Documentof The World Bank ReportNo. 25663 MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ONA COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF MALI July 7,2003 Country Departmentfor Mali AFC15 Africa Region CURRENCYEOUIVALENTS Currency Unit= CFA Franc (CFAF) US$ 1= 572.69 CFAF (June 30,2003) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR January 1-December 31 ACRONYMSAND ABBREVIATIONS AAA AnalyticalandAdvisoryActivities CAS CountryAssistance Strategy CEM CountryEconomicMemorandum CFAF CFA Franc CMDT CompagnieMalienne de Ddveloppement Textile (MalianTextile Company) CPAR CountryProcurementAssessment Report CPPR CountryPortfolioPerformanceReview CSLP Cadre Stratdgique de Lutte Contre la Pauvretb (PovertyReductionStrategyPaper) ECOWAS EconomicCommunity ofWest African States EDM Energie du Mali (Mali Energy) ESSD Environmentand Social Sector Development ESW Economic and Sector Work EU EuropeanUnion FSDP FinanceSectorDevelopmentProject GDLN GlobalDistanceLearningNetwork GDP Gross DomesticProduct GEF GlobalEnvironmentFacility GNP Gross NationalProduct HIPC HighlyIndebtedPoor Countries HIV/AIDS HumanImmunodeficiencyVirudAcquiredImmunodeficiency Syndrome HUICOMA Huilerie CotonniBre du Mali IDA InternationalDevelopmentAssociation IDF InstitutionalDevelopmentFund IEC Information,Educationand Communication IF IntegratedFrameworkfor Trade for Mali IFC InternationalFinanceCorporation IMF InternationalMonetaryFund LIL Learningand InnovationLoan MAP Multi-SectorAids Program M&E MonitoringandEvaluation MDGs MillenniumDevelopmentGoals MDRI Mission for Decentralizationand InstitutionalReform MIGA MultilateralInvestmentGuaranteeAgency MOF MinistryofFinance MSME Micro SmallandMediumEnterprises MTEF MediumTerm ExpenditureFrameworks NEPAD NewPartnershipfor African Development NGOs Non GovernmentalOrganizations NPV NetPresentValue OED Operations and EvaluationDepartment(World Bank) OHADA Organisationpour I 'Harmonisationdu Droit des AfSaires en Afrique (Organizationfor the HarmonizationofBusinessLaw inAfrica) OMVS Organisationpour la Mise en VaIeur du Fleuve Sdndgal (Organization for the Development o f the Senegal River) PAAA ImprovingLearninginPrimary Schools PAIB Grassroots Hunger andPovertyProject PASAOP Agriculturaland ProducerOrganizationsProject PDUD UrbanDevelopmentandDecentralizationProject PER Public ExpenditureReview PNIR RuralInfrastructure Project PRODEC EducationSector ExpenditureProgram PRODESS IntegratedHealthSector InvestmentProject PRSC Poverty ReductionSupportCredit PRSP Poverty ReductionStrategyPaper PSIA Poverty and Social ImpactAnalysis QAG Quality Assurance Group RIAS RegionalIntegrationAssistance Strategy SMEs Small andMediumEnterprises SWAP Sector-wideApproach TSP Transport Sector Project UEMOA West African EconomicandMonetaryUnion UN UnitedNations UNCTAD UnitedNations Conferenceon Trade andDevelopment UNDAF UnitedNations DevelopmentAssistanceFramework UNDP UnitedNationsDevelopmentProgram WAEMU West AfricanEconomic and MonetaryUnion WBG WorldBank Group WTO WorldTrade Organization Vice President : Callisto E.Madavo Country Director : A. David Craig CAS Task Team : Judith Press, Allison Coppel, Eavan O'Halloran COUNTRY ASSISTANCE STRATEGY REPUBLIC OF MALI Table of Contents Page EXECUTIVE SUMMARY ............................................................................................................... 111 ... I INTRODUCTION..................................................................................................................... . I1. 1 COUNTRY DEVELOPMENTPROGRAMAND PROSPECTS............................................ B. PRSPPre-RequisitePillar: Accelerated andRe-Distributive Growth...................25 A. The Poverty Reduction Strategy Paper (PRSP) ....................................................... 2 C. PRSPPillar 1: Promote Institutional DevelopmentWhile Improving GovernanceandParticipation................................................................................ . . . 10 D. PRSPPillar 2: Develop HumanResourcesandImprove Access to Quality . I11. IMPLEMENTATIONOF THE LAST CAS........................................................................... E PRSPPillar 3: Develop Basic Infrastructure andProductive Sectors..................14 Basic Services........................................................................................................ 12 A AssessmentofPerformance................................................................................... . 17 B. Portfolio Management........................................................................................... 17 19 21 D. LessonsLearned.................................................................................................... C. Other Bank Group Activities ................................................................................. . 22 23 IV. E Partners andParticipation...................................................................................... PROPOSEDASSISTANCE STRATEGY.............................................................................. A Strategic Elementsofthe FY04-06 CAS............................................................... . 25 25 B. Assistance Program ............................................................................................... CAS Theme: Promoting Growth................................................................................ 28 28 CAS Theme: Public FinanceManagement and Governance ..................................... CAS Theme: Developing HumanResources............................................................. 32 33 V. V I. RISKS & RISK MITIGATION ............................................................................................... C. Lending Scenarios ................................................................................................. 36 39 VI1. CONCLUDINGREMARKS.................................................................................................. MEASURING RESULTS ....................................................................................................... 40 -41 BOXES: Box 1: Poverty. Social Indicators andthe MDGs............................................................ The Participatory ProcessDuringthe Preparation of the PRSP........................... 3 Box 2: 4 Box 3: The Cotton Sector andthe Reform Program ........................................................ 7 Box 4: Mali's External Partners ..................................................................................... 23 Box 5: CAS Preparation: A Consultative Process......................................................... 27 Box 6: BankActivities onRegional Integration............................................................ 32 .11. .. TABLES: Table 1: 4 Macroeconomic Performance 1999-2002 ............................................................ Slowly Improving Social Indicators ..................................................................... Table 2: 5 Table 3: Health Indicators................................................................................................. 13 Table 4: Education Indicators ........................................................................................... 13 Table 5: Triggers for Bank Assistance Program............................................................... 18 Table 6: Actual Bank Lending Operations ....................................................................... 20 Table 7: AAA Program..................................................................................................... 34 Table 8: IDA LendingOperations .................................................................................... 37 Table 9: CAS Scenario Triggers ....................................................................................... 38 ATTACHMENTS: 42 2. 1. MillenniumDevelopment andPRSP Goals....................................................... Reform Program of Office duNiger................................................................... 43 46 4. 3. Debt Sustainability ............................................................................................ 49 5. Core Labor Standards inMali ............................................................................ 50 6. IMF-WorldBank Relations................................................................................ On-Going Projects .............................................................................................. 51 CAS ANNEXES: Al: Key Economic and Program Indicators . from Last CAS .................... 56 Indicators of Bank Portfolio Performance & Management................................ Mali at a Glance.................................................................................................. Change A2: 57 B2: 59 B3a: IBRD/IDAProgram Summary........................................................................... 60 B3b: IFC and MIGA Program, FY 2000-2003 ........................................................... 61 B4: ..................................................................... Key Economic Indicators ................................................................................... SummaryofNon-lending Services 62 B6a: 63 B7: Key Exposure Indicators .................................................................................... 66 B8a: Statement of IFC's Held& DisbursedPortfolio ................................................ 67 B8b: 68 PRSPPre-requisite: Accelerated & Sustainable Growth ................................... OperationsPortfolio (IBRD/IDA & Grants) ...................................................... B9: 69 B10: CAS Summary of Development Priorities ......................................................... 75 MAP: IBRD32484 -111- EXECUTIVE SUMMARY 1. Mali i s one o fthe poorest countries inthe world due to its limitedresource base, land- locked status, vulnerability to external shocks, poor infrastructure, low levels o f human development and weak administrative capacity. Despite these constraints, Mali has made commendable progress on the economic, political and social fronts over the past decade. Annual real growth rates for 1994-2002 averaged about 5 percent. The private sector i s increasingly playing a much larger role inthe economy, and civil society and stakeholders are strengthening partnershipswith Government with greater responsibility for development activities. Mali has also recorded important improvements incertain social indicators since the mid-1990swhich indicates that it shouldmake progress towards meetingsome o fthe Millennium Development Goals (MDGs). 2. Inparallel withthis progress, Maliachieved a remarkablepoliticaltransformation with an increasingly strong democratic process taking root throughout the 1990s, culminating inthe peacefultransfer ofpower betweentwo democratically elected leaders in2002. This has placed M a l i inthe forefront o f African countries movingto a truly democratic and pluralistic political system and provides a strong platform for pushingforward on further economic and institutional reforms underthe leadership o f a committed Government. While governance, capacity and institutions still needstrengthening, the overall framework for a more effective, transparent and decentralized administrationis gradually taking shape. 3. Board Discussion. The following issues are suggestedfor Board discussion: 0 I s the proposedprogram an appropriate support to the implementationo f Mali's PRSP? 0 I s the proposedapproach to programmatic lending and PRSCs suitable? 0 Are the triggers applied to the CAS for the base, highand low cases appropriate? 0 Does the CAS identify sufficient mitigating measures to address the risks, including the risk posed by the impacts o fthe crisis inC6te d'Ivoire? 4. PRSP. Mali recently finalized its Poverty Reduction Strategy Paper (PRSP) which lays out a comprehensive strategy for fighting poverty and provides a cohesive framework for all donors and development partners. The issue o f sustained and equitable growth i s the cornerstone of the PRSP. Despite achieving strong average growth rates since 1994, there i s a considerable degree o f fluctuation inthe annual growth rates, e.g. the growth rate i s estimated to drop from 9.7 percent in2002 to -1.1 percent in2003. This i s a result o fthe economy's vulnerability to external factors such as unfavorable climatic conditions, terms o f trade shocks and record low prices inthe cotton sector due to cotton subsidies inthe US and Europe. Inaddition to these traditional vulnerabilities, Mali's economy in2002-3 was severely affectedby the crisis inneighboring CGte d'Ivoire which disruptedtransport, trade, investmentandprivate sector activity inthe westernAfrica region. Continued strong support from the international community i s neededto help Mali manage these external shocks, sustain robust growth and make progress on achieving the PRSP goals and the MDGs. 5. The implementationof the Bank'sFY99-01CAS has beensatisfactory as Mali fulfilled nearly all o fthe triggers inthe base case scenario andmost o fthe triggers inthe high case scenario. The CAS focused on supporting stable economic growth and sustainable human development. The Bank supported Mali's macroeconomic stabilization, economic - iv - liberalization and structural reforms and investedineconomic diversification and infrastructure, particularly inthe rural sector. These interventions contributed to the strong economic growth rates since 1998. At the same time, the Bank providedfinancial and technical support to the health and educationprograms inMali which facilitated the improvement insome social indicators. Moreover, duringthe previous CAS period, Mali reached the Completion Points o fthe Original and Enhanced HIPC Initiatives inSeptember 2002 and March 2003, respectively. The debt relief provided under the Enhanced HIPC Initiative was sufficient to allow the debt sustainability ratio to drop to an acceptable level. 6. Objectives. The progress achieved to date and the continued reform program outlined inthe PRSP provide an excellent starting point for the Bank's CAS for FY04-06. The CAS is fully alignedwiththe PRSP and selectively focuses onthree mainthemeswhich directly support the PRSP pillars: (i) promoting growth; (ii) developing humanresources; and (iii)public finance management and governance. The CAS combines a mix o f Bank instrumentsincluding: (i) programmatic support (through SWAPs and PRSCs); (ii)community drivendevelopment operations; (iii) specific lendingoperations that target the growth objective and support necessary infrastructure; and (iv) a wide-ranging AAA program which i s focused on buildingthe knowledge base for the three mainthemes. In particular, the CAS concentrates on capacity building and strengtheningthe framework for programmatic support to Mali: firstly, to strengthenthe sector-wide approaches inthe social sectors and, moving on from there, to finalize the necessary core diagnostic work and establish the appropriate framework for a full move to PRSCs. 7. Lending Scenarios. Mali i s currently inthe base case. The base-case scenario allocates up to US$390 million, o f which up to 29 percent could be inthe form o f IDA grants duringIDA-13. This scenario is predicated on continued good macroeconomic performance, satisfactory implementationo fthe PRSP,progress on strengtheninggovernance and strong portfolio performance. Lendingcould increase to US$462 million underthe high-case scenario ifthere i s accelerated progress on these criteria. It i s possible for Mali to reach the highcase given: (i) strong track record inimplementingmacroeconomic and structural its reforms; (ii) that the PRSP provides a more comprehensive and cohesive framework than in the past, focusing on outcomes andthe MDGs; and(iii) progress onkey sectors -such that as health and education -has beenstrong since 1998,providing a solid platform for continued good performance and achievement o f PRSP targets, particularly with stronger programmatic support from donors inthe years ahead. 8. Risks. The implementationofthe CAS faces several risks: (i) risks from natural adverse climatic conditions which influence agricultural output; (ii) volatility o f commodity prices, exacerbated by agricultural subsidiesinthe industrialized countries; (iii) uncertain external assistance; (iv) continued negative impacts o fthe CBte d'Ivoire crisis; and (v) weak capacity. The Bank will take all necessary steps described inthe CAS to helpmitigate these risks. 9. Measuring Results. The CAS focuses on definingand measuring results inthe framework o fthe overall monitoring andevaluation o fthe PRSP. The CAS measurable indicators are the PRSP targets for 2006 which focus on makingprogress towards the MDGs. Inparallelwiththe annual PRSP Progress Reports andrelatedJSAs, theBank will assessthe achievements o f the CAS. I. INTRODUCTION 1. The last ten years have witnessedsignificant economic andpolitical change inMali. Since 1994, economic growth rates have averaged more than 5 percent. This strong performance was the result o f a series o f macroeconomic stabilization, economic liberalization and structural reforms that were supported by the World Bank, IMF and other donors. The comprehensive reform program has transformed Mali's economy into a market- oriented one where the private sector i s playing an increasingly important role, thus laying a more solid foundation for accelerated growth. 2. Inparallelwiththepositive economic developments, the political landscape inMali has also beentransformed. In 1991, the 23-year dictatorship o f General Moussa TraorC was overthrown and PresidentKonare was democratically elected a year later. Since then, Mali has beencharacterized by an increasingly stable democracy, culminating inthe 2002 elections won by President TourC. This peaceful transfer o fpower betweentwo democratically elected leaders was a first inMali's history andplaces Mali inthe forefront o f African countries moving to a truly democratic and pluralistic political system. 3. Notwithstanding this progress, Mali remains one o f the poorest countries inthe world and i s ranked 164 out o f 173 countries inthe 2002 UNDP HumanDevelopment Index. The country's limitedresource base, land-locked status, vulnerabilityto external shocks, under- developed infrastructure, low levels o f human development andweak administrative capacity combine to create difficult social and economic conditions. In2001,63.8 percent o fthe population was estimated to be living inpoverty. Between75 and 80 percent o f Mali's population o f 11.3 million lives inrural areas and i s dependenton agriculture. The economy i s vulnerable to recurrent drought, poor environmental conditions and large fluctuations in international commodity prices. However, while Mali's social indicators remain amongthe poorest inthe world, some are showing progress, particularly since 1998 (see Table 1). Buildingon and strengtheningthis progress will be critical for Mali as it faces major challenges inachieving the MillenniumDevelopment Goals (see Attachment 1for details). 4. Mali reached the Completion Points o f the Original and Enhanced HIPC Initiatives in September 2000 andMarch2003, respectively. The debt reliefprovided to Mali under the Enhanced HIPC Initiative was sufficient to allow the debt sustainability ratio to drop to an acceptable level. InMay 2002, the Government adopted the Poverty Reduction Strategy Paper (PRSP) which lays out a comprehensive strategy for fighting poverty and provides a strong and cohesive framework for all donors and development partners. The Bank's FY04- 06 Country Assistance Strategy (CAS) is designedto support the PRSP. The Bank's strategy builds onthe lessons learnt from implementingthe previousCAS and i s based on the outcome o f a one-year consultative process with representatives from central and local Government, civil society, private sector, non-governmentalorganizations (NGOs) and other development partners. The PRSP, with the support o f the Bank's CAS, provides a solid framework for movingtowards achieving the MDGs. - 2 - 11. COUNTRY DEVELOPMENT PROGRAMAND PROSPECTS A. The PovertyReductionStrategy Paper (PRSP) 5. The PRSP was adopted by the previous Government inMay 2002 andthen reconfirmed by the new Government (GoM) inOctober 2002. The overall macroeconomic framework was thenupdated to take into account the impacts o f the C8te d'Ivoire crisis and was endorsed by the Bretton Woods institutions inMarch 2003. The strategic axes o fthe PRSP are as follows: e Pre-RequisitePillar: Accelerated and Re-DistributiveGrowth. The growth objective i s the cornerstone o f the PRSP and must be sufficiently robust to ensure successful implementation o fthe PRSP. To achieve growth, the G o M aims to continue macroeconomic and structural reforms andto facilitate the diversification o f production and exports through strengtheningthe supporting framework for development o fthe private sector as the prime engine o f economic growth. e Pillar 1: Promoteinstitutionaldevelopment while improvinggovernance and participation. Within a context of decentralization, the GoM aims to reinforce institutional capabilities, improve public sector management through modernization and reform, combat corruption, strengthenthe rule o f law and thejudiciary system, and reinforce civil society. e Pillar 2: Develop humanresourcesand improveaccess to qualitybasic services. The strategy concentrates not only on improved, decentralized health (including population and nutrition) and education service delivery, but also on complementary living standard aspects, such as housing, water, and sanitation, as well as employment, social protection, and gender. e Pillar 3: Developbasic infrastructureand productivesectors. This pillar integrates the followingdevelopment challenges: (i) improved transportation, energy, communications, and industrial zone infrastructure; (ii) a diverse and competitive primary sector that i s able to provide food security and national resource management; and (iii) a business environment favorable to private sector development able to actively contribute to economic growth. 6. The GoM translated the ambitious program laidout inthe PRSP into the 2003-2005 program-budget. The PRSP builds upon a widespread consultative process (Box 1) and its poverty diagnostic i s based on the availability o f service delivery, spatial analysis and the effects o fpoverty on health and education. Growth is the under-pinningo f the PRSP and the three PRSP pillars target poverty reduction while identifying specific measures neededto integrate the poor and reduce gender as well as rural and urban disparities. 