'

0U %J L.VU LI'.IJSI. LAA -W-WJ.J.-L.L VJ0.U.-WJ. VJ.LJ .U) UUS.LJ wJ) LUUQ 4 LSL$. I --

took to continue its efforts to re-negotiate its external debts, and to.Lir",UitvW V-V eernaSl bUorrowing to hJg gh priority proj.eCtis. Vinar.Ly %,Uilmex I.L"C.O.

credit, and balance of payments financing. Except for commercial operations,.loans -wIL 411 LIot be contr-ac'ed uLLL'ess t.hirlife.L L..is a'0 leas L4CLlO years andU_O theUgrace period generally not less than 5 years. Also, the Government undertookrot to draw on existing lines of credit except f-or a liUiited nuw-ber oL a-reedpurposes. The Government has recently completed negotiations with its East-ern creditors and obtained moratoria from practicaiLy all of them. Negotia-tions with the West German Government have also resulted in postponing subs-ta ntial debt repayments by three years and m ore, in the case of some s-up-plierst credits,

74. Mali has been receiving foreign aid to the tune of MF 7 to 9 bil-lion p.a. during the last 3 years, about half of it in loans. The mainproviders of aid in recent years have been the USSR, the EEC through itsDevelopment Funds, People's China and France. EBC aid is chiefly to im-prove the productivity of groundnut production and diversify agriculture.France's chief undertaking in INali at present is the Sotuba hydro-electricproject; it also provides substantial technical assistance in a variety offields. W-est Germany assisted in the emergency procurement of some 300trucks which constituted RTN's original assets and the building of the oilmill at Koulikoro.

75. U.S. aid,chiefly in grants, has been relatively modest in size,directed essentially towards education and health. Some surplus food isalso provided. '.uch of the aid provided by 7astern countries has been usedto secure consumption goods, as well as aircraft for Air 14ali and various

- 23 -

educationa;l and sanitarv investments_ The lJSSR is also assisting in asurvey of Mali's mineral resources and the financing of a number of pro-cessisng plantsn China hna opened lina nof ererit. to :Tnli - onn rathergenerous terms, parts of which have been used for agricultural processingp%lnts (sugar refinery, anrd the cigrete and n+.r'h fatorie IT+ ml c0nprovides assistance in agriculture (rice projects).

The Medium Term Outlook

76. Exports of the modern sector can be expected to grow quiteilUUstantdLal D|dl iy Utu UltV coD1UWUUf-arse o.- DWit LI1A -. YUCID VI s Wo,

77. Cotton is thle most hopeful of ia]_is export crops and coulddo quite well provided farmers find goods to buy with their earnings. Out-put more thlan doubiled between 1962 and 1964 and is e&pvcted to tripleagain by 1970. With stable prices, foreign exclangE! reC9pts shouldrise from 1VT l,. bil lion in 1964 to F 4I.5 bD13i ion Dy 1yjU90, AltnOUghrepresenting a relatively small proportion of uhe total, e:^0orts fromthe Office du Niger should at least be maintained at about the 1964level and further replacement of cotton by rice avoided.

78. Groundnut output has been stagnant in recent years at about110,000 tons. The official and rather ambitious target of 210,000 tonshas been set for 1970. h!uch will, of course, depend on the incentivesoffered to farmers, but, given continuation of the steps already takenand provided adequate technical assistance continues to be available,a target of 150,000 tons in 1970 appears realistic. Ecports whichused to fluctuate around 45,000 tons suffered a set back in 1965, downto 37,000 tons. This was the result of a combination of factors, inclu-ding inadequate pricing and marketing arrangements and lack of incentives.Exports could then move upward and reach 50,000 tons (shelled) by 1970.This supposes that the intake of the oil refinery intended for domesticconsumption continues to be limited. The prices enjoyed by Mali, however,are expected to fall from the equivalent of the recent French guaranteedlevel of ii'lr 45,000 per ton (f.o.b.) to the projected level of world marketprice of I 35,000 by 1970. Thus, with an increase in volume of some 30%,exchange earnings would only remain at the 1964 level of IT 1.9 billion.

