VZCZCXRO9652
RR RUEHMA RUEHPA
DE RUEHBP #0349/01 1541626
ZNR UUUUU ZZH
R 031626Z JUN 09
FM AMEMBASSY BAMAKO
TO RUEHC/SECSTATE WASHDC 0395
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 BAMAKO 000349 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAID ETRD EINT EAGR ML
SUBJECT: IMF FORESEES STABLE MACROECONOMIC OUTLOOK FOR MALI 
IN 2009 
 
REF: 09 BAMAKO 340 
 
1.(U) Summary:  On May 19 the International Monetary Fund 
(IMF) concluded its annual review of Mali's three-year 
Poverty Reduction and Growth Facility (PRGF).  Speaking to 
the international donor community on May 18, the IMF said 
Mali was well positioned to weather the global economic 
crisis and predicted a stronger balance of payments scenario 
for 2009 based in large part on the optimistic assumption 
that Mali will succeed in privatizing its national 
telecommunications company, SOTELMA, within the year.  Maret 
said Mali had met its 2008 targets but cautioned that there 
were delays with some structural reforms.  He said budgetary 
policy would be loosened in 2009 to allow for greater 
investment in the agricultural sector.  Meanwhile, 
contractual tax exonerations to the mining sector and the 
restructuring of the Malian Housing Bank, together with high 
internal debt, remained obstacles to the adoption of sound 
fiscal policy.  On May 20, however, one of Mali's main 
business leaders provided the Embassy with a noticeably less 
rosy view of Mali's economic future.  End summary. 
 
------------------------------------- 
Mali Escapes Economic Crisis, For Now 
------------------------------------- 
 
2.(U) On May 18 IMF African Department Deputy Division Chief 
Xavier Maret said Mali would be largely insulated from the 
2009 global economic crisis.  Speaking alongside Mali's newly 
appointed Minister of Economy and Finance, Sanoussi Toure, 
Maret said Mali's GDP remained stable as gold, which accounts 
for 80 percent of Mali's export revenue, continued to fetch a 
high price on the world market.  Maret said remittances, 
tourism, and foreign direct investment would decline in 2009 
but that this would be offset by an increase in revenue from 
customs, taxes from the mining industry, and petroleum 
products.  The GOM would further increase revenue by 
following World Bank and IMF recommendations to raise the 
state-owned electricity company's tariffs for businesses and 
wealthier households. 
 
3.(U) Maret said global decreases in food and petroleum 
prices had lessened financial pressures for Malian consumers 
and businesses.  The IMF predicted that balance of payments 
would improve in 2009 once the GOM completed the 
privatization of the telecommunications parastatal company 
SOTELMA.  This privatization process, however, recently 
suffered a serious setback when the GOM rejected a takeover 
bid from the Moroccan telecommunications company Maroc 
Telecom.  Maroc Telecom had offered to purchase SOTELMA for 
approximately USD 330 million, or USD 70 million less than 
the GOM's asking price.  After more than three months of 
negotiations with Maroc Telecom to fashion a deal, Mali 
rejected Maroc Telecom's offer in May and must now issue a 
new tender for SOTELMA.  The IMF acknowledged some delays in 
structural reforms such as the privatization of the cotton 
parastatal CMDT, but remained nonetheless optimistic that 
these needed reforms would take place in 2009. 
 
-------------------------------------------- 
Budgetary Policy and the Agricultural Sector 
-------------------------------------------- 
 
4.(U) Mali's internal debt, estimated between 200-300 billion 
CFA (400-600 million USD), is a considerable obstacle to 
economic growth. Maret said IMF efforts to work with the GOM 
to reduce the debt were complicated by indirect accounting 
methods in the national budget.  In 2009, the GOM faced an 
additional outlay of 57 billion CFA (114 million USD) in the 
return of value-added tax to mining companies and the 
restructuring of the Malian Housing Bank (BHM).  As a result 
of these costs, the budget deficit in 2009 would rise above 
1.5 percent of GDP.  Although this is 0.3 percent more than 
the IMF had initially forecasted, Maret said this would have 
limited negative effects on the economy. 
 
5.(U) The IMF said budgetary policy in 2009 would be driven 
by investment in the agricultural sector as the Malian 
government sought to increase cereal and cotton production. 
Mali's cotton production has dropped substantially in recent 
years (reftel).  Maret said the key aspect of any 
agricultural program would include first and foremost payment 
to cotton producers for the 2008/9 campaign.  To date, just 
39 percent of cotton producers have been paid - a statistic 
that threatens to undermine the 2009/2010 campaign.  Maret 
estimated that Mali needed 20 billion CFA (40 million USD) to 
finance successful cotton campaign this year.  World Bank 
Senior Agricultural Economist Agadiou Dama told the Embassy 
on June 2 that the WB was finalizing a USD 70 million 
allocation to Mali's agricultural sector, though he did not 
specify how much of this would be earmarked for cotton. 
 
BAMAKO 00000349  002 OF 002 
 
 
Germany's representative at the IMF meeting indicated that 
Germany may also provide additional assistance as it is 
increasing its bilateral aid to Mali. 
 
6.(U) Maret said it was difficult to ascertain exactly what, 
in budgetary terms, the GOM intended to allocate to the 
agriculture sector.  He complained that GOM decisions on 
agricultural subsidies were often ad hoc and driven by short 
term political considerations.  Maret advised the GOM to keep 
subsidies to a minimum and implement rigorous oversight of 
any future subsidies, which has not been done in the past. 
 
-------------------------------------- 
Local Industrialist Is Less Optimistic 
-------------------------------------- 
 
7.(SBU) In contrast to the generally positive economic 
outlook presented by the IMF, a leading local businessman 
said that the country's internal debt was stifling the 
private sector.  On May 20 Cyril Achcar - Director of the 
Achcar Group which owns two of Mali's three flour mills, the 
local airline Mali Air Express, a large detergent factory, 
and a candy factory - said that some local companies had been 
driven out of business as they awaited payments for goods and 
services provided to the government.  According to Achcar, 
these payments were routinely delayed by more than one year. 
Achcar also challenged the IMF's assumption that global 
decreases in food and fuel prices somehow lessened financial 
pressures for Malian consumers and business.  Achcar said the 
purchasing power of Malian consumers was not rising fast 
enough to fuel economic growth and attributed any increases 
in consumption to nothing more than modest population growth. 
 
--------------------------- 
Comment: An Optimistic IMF? 
--------------------------- 
 
8.(SBU) Mali's relative insulation from instability 
associated with the global financial crisis is largely a 
function of Mali's reliance on gold exports.  During a 
separate meeting with the Ambassador on May 13 the IMF team 
noted that Mali's good fortune in this regard was 
attributable not to GOM decision making but rather to chance 
as gold is one of the few commodities to experience a rise in 
global prices.  Mali's gold deposits, however, are dwindling 
and, with 70 to 80 percent of its export revenues dependent 
on gold, a sudden drop in prices could have serious 
consequences.  The IMF's bet that Mali will manage to 
privatize SOTELMA in 2009 and resurrect Mali's rapidly 
sinking cotton sector may be overly optimistic.  Any 
potential economic good news for Mali in 2009 may also be 
offset by a less than propitious business environment. 
Companies like Achcar's, which have been in Mali since before 
independence and enjoy a near monopoly, will continue to 
thrive.  But Achcar's comments underscore the difficulties 
for smaller companies or those seeking to break into the 
market.  With a slow rise in consumer demand and a government 
unable to pay its bills on time, Mali's business climate 
remains a difficult place in which to fuel economic growth. 
LEONARD