7. Assessment of the PRSP. The PRSP provides an overall credible poverty reduction strategy. According to the Joint Staff Assessment (JSA), the following are the strongest areas o fthe PRSP: (i) the consultative andparticipatoryprocess, notwithstanding the large size o f the country and its thinly spreadpopulation (see Box 1); (ii) the poverty analysis, - 3 - despitethe limitedavailability o f data; (iii) comprehensiveness o fthe strategy and its the focus on macroeconomic stability, highand sustainable growth, human development, the strengthening of access to basic social services, private sector development and good governance; (iv) the efforts to draw up a long-term strategic vision consistent with sectoral strategies; and (v) the attempt to cost the strategy. The PRSP also makes a notable assessment o f the risks associated with the implementation o fthe strategy, including Mali's vulnerabilityto exogenous shocks. Box 1: The Participatory ProcessDuringthe Preparationof the PRSP The PRSPclearly lays out the processfollowed in itspreparation, which has drawnfrom andbuilt upona traditiono f implementingconsensus-basedpolicies and debatingmajor issuesand strategies. Consultation activities for the formulation ofthe PRSP includedtwo notable elements. First, eleventhematic discussion and workinggroupswere establishedunder an overallNationalTechnicalCommittee. Second, consultations onthe draft PRSPwere heldat the national level, in eachofthe eightregions, and inthe districtofBamako. This approachresultedinthe identificationand inclusion inthe PRSPo fthe major developmentconstraints and strengthsof eachregion, the considerationo f certainspecific regionalissues inPRSP projectsand programs,the buy-into the PRSPprocessbyregionaland local actors, andthe establishment ofregionaland local committeesto steer and implementthe PRSP. However, hrther work is requiredto mainstream participationand consensusbuildinginthe managementof publicaffairs andto strengthenand sustainthe dialogue with the poor duringthe consultationprocess. Developmentpartnersalso playeda keyrole inthis process, notablythe UNDP,the EuropeanCommission,the Netherlands,Canada, USAID,Sweden, and I Belgium. [Source: Joint StaffAssessment, (JSA) Mali PRSP 20031 8. The JSA noted a numbero f areas where the PRSP could be improved. First, there i s a needto deepen the policy analysis once the expenditure data from the 2001 household survey becomes available in2003 (see Box 2). Second, while there is a comprehensive coverage o f the development challenges, there i s a lack of prioritization inoutlining them. The GoM is beginningto prioritize, as exemplifiedby the framework letter introducedby the President to the GoM inOctober 2002, where employment, health, education, and increasing purchasingpower were indicated as Mali's top four priorities. Third, the GoM needs to ensure that components o f all existing sector strategies are adequately reflected inthe PRSP (notably those for transport, drinkingwater supply and sanitation, urban development, and soil fertility). Fourth, there i s a needto reinforce and buildupon existingmechanisms to monitor and evaluate strategy implementationand outcomes. Finally, the PRSP proposes a widening ofthe economic base to betterwithstand external shocks (climate, regional instability, international commodity prices) and emphasizes that growth should be drivenby the private sector with a strong foreign investmentfocus. Itis critical for Malito develop new sources o f growth through diversification ofthe agricultural base into fmits, vegetables and Arabic gum, development of agri-business and transformation o f agricultural products (i.e. textiles), expansion o f mining, development o f the tourism and handicrafts industries and promotion o f small and medium-sized enterprises inservices, communications and other non-agricultural sectors. However, a clear, integrated strategy on pro-poor growth, including diversification o f growth sources, has yet to be articulated. - 4 - Box 2: Poverty, Social Indicators and the MDGs While the incomeindicatordata o f the 2001survey have not beenhlly aggregatedand analyzed, it is expected :hatthepoverty levelon an incomebasis will be less thanthe 70 percentrecordedin 1996: this reductionis :xpected as a result ofthe strongaverage realGDP growthrateo f 5% since the 1994 devaluation. According :o an access-to-servicesindex constructedfrom the 2001householdsurvey data, 63.8% of the populationwere :stimated to be living inpoverty in2001. Onthis basis, poverty affects 75.9% ofthe ruralpopulation,versus mly 30.1%o fthe urbanpopulation. Poverty levelsarethe lowest inBamakowith only 28.6% ofthe populationconsideredpoor, while the highest levels are inKidalwith 92.8% o fthe residentsbeingpoor. In terms of poverty depth, the regiono fMoptihasthe highestrateof 53.1%while Bamakohas the lowest of 14.8%. Gender Issues andPoverty. Gender analysis of povertyreveals a strong interconnection o f the status and Dpportunitiesavailableto womenand overallpoverty. For example, maternalandchildmortalityrates significantly drop with the rise inthe levelofthe mother's education; the more educatedmother is also more awareofcontraceptionpossibilities. Accordingto a 1997survey ledbythe Observatoryfor Employmentand rraining,womenmakeup 65% o fthe informalsector but only 32.75%ofthe formal sector. While a full gender analysisdoesnotyet exist for employment,accordingto the 2001DemographicandHealthSurvey, 40% of women (aged 15 to 49) work inagriculture, of whom only 58% are paidfor their work. Forthe remaining60% who do notwork inagriculture, only 8% are not paidfor their work. HealthandeducationindicatorsinMali, despiteimprovements,are amongthe lowest inthe world with a significantdisparitybetweenruralandurbanareas as demonstratedbythe access-to-servicesindex described above. Fewerruralchildrenattendschool, notablyfewer girls, andrural infantand childmortalityrates are significantly higherthan in urbanareas. The poor are less likely to use healthservices, particularlythe rural poor, andtendto spendproportionatelyless on healthcare. The 2001DemographicandHealthSurvey confirmsthat healthbehaviorsare influencedbythe mother's educationlevelandaccess to basic services and information. Maliis expectedto face a major challenge inachievingthe MillenniumDevelopmentGoals(MDGs) as there i s (i) capacity indelivering basic services; (ii) poor cross-sectoralintegration o f activities; and (iii)long weak delays in carryingout policyreforms. As shown inAttachment 1, there is a lack o f baselinedata for many goals. Achievement ofthe goals, however, is further complicatedbythe lack o fan integratedstrategyto do so, reflectingthe multisectoralaspect o f reachingMDGs. For example, the 2001DemographicandHealth Surveyrevealedthat healthconditions aretightly relatedto factors outsideo fthe healthsector, such as monetary income. However, the PRSPtreats such issuesas childmortalityas a health issue. Despitethese constraints,there has beenan importantpositive trend since 1997/98inimprovingcertain healthand education indicatorsas showninTable 1. Table 1: Slowly ImDroving Social Indicators 1997 2001 Life expectancy 50 yrs 5 1.5yrsC Grossprimary enrollmentrate 35% 59% Student-to-teacherratio 80a 71 Access to healthcare(15 km) 49%b 66% Utilization(assistedbirths) 37%b 41% Accessto water 48% 51% a = 1999; b= 1998; c = 2002 - 5 - I Box 2: Poverty, Social Indicatorsand the MDGs (cont'd) I The 2002 PRSPconcentrateson developingbasic social services(Le. primaryschool education, basichealth infrastructure) whichwould setthe foundationsfor a solid developmentframework. At the same time, the Ministryof Healthstaffacknowledgedthe needfor the multi-sectoral approachand efforts are intensifying toward articulatingsuch an approachandthe accompanyinginstitutionalmechanisms to support it. It is expectedthat once moreofthe framework is inplace, progresswill accelerate. Therefore, while Mali is unlikely to reachmany ofthe MDGs by 2015, it still may achieveseveral,notably educationenrollmentrates, particularlyas Mali is eligiblefor the Education-For-All (EFA) initiative. With resourceconstraintsbeing lifted as a resultof additionalexternal supportunderEFA, the challengewill be to reinforcethe capacityand enabling administrativeenvironmentto successfully implementthe GoM's strategy anduse available resources to reachthe MDGs. The environmentaland sanitationMDGs also will needconsiderableattentionfrom the GoMto makeprogress. Increasingpopulationpressures andurbanizationwill leadto large additional investmentneedsfor water supply facilitiesandrequire increasedattentionto environmentalissuesto ensure that Mali's developmentremains sustainable. Malineedsto producereliable, robustandcurrentstatisticsinorder to monitorprogresstowardsthe MDGs. The establishment of an effectiveMonitoring& Evaluationframework is a core focus ofthe Bank's and donors' work inthe contextoftheir supportto the PRSP. I I B. PRSP Pre-RequisitePillar: Accelerated and Re-DistributiveGrowth RecentMacro-Economic and GrowthPerformance 9. The PRSP was preparedafter a decade-longperiod of growth and good macro- economic performance. Despite a number of adverse shocks, real GDP growthhas averaged about 5 percent per annum between1994-2002, enabling real per capita GDP to rise by 2.5 percent per year. The GoM has been successfulat limiting inflationto single-digit figures and reining inthe fiscal deficit inlinewith the convergenceobligations under the West African Economic and Monetary Union (WAEMU)regional integration agreement. Mali also made good progress on revenue generation with revenues reachingmore than 17% of GDP (well above the Sub-SaharanAfrica average). Table 2: MacroeconomicPerformance 1999 and 2002 I1999 12002 (estimate) Realgrowth rates (%) GDP 6.7 9.7 Exoorts GNFS 6.2 23.1 Shares o fnominalGDP (%) Gross domestic investment/GDP I 20.0 I 18.9 I- Inflation(CPI for Bamako) 1 -1.2 I 4.9 I Source Malian authorities and staff estimates - 6 - 10. Mali's economic performance remains fragile inview o f the economy's vulnerability to climatic conditions, fluctuating terms o f trade, dependence on ports inneighboring countries and the concentration o f its exports inthree primary sector products'. The favorable average real growth experienced since the 1994 devaluation masks significant annual volatility. Economic growth fell to 3.5 percent in2001 owing to the cotton sector crisis and difficulties infood crop production. However, GDP growth in2002 rebounded and i s estimated at 9.7 percent due to the sharp increase ingold, cotton and cereal production. The fluctuations ingrowth reflect Mali's economic structure, which is biased towards agriculture (the main source o f livelihood for 75-80% o fthe population) and services. These two sectors accounted for 38% and 36% o f GDP, respectively, in2001. Mali's economy i s relatively outward looking, with trade ingoods representing around 53% o f GDP in2002. The share o f manufacturing inGDP and exports has beenlimited, due to low productivity, highcosts and low quality ofbasic services (energy, water, telecommunications), high overall transaction costs o f doing business, and a financial sector inadequately orientedto serve as intermediary betweensavings and investments. 11. Mali's macroeconomic performance can be attributed to the effective implementation o f macroeconomic stabilization and economic liberalization policies since the 1994 devaluation of the CFA franc which created the foundations o f a market-led economy and encouraged private sector development. Recent economic developments have been influenced, however, by weak performance of the country's cotton sector (see Box 3). The sector, which achieved impressivegrowth and significant gains inthe world export market share following the 1994 devaluation, experienced a severe financial and structural crisis in 2000 inthe wake o fthe falling international cotton price. Coverage o f the sector's losses by transfers from the budgetto the cotton parastatal company (Compagnie Malienne pour le De`veloppement des Textiles), riskedderailing Mali's otherwise satisfactory fiscal and economic performance over a decade-long process of economic and structural reforms. The emergence o f gold as Mali's leading export product since 1999 has fortunately helped mitigate some of the negative impact o fthe cotton sector crisis. 12. Significant market reforms have beenachieved during the 1990s, beginning with the liberalization o f grain markets, the easing o f price controls and the implementation o f pro- investmentpolicies to remove distortions inthe incentive framework. More recent measures include the application as o f January 1,2000 of the common externaltariff (CET) underthe WAEMU agreement, which reduced import dutiesbelow a 20% ceiling and greatly simplifiedthe tariff structure. To modernize the tax system and offset the potential customs revenueloss related to the introduction o fthe CET, the GoM successfully implementeda comprehensive tax reform program with Canadian assistance, including introduction o fthe value added tax and simplification o fthe tax structure. The economy responded positively to these changes which reinforced the significant positive growth trend emanating from the 1994 devaluation. The combined effect of these policies has created the foundations o f a market-led economy and encouraged private sector development. Gold and cottontogether comprise over 80 percent of export earnings, while livestock- exported primarily to West Africa regional markets - accounts for about 8 percent of export earnings. Cotton has historically been the number one export earner ahead of gold, although gold has only recently surpassed cotton export revenues and today accounts for about 55 percent ofexport receipts. - 7 - 13. Mali's macroeconomic performance has generally beenwithinthe GoM's targets and ithas managed to attract bothmultilateral andbilateralfunds aimed at deepening structural reforms and enhancing its socio-economic situation. The fifthreview o fMali's PRGF concluded inFebruary 2003 that Mali continuedto implement its program ina satisfactory manner inthe first nine months o f 2002. All the quantitative performance criteria, benchmarks, and financial performance indicators were observed. The structural performance criteria and structural benchmarks for 2002 were also met. The sound macroeconomic performance was achieved inthe face o f a downward adjustment in expenditures(except for priority poverty reducing items)inline with a shortfall inrevenues owing to the Cote d'Ivoire crisis. The sixthand final review i s underway and i s expected to be completedby August 2003. The Bank is continuingto work closely with the IMF in supporting the PRSP, including monitoring debt sustainability inthe post-completion point framework, and cooperating on public expenditure management and cotton sector reforms. Box 3: The CottonSector and the Reform Program Cottonproduction inMali has expanded remarkably inthe years following the devaluation ofthe CFA Franc in 1994, from 293,021 tons of seedcotton in 1994/95to 522,903 tons in 199811999and 459,123 tons in 1999/2000.Inthe 1990s, Malibecamethe first exporter of cotton lint in Sub-Saharan Africa. However, from 1999to 2001, the sector experienceda severe financial crisis, due inpart to the fall in world cotton prices and also to weak management of CMDT, the cotton parastatalcompany. The crisis took a dramatic turn inJune 2000 with the decision of a large number of farmersto boycott cotton cultivation for the 2000/2001 cropping season due to the fact that CMDT was offering arelatively low price for seed cotton becauseof its financial difficulties. As a result, production for 2000/2001 decreasedto 241,000 tons of seed cotton, i.e. barely more than halfthe production ofthe previousyear. With the support o fthe World Bank, the GoM preparedand adoptedacomprehensiverestructuring plan for the cotton sector. This plan was approved in October 2001 and spells out the long-term vision for a competitive model for the sector and the structural changes neededto makethe transition from the monopsony organizationand restorethe sector's profitability, sustainability and competitiveness. It includes: (i)the downsizing of CMDT, as well as structural reforms to change the sector's organization; (ii) disengagingthe state and involving the private sector and farmers associations; (iii)breaking up the monopoly into regional entities through the sale of agro-industrial assets to private operators; and (iv) liberalizing seed and oil trade through, inter alia, privatization ofthe oil seed company. The GoM establishedaunit, the Mission de Restructurationdu Secteur Coton (MRSC), reporting directly to the Prime Minister, to managethe implementation ofthe restructuring plan. The reform program is supportedby the Bank's ThirdStructural Adjusfment Credit (SAC-3): the latest supervisiono fthe SAC-3 indicated that the cotton sector reforms are broadly on track. As far as the next stages ofthe reform process are concerned, the MRSC and the GoM indicated that it is preparing a comprehensiveplanto leadto the full privatizatiodliberalizationofthe sector by 2005/2006, as foreseen inthe letter of sector policy development. This plan would comprise: (i) the full privatization of CMDT in the next 12to 18 months (ii)the full liberalization ofthe sector over a3-4 year transition period, allowing for severalkey functions to be progressivelyand safely transferredto the private sector and farmers organizations; and (iii)continued and increased supportto institutional and capacity-building activities. At the same time as Mali has been making commendableprogress on cotton sector reform, the world cotton industry i s suffering through one of its most painfulperiods for producersin developing countries. Average international cotton prices last season were the lowest since 1972-73 and, when adjusted for inflation, rank as the lowest inhistory, halving the incomes of many developing country cotton producers. Subsidies to agricultural producers in the United States and the European Union are the single biggest force driving down world prices and Sub-SaharanAfrica is most deeply affected. The cotton farmers of western and central Africa are amongthe lowest cost producersinthe world. Yet, despitethis comparativeadvantage, the cotton industry in Africa is losing world market share and cotton farmers are falling further into poverty. - 8 - Box 3: The CottonSector and the Reform Program (cont'd) Accordingto analysisconductedjointly bythe World Bank, the IMF andthe International CottonAdvisory Committee, cottonproducersin developingcountriesface annuallosses of aboutUS$9.5billionas a result of subsidiesbenefitingrich countries. Total losses to developingcountry producershave amountedto US$23 billionover the past four years. Removalof direct subsidiesworldwidewould have a netpositiveeffect o f3 1 cents per poundon average internationalcotton prices. Despitethe successfulefforts ofthe cottonindustryto expandthe demand for cotton, which will reacha recordin2002-2003, and despitean expectedreductionof supply and higher economicgrowth inmajor economies,excess productionwill continueto affect prices in international marketsand cottonpricesare expectedto remainwell belowthe long-runaverage for the next severalyears. FuturePolicy Orientation. 14. The GoM aims to continue structural reforms to: (i) promote strong and sustainable economic growth; (ii) poverty and raise living standards inthe long term; and reduce (iii) financialviabilityinthemediumterm. Newsourcesofgrowthwillneedtobe ensure promoted, as cotton and gold production alone will be insufficient to ensure highsustainable growth. Inaddition to promoting diversification o f export products, the G o M intendsto encourage and support efforts inprocessing o f primary products prior to sale domestically or inexport markets. Particular emphasis is beingplacedontargetingthe West African regional market where some o f Mali's potential export products have a comparative advantage. Efforts will also be intensifiedto improve facilitation o ftrade and transport systems. The GoM i s working towards continuing to improve market mechanisms and toward establishing a sound and transparentjudicial and regulatory environment conducive to national and foreign private investment, as well as to increased investment ininfrastructure and human resource development. Monetary policy, consistent with the fixed exchange rate o f the WAEMU, will aim to increase the efficiency o f the banking system by improving financial intermediation. The GoM intendsto continue to promote the sound development o f micro-finance, inparticular by reinforcing the supervisory capacity. It also intendsto better manage new loan commitments through, inter alia, pursuingfinancing sources that maximize the grant element offuture commitments. Macroeconomic Outlook. 15. Mali's current dependency on a narrow export base and its highvulnerability to drought and international commodity markets make the achievement o f sustained growth fragile. The growth prospects for 2003 are less favorable thananticipated as a result o f a combination o f external factors: (i) insufficient rainfall at the start o f the 2002-03 season2, (ii)depressed world prices for cotton, (iii) expected decline ingold production (given current information on reserves), and (iv) negative impacts from the crisis inCBte d'Ivoire with respect to trade, transport, public finances andMalianworkers' remittances from CBte d'Ivoire. Beyond 2003, two macroeconomic scenarios have beenprepared based on different assumptions about the impact o f the crisis inneighboring CBte d'Ivoire. As a result, cottonproduction is now expectedto fall by about 25 percentto 430,000 tons, instead of remainingat the 2001/02 level of 571,000 tons, and cerealproductionis forecast to fall by 3.7 percent. - 9 - 0 Base-Line Scenario: The assumption i s that the effects o fthe closing o f the Bamako- Abidjan corridor will fade gradually duringthe third quarter o f 2003 and that economic activities will returnto their usual level by the end o fthe year. Downside Scenario: Evenwith a returnto a tenuous peace inC6te d'Ivoire, it i s possible that the crisis inC6te d'Ivoire will continue to have a negative impact throughout 2003 and beyond as it could take time to re-open the Bamako-Abidjan trade corridor and for the Ivoirianeconomy to regainmomentum and positively impact neighboring economies such as Mali. 16. Base-Line Scenario. The macroeconomic framework presented inthe PRSP was revisedby the authorities late in2002 andthe medium-termprojections were adjusted accordingly. The 2003 growth rate has beenreviseddownward to -1.1 percent. Growth i s expected to reboundin2004 (see Annex l), to average 3.5 percent a year over the and period 2003-05 as against 5.0 percent a year over the period 1994-2002. Potential sources o f this growthare expected to come from developing the industrial sector, especially for textiles and agribusinesses, from diversifying the agricultural export base into fruits, vegetables and Arabic gum, from expanding mining, from developing the tourism and handicrafts industries, and from promoting small and medium-sized enterprises inservices. Inflationi s estimated to average 3.0 percent over the period 2003-05, and the external current account deficit (excluding official transfers) to narrow from an average 11percent o f GDP over 2000-02 to seven percent over 2003-05. 