79. Some meat exports should be possible, although considerably lessthan the ambitious hoDes entertained earlier bv the Government. These arecurrently running at around 500 tons per annum (valued at XF 50 million).Provided deliveries of cattle to the newly built slaughter houses can bemade more profitable to the farmer than local butchering or casual exportson the hoof andn,i a deu ate refrig eratiron and transport, it Tomildnot bo unreasonable to project a rise to about 4,000 - 5,000 tons, witha value of about IV-7 400 million by 1970.

Pn. All other ~por-s arel es;aeAtaotI ilo n 10A4.fl..LJ.. 0 SO J~.pJ4 Old aI~ 0 L u.,aO -d L,Stv IJ.W -SL~~.l n L/-4+0

These consist of cattle on the hoof, fish, accounting for MF 3e5 billionandu a ntU-,Uwer o04 'less D,0Jportant products iLLn.LudLing.LJ6 rice aLnL AI"LLVV. BJoth1 catll 0L

and fish offer promising opportunities for the expansion of exports providing

- 24 -

production can be reorganized and more modern and speedy methods of distribu-tion can be introduced, but prvogress is likely to be sloVw due to the extentto which these activities are concentrated in the hands of the traditionalnomad and relatively isolated fishing communities. However, a gradual in-crease in exports of all other products, including cattle and fish, is likelyso tnat the total of this category may reach PIF 7 billion by 19±70V. ±11us5total exports might plausibly be projected at nearly MF 14.0 billion by 1970,as against HvY 801 billion for 1964.

81. Imports have grown relatively little in the past few years reflectingthe considerable restrictions on current imports which applied more strictly,however, to consumers and the private sector than to public enterprises. ifthe fiscal and monetary policies indicated in the foregoing chapters arepursued, it should be possible for imports to be maintained around iMF 14 bil-lion until 1967. With the growth in exports expected, this could lead to asignificant reduction of the current deficit by then - say, to MF 2 or 3 bil-lion. Indeed, unless sizable capital public inflows are continued, the deficitwould obviously have to be cut even more, but it seems probable that an importlevel significantly less than around MF 14.0 billion by 1967 would force cutsin consumption and/or investment which would be extremely difficult from asocial and political standpoint.

82. Current invisible transactions which consist mainly of governmentand diplomatic expenditures and expenditure on investment feasibility studiesare expected to remain largely unchanged in net terms over the next few years.In fact, efforts have been made by Mali to cut its diplomatic expenditures.

83. Current transfers will probably show some increase reflecting theincreasing reliance on forei gn technical assintance to nrepare and implementnew development projects. Capital transfers are expected to remain at their196 lezvel of about iF 3 billion. If soft aid is added to this figure, onemay reach a total of approximately k' 5 billion after 1967, reflecting inthose years, a substantial part of he proposed I)A creit for the PailwayRehabilitation Program. This element, whlich is estimated to be about iF 1b illion a yer, would Anee o be rplaced by an increase Jn soft cred-t4s fro

.. - .1 - -- _l_ "___ - ~ -2 ..* LUt) ~UJLj- 'JL 'A *S V¼J -J V.L. JIother sources in succeeding years. The figure of is 5 billion representsoulr -resent est ,_nten of thne 1lirit of ai-d wbhich Mali' ndght exec Cto 4obtain-on soft terms from abroad during the next 5 years, given the limited absorp-tive L c j of the econorUjy andL tuhe planr-Ling organiza .ion, and the ±lmiteddomestic financial resources likely to be available as a local counterpart toe^xternal aid.8h. The increase in official loans from PF 1 billion in 1962 to MF 3.7

U.±LLUi± ±11 u.LJ WIU £'±L 14,7 LJ.LLLLIII .1.1i .UL7UL4 L114b utier fL~ coLrLi d.IAJbVi-bi.l''on n1' -d. .9blir2n16habenone of tuhu f acto- con- tributing to the balance of payments difficulties of Mali, although the cor-responding debt service chnarges have not yet had their full impact. Ann-alservice charges on medium and long-term loans are estimated to reach MF 2.8bill Ion oy 1972 of which about half^ to Sino-Soviet countries. * Mali has al-ready had some success in postponing service of its debt to Germany by 2 or3 years. It may also get some formal success in rescheduling its debt toFrance but, under any presently foreseeable circumstance, Malits ability toservice additional debt on conventional terms appears non-existent.

