International Monetary Fund (Washington, DC)

9 January 2014

Mali at the Dawn of the New Year: From Crisis to Recovery

(Page 3 of 5)

Although the global outlook suggests a relatively benign external environment for Mali, your country is facing some difficult challenges of its own as it emerges from a turbulent period.

Consolidating peace, advancing national reconciliation, and ensuring political stability are key objectives. And rightly so—political stability is essential for good economic performance. And vice versa—a strong, healthy economy improves the prospects for political stability and social peace. Fostering inclusive growth, where individuals across the broad spectrum of the economy can benefit and thrive, is an important part of this process.

Mali's challenges are formidable; but so are its opportunities. This country has large untapped, economic potential—including a wealth of natural resources. Agriculture is one example.

If rivers can be harnessed to irrigate large swathes of uncultivated land, production can be expanded significantly. Agriculture, which today provides most employment, could thus create additional jobs for the fast-growing population. It could also increase, as well as diversify, exports to neighboring countries that are net food importers.

Unleashing these opportunities means tackling other bottlenecks. A major one is underdeveloped infrastructure, which unless addressed, is going to hold back growth.

The lack of power, for instance, is a big brake on expansion.

You all know what this means. Without reliable power, there are power outages. Companies are forced to produce the electricity that they need, which drives their costs up. Children cannot study in the evening. Cooking is done on wood stoves, or stoves using other polluting fuel sources—fuels that families spend hours collecting in fields and forests.

A thriving economy will also require a strong base of human capital. So investment in education and training are crucial. The emerging labor force must have the basic skills and the skills that match business demand.

In other words, unlocking Mali's potential will require large investments—both in the public as well as the private sector. A policy agenda that has inclusive growth as an overarching objective can, in turn, help solidify the dividends from such investment. So we need three P's: public investment, private investment, and participation for all. Let me take up these issues in turn.

3.1 Unlocking Mali's Economic Potential—Public Sector Investment

The first "P": In terms of public sector investment, creating fiscal space to accommodate additional spending calls for action on two fronts. First, Mali needs to mobilize more tax revenue; and second, it needs to make better use of existing resources.
There is certainly room to increase tax revenue. At 15 percent, Mali's tax revenue-to-GDP ratio is lower than it should be. Efforts to raise revenue should focus on broadening the base—by strengthening tax administration and phasing out exemptions—and improving compliance.

There is also a need to make better use of existing resources.To begin with, Mali has a large energy subsidy bill—amounting to about 100 billion CFAF. This is more than the budget of the ministry of health. Gradually removing these subsidies would free up budgetary resources that could be directed instead to priority investments for the development of Mali.

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