17. Underpinningthe projections for growth is the assumption that Mali will be able to attract foreign savings, including private capital, to supplement domestic saving. Gross domestic saving would remain at a historically highlevel over the next few years, partly as a result o f higher government saving, and average about 14 percent o f GDP a year over the next 3-6 years. However, this growth rate will be insufficient to finance total domestic investment,which is projectedto average about 22 percent of GDP a year. Hence, Mali will still needto continue to attract a high level o f foreign investment, with annual net foreign private capital inflows continuing to amount to about 2% percent o f GDP. 18. Fiscal policy reflects the poverty reductiontargets that the G o M definedinthe PRSP. This policy aims at increasingpoverty-reducing expenditureswhile lowering the basic fiscal deficit. Inorder to keep overall government spendingat about 27% o f GDP, the authorities intendto increase total government revenueby 1.8 percentage points of GDP to 19.0% in 2003, with tax revenuerising by 1.6 percentage points o f GDP to 15.8%. About one-third o f the improvement is expected to be dueto a recovery intax receipts once the crisis inC6te d'Ivoire has ended. Inaddition, the GoM will seek to broaden the tax base by rationalizing the tax system, simplifyingitfor smaller enterprises, and increasing the efficiency o fthe tax administration. To reduce shortfalls inthe mobilization o f domestic resources, the G o M will ensure the strict application o f laws and regulations governing the granting of tax exemptions to businesses and, more generally, intensifyanti-fraudefforts. The effectiveness o f the tax reforms implementedinrecent years will be assessedand additional measures will be identifiedto helpraise the tax revenue-to-GDP ratio. Measures will also be introduced to improve the quality o f macroeconomic accounting and analysis. Nevertheless, underthis scenario, the GoM will needadditional assistance incalendar year 2003 to support the implementation o f the PRSP program; the Bank could provide assistance through a - 10- supplemental credit to the on-going SAC-3, provided that the G o M has outlined appropriate actions to take to respond to the situation. 19. Downside Scenario. This scenario assumes that the C8te d'Ivoire crisis would furtherdampen economic activity andputupwardpressure ondomestic prices. Itwould be difficult to achieve the G o M revenuetargets and higher expenditures would be neededto address security and refugee considerations. The economy would be affected through the direct impact o f highertransport costs on cotton competitiveness andby the indirect impact o f lower income on demand for domestic goods. Real GDP growth beyond 2003 could be negatively affectedby up to 2 percentage points. Therewould be a corresponding increase in the fiscal deficit, assuming the GoMwas able to maintainthe level o f social spendingand public investment. Meanwhile, government revenue would remain stable relative to GDP but be lower innominal terms. Underthis scenario, it is likely that GoMwould require additional assistance incalendar year 2004 to support the implementation o fthe PRSP program. 20. Debt Sustainability. Mali reachedthe CompletionPoints o fthe Original and Enhanced HIPC Initiatives inSeptember 2000 and March 2003 respectively. The debt relief provided to Mali under the Enhanced HIPC Initiative allows the debt to fall to an acceptable level, unless there i s a significant external shock. The net present value (NPV) o f Mali's debt i s projected to decrease from $1.5 billionat end-December 2002 to $1.1 billion in2003. The debt-to-export ratio i s projectedto drop to 119% in2003, rising to 142% in2014, and gradually declining thereafter. This assumes that the G o M will only take on new loans under concessional or highly concessional terms and that these loans are targeted to support effective implementation o fthe PRSP (see Attachment 3 for further details on debt sustainability). C. PRSPPillar 1: PromoteInstitutional Development While Improving Governance and Participation 21. The 2002 elections solidifiedthe democratic process inMali, andthe formation of a multi-party Government inOctober 2002 provided a strong platform to pushforward on further institutional reform underthe leadership o fPresident TourC. Duringthe GoM's first Council o f Ministersmeeting, President TourC challenged all Ministers to implement a results-oriented development policy based on the PRSP and he emphasized that strengtheninggovernance would be histop priority. This confirmedrecognitionthat Mali had beenmaking important strides inimproving governance and reforming institutions inthe past and, with the adoption o fthe PRSP, this was again placed at center-stage. 22. The challenge laid down by the President i s ambitious as the Malianadministration has been characterized to date by: (i) slow decision-making; (ii) insufficiently qualified human resources with a lack o f appropriate material resources; and(iii)poorly adapted a development and institutional management framework, which has hampered the GoM's ability to elaborate effective development policy and mobilize the necessary resources. Furthermore, planning anddevelopment structures are dispersedwithindifferentministries with inadequate coordinationmechanisms betweenthem. Thejudicial system itselfis characterized by: (i) complicated and costly procedures; (ii) inadequate access, concentrated inBamako; (iii) irrelevant legislationandregulation unable to keep up with social, political, economic, cultural, and environmental changes; (iv) lack o ftrained personnel combined with - 11- a lack ofjudicial inspectionandaccountability; and(v) uncleardivisionbetweenpolitical and administrativeaffairs withinthejudiciary system. 23. Governance. In1999,the GoMlaunchedthe NationalPolicyto Fight Corruption. Since then, implementationhas beenprogressing, albeit at a slowpace due to the sheer complexityofthe issues coupledwiththe weakjudicial system. InJuly 2002, the GoM formed anad hoc committeeoncorruptionas part ofthe PrimeMinister's office, which led to the CouncilofMinisters' adoptionof severalcommittee recommendationsto create and strengtheninternal inspectionsand limitprocurementabuses. The committee's work benefitedfromthe Bank-prepared"Recommendations to Reinforcethe Anti-Corruption Program" publishedinApril 2002 at the GoM's request. Effortsneedto be enhancedto implementfurther recommendationsfromthe Report. 24. PublicExpenditureManagement. The GoMhas madesome strides inimproving public finance management. Efficiencyandefficacyinthe budgetpreparationprocedures have improvedsince the introductionofprogram-budgetsin 1998 andthe increaseinthe number ofInspectorsandMagistrates. The Lois de Re`glement 1997to 2001havebeen produced, adoptedby the Cabinet and submittedto Parliamentfor approval. Inaddition, improvedinspections andanewly adoptednomenclaturehaveincreasedtransparency and monitoringofbudgetimplementation.The GoMi s committedto strengtheningthese reforms andto implementingthe recommendationsofthe WorldBank-led2002-3 CountryFinancial Accountability Assessment(CFAA). As partofthe HIPCExpenditureTrackingAssessment, the GoMhas madevery strongprogresson implementingmeasuresoutlined inthe related actionplanto improvepublic expendituremanagement, andhasjust createda ve`rzjkateur inde`pendunt, similar to a general accounting office. Furthermore,the GoM i s preparinga referendumto separatethe section des comptes fromthe SupremeCourt to create an independentCour des Comptes (ajudicialcourt). 25. Withthe 2003 Budget,the authoritieshaveintroduceda three-yearmedium-term expenditure framework. A proceduresmanualfor budgetexecutionhasbeenpreparedand internal audit functions havebeenstrengthened. Also, the capabilities of the Court of Accounts havebeenstrengthenedwith additional staff andnew facilities to enable clearing the backlogofwork andensuringtimely completionofresponsibilitiesinthe future. Witha view toward strengtheningthe budgetinformationsystem, mechanismsto integratethe computer systems ofthe treasury, budget, andfinancial controldepartmentsare being developed, andwill betestedandinstalledinthe comingyear. Additionalmeasureswill be pursuedto ensure continuedimprovementsinpublic expendituremanagement. 26. Procurement. In 1995,the GoMimplementedapublic procurementcode and procurementregulations. While private sector procurementfunctions relatively well, Governmentprocurementsuffers from inefficiencydue to weak capacityinhumanand administrativeresources, anda lack of decentralizationofprocurementprocedures. Correctivemeasuresare beingtakento improvetransparencyby reducingleewayfor subjectivedecision-makinginpublic procurementprocedures, andby filling inregulatory andadministrativegapsthat couldleaveroomfor corruption. The GoMhas also indicated that it intendsto strengthenmonitoringstructures to ensure that adoptedcodes andlaws are applied, as well as developanethics code. Improvementinhumanresourcemanagementand an increasedfocus on the responsibilityof the public procurementbody, combinedwith greatervigilance amongall stakeholders,will help fillthis gap. - 12- 27. Participation. One o fthe strengths o f the Malian democracy i s the developing participative framework. Over seventy political parties exist and are grouped into three major coalitions at the national level. Civil society i s vibrant with over 1,500 registered NGOs and as many as 2,500 associations. The media are free and over thirty newspapers and 120 radio stations are operating. The recently createdNational Council o f Civil Society Organizations o f Mali should help channel civil society dialogue with G o M and the donor community. Inthe framework o fthe PRSP, it will be critical to institutionalize participatory mechanisms that involve stakeholders inthe implementation, monitoring and evaluation o f poverty-oriented programs. 28. Decentralization and Deconcentration. In 1992, the G o M embarked on a participative decentralizationprocess andthere are now 703 local-level municipalities (communes), 49 sub-regional districts (cercles), 8 regions and the district o f Bamako (with the status of a region). While the Mission for Decentralizationand Institutional Reform (MDRI)effectively piloteddecentralizationthroughoutthe 1990s, the concomitant deconcentration process lags behind. Effective and efficient decentralized government and service delivery i s hampered by poor resource mobilization, weak capacity, inconsistency between national sectoral programs and local development plans, poor governance and a weak institutional framework. Inresponse, the Commissariat for Institutional Development, reportingto the new Junior Minister attached to the Prime Minister and charged with State Reform and Institutional Relations, prepared an action plan through a participatory process in January 2003 with the objective o f improving: (i) state reform and public sector central management; (ii) decentralizationand deconcentration; (iii) resource capacity human building; and(iv) communications andpartnerships with service users. D. PRSP Pillar 2: Develop HumanResources and Improve Access to Quality Basic Services 29. Health. Progress has beenmade inhealth since 1998 (Table 3). The G o M has reinforced its accountability and management capacity, notably through the preparationo f a medium-termexpenditure framework (MTEF) which costs programmed investmentsand links activities to results inorder to more effectively allocate resources towards achieving the PRSP objectives and MDGtargets (see Attachment 1). The attainment o f Original HIPC and Enhanced HIPC Initiative targets encouraged an acceleration inreform implementation(e.g. healthpersonnel recruitment and a rise inbudget allocations to the health sector). While Mali's health indicators are among the poorest inthe world, the implementation o fthe first phase o f the ten-year health and social development program (PDDSS), which targets basic health care and decentralized community management, has ledto a significant improvement inaccessto healthcare. The results aremostnotable for thepoorest quintile,where infant and child mortality rates dropped23% and 24% respectively from 1996 to 2001. 30. However, health service utilization i s still low andthe quality o f health care i s still poor due to: (i) unavailable and poorly trained personnel inregional and rural health centers; (ii)lackofsupplies; (iii) a inaccessibility o fhealth centers outside o f Bamako; (iv) high transaction costs for dealing with multiple donors which has exacerbated the Ministryo f Health's low absorptive capacity; and (v) poor resource allocation, including over-emphasis on infrastructure investmentwithout taking into account operating costs. - 13- Table 3: Health Indicators 1998 2001 PRSP Goal for MDGs Access to health- care (15km) 49 66% 80% Not Indicated MaternalMortality Ratio (per 577 582 450 145 100,000) InfantMortality Ratio (per 123 113 100 55 1,000) Child Mortality Ratio (per 258 229 210 83 1,000) Fertility Rate (children per 6.7 6.8 6.5 Not Indicated woman HIV/AIDS Rate 3.4% Women; 2% Women; 1% 1% 2.4% Men(1996) 1.3% Men 31. Education. Progress has also beenmade since 1998 ineducation (Table 4). To reach the HIPC targets, difficult education reforms were enacted to focus attention on primary schooling. Politically sensitive budget allocation reforms accelerated teacher recruitment, the purchase o f teaching materials and classroom construction. The first phase (PISE) o fthe ten-year education program (PRODEC) continues to lay the groundwork for improvement, particularly inprimary education. The Ministryo f Education i s currently preparing a medium-termexpenditureframework (MTEF), along similar lines to the MTEF work inthe health sector. This framework will encourage better donor coordination and thus contribute to improved prospects for resource pooling. Table 4: Education Indicators PRSP Goal for MDGs 199912000 200112002 2006 2015 Gross enrollment, primary school (%) 39.5 58.7 70 100 Gross girls' enrollment, primary school (%) 44.5 49.1 58 100 Gross enrollment, secondary school (%) 24.6 26.2 Not Indicated Not Indicated Gross girls' enrollment, secondary school (%) 18.7 19.2 Not Indicated Not Indicated University enrollment 10,774 (1997) 29,482 (2002) Not Indicated Not Indicated Studentlteacher ratio, public primary schools 80.3 71.2 50 Not Indicated Repeat rate, primary schools (%) 23 (1998) 18 13 Not Indicated %Primary ineducation budget 57 61 61 %Education innationalbudget (with social 32. Efforts should be intensifiedinthe education sector to: (i) improve access for the poorest; (ii) improve education quality, including linkages betweeneducation, professional training, and the current job market; (iii) reinforce decentralized and deconcentrated management; and (iv) reinforce overall institutional management. Moreover, the cross- sectoral linkages betweeninfrastructure levels (roads, transport) and accessibility to schools also needto be enhanced. Despite some efforts3, teaching quality i s still poor and curricula are often not pertinentto actual needs; for example, vocational training i s often more theoretical than practical. Quality issues can, inpart, be attributed to a lack o f access, teachers (for example, the universitystudent-to-professor ratio i s about 624:l), teaching One notable effort is the successfklImproving Learningin Primary SchoolsProgram, which is financedmostly by a Bank LIL. Studentsare initiallytaught inanational language (materials are available inelevenoutofthe thirteen)beforeFrench i s introduced, using a dynamic pedagogythat differs from the traditional learning-by-rote. - 1 4 - materials, books, infrastructure, and laboratory equipment, as well as the poor organization o f the Koranic school system. Moreover, high-school anduniversityscholarships are poorly and opaquely managed, often causing disruptive student strikes. 33, The GoMhas adopted measuresto transfer healthand educationresponsibilities from the central to the regional and local levels and i s inthe process o f establishing an appropriate resource transfer mechanism, which would require substantial capacity building,particularly at the regional and local levels. To be effective, the mechanism should foster greater consistency betweensectoral programs and local development plans as well as improvements inlocal-levelfinancial responsibility. 34. Gender. As described inthe poverty analysis inBox 2, the inadequate opportunities for women inMalian society contribute to the highlevels o f poverty and, accordingly, gender issues are at the forefront o f Malianpolicy. In2002, the GoM adopted the Promotion o f Women, Children, and Family Policy and Action Plan for 2002-2006. The first part o fthis document, which i s aligned with the PRSP, analyses health, education, the judicial system, economic opportunities, the environment, and institutional development interms o f gender, while proposing priority actions for improving the situation ofwomen. One ofthe most important gender issues i s the higherHIV adult prevalence rate for women than for men (Table 3) which needs specific attention. E. PRSPPillar3: DevelopBasic Infrastructureand ProductiveSectors 35. PrimaryProductiveSectors. While the GoMhas beenimplementing important reforms for laying a solid framework for accelerated growth, Mali suffers from a limited resource base and its economy i s poorly diversified, with production concentrated heavily in agriculture. Implementationo f agricultural policy i s guidedby the 2000-2010National Rural Development Master Plan as well as the 1999National Environmental Action Plan which were bothintegrated into the PRSP. A striking element o fMali's economic performance over the last decade i s that remarkable strides have beenmade inrural development by an adequate combination o f policy reform, investment, technology improvements and strong donor coordination. Perhaps most important have beenthe comprehensive reforms inthe cotton sector which include the partial restructuring and the proposed privatization o fthe national cotton company (CMDT, CompugnieMulienne de De'veloppementdes Textiles)and its cottonseed oil subsidiary (HUICOMA, Huilerie CotonniBredu Mali). The details o f these reforms are described inBox 3. Another important success story has beenthe ongoing reforms o f the OfJice du Niger that buildon measures taken since the 1980s which have led to a six-fold rise inrice production (see Attachment 2 for more details). 36. A further identifiedgrowth area-livestock -is beingsupported through the Pastoral Charter, which i s currently under review by the National Assembly and which delineates rightsandresponsibilities for farmers andherders, particularly property rights and accessto range resources and land use. To better tackle soil degradation, the GoM i s currently preparing the National Soil Fertility Management Plan. As water management i s key to rural development, the National Irrigation Strategy, prepared under the National Rural Infrastructure Program (PNIR), mainly concentrates on large irrigation, and pilot actions and operations are underway to expandsmall irrigation. There i s significant potential in agricultural diversification into fruits, vegetables and Arabic gum, development o f agri- businessandtransformationof agricultural products (e.g. textiles). Other potential sources of - 1 5 - growth exist inthe expansion o f mining, development o fthe tourism and handicrafts industriesandpromotion o f small andmedium-sizedenterprises inservices 37. Private Sector Development. The GoM has concentrated on creating a legal and regulatory framework conducive to private sector development. It has been able to attract private investmentinthe gold, telecommunications, energy and water sectors, as well as large external funding ininfrastructure. Measures have been taken to harmonize the legislative and regulatory environment under the Organization for the Harmonizationo f Business Law inAfrica (OHADA) Treaty; measures have also beentaken to address core labor standards (see Attachment 4). Furthermore, the GoM instituted a public enterprise reform action plan for 1999-2002 inorder to reduce the number o f state-owned enterprises from thirty-three to eighteen. Currently, the GoM retains a majority holding inten non-bank enterprises and minority holding ineight. However, about 90% o f Mali's economy still remains inthe informal sector. Small and mediumenterprises (SMEs) comprise a significant share (over 65%, although largely informal) o fthe private sector. Limitedaccess to short, mediumand long-term credit instrumentsfor business startup and investmentis a primary constraint for SMEs. As highlightedinthe JSA o f the PRSP, there i s a risk o f slower-than- anticipated development o fthe private sector into a dynamic engine o f growth. Therefore, the GoMwill needto continue to pushaheadwith reforms and incentives for developingthe private sector. 38. Financial Sector. Private sector development i s contingent upon financial sector development and access to sustainable finance. The G o M has been implementingvarious reforms to improve confidence and competitiveness inthe financial sector. In 1992, the GoM began consolidating and liberalizing the state-owned and uncompetitive sector while opening it up to competition and creating the necessary legal and regulatory framework for sustainable growth. In2001, the B M C D bank was restructured, privatized and mergedwith BDM-SAto create the largest bank inMali andthe twelfthlargest bank inthe UEMOA, thereby increasing Mali's presence inthe regionalfinancial market. The BIM-SAbank is currently beingrestructured and privatized. The G o M i s further creating a financial enabling environment by continuing to lay the necessary legal and regulatory framework, especially on a regional level (having adopted the UniformActs o f OHADA), diversifyingthe financial sector to support non-bank financial institutions, fostering access to credit on a decentralized level through micro credit, and modernizing financial systems as a whole. 