85. In any event, it seems certain that any practical solution to Malitsmedium.-te;rL balance of paymflenlt problembs will have Vo nvclude a reschedulingof debt. It also appears that such a rescheduling wi:Ll have to allow for agrace period of several years - at least through 1970 - in order to allow timefor Mali to build up its exports and set aside at least moderate reserves forworking balances.

Long-Range Prospects

86. It may be seen that under fairly optimistic assumptions, the mainelements in Malits prospects for the next five years add up to a picturewhich, in spite of considerable difficulties, presents some promise. . Thepicture may be summarized as follows: export growth of over 10% p.a. in the nex:.five years seems possible as the result of investments already made, and onthe assumption of reasonable success in efforts now under way to encourageoutput and ensure markets for the main crops. TWith modest growth in othersectors - say, around 3% annually, this export growth could produce an in-crease in total real income averaging 4% between 1965 and 1970. Such agrowth rate can probably be realized with a maintenance of investment andcurrent public expenditures at even moderately lower rates than in the re-cent past, provided efforts to direct these resources to the more productiveusesa are intensified.

87. More basic problems relate to the extent toD which improvements canbe achieved in the efficiency of investment and of development outlays overthe longer run. The obstacles to greater efficiency lie firstly in the com-parative inexperience of the government administration. but much more funda-mentally in the lack of exploitable resources and good investment opportunitiesin Mali There do eYist. poiilites for fiirther ex.pansionn in outnut ofgroundnuts, cotton and perhaps meat in the 1970s. However, it is likely thatg-nTro+.h rates in oi+inil_. itrill eh Acr lini rnc 1h-y +then hpr'micC0 mont of the readri1vavailable acreage will have been utilized, and the easier possibilities forobtain-ng increased yields, 1-gely ,-oi +v-A- Trh. a+.j,ie of +'h Senegal riverbasin presently undertaken under the aegis of the U.N. and some of its special-i7.zed agencies Tmyvh hAV.T=%Ta? panv +-ha wyJ for some im+.mant whinh oiilrld vi el dbenefits in Mali during the seventies. Any major investment would have tobe fi-n.ced for the larger part from. abroad, over and above what is nlreadyneeded. The fact remains that, by and large, the opportunities for longerr.n growth4- at -esral ----- WWI. -- i4 -re uit '14ted, -1es -- iv4 car. be as=* US.L LJVS 1.15OU I CO.CU1Q&CLVJ.% L Vo.'.~u L i.LL "L % '.uj. UV .L.LJ15V.LULpL, u,0 A.5. '.UJL L~sociated in some way with a larger market area, and Malits longer economic

prspcs seem' deper.der.t upon so -Z.e k -d __ resu, on,- or cre s of2 -s-4t-A -prospeciiit UV,PAUt;EU .,LJUPW CIVIRU AtJAu V.L I -UOAHjMJ.LVJIAS UL- ;;L-VLet V.UL1q U.S. 1P.L.L.Q5..tional links much like those which it used to maintain with the outside world.

^8. Thus, it is apparent that Mali cannot be expected to generate sur-plus resources to service new conventional debt during the next decade, andperhaps beyond, so that capital inflow for the foreseeable future should beon very easy terms.

ANNMrnflmr.V~CNKMOIM V rv' AT T

F'oduction, cporrts and Developments inthe Principal Sectors of the BconomZ

Agriculture

1. Agriculture and animal husbandry are the mainstay of the Mali economyand, with the exception of groundnuts, cotton, rice and miilet, and minorforest produce, production is entirely for domestic consumption; most of thisdoes not pass through the money economy. Of an annual output of some 900,000tons of millet and sorghum and some 185,000 tons of paddy, 10,000 tons ofmillet and 17,000 tons of rice were exported in 1962 and only a fraction ofthis in 1963 and 1964. Groundnuts and cotton are the principal cash andexport crops of MaLi. For the rest, the economy is largely self-sufficientin foodstuffs and is able to supplement its cereal consumption with meatand fish. The value of exports of cattle on the hocf and of dried fish aretogether more than double the value of other agricultural exports but arehandled mainly through traditional trading channels.

2. Groundnuts. The production of groundnuts seems to have remained fairlystatic around 110,000 tons over the last 5 years, with an average yield of610 kg per ha but the proportion exported has fallen fro