39. Transport Sector. The program o freforms and investmentsinthe transport sector in the 1990stargetedthe following: (i) and sustain efficiency o fthe sector's operation; enhance (ii)improve and maintain infrastructure, especially for roads and rail; and (iii) access to open the remote andpoorest areas. Progress onthis reform programto date has beeninsufficient and transport costs are extremely highinMali, accounting for approximately 30% o fproduct prices. While railway transport i s the cheapest mode for long distance and bulk traffic, about 80% o f international traffic i s by road due to inefficient railway operations and the poor condition o f railway track and equipment. Before the crisis inC8te d'Ivoire, between70 and 80% o f Mali's trade was transported along the Bamako-Abidjan corridor. The crisis highlightsthe importance o f improving alternative transport corridors to Conakry, Lomi, Cotonou, Dakar, Accra, and Takoradi, inthe context o f a regional approach to transport infrastructure. However, untilthese alternatives are better developed, the use o f ports further away than Abidjan has resultedinsignificant price increases. The railway company's - 1 6 - performance i s expected to improve following the award o f the concession o f railway services betweenDakar and Bamako to ajoint venture o f private investors inFebruary 2003. 40. Energy. The GoM has made important steps on reform and on increasing efficiency inthe energy sector. Until2001, unreliablepower supplywas amajor constraint for business expansion inMali andtariffs were below economic cost. The state power utility Energie du Mali (EDM)was poorly managed and lacked finds to ensure quality and reliability o f services and to expand access to electricity. In 1999, the G o M issued a policy letter with the following goals: (i) liberalization, allowing initiatives from communities and the sector private sector; (ii)institutional reforms to orient the State's responsibility to activities o f strategic and regulatory nature; (iii) valorization o f national energy resources (renewable energy, hydroelectricity); (iv) protectiono f forestry resources through sustainable exploitation benefitingrural populations; and (v) pursuingpetroleum research. The goal is improved sector efficiency, a withdrawal o fthe public sector from operations, andto extend service coverage. To that end, the GoM has restructuredthe sector by adopting a new Electricity Law and its implementation texts, which ends EDM'smonopoly and has opened the sector to competition, underaregimeo ftransparent regulationby anindependentagency. Reform processes and institutions needto be strengthenedto foster a lasting competitive businessenvironment attractive to private investors and operators. The imperativeto provide energy services to the poor calls for a spectrum o f energy services, innovative service deliverymechanisms, with participationby communities, NGOs andthe private sector. 41. Environment. In 1999 with the adoption o fthe National Environmental Action Plan (NEAP), the G o M strengthenedits policy for the environment with seven strategic axes, four o f which were to strengthen national capacity, restore degraded areas, organize a permanent system o f control andmonitor the environment. However, implementationo fthe strategy has to date been ad hoc andpartial. Soil degradation i s the number one environmental issue inMali: to improve its focus onthis issue, the GoMis currentlypreparingtheNational Soil Fertility ManagementPlanand has requestedBank support through various operations including the PASAOP and the proposed Rural Community BasedDevelopment Project (para. 80). As water management i s key to rural development, the National Irrigation Strategy, elaborated underthe National Infrastructure Program (PNIR), concentrates on both large irrigation schemes as well as pilot actions and operations for small irrigation. Biodiversity also requires significant attention, although capacity for biodiversity management i s extremely weak. The GoM i s trying to address this through a Bank- supported pilot (the Rural Infrastructure Project) geared to exploring community-based conservation inan arid area while addressing structural issues at the national level. 42. RegionalIntegration. Mali i s a member ofthe Economic Community o f West African States (ECOWAS) andthe West African Economic and Monetary Union (UEMOA). The ECOWAS Heads o f State endorsed the NewPartnership for African Development (NEPAD) and confirmed the role o fthe ECOWAS Secretariat as lead agency for implementation and monitoring. The UEMOA countries signedthe "Convergence, Stability, Growth and Solidarity Pact" (Pacte de Convergence,de Stabilitk, de Croissance et de Solidaritk), which commits all member countries to achieve macroeconomic convergence, and established a multilateral surveillance system. In2000, the UEMOA's Customs Union eliminated all intra-regional tariffs and established the Common External Tariff, which has created new opportunities and a market that can support medium-size agro-industries inthe - 17- region. The ECOWAS Customs Union is due to be inplace by 2007. The UEMOA also adopteda General Competition Law which sets rules andproceduresrelated to cartels, abuses of dominant positionwithinthe UEMOA economic space, and state aidto enterprises. 43. Mali plays a key role inregional harmonization of sectoralpolicies inpower, transport, telecommunications, and agriculture. Potential markets inthe region for Mali's products include livestock products, fruits (mangoes) and evenrice inthe mediumrun. But success will dependon improvement of business practices inthe region, development of market informationsystems (to be aware of business opportunities) as well as the elimination of non-tariffbarriers (including illegalpayments at checkpoints) which dramatically slow the speedand ease of goods acrossthe region. As a landlocked country lackinga viable transportation system, whose economy i s basedon the primary sector and raw materials, it i s extremely important that Mali be well integratedinthe western Africa region. The context i s all the more urgent considering the recent impact of the CGte d'Ivoire crisis, which clearly displays the needfor further diversification oftrade routeswithinthe region. 44. InMay 2002, Mali signedthe Water Charter with SenegalandMauritania, the other membersofthe Organization for the Development of the SenegalRiver (Organisationpour la Mise en Valeur du Fleuve Se`ne`gal). This agreementprovides a framework for the OMVS countries to managethe SenegalRiver Basinmore efficiently. Guinea is expectedtojoin soon. A similar effort i s also beginning with the Niger River Basin. 111. IMPLEMENTATION OF THE LAST CAS A. Assessment of Performance 45. The last CAS was preparedina context of strong growthachieved sincethe 1994 CFA franc devaluation and was basedon the 1997 Government strategy - Propositions Pour Une Croissance Durable et de De`veloppement 2r 1'Horizon2010. Within this framework, the Bank's CAS was structured around two main axes: (i) economic growth; and stable (ii) sustainable human development. 46. Regardingthe first axis - supporting stable economic growth-good progresswas made on growth and macroeconomic stability (see Para. 9) with the support of the Bank's structural adjustment lending andthe IMF's PRGF facility. The Bank also providedsupport to broad-basedgrowthby supporting the rural sector through the Grass Roots Hunger and Poverty Project (PAIB)4 and the Agricultural Services and Farmers Organization Project (PASAOP), and by expansion of irrigated areas and buildingfeeder roads through the Rural Infrastructure Project (PNIR). A Financial Sector Operationwas also preparedto support the goal of creating an enabling financial environment to allow for private sector-led growth (see Table 5 for Bank operations approved since the last CAS). The combination of the SAC, Financial Sector Project and the Bank's Analytical and Advisory Activities (AAA) program, The Grassroots Hunger and Poverty project (PAIB) had already surpassedexpectations by reaching 186 villages and 172,000 people by the 2002 mid-term review compared to the original end-of-project goals o f reaching 130 villages and 130,000 people. -18- together with operations such as the PAIB and PASAOP has proven to be an effective use o f Bank instruments to support the growth objective. Table 5: ActualBankLendingOperationsFY99-03 FYOO FYOl FY03 I Health Rural 115.5 Education 45 Sector Infrastructure Sector Farmers Org. Financial 21 Structural Hunger & Sector Adjustment Poverty Basic 3.8 Education Pilot Total 140.3 45 I113.5 TOTAL 359.8 47. As regards the second axis -humandevelopment -the Bank supported the GoM's efforts to improve access to and quality o f social services through: (i) the Health Sector Project (PRODESS) which focuses on improving the overall efficiency and effectiveness o f health delivery systems through cost recovery and further participation by the private sector; and (ii) the Basic EducationPilot andBasic EducationProject (PRODEC) whichtarget improving the quality and relevance o fbasic education while keepingthe costs o f education and training within affordable levels. The Bank's support to the health and education sectors i s contributing to strengtheningfurther the performance o f social sectors indicators which have shown important improvements since 1998 - as outlined inTables 3 and 4. 48. Overall, Mali has performed well on the implementation o f the CAS. As shown in Table 6, Mali fulfilled nearly all o f the triggers inthe base case scenario and fulfilled most o f the triggers inthe highcase scenario. While Malimade commendable progress, the implementation o f the CAS sufferedfrom frequent changes inGovernment, weak administrative capacity and unclear institutional roles and structures. Moreover, participation with stakeholders andpartnerships withthe private sector, civil society andNGOs were fledgling so initial delays were encountered inensuring a more participatory approach to the implementation o f projects. As a result, there were difficulties encountered inthe overall performance o f the portfolio which meant that the highcase trigger for portfolio performance was not met. The previous CAS period was extendedto ensure also that the preparation o f this CAS was fully aligned withthe PRSP. 49. Client Survey. The April 2002 Client Survey, complementedby a feedback session inNovember 2002, concludedthe following: a) the Bank should strengthen its own decentralization and deconcentrationprocess to be closer to Malian realities. The Bank was already taking, and will continue to take, concrete actions to strengthenthe skills-base o fthe Bamako office. It i s also taking advantage o f the availability o f expert staffbased inthe westernAfrica region; b) the Bank needs to help the GoMto strengthen itsJiduciary management in order to shift toprogrammatic support. As Mali moves to a more programmatic approach, - 19- strengthening the analytical base on core fiduciary issues i s a centfal focus o fthe Bank's work. Moreover, the Bank i s working inclose collaboration with other development partnersto ensure that they also move at the same pace towards programmatic support; and c) the Bank shouldplay a catalyzing role to increase beneficiary participation and make them more accountable. Inthe context o f all operations, the Bank has ensuredthat beneficiaries and local partners take on an increasingly important role inthe design and implementationo f development programs. The success of the PAIB project which i s beingimplementedby local community groups andNGOs i s a good example o fthe effectiveness o f involving beneficiaries. The Bank i s also providing support through its social sector and rural operations to strengthencapacity at local levels and to ensure a more decentralized service delivery. B. Portfolio Management 50. The quality o fthe portfolio, which currently includesten investmentprojects and one adjustment project, declined from FY98to FY02, as evidenced by the rise o f at-risk projects and overall slow implementation. There i s an issue of absorptive capacity inMali, as in many IDA countries, with the disbursementrate dropping from 20% inFY98-00to 15% in FYO1-02. The reasons for these weaknesses stem from: (i) inadequate institutional frameworks; (ii) slow procurement; (iii) financial management; (iv) cumbersome weak donor procedures; and (v) poor GoM implementation capacity. 51. At the start o fFY03, the Bank worked withthe GoMto prepare a Portfolio Improvement Program (PIP), which outlined a full action plan to strengthenthe performance o f IDA'Sprojects, and a Country Portfolio Performance Review (CPPR) was heldinJanuary 2003 (see para. 52 below). Since then, strong corrective actions have beentaken and the three identified problem projects are now rated satisfactory. While slow disbursementand weak management still hamper some other projects inthe portfolio, and the PIP i s being updated to tackle these issues, the disbursementratio increased to 17.6% inFY03. As o f July 1,2003, there are ten projects inthe portfolio (see Attachment 5)5, down from fifteen in FYOl,which will allow efforts to be concentrated on strengthening the performance o fthose projects still under implementation. The Improving Learning inPrimary Schools LILProject closed on June 30,2003. - 20 - Table 6: Triggers for Bank Assistance Program Base Case Status High Status ,thieved Full compliancewith PFP Achieved I r"' targets Paper Expansionoftax revenue from Achieved, now 13.2%of GDP to 15% of GDP 17% I (2000) Education ducation IApproval of a 10-year sector plan by ,thieved, Approval Agreementon teachers' salaries Achieved (as Sector Dec. 1998 RODEC (1999) part of HIPC) egan 8/01 Agreementto reform secondaq Achieved (as & higher educationscholarship part ofHIPC) program ComitP depilotage named. ,thieved, Availability of resources to Achieved Agreement on management team RODEC implement educationreforms within Ministryof Education by egan 8/01 Dec. 1998 Maintain 1996 levelof scholarship ,thieved (as (F CFA 4.2 billion) I Base Case Status High Status Public Action plan implementedfor chieved, Privatizationof EDM Full Enterprises improving EDM's financial rivatization underway privatization situation, including tariff increases egan 1999 achieved in 1998, 1999& 2000 Privatizationof SOTELMA Not yet achieved Satisfactoryarrangements for ichieved, strengthening EDM's management rivatization egan 1999 Rural Implement redeploymentplan to hgoing Implementation of new MDRE No Development ensure better balance between staff organizational structure. of MDRE based inthe capital and in Implementation of arural road No strategy Ingoing, near ompletion I Completion of cotton sector strategy ichieved. I (June 1999) ,Ool ' erformance :Y99-00: 2 FY99-00: 2 FYOI: 0 FY02: 3 - 2 1 - 52. The 2003 Country Portfolio Performance Review(CPPR) aimedto buildonthe PIP, furtherpinpoint systemblockages and initiate constructivedialogue with GoM, donors, and civil society partners. The CPPR produced an actionplan, validated by GoM inMarch2003, that sets a timeline to solving specific problems within each project and generic problems affecting many projects such as inadequate institutional framework, weak humanresource capacity, poor monitoring and evaluationand insufficient donor coordination. It was also recognizedthat the complex and varying donor procedures were one o f the main causes o f the slow disbursement andthe GoM calledonthe Bank andother donors to work more closely together to harmonize their procedures. The Bank agreed with G o M to hold another CPPR in2004, when the frequency o f future reviews will be determined (remaining on an annual basis or reducing the frequency to every eighteen months or two years). The frequency will dependon: (i) progress made inresolving issues; and (ii) whether better mechanisms have beenput inplace, such as a necessary G o M portfolio management system, anda partners' forum supporting a shift to programmatic and budgetsupport. The Country Office will continue to reinforce its capacity for portfolio management. 53. With the goal of addressing institutional development and capacity building,Mali's participation inWBI programs has increased significantly over the last two years to reach 470 participants inFY02. Participation will continue to increase further once the Global Distance Learning Network (GDLN) i s underway and the Distance Learning Center i s built. A muchgreater number ofMaliannationals will have access to not only WBIcourses, but also courses offered from other GDLN sites inindustrialized and developing countries. 54. OEDResults. OED's evaluations ofprojects closedsince FY99 revealed mixed results for project performance. Out o f the eight projects evaluated during this period, four were rated satisfactory for outcome while the other four were ratedmarginally satisfactory. Only 62.5% were likely to be sustainable. Those not deemedto be sustainable were either unable to create a viable legal and regulatory framework for sustainability (MiningCapacity Project), unable to strengthenthe framework put inplace (Second Power Project), or unable to ensure long-term financing, (Agricultural Services Project). Fifty percent (4) o fthe projects made substantial institutional impact on institutional development, with one o f those having a highimpact. Inthree o f the projects with only modest institutional development impact, sustainability was rated as unlikely. Overall, these ratings highlightthe importance o f preparation, capacity building, monitoring and evaluation inorder to effectively buildand strengtheninstitutional frameworks to sustainviable institutional structures. C. Other Bank Group Activities 55. To promote foreign direct investment,private sector investment, and communication infrastructure investment, inNovember 2002 MIGA provided guarantee coverage to National Telecommunications Company o f Senegal (Sonatel) for its investment inIKATEL. This represents the largest foreign investmentinMalito date. 56. has a small investmentportfolio o f US$8.4 million inMali. O fthis, US$4.8 million i s concentrated inthe gold miningsector, where IFC was active inthe 1990s. An additional gold mininginvestmentwas paid off inthe past year as the mine closed. The balance o f the portfolio i s a series o f small investmentsinthe hotel industry, including the GrandHotel, a second hotel bythe same operator, and a small inn; and inthe printing/packaging and constructionmaterials industries. The IFC i s inpreliminary - 22 - discussions with Saur Int'lconcerning financing for the capital expenditureso f Energie du Mali, the integrated powedwater utility. The IFC financing i s beingdevelopedjointly with IDA,whichbackedtheprivatization. A potentialinvestmentofupto US$lOO millionby IFC and other commercial sources i s envisaged. The IFC and the Bank's energy team have also played a role inhelping Saur and the G o M address disputesconcerning the reduction in tariffs, the associated compensation to be paid to Saur, GoM arrears, and the state o fthe utility upon assumption o fcontrol by Saur. 57. Mali i s expected to be one o fthe countries to implementan integrated micro, small and medium-sized enterprises (MSME) support program, implementedby IFC with IDA support. The program i s currently beingfinalized and will consist o f establishment o f a commercial micro-finance bank, capacity buildingfor banks and other lending intermediaries, BusinessDevelopment Services to firms, and support to improve the enabling environment for SMEs. Support from IDA i s under discussion from the proposed Sources o f GrowthProject inFY05, and possibly from the existing Financial Sector Development Project. IFC and other commercial sources would invest up to US$3 million inthe capital o f the micro-finance bank. D. Lessons Learned 58. A thorough analysis o f the implementation o f the Bank's previous CAS, including OED's evaluations o f closed projects, indicates important lessons which have been taken into account inthe selection and designo f future Bank activities inMali. 59. An efficient institutionalframework increasessustainability and accelerates service delivery. Institutional weaknesses, noted for nine active projects (PNIR, PASAOP, PPIP, Manantali, FSDP, PAAA, PRODESS,PRODEC, and TSP), primarily stem from: (i) frequent GoM reshuffles - since 1992,the GoMhas changed twelve times; (ii) poor donor coordination for meetings andprocedures, which leads to multiplicity o f tasks for civil servants; (iii) complex procedures, particularly for procurement and disbursement, complicated by an absence o f motivation and sanction, absence o f follow-up, and weak human resources; and (iv) insufficient post-project planning from the onset, putting sustainability at risk. 60. Trained and motivated human resources are vital. Key structures needto be continually reinforced: (i) administration, particularly inthe various ministry offices central o f administration and finance (Directionsadministratives etfinanci&es), where lack o f training, motivation, and accountability contributes to slow procurement, poor financial management, and slow disbursement; (ii) decentralized anddeconcentrated administrative structures, particularly for the health and education sectors, where personnel i s often lacking or poorly motivated because o f low salaries; and (iii) civil society and the private sector, where there are large deficiencies inplanning,management, procedures, andmonitoring and evaluation. 61. Decentralization of service delivery and community-driven development increasegrassrootsparticipation and help adapt development programs to local realities. By supporting community-driven development, the Bank was able to contribute to improved service accountability and increased local participation inthe preparationand implementationo f development programs. Aspects o f decentralization were included in - 23 - seven on-going Bank-financed operations from the last CAS (PRODEC, PRODESS, PAAA, FSDP, PASAOP, PNIR, andPAIB). 62. Monitoring and evaluation(M&E)needs to be conceived from the beginningby all stakeholders. The 2003 CPPR revealed five active projects (ongoing: PASAOP, PPIP, PRODESS,PRODEC,and TSP) where insufficient M&E affects program quality. Adequate M&Eresources which include necessary funds for training needto be allocated from the onset. Stakeholder involvement to determine indicators will better pinpoint not only how to measure progress, but also the capacity limits o f doing so. 63. The right combinationof instrumentscan create good results. A strikingelement o f Mali's economic performance over the last decade i s that remarkable strides have been made inrural development by an adequate combination o fpolicy reform, investment, technology improvements and strong donor coordination. This has been the case for cotton development, irrigated rice cultivation and, to a lesser extent, micro-finance and integrated rural development insouthern Mali. This lesson has beentaken into account and guides the Bank's assistancepolicy by prioritizing the Bank's ability to mobilize and package structural adjustment, policy reforms, knowledge and investmentaround the PRSP. E. Partnersand Participation 64. Mali's economic and political stability, progress on reform andparticipatory traditions, and a large number o f active donors position it well for development partnerships. Overall, it i s expected that the PRSP will greatly facilitate donor coordination, particularly as the participatory process ofthe PRSP involved all donors andbecause the PRSP lays out one comprehensive framework for all donor activities. As part of the PRSP process, the GoM holds regular meetingswith major donors (Commission mixte), chaired by the Minister o f Economy and Finance. Donors also meet among themselveson a monthly basis, with the chair rotating every six months and alternating betweenbilateral and multilateral partners. With respect to the UNsystem, the Bank participates intheir monthly coordinationmeetings; Mali i s a Roundtable country and a meeting i s plannedfor December 2003. Box 4: Mali's ExternalPartners Multilateral EuropeanUnionjust signedtheir 2003-2006 strategy with the GoM andwill be principally involved inbudget support (Mali's largest donor inthis area), the transport sector, and institutional developmentand decentralization and, to a lesser extent, supportingthe Office du Niger, Malian culture, and civil society. The UnitedNations System recently completed its 2003-2007 Development Assistance Framework (with participation from the World Bank). The activities o fthe UNDP center aroundthe environment, governance, andeducation. WHO is involved inseveralhealth programs. Human development inabroader sense is supportedparticularly by UNFPA (reproductive andwomen's rights) and UNICEF (children's issues). F A 0 andWFP are active infood security, soil and water conservation(WFP also ineducation andnutrition). There is also aUNAIDS country programcoordinator. Arab Bankfor EconomicDevelopmentinAfrica supports transport and rural developmentprojects, including potable water and irrigation schemes. IslamicDevelopmentBank financesthe Manantali dam, rural developmentprojects including potable water andirrigation schemes, andthe construction of health centers. - 24 - France supports institutionalcapacity building anddevelopment, including for thejudiciary branch, decentralization, health andeducation, urban andrural infrastructure,includingthe ManantaliDam, andthe transport sector. Belgium supports decentralization, healthandeducation, andrural development, mainly in livestockandwater (for drinking andenergy). It also funds various initiativesthroughtrust funds, for example, the FY03 poverty assessment. Canada is very active ininstitutionaldevelopment, notablyin budgetsandthejudiciary system. It also supportshealthand education, rural infrastructure,includingthe ManantaliDamandthe para-publicAGETIPE, urbaninfrastructure,the environmentandmicro finance. Switzerland intervenesvery locally, usuallyinpartnershipwith large, governmentprograms, in rural development andthe environment, governanceand decentralization, supporting artisanindustries, andsmallhealthprograms. The United States throughUSAID does not give direct governmentsupport, but channelsfunds throughAmericanNGOs infour areas: health, democracy (large decentralizationandcivil society programincluding capacitybuilding), education, economic growth, includingtrade promotion,financialsector development(notably micro finance), andagricultural promotion(highlighting the animalfeed industry). Germany is active insupportingthe decentralization process and institutionaldevelopment,health, education, professional training, child trafficking, rural developmentincludingnaturalresourcemanagement, rural infrastructure, rural finance, and food security, communications, transport, andmines. Sweden began interveningin Mali only since 2000, and currentlyprovidesbudget support with technical assistanceand is active in education, private sector developmentinpartnershipwith the IFC/WBG SME department,humanrights and democracy, and is consideringnaturalresource managementthroughhouseholdenergy (with participationfrom the Bank). Saudi Arabia finances the ManantaliDamand is involved intransport. Kuwait also finances the ManantaliDamas well as several irrigation andhydraulicprojects. 65. International NGOs and civil society are crucial partners indevelopment activities in Mali. Civil society i s vibrant with over 1,500 registered international andnationalNGOs and as many as 2,500 national associations. Many organizations are well organized into three confederations, whichrecently created the National Council of Civil Society Organizations o f Mali to better channel civil society dialogue with G o M and the donor community. Partnerships, more thanjust participation, are also becoming increasingly important in development activities. For example, civil society groups and international NGOs completely manage local capacity buildingand development projects through the Bank- supported Grassroots Hunger andPoverty project (PAIB). 66. Inthe context ofits projectportfolio, theBank works inpartnership with anumberof major donors inMali (see Attachment 5). With regard to the healthprogram, coordination has improved considerably since the GoM institutedjoint missions and the donor community - 25 - elected a "lead coordinator" (chefde Jile). The education program also benefits fromjoint missions although donor coordination i s weaker and i s one o fthe main causes for slow implementationo f the program. Across all the donor-financed programs and projects, the G o M i s taking action to ensure that joint missions are more comprehensive intheir coverage inorder to discourage donors from conducting additional, separatemissions. Overall, while these mechanisms provide a framework for more effective donor coordination, the multiplicity o f donor procedures impedes efficient project implementation, as noted during the 2003 CPPR. The Bank is currently working with other donors on strengthening the framework for a programmatic approach to the social sectors through pooling resources for PRDSS and PRODEC. It i s expected that this will avoid the multiplicity o f procedures and allow the concentration o f capacity buildingefforts inthe programming and implementation o fthese sector-wide programs. 67. Strengtheningthe programmatic approach to the social sectors is regarded as a solid buildingblock for boththe donor community andthe GoM to move towards full budgetary support to the implementation o fthe PRSP. Most donors, as well as the Bank, have clearly indicated their intention to provide budgetary support inthe near future. It i s important that donors work together to ensure proper sequencing o f the programmatic approach so that they are on board at the same time andthat ownership i s fully withthe GoM. Inorder to achieve the objective ofeffective budgetary support, two important areas o fcapacity buildingare essential: (i) to buildcapacity for the GoM to use its own fiduciary and disbursement procedures inan efficient and transparent manner; and (ii) build capacity for establishing to a comprehensive and effective M&E framework for the PRSP, against which budgetary support programs can be measured. Buildingthis capacity i s a core element o f donor programs, including the Bank. While these capacity buildingefforts are beingpursued, the GoM, donors andthe Bank are working inparallel to ensure greater harmonization o f procedures to the extent possible and are deepeningtheir experience with programmatic support to the social sector programs. IV. PROPOSEDASSISTANCE STRATEGY A. Strategic Elements of the FY04-06 CAS 68. Focus on the PRSP. The PRSP lays out a comprehensive strategy for fighting poverty and provides a cohesive framework for the activities o f all donors and development partners. As already described inParagraph 8, the JSA o f the PRSPhighlighteda number o f areas where the PRSP needs to be improved. The Bank's CAS focuses on these areas o f weakness and proposes lendingand non-lending activities to assist the GoM to continually strengthenthe implementationo fthe PRSP. Inparticular, the Bank's AAA work will focus on strengtheningthe growth strategy, linking the sectoral strategies to the PRSP and ensuring sufficient cross-sectoral linkages with the goal o f developing a more comprehensive approach to reachingthe PRSP indicators and ultimately the MDGs. Progress towards the objective o f strengtheningthe PRSP will be closely monitored inthe context o f the annual JSAs o fthe PRSP Annual Progress Reports. 69. Selectivity. The Bank's CAS has beendesignedto supportthe implementation o fthe PRSP and to complement the interventions of other donors, a collaboration aided by Bank - 26 - involvement inthe pre aration o fthe 2002 UnitedNations Development Assistance Framework (UNDAF)?! .The program selectively focuses on the following themes: 0 Promoting growth through combining policy support from the SAC and the Poverty Reduction Support Credits (PRSCs) with an approach o f increasing agricultural productivity and diversification through the rural sector operations andthrough promoting non-rural sources o f growth which are driven by the private sector (SME development, mining). The Bank will also investintransport infrastructure as a driver o f growth. Finally, the AAA program has been structured towards a greater understanding o f the sources of growth and the necessary legal and incentive frameworks to maximize the potential sources o f growth. This theme covers the PRSP Pre-Requisite Growth Pillar and PRSP Pillar 3: Develop Basic Infrastructure and Productive Sectors. 0 Developing Human Resources. The focus i s on working with donors to strengthen the programmatic approach inthe health and education sector wide programs (SWAPS), with the goal o f moving to full budgetary support via the PRSCs. Furthermore, the participatory process o f preparing the CAS (see Box 5) revealed that stakeholders inMali would liketo see the Bank's strategy incorporatethe following: (i) evolvingroleoftheState,particularlytoallowforbeneficiariestobefully the involved inall stages o f projects and programs; (ii) strengthening governance to ensure that projects andprograms -particularly those for the social sectors are more - participatory and transparent; and (iii) capacity building. The CAS emphasizes the participation o f all development partners inBank activities and proposes that capacity building for stakeholders be streamlined into the planning and implementationof policies and programs. This theme covers PRSP Pillar 2: Develop HumanResources and Improve Access to Services. 0 Public finance management and governance. The Bank's program focuses onthe public sector financial accountability mechanisms covering public expenditure, procurement, and financial management systems. The fiduciary analysis will cover the country's policies andpriorities and will continuously identify actionplans to address remaining weaknesses. The fiduciary cross-cutting issues are crucial to the on-going Bank programs, the plannedoperations, as well as the preparationfor the PRSCs. With regardto strengthening governance, the Bank will focus on assisting the GoMto implementthe recommendations ofthe Anti-Corruption Program and on providing support to decentralization. This theme i s integral to PRSP Pillar 1: Promote Institutional Development, Improve Governance and Participation. To contributeto the harmonizationo f donor support ofthe PRSPand to help Mali achieve the MDGs, the UNsystem o f donors, includingthe Bank, preparedthe 2003-2007 UNDAF. - 27 - Box 5: CAS PreDaration: A Consultative Process Consultativeactions led in2002-3: Mopti Retreat, May 31- June 4, 2002. Over sixty participants- representingthe State, collectivities,civil society, private sector, and donors - brainstormed on CAS possibilities, basing their reflections on the PRSP, the MDGs, and field visits to Bank-financedprojects. Rural DevelopmentStrategy Discussions, October 29-31, 2002. Bank staff, primarily from the RD sector, held internaldiscussions for two days, then invited counterpartstojoin them ina discussion o fthe Bank's work, past & future, to supportrural development inMali. Clieni Survey Feedback Workshop, November 5, 2002. Over forty-five participants (representing the State, collectivities, civil society, private sector, and donors) provided pragmatic suggestions to improving the Bank's service delivery andenhancingits programmingduringthe nextCAS period. Country Portfolio Performance Review, January 7-10,2003. Ledby the Minister ofEconomy andFinance, and after months of preparation, morethan one hundredparticipantsrepresentingthe State, collectivities,civil society, private sector, and donors reviewed the Bank's portfolio for the first time since 1995 and proposed concrete immediateandmedium-termactionsto improveits quality andperformance. Regional consultations in SPgou, Mopti, and Timbuktu, February 15, 22, and 24, 2003. Bringingtogether local development actors andrepresentativesfrom key centralstructures,the sessions focused on pinpointingblockages to the decentralizationand deconcentrationprocess, and the implicationsfor Bank operationsinMali. Bamako Consultation,March 20, 2003. This workshop allowed over seventy participantsto debate the contents ofthe CAS before it was finalized. Gender Focus, At all stages of the consultative process, women were actively consulted and involved and gender-sensitiveissues were frequentlyraisedduringthe discussions. 70. The overall direction ofthe CAS is to move away from structural adjustment operations and stand-alone investment operations inthe social sectors and to move towards multi-sectoral, budgetsupport operations inthose areas. At the same time, the Bank will continue to focus its strengths insupporting rural development and promoting sources o f growth. While it i s active inurban and transport activities, it i s important to emphasize that the Bank is not the leaddonor inthese sectors but rather provides complementary financing to that o f other donors. 71, BankLendingInstruments. The Bank's support to Mali will continue to bethrough a selection o f lending instruments, combining support from structural adjustment or PRSC lendingwith community-driven operations and specific investmentoperations: a) support through Structural Adjustment Credits (SAC), moving to Poverty Reduction Support Credits (PRSC) inthe third year of the CAS implementation. The Bank's positive experience with structural adjustment inMalihas shownthat policy-based lendingi s an effective mechanism o f support. Futuresupport will continue to focus on macroeconomic issues, public sector management (including decentralization) and reforms inthe cotton sector. As the overall fiduciary framework i s strengthenedand donor coordination enhanced, the Bank would move to further programmatic support to the PRSP through PRSC lendingin FY06(inthe highcase, the PRSCs could be introduced inFY05). The core diagnostic work for programmatic lending- such as the CFAA, CPAR, CEM, Poverty Assessment and PER -will all be inplace by the time the PRSCs are - 28 - introduced andthis would under-pinthe programmatic transition. Inthe future, PRSCs are expected to account for about 30% o f the annual IDA allocation. b) community-driven development operations which focus on raising the productivity o f labor and capital through supporting the productive sectors and fighting HIV/AIDS. These operations will draw from the successful experience to date with the IDA-financed Grassroots Hunger and Poverty Project (PAIB); and c) the Bank will continue its support through traditional investmentoperations concentrating on specific needs inthe transport sector and inprivate sector development with the goal o f enhancing the competitiveness o f Mali's economy. The Bank will continue to ensure that these investmentoperations are developed as part o f a comprehensive sectoral framework and inclose partnership with other donors. 72. MonitoringandEvaluation. To assess CAS performance, the Bank will monitor the CAS supportto the PRSP usingPRSP indicators (see Table 10 and the CAS Matrix inAnnex B9). The Bank will closely monitor portfolio performance indicators for all IDA-financed operations inorder to evaluate the effectiveness o f specific operations inachieving desired outcomes. Inaddition, the Bank will have regular consultations with the GoM, civil society and the donor community to get feedback and monitor implementationo f CAS priorities. The CAS will also monitor progress on key MDGtargets as indicated inAttachment 1. The quality o f Mali's statistical system will be a key factor inthe success o fthe monitoring and evaluation effort and capacity building for M&E will be a priority. Inparticular, the Bank and other donors will assist the GoM to: (i) rationalize the selection o f monitoring indicators to ensure their utility as management tools; (ii) enhance feedback loops to ensure that the monitoring and results indicators are usedinplanning and policy formulation processes; and (iii) theinvolvementofcivilsocietyintheM&EofthePRSP. support B. AssistanceProgram CAS Theme: PromotingGrowth PRSPPre-RequisitePillar: Accelerated andRe-DistributiveGrowth PRSPPillar 3: DevelopBasicInfrastructureandProductiveSectors 73. As highlightedinthe JSA, the key challenge inthe medium(and long) termremains how to broaden the economic base and strengthen growth so that the country i s ina better positionto withstandthe impact of adverse climatic conditions and external shocks. The Bank's strategy will focus on helping Mali to: (i) and diversify sources o f growth develop through improving the financial and businessenvironment for increased private sector development, includingfor micro, small, and mediumenterprises (with involvement fi-om the Bank-IFC SME department); (ii) and maintainnecessary infi-astructure; and build (iii) decentralizedgovernment,deconcentratedservicesandlocalpopulationswhile involve buildingcapacity. - 29 - 74. One o fthe areas o f weakness noted inthe PRSP i s that there i s very little mention o f exactly how the proposedPRSP investmentswill contribute to the sought-after growth rate, largely because Mali has not yet formulated a coherent and integrated growth strategy. For this reason, the FY04 CEMwill focus onthe growth prospects andwill articulate an integrated pro-poor growth strategy. Iti s expected that the sources o f growth will be from diversification o fthe agricultural base into fruits, vegetables andArabic gum, development of agri-business and transformation o f agricultural products (i.e. textiles), expansion o f mining, development o fthe tourism andhandicrafts industries andpromotion o fsmall and medium-sized enterprises in services, communications and other non-agricultural sectors. The Integrated Framework for Trade for Mali(IF) (underpreparation), an initiative supported by the World Bank, IMF, WTO, UNCTAD, UNDP, and the International Trade Commission, seeks to enhance Mali's integration into the world economy and intemational trade policy discussions. The trade diagnostic study will highlightMali's comparative advantages and formulate an actionplan for capacity buildingand technical assistance to promote export-led growth, centered around selected agri-industries and some traditional knowledge industries (namely music, handicrafts and tourism). The IF report will be discussed at the next UNRound Table for Trade tentatively scheduled for December 2003. - 75. The findings o fthe IF and CEM diagnostics will provide essential inputs to the design o fthe multi-sectoral Sources of Growth Project (FY05). While it i s too early to pre-judge the recommendations o fthe IFand CEM, itis expected that the Sources of GrowthProject will focus onthree components: (i) support to further legal and regulatory reforms to create a more conducive environment for private sector development, with particular emphasis on the communications sector; (ii) the implementation ofaninnovative SMEDepartmentinitiative inmicro, small, andmediumenterprise (MSME)development involving improving accessto capital and buildingknowledge. This would be complementary to the ongoing Financial Sector Project; and (iii) development o f the mining sector since, while gold became the largest export eamer for Mali in2002, it does not contribute as much as it mightto the economy's development7. The project will also ensure complementarity with the rural sector operations which focus on diversifyingthe agriculture base and developing agri-businesses. 76. To ensure selective and adequate coverage o f the rural sector inthe CAS, the Bank conducted extensive analytical work which identifiedeight key issues and challenges to rural development inMali: unevenproductivity, poor infrastructure, perpetuationo f barriers to decentralization, unfavorable business climate for private sector, limited diversification o f income, weak export competitiveness and unfinishedprivatizations, an inadequate risk management strategy, natural resources constraints and capital depletion. The key conclusion o fthis analysis i s that poverty i s synonymous to subsistence agriculture. Therefore, a key priority i s to allow farmers to get access to markets, generate cash income, increase productivity through input, equipment andtechnology and get out o fthe vicious circle o f subsistence agriculture, low productivity andpoverty. 'The mining component will seek to respondto three key GoM concerns:(i) to ensure that Malioffers the optimalpackage to bothattract incominginvestors and increase revenuesto the budget andthe economy; (ii) to strengthen its capacity to track and analyze what mining companiesare doing, bothingeneraloperations andwith respectto environmental concerns; and (iii)to help artisanal and small-scaleminersto operate inamore efficient andenvironmentallyfriendlier manner. The Bankhas acomparativeadvantage inthis areaas aresultof significantrecentminingwork inother countries. - 30 - 77. The fact that poverty i s predominantly rural points to the needthat growth must come from rural areas to increase rural incomes and provide employment (farm and non-farm). The sources o f growth inthe rural sector are quite well knownandthe Bank has experience and knowledge o f what kindo f investments can stimulate rural growth. The question i s more to formulate comprehensive programs, facilitate GoM commitment and mobilize the resources, particularly human, for implementation. For example, the livestock sector i s potentially important for growth and poverty reduction inview o f its role inthe rural economy. The same applies for nontraditional exports (fruits and vegetables, arabic gum, Tiger pea, etc.), for which markets exist andpilot marketingtests have beensuccessful (e.g. mango exports by sea). The actions to be undertaken to support development o f these sub- sectors needto be articulatedina clear and operational strategy fully backed by GoM and stakeholders. The Bank plans to do this inthe context o fthe CEM as well as through the rural operations. 78. The AgricultureDiversificationand CompetitivenessProgram(FY05) aims to buildonthe knowledgebase and raise ruralpopulation incomes through promotinghigh value-added agriculture products, raising agricultural productivity, increasingmarket access, upgrading irrigation equipmentandtechniques and improving cotton sector production. The program will be intrinsically linkedto the on-going cotton reforms beingpursuedthrough the SAC. The objectives o f this project respond to the pressingneeds for income generation, diversification and food security. The project will complement the on-going two rural development projects, namely the NationalProgramfor RuralInfrastructure(PNIR) and the AgriculturalServicesandProducerOrganizationsSupportProgram(PASAOP) which focus respectively on rural infrastructure and environmental protection and agricultural research and support to agricultural and producer organizations. 79. As outlined inBox 3, the Bank has beenvery active inhelpingthe GoM and stakeholders inthe cotton sector to respond to the severe crisis o f CMDT in 1999/2000, as well as to prepare and implementa sector restructuring program which is beingsupported through SAC-3. These reforms have beeninitiatedand the transition to a fully privatized and liberalized sector organization will require strong and steady support for a number o f years. GivenMali's comparative advantage inthe cotton sector, recovery ofthe sector remains a highpriorityandthe Bank's program will continue to provideclose assistanceto the country's efforts inthis regard. 80. As already mentioned, Mali's population is predominately rural and dependent onthe agriculture sector. While basic infrastructure i s essential and i s beingsupported through the PNIR, it alone will not catalyze rural development; rural populations also needsustainable revenue-generating activities. The proposed RuralCommunity-BasedDevelopment Project(RCBD-FY05) aims to create alternatives to rapidcity migrationby creatingrural job opportunities usinga participatory approach and by promoting social and productive investments. The operationwill also focus on capacity buildingfor local government, deconcentrated service providers and local populations, including civil society. It will build on the community-driven development lessons from the successful Grassroots Hunger and Poverty Project (PAIB) and will complement the activities o fthe PNIR. 81. The current UrbanDevelopmentandDecentralizationproject will be extendedto allow for full implementation. As the urbanpopulation continues to grow, the Bank will conduct UrbanAnalysis ESW to take into account rural-urban migration issues and to - 3 1 - determine the priority issues facing urbanareas. The results of this study will enable a sound designo f a follow-on operation (preparation inFY06) which would focus on secondary cities, including the capitals o f each region and on strengtheningthe capacities o f the municipalities and other decentralized entities to manage resources and development programs. 82. A Household Energy and UniversalAccess Project (FY04) will bejointly financed by GEF, IDA and UNDP. Inaddition to helpingGoM focus on strategy, policy, and monitoring and evaluation, the householdenergy component will helptransfer the management o f forest resources to local communities by promoting community-based forest management initiatives, including the introduction and the promotion o f efficient charcoal production technologies. Itwill also empower local communities, NGOs and the private sector to operate demand-side inter-fuel substitution initiatives such as the manufacturing, commercialization and dissemination o f improved (wood, charcoal) stoves as well as kerosene and LPG stoves. Dueto the vast expanse o f Mali, andthe low density o f population inmany regions, it will not be viable to connect the entire country to the grid; thus many areas will dependon appropriate rural electrificationschemes. The projecttakes into account transversal aspects such as solar power for rural health clinics and schools, as well as for agro-industrial transformation. The Netherlands are currentlyfinancing an interimHouseholdEnergyproject. This projectwill be implemented inparallelto the Western Africa Power Project (WAPP, currently under preparation) which aims to build and reinforce regional electricity transmission lines (see Box 6 for further details o f regional activities). Mali will be the beneficiary for about US$70 million o f this US$250 million credit, for its 541 kilometer share o f the transmissionline linking Segou inMali to Ferkkssedougou inC6te d'Ivoire. 83. Ina landlockedcountry as largeas Mali, the transport sector is critical to improve access both to and withinthe country. While the European Commission i s the lead donor in financial terms for road investments (about EUR140 million over the next four years), there i s still a need for Bank involvement, inparticular regardingthe policy framework and to help ensure a coherent sector-wide approach. Inthis respect, the Bank i s working very closely withthe EUon the preparationof an Interim Transport Project which is near completion (early FY04), focusing on: (i) redundancies for RCFM (railway) staff to increase the efficiency o fthe firm as it i s concessioned; (ii) rehabilitationo ftwo major roads; and the (iii) mitigating the adverse effects on road quality as a result o fthe C6te d'Ivoire crisis. This project will be an integral part of the Bank's regional efforts to develop and improvethe transport corridors inwestern Africa. A plannedTransport Sector and Growth E S W (FY04) will focus on the linkages betweentransport and other sectors and will provide support to the agenda o f growth with equity which will be pursuedunder the Second Transport Sector Program (FY06). This program will be designedinclose collaboration with several other donors -EU,France, AfDB, IsDB,Kuwaiti Fundandthe Saudi Fund. The Bank financing will be complementary to that provided by these partners. 84. Three Global Environment Facility (GEF) operations will be launched inMali over the nextthree years. The Biodiversity Project (FY04) aims to halt and, insomecases, reverse biodiversity degradation trends inkey conservation areas and project sites; this project i s beingprepared and implementedinpartnership with France (French GEF). Two - 32 - large multilateral efforts to improve resource management along the Senegal and Niger River Basins should come to fruition inFY04 and FY06 respectively. Box 6: BankActivitieson RegionalIntegration As alreadymentionedinParagraphs42-44, Maliis a member ofUEMOA andECOWAS andplays a key role inseveralregionalintegrationactivities. The Bank's 2001RegionalIntegration AssistanceStrategy (RIAS) seeksto supportthe objective of deeper regionalintegrationchosenbythe countries ofWAEMU andECOWASby promotingan Open, UnifiedRegionalEconomic Space (OURES), anda conducive environmentto facilitate the growthof a moreefficientand competitiveprivate sector. Italso seeksto support the Region's own goals ofacceleratinggrowth and alleviatingpoverty, while recognizingthat assistanceto individualcountries-with a heightenedfocus on cross-borderconstraintsandopportunities facing a country - will remainthe primaryvehicle for support fromthe Bank. The followingregionalactivities all play a core role inthe Bank's overallsupportto Mali: The West AfricanPower Project(WAPP) aims to buildandreinforceregionalelectricitytransmission lines throughfinancing a linebetweenCBted'Ivoire and Maliand to assist indevelopingthe regulatory framework for regionalpowertradewithin ECOWAS(see para. 82). The harmonizationoftelecommunicationspolicy andthe establishmento fa regionalregulatory framework is likely to feature as a component ofthe Sources of GrowthProject(FY05). The Bank is providingsupportto regionalwater managementissuesthrough AAA work and a regional IDFto the Organizationfor the Developmento fthe Senegal River(OMVS). The proposedtransport operationsare beingdesigned within an overall regionalframeworkfor strengtheningand diversifyingthe transportcorridors inwesternAfrica. The Bank's AAA will focus on fast-tracking integrationbetweenMali, Senegal and Guinea A RegionalPaymentsSystem Creditto the BCEAO is under implementationthat seeks to establish paymentsystems adaptedto the marketneedso fWAEMU andthat are internationally acceptable. Supportto the implementationofthe WAEMUAgriculturalPolicy(adoptedinDecember 2001). 0 A proposedInstitutionalandFinancialDevelopmentProjectfor the West AfricanDevelopmentBank (BOAD) whichwould promotethe developmentof integratedfinancialmarketinginwesternAfrica. C A S Theme: Developing HumanResources PRSP Pillar 2: Develop HumanResources and ImproveAccess to Quality Basic Services 85. The Bank proposes to focus on: (i) solidifying the necessary framework for sustainable human development; (ii) increasing participation and local accountability in deconcentrated service delivery; (iii) improving access to quality services; (iv) working more closely with donors to buildcapacity o f GoM and other development actors; and (v) working with NGOs, the private sector, community groups and civic organizations to reduce the risk o f an HIV/AIDSepidemic. 86. The Bank will work with the donor community to seek to transform the ongoing education sector operation PISE into a fully pooled SWAP duringthe transition to budget support. At present, many donors finance the PISE; while the EuropeanUnion, the Netherlands and Sweden finance through budget support, other donors are still earmarking funds to be usedfor specific sub-programs. As previously mentioned, the problems related to the multiplicity o f donor procedures and allocation criteria are a major cause o fthe slow - 33 - disbursements. Ifnecessary, the closing date o fthis project may be extendedby one year. In FY05, the Bank will undertake EducationSector StrategyESW ineducation to helpdefine the focus o fthe second phase ofPRODEC, the ten-year education program, andto strengthen the MTEFfor education to feed into the PRSCs inFY06. Furthermore, Mali is a candidate for the Educationfor All initiative,which should significantly increase funding to the education sector inorder to accelerate the rise inenrollment rates while improving education quality. 87. The first phase ofPDDSS, Mali's ten-year health and social development program, ends inDecember2003 andthe Bank's PRODESSsupport operationis due to close by mid- 2004. The Bank will consider extendingthe closing date to finance the early part o f designingthe second phase. A HealthSector IssuesESW will be carried out inFY05 to provide technical support to the second phase o f PDDSS and to feed into the preparation o f the PRSCs. Itis expected that subsequent support to the healthsector will come through PRSCs, to helpreduce the current hightransaction costs due to the multiplicity o f donor procedures. 88. The 2001Adult HIV prevalence rate was estimated at 1.7%; however, the significant population movements due to the crisis inneighboring Ivory Coast (where the HIV/AIDS prevalence rate i s 9.65%) pose a potentially serious threat to Mali. The proposed Multi- sectoralHIV/AIDS Project(FY04), to be fundedthrough anIDA grant, will, inter alia, support community efforts on fighting HIV/AIDSthrough capacity building, establish an information-education-communication (IEC) mechanism, and create partnerships particularly with the transport andprivate sectors to fight the disease. The project will complement other ongoing HIV/AIDS prevention initiatives such as the work o f UNAIDS and activities under the HIV/AIDS component ofthe PDDSS. Itwill also focus specifically onthe gender dimensions o f HIV infection as the infection rate for women i s higher than for men. CAS Theme: PublicFinanceManagementand Governance PRSPPillar 1: PromoteInstitutionalDevelopmentWhileImprovingGovernanceand Participation. 89. GivenMali's satisfactory maintenance o fmacroeconomic stability and its recent completion o f the PRSP, the GoM has indicated that it would eventually like to benefit from budget support for the implementationo fthe PRSP. As already outlined inParagraph 71,the Bank proposes a gradual move towards the introduction o f PRSCsinFY06. As it moves to PRSCs, the Bank's assistancewill focus on carrying out the core diagnostic reports (as shown inTable 7),and strengtheningpublic sector management and governance, which were highlightedinthe JSA as particular concerns. 90. Giventhe negative impact ofthe C6te d'Ivoire crisis onthe Malianeconomy, the G o M would needadditional assistance incalendar year 2003 to support the implementation o fthe PRSP program: the Bank i s planning to provide assistance througha supplemental credit to the on-going SAC-3, provided that the GoM has outlined appropriate actions to take to respond to the situation. As the Bank moves to introduce PRSCs by FY06, it will continue to provide balance of payments support through a fourth StructuralAdjustmentCredit - 34 - (SAC-4,inFY04), which will support continuedpublic expenditure management reforms, budgetmanagement reforms and initiate support to decentralizationreforms (thusalso supporting Pillar 2 o fthe PRSP), as well as cotton sector reforms (thus supporting Pillar 3 o f the PRSP). With respect to decentralization, the focus ofthe Bank's work will involve strengtheningcentral and deconcentrated levels of GoM, as well as the elected representatives of municipalities, districts, andregions to: (i) assess, focus, and reinforce their structures; (ii) improve accountability, control o f public finances, efficient and transparent resource allocation, and overall good governance inpublic management; and (iii) integratepublicparticipation. better 91. The Bank's AAA programwill concentrate onthe following: (i) assisting the GoM implementthe recommendations o fthe 2003 CFAA which is being completed inpartnership with theNetherlands and Canada; (ii) continuing to work closely with the IMF on implementingthe action planofthe HIPC Expenditure Tracking Assessment; (iii) updating the 1998 CPAR and ensuringimplementationofthe recommendations; (iv) continuing the close dialogue with the G o M on the implementation o fthe recommendations o f the Anti- Corruption Program; and (v) analyzing further necessary policy and structural reforms through the C E M planned for FY04. Table 7: AAA Program Ongoing FY04 FY05 FY06 Priv. Sect. StrategyNote PRSPProgressRpt 1 NewHealthEducation NewPoverty CottonPoverty Study (PSIA) Review ESW Assessment Livestock PovertyGrowth IDF Supportto Min. NewUrbanESW Niger RiverBasin SenegalRiverWater Resource Women PRSPProgressRpt2 support Mgt CEMISourceso f Growth Review PRSP 2 Review Supportto PovertyReduction with Equity(RPT) Strategic Gender Reg'l Program Info. System(PRIS) CPAR Assessment TraditionalEnergy Transport Supportto Growth & JSDF Supportto NGOs CPPR Sector Equity Supportto PER (CNS)/ STATCAP IntegratedFrameworkfor Trade MTEF UNDPRoundtable Preparation 92. Mali conducts its own Public ExpenditureReviews(PERs),under an agreement including ex-post review by the Bank andthe IMF. To further strengthenthe GoM's capacity to prepare PERs, the Bank will provide close analytical and technical assistance throughout FY04 ina framework o f dialogue with other donors. The Bank will also continue support to the development o f sectoral medium-termexpenditure frameworks (MTEF). The last PovertyAssessment was undertakenin 1993; while the work undertakenfor the PRSP provided an adequate poverty diagnosis, based on an indicator o f access to basic social services, there was very little data available at the time to allow full discussion o fthe dimensions o fpoverty(this was indicated inthe JSA as a weakness o f the PRSP). Through a Belgian trust fund, a full poverty assessment is beingundertaken inorder to better understand the determinants and dynamics o fpoverty, as well as the impact of GoMpolicies andactions on poverty. InFY06, the Bank will again updatethe analysis o fpoverty which will, inter alia, allow for a comprehensiveassessment ofpoverty trends since the 2003 analysis. - 35 - 93. The poverty assessment will also provide a richbasis for the preparationo fthe FY05 GenderAssessment which will deepen andbroadenthe Bank's work inaddressing gender issues and will feed into the PRSP through facilitating a more gender-responsive agenda. Genderis a crosscuttingpriority inthe PRSP and the Bank will be supporting several non- lending operations to support gender issues. Inconjunction with the Japan Social DevelopmentFund(JDSF), the Bank will support the capacitybuildingof community- based legalaid NGOsthat target vulnerable groups (widows and orphans living with HIV/AIDS; victims ofharmful traditional practices). Furthersupport to gender issues will be contributed through an FY04 IDF grant for InstitutionalSupportto the Ministry of Women, ChildrenandFamily. 94. The plannedPoverty and Social Impact Analysis (PSIA) work inthe cotton sector will evaluate the impact o fthe cotton sector recovery program on rural poverty andpropose policy recommendations to increase the impact o f cotton growth on poverty reduction. This analysis i s expected to yield qualitative as well as quantitative results which will feed into the consultations regarding the next phase o f the reform program and help fine-tune implementation o fthe program. A PSIA on macro-growth policies i s also proposed to be carried out inconjunction with the CEM. 95. The JSA highlightedthe lack ofa clear mechanism for Monitoringand Evaluation (M & E)ofthe PRSP as well as acomplete list ofquantifiedresults-oriented indicators. The Bank works closely with the GoM and other development partners to strengthenthe M&E framework and ensure a more results-based focus. The Bank's PER, MTEF and AAA support to statistical services will contribute to this goal. With respect to participation, the JSA highlightedthe needto institutionalize participatory mechanisms that involve stakeholders inthe implementationand M&E of programs. Consequently, stakeholders and beneficiaries will be increasingly involved indeterminingindicators and measuring progress. A range o f Observatories (poverty, labor, social affairs, etc.) is providing analyses and thematic studies on their sectors' status, the impact o f sectoral policies and makes policy recommendations. These institutions play a key role indissemination o f information. The GoM, with the support ofthe Bank and donors, i s strengthening the dissemination aspect of the M&E systemthrough puttingthe focus onthe establishment o fweb-based networks of interrelated databases to be developed progressively while, at the same time, strengthening o f the communication systemat the regional andcommunity level. 96. The Bank will continue to provide support to developingM& E systems through a variety o f instruments: (i) underthe GRIP project, support is beingprovidedto the Sustainable HumanDevelopment Observatory (Observatoire du de'veloppementhumain durable - ODHD) andto the NationalDepartment o f Statistics (DirectionNationale de la Statistique et de 1'Informatique DNSI)to improve decisionmaking inpoverty alleviation - and to carry out the population census and a household survey. The ODHD i s operational and i s being supported also by UNDP; and (ii) the proposed CBRD project, support will under be extendedto the DNSIto enable them to carry out householdsurveys, monitor the evolution o fpoverty inrural areas, evaluate the impact o fprojects on poverty reduction, and helpthose projects better target poverty stricken communities and areas. The CBRD project will also continue the support provided under the Natural Resources Management project (now closed) to continue strengthening the Environmental Information Systems (EIS) and buildcapacity inseveral national agencies which are charged with environmentalmonitoring. - 36 - 97. Mali i s currentlypreparing a Statistical Master Planwith the assistance of another World Bank facility the TrustFundfor StatisticalCapacityBuilding,TF-SCB. The TF- SCB i s a grant which supports a three-year strengtheningprogram for the statistical system. Itwill helpthe country reviewand update thenational strategy for the development ofthe statistical system prepared since 2001 as the "Schema Directeur de la Statistique" and format itas a Statistical Master Plan(SMP). Once the Master Planis adoptedbythe Government, a STATCAP program could be prepared for a ten-year period to support the cost o f recurrent statistical activities (National accounting, Price Index, Social Accounting Matrix, Statistical Yearbooks, etc.) as well as survey programs. 98. The GlobalDistanceLearningNetwork (GDLN) is a transversal public-private, institutional and civil society capacity buildingoperation planned for FY04. Distance learning will bring quality educational and training programs to a muchwider audience in Mali than would otherwise be possible. It i s also expected that Mali would benefit from a grant proposed to help launch a portal inthe Development Gateway during the CAS period. C. LendingScenarios 99. The IDA FY04-06 allocationfor Mali is set at US$390 millioninthe base-case scenario, US$462 million inthe high-case scenario and US$237 million inthe low-case scenario (Table 8). The planned operations for Mali are relatively large (withthe exception o f the GDLNproject) so as to allow for consolidation o fthe project portfolio around fewer operations. These projects are, to the extent possible, multi-sectoral operations and involve partnerships with donors, NGOs, the private sector and civil society. There i s a degree o f front-loading o fthe lendingoperations primarily because planned FY03 operations were pushedto FY04 as their preparationsuffereddelays resultingfrom the 2002 Presidential and legislative elections and the formation o f a new Government. 100. Base-casescenario. Mali i s currently inthe base case. Underthe base-case scenario, lendingfor Maliwill amount to up to US$390 million. This scenario is predicated on continued good macroeconomic performance, satisfactory implementationo f the PRSP, transparency and accountability inpublic finance management, and portfolio management (Table 9). Strengthening the performance o f Bank operations will be a central element o f the Bank's assistanceto Mali, with a core focus on continued implementation o f the actions outlined inthe PIP and highlightedby the CPPR. Delays inimplementingthe PRSP and difficulties incarrying out public finance management and governance measures could preventMali from achieving the highcasetriggers. However, sustained and better coordinated support on these issues from donors and the Bank should help Mali to address these challenges. - 37 - Table 8: IDA Lending Operations ey(14 BASE CASE IDA $ FY05 IDA $ FY06 IDA$ TOTAL I 15 RuralCBD** 50 Transport Sector2 15 Ag. Divers'n & Comp. 35 PRSC-1 38.7 SourcesofGrowth SAC-4 55 GDLN* 2.5 HouseholdEnergy 35.8 162 1 FY04 IDA $ FY05 IDA $ FY06 IDA$ TOTAL HIV/AIDS * 15 RuralCBD** 50 Transport Sector 2 90 SAC-3 Supplemental* 15 Ag. Divers'n& Comp. 35 PRSC-2 35 InterimTransport** 38.7 Sourcesof Growth 55 SAC-4 55 PRSC-1** 35 GDLN* 2.5 HouseholdEnergy 35.8 162 175 125 462 FY04 IDA $ FY05 IDA $ FY06 IDA$ TOTAL InterimTransport** 38.7 Ag. Divers'n & Comp. 35 HealthEduc. 20 GDLN* 2.5 Sources of Growth** 50 Rural CBD 40 HIV/AIDS* 15 HouseholdEnergy 35.8 92 85 60 237 I *** Operationsplannedto be filly financedby IDA grants I I I I I I Operationsplannedto be partiallyfinancedby IDA grants 101. High-case scenario. Lendingcould increase to upto US$462 million under the high- case scenario, with the PRSCs introduced inFY05 ($35 million) and the allocation to the Second Transport Project increased to $90 million. This scenario i s predicated on accelerated progress on the four criteria outlined inTable 9. There i s a good possibility that Mali could meet the triggers for the highcase due to the following factors: (i) it has a strong track record inimplementingmacroeconomic and structural reforms, and this good performance i s expected to be maintained; (ii) the GoMand development partners are fully committedto the PRSP and its reformprogram andthe PRSP provides a more comprehensive framework for GoM activities and donor interventions; and (iii) progress on key sectors - such as healthand education -has beenstrong since 1998,thus providing a - 38 - solidplatformfor continuedgoodperformance andachievementofPRSPtargets, particularly with a moreprogrammaticsupportfrom donors. 102. Low-case scenario. The low-casescenario i s determinedon Mali not beingable to meetthe base-casecriteria. Inthis case, lendingwouldonly be upto US$237 millionas the Bankwould not do any further adjustmentlendingandwouldreduceor delay other lending operations. The PRSCswouldbepostponeduntilFY07(or beyond). Ifnecessary, an investmentoperationwouldbepreparedto support the health andeducationsectors, inthe absenceofbudgetary support fromthe PRSC. The focus ofthe Bank's work would shift to supportingcapacity buildingto enableMalito movebackto the base case. 103. Use of IDA Grants. Mali qualifies for IDA grants as a debt-vulnerableIDA-only country as per the guidelines which set the criteria as part ofthe IDA-13 replenishment framework. Onthis basis, IDA grants canaccount for 29% ofthe lendingprogramalthough the actual percentageofthe lendingprogramwhich may be financedby IDA grants is establishedon an annualbasis. The strategyfor the use ofthese grantsinthe Maliprogram i s to apply them to those Bank activities which support the priorities o f the PRSP. InFY04, the GlobalDistance LearningNetworkProject,theproposedHIV/AIDSMAP operation,and the proposedSAC-3 SupplementalCreditwouldbefinancedthroughIDA grants. The InterimTransport ProjectinFY04andthe RuralCommunity-BasedProjectinFY05would bepartially fundedthroughIDA grants. Table 9: CAS ScenarioTriggers Base Case High Case (Base Case plus) Monitoring Mechanisms Macroeconomic framework: Continuedmaintenanceofgood Strongmacroeconomicperformance Supervisionof SAC-3 macroeconomicenvironmentas surpassingthe PRSPmacro targets IMFPRGF supervision witnessed by continuedsatisfactory Analysis of macroeconomic implementationofthe PGRFprogram policy measures identified in and/or attainment ofthe PRSP macro PRSP, Le. domestic revenue goals mobilization PRSPProgressReports Joint StaffAssessment PRSP: Satisfactory implementationof Accelerated progressmadeon PRSPProgressReport the PRSP andprogresstowards implementingthe PRSP and Joint StaffAssessment meetingindicatorsspecifiedinAnnex achievingthe "Poverty Reduction Indicatorsfrom Healthand 1of the PRSP: "Poverty Reduction Targets" outlined inAnnex 1o f the Educationsector-wide Targets". PRSP, particularlywith respectto programs achievementsinthe healthand education sectors. Base Case High Case (Base Case plus) Monitoring Mechanisms Transparency and accountability in Strong implementationof the action CFAA follow-up public finance management: planwith the following CPAR follow-up Preparationof actionplanto achievements: (i) timing for the Anti-Corruption Report implement CFAA, CPAR, andAnti- Lois de Rsglement shouldbe follow-up corruption Reportrecommendations. GovernmentandParliament adopt this actionplan andprovidesufficient financingandsupport for its implementation. Portfolio management: ~ 25% or less o f projectsat risk; 20% or less of projectsat risk; CPPR disbursementrate 1 15% disbursementrate 2 20% Regular portfolio analysis V. RISKS & RISKMITIGATION 104. Mali enjoys relative stability, bothinpolitical terms and interms o f macroeconomic management, thus considerably reducing overall risk. However, there are both exogenous and internal risks to Mali's development andthe successful implementation o fthe FY04-06 CAS, which the Bank's programproposes to mitigate. The PRSP appropriately signaled the following four major exogenous risksthat could compromise the achievement o f development andpoverty reduction objectives, andthus also CAS objectives. 105. Natural risks (drought andpest infestation, etc.), which influence agricultural output. To mitigate these risks, the emphasis inthe PRSP i s on further developing Mali's largely untapped hydrological potential and on ensuringfood security i s primarily intendedto address this vulnerability. The Bank's program supports this goal through the several agricultural and rural infrastructure operations either already under implementationor proposed. 106. Thevolatility of commodity prices (mainly cotton and gold). Mali's vulnerability to volatile commodity prices stems from the lack o f diversity inits agricultural production and product transformation. The Bank's program i s focused around developing sources o f growth and diversifyingthe economy. Moreover, the Bank's continued support to the cotton sector through the SAC-3 i s strengthening further the competitiveness o f the sector. The CAS also mitigates the economic riskthroughpromoting stable macroeconomic policies and ensuringsufficient structural adjustment assistanceto respond to the negative impacts. Finally, the availability o f IDA grant financing inIDA-13 will also contribute to ensuring that Mali's debt levels remain sustainable. 107. Uncertain external assistance, which is especially important for the strategy's success, giventhe ambitious government revenue projections and growth rate. This risk can bestbe mitigatedby Mali demonstrating that it is increasing its absorptive capacity and improving the efficiency o fpublic expenditure management. The thrust o f the CAS with - 40 - respect to portfolio management and strengtheningthe fiduciary framework i s designedinter alia to help Mali make a tenable case for sustained and, ifpossible, increasedexternal support. This risk i s also beingmitigated by strengtheningdonor coordination so that various partners are ready to help cover any unforeseen resource gaps that may emerge. 108. Continued negativeimpactsof the C6te d'Ivoire crisis. The impact o fthe crisis on GoM's revenues can be mitigated through the proposed supplementallending o f the SAC-3. The impact onthe flow o f exports andimports dueto transport bottlenecks andhigher costs will be mitigated through the proposedtransport sector operations which will helpMalito strengthenother corridors for trade and reduce the cost o fusingthem. Finally, the Bank is working closely on regional integration issues inWest Africa which will promote a more integrated approach inthe regionto transport and infrastructure. 109. Finally, as regards internal risks,the mainrisk i s posed by the weak institutional capacity and governance inMali, particularly on the decentralized and deconcentrated levels. The risk ofnot been able to sustain a serious legal andjudicial reform effort would also endanger the economic development goals andweaken the democratization effort. Several donors are already working with GoM to build capacity on decentralized/deconcentrated levels. These efforts will be reinforced through close follow up on the recommendations o f the CFAA, CPAR andthe Bank's Anti-Corruption Report inorder to ensure that financial mechanisms and institutional structures inplace truly respond to needs. The risk o f slower- than requiredprogram implementation owing to capacity constraints will be reduced through continued technical support by the World Bank and other donors to buildcapacity through the PRSP process. VI. MEASURINGRESULTS 110. The CAS focuses on definingandmeasuring results inthe framework of the overall monitoring and evaluation o fthe PRSP. Table 10 outlines the CAS measurable indicators which include the PRSP targets for 2006 which focus on making progress towards the MDGs. Inthe context o fthe annual PRSP Progress Reports andrelatedJSAs, as well as through continuous monitoring o f the project portfolio, the Bank will assess the achievement o f the CAS on meeting the PRSP goals. PRSPKASTheme CAS ProgressBenchmark AssociatedCAS Instrument Theme: PromotingGrowth - PRSPpre-requisitepillar: - Strengthenmacro-economic SAC-4 management PRSCI Acceleratedandre- - Developand implementgrowth Sourcesof Growth Project -distributivegrowth strategy AgriculturalDiversificationProject PRSPPillar 3: Develop Continuecotton sector reform Rural Community-BasedDev't Proj. basic infrastructureand -- Monitorbudgetspendingfor UrbanDevelopmentProject productive sectors povertyreductionprograms InterimTransport Project - StrengthenMTEF andprogram- SecondTransportSector Program basedbudgeting - Strengthenstrategy Bio-diversityproject for pursuing PER agricultural diversification CEM -41 - IAdequate provisionofpublic IntegratedFramework for Trade nfrastructure Transport Sector andGrowth ESW UrbanAnalysis ESW Theme: DevelopingHuman 'Expandaccess to and quality of EducationSector ProjectPRODEC- Resources - PRSPPillar social service delivery fully pooled 2: Develop .Maintainor increaseratio of HealthSector ProjectPRODESS humanresources and improve :xpenditures inhealthand Multi-SectoralHIV/AIDS Project access to qualitybasic :ducation sectors to GDP (or PRSC 1 services :xpenditure inpriority sectors as a RuralCommunity-BasedDev't Proj. rhare oftotalexpenditures). EducationSector StrategyESW .Developand/orstrengthenMTEF EducationForAll Initiative .Forprioritysocial sectors. HealthSector IssuesESW HIV/AIDS: preventiveand PovertyAssessment :ounseling services inplace and a nationwideIECcampaign underway. Theme: PublicFinance .Implementactionplanofthe SAC-4 ManagementandGovernance HIPCExpenditureTracking - PRSPPillar PRSC 1 1: Promote Assessment RuralCommunity-BasedDev't Proj. institutionaldevelopment - Update 1998 CPAR and GlobalDistanceLearningCenter while improvinggovernance implementrecommendations EducationSector StrategyESW andparticipation - Implementactionplan ofthe EducationFor All Initiative 2003 CFAA - Significantlyincreasedshare o HealthSector IssuesESW f CEM Governmentprocurementsubject CPAR to competitivebidding - Development CFAA o fMTEF as a tool PER for annualbudgetformulation, PovertyAssessment progressivelyintegratingkey TrustFundfor Statistical Capacity sectors - Greaterinvolvement o Bldg. f PSIA in Cotton Sector communities,NGOs andother JSDF support to NGOs developmentpartnersinthe PRSP IDF Supportto Ministryo f Women andpoverty reductionprograms VII. CONCLUDING REMARKS 111. Mali's PRSP, together with its good track record on economic management and structural reforms, have laid a solid foundation for the Bank's CAS. It i s expected that Mali's commitment to the objectives o f the PRSP and its strong partnershipwith the World Bank will result insatisfactory implementation o fthe PRSP andthe CAS. The Bank is committed to working closely with the Malian authorities and all development partners to reach this goal. James D.Wolfensohn President by Shengman Zhang Washington, D.C. July 7,2003 - 42 - Attachment 1 MILLENNIUMDEVELOPMENT AND PRSPGOALS s and girls alike, will be able - 43 - Attachment2 REFORMPROGRAMOF OFFICE DUNIGER Water for PovertyReduction,EconomicGrowthand FoodSecurityinMaliProject ProjectData Region Africa The project sought to reduce poverty, increase Country Mali agricultural production, reduce government Project Name Office du Niger Consolidation subsidies and support agriculture by: Dates FY90 - FY2000 Agriculture, fishing, and 0 providing strong incentives to farmers to Sector(s) forestry increase production; 0 improving the efficiency o f irrigation management; and 0 creating mechanisms for sustainable irrigation development. The method included reforming the irrigation agency (Office du Niger or ON), rehabilitation and modernization o f irrigation canaldstructures, and agricultural policy reforms (rice price/market liberalization and land tenure). The project also sought to: (i)strengthen and narrow 0 " s focus on infrastructure management and agricultural services by divesting its commercial activities and by making its operations more transparent; (ii)forge stronger partnershipsbetween ON, GoM and farmers through performance contracts, training and improved financial management; and (iii) rehabilitate and modernize irrigation networks and increase farmer involvement in water fee determination and management o f maintenance. Impacts According to OED, the project appears to have been successful in overcoming institutional 0 The GoM has liberalized the rice trade problems which have been identified as key and markets and sustainedthat reform; constraints to the improvement of O&M performance in other countries. The ON is The ON was restructured, its financial described as being transformed from a bloated health restored and the investment bureaucracy to a lean and efficient organization program successfully implemented; accountable to both users and government. Reduced milling costs saved GoM $1.6 milliodannum and reducedmilling costs to farmers/consumers by $6 milliodannum; Paddy production increased from 98,000 to 271,000 tons; Water fee collection rate increasedfrom 60% to 97%; Production o f non-rice crops, such as onions (71,000 tons), garlic (800 tons) and pepper (600 tons) increased. Cropping intensity increased from 75% to 120%; Real per capita income increased by $70/annum and productionexceeded targeted level by 37%; Duringthe decade population on the scheme doubled from about 105000 to 210000, largely due highimmigration rate: hence a significantcontributionto poverty alleviation; 57 km o f canals and main drains were rehabilitated and modernized; The success o f the project led other donors to finance even more perimeters in successive tranches - the Bank`s investment leveraged 250% more investment from other donors; -45 - 0 Difficult institutional reforms, particularly those that go beyond a single ministry, should be headed by an independent agency outside the concerned ministriedagencies. Potential Bank Role in Future of Office du Niger 0 Bank could play an important role to facilitate future reform agenda, including: Increased cost recovery to ensure the maintenance o f all infrastructure, including primary infrastructure (whose maintenance is currently financed by GOM), and payment o f all or part o f the investment cost, given the increased profitability o f investments at ON. In parallel, increased empowerment o f farmers and increased responsibility for O&M decisions; Furtherreductioninthe part o fO&M charges spent on overhead; Increased land tenure security, while maintaining deterrents against non-payment o f O&M charges; Strengthening farmers' organizations for better proficiency in input purchase and output marketing strategies; Given the present profitability o f irrigated rice and vegetable production, facilitate increased private sector investment in further development o f irrigation infrastructure, e.g., through devising mechanisms, in collaboration with MIGA and IFC, for availing long term financing to would-be private investors in the ON zone; Continued support to improving access to markets to facilitate input purchase and output/product distribution; and Further attention to environmental externalities. - 44 - Yields increasedfrom 1.8 to 5.5 M T k a (see figure 1) while the ex-post ERR was 30%, compared to 16% at appraisal; G o M was able to push through difficult institutional reforms involving divestiture and staff layoffs (70% o f staff was laid off); Participation was strengthened through farmer membership on management committees, ON Board, and overseeing performance contracts; The project transferred credit responsibility from ON to the State Agricultural Bank and stimulated private investment infarm infrastructure. Credit was initially used for equipment, oxen and fertilizer, with repayment rates o f over 95% ; and Water fees are retained in the areas where they are collected; at least 50% are used for maintenance while only 10-12% are transmitted to Head Office for general use. 7,000 Evolutionof Paddy Yield ~ -6 6,000 Q 5,000 Y 4,000 a 3,000 2,000 1,000 0 Z i % % 3 % 6 % % % S ~ $ ? S % 8 6 % % 8 6 ~~~~~~Cn~~~~~~Cn~~~OO N N Year Fig 1: evolution of paddy yields in ON Lessons Learned For greater impact, sector reforms and investments require a conducive macro framework such as the proper valuation o f the national currency, a low inflationary environment and a liberal trade policy. In addition, sectoral reforms should be accompanied by adequate complementary sectoral investments inorder to have a major impact. A well-coordinated multi-donor effort is essential for high impact investments which utilize potentialsynergy and complementarity within and between sectors. Farmer empowerment and transparency is essential for greater water fee recovery and sustainability in irrigation schemes, and the fee settingmechanism should be an independent and transparent process, based on clear needs and free from G o M interference. Greater transparency in land management increases farmers' land security, even in the absence o f land titles. - 46 - Attachment 3 Mali: IDA Lendingand Debt Sustainability Introduction The enhancedHIPC Initiative reducedMali's external debt burdenconsiderably. At its recent completion point inMarch2003, Mali's creditors committed themselves irrevocably to reducing Mali's external debt by $417 million inNPV terms as o f end-1998, bringingthe NPV o f debt down from 184percent to 126percent o f exports as o fend-2002. This i s in addition to the $121 million committed under the original HIPC Initiative. The Boards o fthe Bank and Fundconcluded inMarch 2003 that inthe absence o f major exogenous shocks, this relief reduced Mali's debts to a sustainable level. At the same time it i s widely recognized that achieving long-term debt sustainability requires prudent debt management on the part o f the authorities along with the provision o f financing on suitably concessional terms by the international community. Giventhat the completion point document was presentedto the BoardinMarch2003, the macroeconomic projections underlying the completion point debt sustainability analysis have beenretainedinthis annex. The baseline scenario, predicated on base case IDA lending and a successful diversification o fthe export base, indicates that Mali's debt to export ratio may increase gradually over the next decade, but i s expected to remain under 150percent, peaking at 142percent in2014 and gradually declining thereafter. External debt service i s expected to remain below 7 percent and 10percent o f exports and revenues respectively over the projection period. Sensitivity analysis, however, indicates that the NPV debt burden indicators could rise sharply ifMali's exports grow more slowly than projected or ifMali i s hitby exogenous shocks (such as declines intheprice ofgold and cotton or arecurrence of drought). SensitivityAnalysis The baseline scenario is predicated on continuedfiscal consolidation, a gradual diversification o f the export base, and the absence o f major external shocks. Reforms are expected to increase productivity inthe cotton sector and to stimulate greater value-added in agricultural productionand processing. Reforms to the legal system and regulatory environment are expected to stimulate the private sector and attract foreign investment. The base case scenario also assumes IDA grants at 29 percent under IDA-13, Untilthe successful diversification o f the export base i s achieved, however, Mali's export earnings remain exposed to price volatility, disruption o ftransport links, and climatic conditions. The speed with whichthe private sector will respondto the reforms undertaken by the GoM is not yet clear. An alternative scenario i s therefore providedto indicate the effect onthe NPV debt-to-export ratio o f nominal annual export growth at 5.1 percent (the average growth rate 1998-2002) from 2004 onwards (as compared with 6.6 percent average growth from 2004 onwards inthe baseline scenario). New borrowing i s keptto the levels projected inthe baseline scenario, and IDA lendingi s assumed to be at the level o f the base case. - 47 - The evolution o f Mali's debt-to-export ratio i s also very sensitive to the terms o f new financing. A second alternative scenario therefore assumes a decreased provision o f capital grants equivalent to half a percentage point o f GDP from 2004 onwards, and an equivalent increase inthe level o f concessional borrowing. Figure 1illustratesthe impact ofthese scenarios. Inthe case ofthe lower exports scenario, in the absence o f any moves to constrainnew borrowing, the debt-to-exports ratio would increase gradually and inexorably for the foreseeable future, passing the 150ratio in2014. Inthe case ofthe less concessional financing scenario, the debt-to-export ratio would peak at 151percent in2017. The debt-to-export ratio would stand 12percentage points above the baseline scenario at the end o fthe projectionperiod in2021. Figure 1: Sensitivity Analysis of Debt-to-Export Ratio 180 170 160 150 140 130 120 110 1oc 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Giventhat debt service over the next five years i s expected to average $64 millionper year while 2002 exports stood atjust under $1 billion, debt servicingratios inthe mediumterm are not expected to presentmajor difficulties. However, the results highlight that giventhe combination o f highlevels o f poverty reducing spendingplannedinMali andthe narrowness o fthe country's export base, an increase inborrowing, even on highly concessional terms, could leadto debt sustainability problems inthe long term. It i s therefore vital that inthe eventthe key ratios beginto show a clear upward trend, the authorities respond with a policy o f curtailingnew borrowing, replacing loans with grants, and appropriate measures to encourage growth. - 48 - Impact of new IDA lending IDA is the singlelargest creditor to Mali, accounting for 42 percent o fthe country's borrowing in 1999-2002. Inassessingthe size of the program, therefore, debt sustainability mustbe amajor consideration. The estimates suggestthat assuming 29 percent ofthe IDA- 13 allocation comes inthe form of grants, the NPV of debt as o f end-2007 would be $79 million higher inthe highcase than inthe low case lendingscenario, and around $25 million higher inthe highcase than inthebase case. The difference betweenthe highand low case lendingscenarios would be equivalent to slightly over 5 percent ofthe debt stock inNPV terms. However, ifthe failure to maintain a good macroeconomic environment such as would trigger the low case lendingscenario were to reduce the rate o f export growth by a third, thendespitethe lower rate o fdisbursementsthe debt-to-export ratio would be 5 points higher inthe low case than inthe base case by 2007, and by 2015 the debt-to-exports ratio would stand at 170 percent as compared with 142 percent inthe base case scenario. Furthermore, as indicated inthe CAS theme on promoting growth, the Bank's program itself i s aimed at assisting the diversification o f the Malian economy and stimulating further sources of growth. The sensitivity analysis would suggestthat the evolution o fMali's key debt ratios should be watched carefully, to ensure that ifthe growth projections turn out to be optimistic, they do not encourage over-lending by IDA or over-borrowing by the country. Inthe event that exports do not increase at the level projected inthe baseline scenario for reasons outside the control of the country, it i s essential that the international community respond with a greater level o f concessional finance inorder to avoid the reemergence o f an unsustainable debt burden. - 49 - Attachment 4 Core Labor Standardsin Mali Mali has ratified all 27 ILO conventions (two denounced in 2000, see below) which includethe five core labor standards: 1. Prohibitionofforced labor 2. The elimination ofdiscriminationin employment 3. Freedomof association 4. Right to organizeandbargaincollectively 5. The elimination ofexploitive use ofchild labor In2000, GoMdenouncedtwo conventionsreferringto the minimumworking age inboth industrialandnon-industrialactivities. However, attentionin2001/2002givento a child traffickingring from Malito the Ivory CoastpromptedGoMto launchan impressive marketingcampaignto raiseawareness againstchild labor during the 2002 African Nations Cup. I - 50 - Attachment 5 On-GoingProject 1 PO46651/Ewy"' 16/26/97 9/10/97 4/30/98 I DEVELELOPMENT (FSDP) 16/27/0019/18/00 4/16/01 I1 6/30/04 1::l 1: 1 1: 1 Saudi Arabia, France, Canada, Germany 4/30/06 EDUCATIONSECTOR Netherlands, France, UNDP 12/31/04 45 13.8 36.1 Canada, USA, Belgium, WHO, UNICEF, Germany EuropeanCommission,the 6/30/04 4o 13,1 25,27 Netherlands, France, WHO, (PRODESS) Canada, USA, UNICEF, Germany, Belgium 12/31/03 70 45.9 27.8 The Netherlands AGRICULTURAL AND 3 PRODUCER 1 I I ORGANIZATIONS 12/11/0112/12/01 8/21/02 12/31/05 43.5 4.8 43.3 The Netherlands (PASAOP) RURAL INFRASTRUCTURE I I I (PNIR) 6/27/00 9/18/00 6/27/01 12/31/05 115 19.3 102.4 The Netherlands 1/31/04 21.5 20.7 0.3 EuropeanUnion,France, PO01730 TRANSPORT SECTOR (TSP) 5/26/94 7/8/94 4/13/95 I l l 12/31/04 65 58.0 4.9 AfDB, IslamicDevt.Bank, KuwaitiFund, SaudiFund URBANDEVELOPMENT& PO01750 DECENTRALIZATION 12/13/96 12/19/96 6/19/97 12/31/03 80 49.8 24.5 France, Canada (PDUD) - NB The ImprovingLearning inPrimary Schools LILProject closed on June 30,2003. - 51 - Attachment 6 Mali: IMF-World Bank Relations Partnership inMali's Development Strategy Mali's development objectives place increased emphasis on poverty reduction and growth, as reflected inits Poverty Reduction Strategy Paper (PRSP) approved by the Government in May 2002. Thejoint assessment o fthe PRSF by the staff of the World bank and IMFwas presentedand approved by the respective Boards o fDirectors inMarch2003. The PRSP process enabled the country to articulate an integrated growth and poverty strategy framework for mediumand longterm development, buildinguponthe national poverty strategy formulated in 1998 with UNDP assistance and situating Mali's main poverty reductionchallenges explicitly withina sound macro-economic framework. Mali also reached its HIPC completion point inMarch2003, supported by thejoint debt sustainability analysis. The IMF continues to take the lead inassisting Mali inmaintaining macroeconomic stability and financial sustainability through settingquantitative targets withinthe framework o f the Poverty Reduction GrowthFacility (PRGF), which has beeninplace since August 1999 and will expireinAugust 2003. Structural measures inthe program are coordinatedwiththe World Bank and structural conditionality limitedto areas with significant macroeconomic, typically fiscal, implications. Thus the IMF's structural performance criteria focus on cotton sector reforms (measures impacting on the government's transfers to the sector), and structural benchmarks include measures related to public expenditure management (efficient use o fHIPC and other resources) as well as civil service reform (primarily issues impacting on the wage bill). The World Bank continues to lead the policy dialogue on structural, social and institutional reforms ina number o f sectors. A U S 7 0 million Structural Adjustment Credit was approved by the World Bank Board inDecember 2001,comprising cotton sector reform andpublic expendituremanagement reform measures. Other Bank operations that address, respectively, private sector development, financial sector development, education sector reforms and investmentprogram, and health sector reforms and investmentprogram, have beenunder implementation for varying lengthsof time. Progress i s beingmade inall these operations, albeit slower than anticipatedinsome sectors. The World Bank i s also leading the diagnostic trade studyunder the IntegratedFramework for Trade (IF), an initiative supported by the World Bank, IMF, World Trade Organization, the UNConference on Trade andDevelopment, UNDP, andthe International Trade Commission. The Mali IF,which i s beingundertaken incollaboration with USAID, aims to enhance Mali's integrationinto the world economy and international trade policy discussions. The trade diagnostic study will highlight Mali's comparative advantages and formulate an actionplanfor capacity building and technical assistance to promote export-led growth, centered around selected agro-industries and some traditional knowledge industries (namely music and handicrafts). The diagnostic report will be discussed at the nextUN Round Table for Trade, which i s tentatively anticipated to be heldDecember 2003. - 52 - Bank Group Strategy The current Country Assistance Strategy (CAS) for Mali was approved bythe BoardinApril 1998. Its focus is on stable economic growth, and sustainable human development. The next CAS currently beingfinalized, will be presented to the Board at the beginningo f FY04. The new CAS supports elements o fthe country's PRSP, andthe government's desire to enter into newrelationships with its development partners basedon a gradually-phased transitionfrom projects to programmatic lending underpinnedby more effective and efficient use o f aid resources. It i s envisionedthat by the end o f the CAS period inFY06programmatic lending would comprise about a thirdo f the portfolio. The Bank's ThirdStructural Adjustment Credit (SACIII; US$70 million) to Malihas as objectives, the following: (i)to help Mali restore the basis for stable economic growth by restructuring the all-important cotton sector to make it more efficient and capable o f adjusting smoothly to changing international economic conditions; and (ii) to improve the tools for planning andmanaging public expendituresfor more effective poverty reduction. IDA support since FY99has includedlendingfor two projects aimed at strengtheningthe basis for stable growth (a rural infrastructureproject and a financial sector project); three others focused on human development (a health sector project supporting the country's decadal program -PRODESS; a project to improve learning inprimary schools; and a long- term education sector project supporting the country's decadal program -PRODEC) and three ininfrastructure. The active portfolio comprises tenprojects: three inrural development, three ininfrastructure and energy, two inhealth and education, one on financial sector and one on Structural Adjustment. The performance ofthe portfolio is satisfactory overall, bothinterms of development objectives and implementationprogress. Non-lending analytical services under the assistanceprogram have comprisedanirrigationstrategy, apoverty andhousehold survey, a poverty profile update, and technical assistance on public expenditurereviews. It has also included monitoring o f economic developments together with the IMF and other development partners inresponse to evolving domestic, regional and international economic conditions. This activity has included assessingthe impact o f the CBte d'Ivoire crisis on Mali's economy, inview of Mali's landlocked status and consequent dependence on neighboring countries (particularly CBte d'Ivoire) for the handling o f its trade flows. The Bank i s also supporting capacity buildingon analytical skills for macroeconomic and poverty analysis, as well as on sectoral medium-termexpenditure frameworks. An important element ofthe Bank's support to Mali is assisting the authorities to strengthen governance and improve accountability inthe use o f public resources. Inthis context, work i s under way with the Malian authorities on capacity building for managing public financial accountability. These efforts also extendto encouraging greater openness inthe Malian administration. An important step inthat direction has beenrecently the willingness to share the contents o fthe forthcoming CAS withthe population and interested donors. The strengthening o fthe knowledge base andthe support for buildingcapacity to handle fiduciary imperatives should positionMali for assistancethrough a Poverty Reduction Strategy Credit inthe newCAS period(FY04-06). - 53 - Bank-Fund Collaborationin Specific Areas The IMF and World Bank staff maintaina collaborative relationship insupportingthe Government's structural reforms. The recent April World Bank-IMF joint mission inMali reinforced the good working relationshipsthe two institutions entertain. As part o f its overall assistance to Mali through lending, country analytic work andtechnical assistance, the Bank supports policy reforms inthe following areas incollaborationwith the Fund: Cottonsector reforms The objectives ofthe cotton sector reforms are to safeguard the mainsource o fgrowth and income generation o f the economy. Difficulties experienced inthe late 1990s highlightedthe sector's vulnerabilityto external shocks such as the continued decrease o f cotton prices on the internationalmarkets. The Government's decisionto pullout o fproductive, industrial and commercial activities has ledit to designa reform strategy with the following objectives: (i) improvementoftheflexibilityandresponsivenessoftheinstitutionalstructureofthe the cotton sector; (ii) reduction o fthe risks associated with having only one operator; and (iii) the the establishment of a highervisibility (transparency and capacity to anticipate) inthe management o fthe sector. These objectives will be achieved through a comprehensive program to redefine the parastatal company's role incore cotton production activities, increasing participation o fproducers and the private sector inmanaging the cotton sector, and liberalizing cotton and cottonseed oil markets and enterprises. Inview ofthe budgetary impact ofcotton sector losses, the Bank andthe Fundcollaborate closely on the reform program, with the Bank taking the lead inthe policy dialogue and program implementation under the SACIII. Publicexpendituremanagement Mali has made significant progress inthe last several years to move the public expenditure systemcloser to the desiredlevel o f effectiveness, and the Government is steadily implementingmeasures inits ongoing reformprogram. The objectives o fthe current reform program are: (i) improving the budgetpreparationprocess inorder to progressively reach a systemthat establishes solid links betweenthe allocation o fpublic resources andthe poverty reductionobjectives o f the development programs; (ii) improving the efficiency and effectiveness o f public expenditure execution; and (iii) improving financial transparency and managerial accountability inthe use o f budgetresources, through an effective expenditures monitoring and control system and information reports on budget execution. These reforms have beensupported by the donor community including through successive World Bank projects, and the donor community continues to work with the Government on the ongoing reform program. The reform program is supported bythe Bank underthe SACIII which includes, among other actions, a better integration o f the various budget documents, improving classification o f expendituresto enable better poverty-oriented monitoring (including at the decentralized level), automation o fbudget execution through an integrated information system, actions to improve the timeliness of government account preparation, strengthenedinternal and ex-post - 54 - audit functions, and preparationo f a medium-termexpenditure framework (MTEF) globally and at key sector levels (initially inthe social sectors and subsequentlyinrural development). The Bank and Fundhave collaborated inreviewing Mali's public expendituremanagement (PEM)performance, through the sharingof SACIIImission documents andthose ofthe Fund's Fiscal Affairs Department (FAD) which, together, yielded a comprehensive action plan for PEMreforms (ROSC AAP). The FundFAD team has, consistent withthe program underthe SACIII, providedtechnical assistance on specific areas, notably onthe classification o f poverty and HIPC expenditures. In2002, the Bank undertook a Country Financial Accountability Assessment (CFAA) that highlightskey policy measures relating to strengtheningfinancial management inreadiness for the potential shift to programmatic lending. The CFAA recommendations have been incorporated inthe forthcoming CAS and progress inimplementingthem will be monitored closely. Privatization Program Mali has been engaged infar-reaching reforms inthe private sector, which have been supported through a telecommunications support program, a railway support program, a financial sector development project, the SACIII (on the cotton sector), and the Private Sector Assistance Project that closed inmid 2002. The program's objectives are: (i) the reduction o f state ownership o fthe banking sector to less than 20 percent; (ii) divestment the o fthe state from ten non-bank enterprises (either through the sale o f shares, liquidation, or the establishment o fconcessioncontracts)*; and(iii) continuationo fprivate sector the development initiatives, through enhancing competition and improving the business environment inkey sectors o fthe economy. A key issue o f mutual interest to the Bank and the Fundis the associatedretrenchment program (particularly for the railway andthe cotton sector), its potential impact on the government budget and its precedent setting implications for future privatizations, notably o f the telecom company. The Bank i s taking the lead in evaluating the retrenchment plans inthe course o f supervision o fthe various sector reform programs. Eighteennon-bankenterpriseswere to remaininthe governmentportfolio-those with majoritygovernment holding-CMDT (cotton fiber), ON(agricultural development), RCFM(railways), OPAM(foodmanagement), ONP (post office), PPM(pharmaceuticalsproductsmarket), PMU-Mali (horseracing), ADM (airport management), COMANAV (river transport), CESPA (film production); andthose with minority government holding-EDM(electricityand water), SOTELMA (telecom), COMATEX-SA,(textiles) ITEMA (textiles), SOMISY-SA(mining), SEMOS-SA(mining), ACI-SA (real estate), and SUKALA (sugar and alcohol). - 55 - FinancialRelationswith the World BankGroup (As ofJuly 1,2003, inmillions of U.S.dollars) Credit Fiscal Number Year Sector IDA Undisbursed C26170-ML 1994 Transport Sector 65.0 4.7 CN0040-ML 1997 Urban Devt.& Decentralization 80.0 24.6 C29700-ML 1997 Regional Power 17.1 3.1 CN0370-ML 1998 Grassroots HungerPoverty 21.5 1.2 C31550-ML 1999 Integrated Health Sector Investment 40.0 25.3 C33940-ML 2000 Finance Sector Development 21.0 19.3 C33930-ML 2000 Rural Infrastructure 115.1 104.6 C24748-ML 2001 Education Sector Expenditure Prog. 45.0 37.3 C35830-ML 2002 Agricultural & Producer Organizations 43.5 42.1 C35820-ML 2002 SAC I11 70.0 27.1 Total (number of credits: 10) 5 18.2 285.4 Source: World Bank - 56 - Key EconomicandProgramIndicators- Changefrom LastCAS CAS Annex A1 -orecast in Last CAS Actual Current CAS Forecast Economy (CY) 199g8200@ 2001 1999' 2000' 2001' 2002' 2003' 2004' 2006 2006' Growth rates (%) GDP 6.4 5.0 5.6 6.7 4.6 3.5 9.7 -1.1 5.7 5.8 5.7 Export of goods and services Exports (Fob) 5.3 3.8 13.5 6.2 10.4 36.9 23.1 -7.3 8.8 7.4 3.6 Imports (Fob) 2.2 4.6 2.6 13.2 13.1 27.7 -7.4 2.2 7.0 6.9 6.5 Inflation (%) 2.5 2.5 2.5 -1.2 -0.7 5.2 5.0 3.8 2.5 2.5 2.5 National accounts (% GDP) Current account balance -8.5 -8.4 -11.7 -10.8 -13 -14.2 -6.3 -8.2 -6.7 -6.4 -8.6 (excl. all ext. transfers) Gross investment 21.2 21.9 21.7 20.0 20.6 21 18.9 20.5 19.7 19.1 21.5 Public finance (% GDP) Overall surplus (+)/deficit (-) -7.6 -6.9 -8.0 -8.7 -9.7 -8.8 -7.7 -9.1 -8.3 -7.6 -6.4 (excl. grants) International reserves 4.7 3.6 3.4 4.2 3.9 4.0 5.8 5.9 7.4 8.9 5.1 (as months of imports) Program (Bank's FY) 199ga20000 2001 ' 1999' 2000' 2001' 2002' 2003' 2004" 2005" 2006" Lending ($ million) 25 55 85 60.5 140.3 45 113.5 0 162 140 88 Gross disbursements 69.7 39.2 28.5 62.3 42.3 75.9 71.4 78 104 107 102 ($ million) abEstimated year Projected year Actual outcome - 57 - CAS Annex A2 Mali at a glance 7/7/03 Sub- POVERTY and SOCIAL Saharan Low- Mali Africa Income Developmentdiamond* 2002 Population,mid-year (millions) 11.3 674 2,511 Life expectancy GNI per capita (Atlas method, US$) 240 470 430 GNI (Atlas method, US$billions) 2.7 317 1,069 Average annual growth. 1996-02 T Population(%) 2.4 2.5 1.9 Laborforce (56) 2.3 2.6 2.3 GNI Gross per primary Most recent estimate (latest year available, 1996-02) capita nrollment Poverty (% of populationbelownationalpoverfyline) 64 Urban population(% of totalpopulation) 30 32 31 Life expectancy at birth (years) 52 47 59 1 Infant mortality(per 1,000live births) 113 91 76 Child malnutrition(% ofchildren under5) 25 Access to improvedwater source - Access to an improvedwater source (% ofpopulation) 51 55 76 Illiteracy(% ofpopulation age 15+) 55 37 37 Gross primaryenrollment (96 ofschool-age population) 59 78 96 Male 66 85 103 Mali Lowhcome group Female 49 72 86 KEY ECONOMICRATIOSand LONG-TERM TRENDS 1982 1992 2001 2002 Economicratios' GDP (US$ billions) 1.3 2.6 2.6 3.1 ~ Gross domesticinvestmenUGDP 16.3 21.9 21.I 18.9 Exportsof goods and services/GDP 14.3 15.4 31.5 34.8 Trade Gross domesticsavingsiGDP 0.8 4.4 10.3 14.7 Gross nationalsavings/GDP 6.8 9.0 17.5 T Current account balance/GDP -14.9 -7.6 -11.o -6.3 Interestpayments/GDP 0.4 0.6 0.7 0.7 Domestic Investment Total debtlGDP 65.9 101.9 90.0 64.3 savings Total debt service/exports 26.4 11.7 0.0 7.6 Presentvalue of debVGDP 37.1 Presentvalue of debtlexports 107.6 Indebtedness - 1982-92 1992-02 2001 2002 2002-06 (average annualgrowth) GDP 2.1 4.6 1.4 9.7 4.9 GDP percapita -0.5 2.1 -0.9 7.1 1.5 Mali Low-income group Exportsof goods and services 5.6 11.7 24.7 29.2 0.4 STRUCTURE of the ECONOMY (% of GDP) Agriculture 44.1 46.1 Industry 13.7 15.6 26.4 25.3 Manufacturing 6.4 7.5 Services 42.2 38.0 35.9 32.2 Private consumption Generalgovernmentconsumption 11.1 13.2 13.0 11.4 Importsof goods and services 29.8 32.8 42.3 35.9 1982-92 199242 (average annualgrowth) Growth of exports and imports (Oh) Agriculture 5.7 3.0 -12.8 14.0 50 Industry 4.3 9.0 31.0 9.3 40 Manufacturing 7.0 2.2 -1.5 1.0 30 Services 1.3 3.6 1.2 3.7 ;; Privateconsumption 1.5 3.0 2.9 0.2 0 General government consumption 8.3 6.3 -6.5 3.0 -10 Gross domesticinvestment 5.9 4.2 -0.4 -3.1 ---Exports -Imports Importsof goods and services 6.0 4.0 24.0 8.5 - 58 - CAS Annex A2 (Cont'd) Mali PRICESand GOVERNMENT FINANCE 1982 1992 2001 2002 Domesticprices 1 Inflation (%) 1 (56 change) Consumer prices -6.3 5.2 4.9 ImplicitGDP deflator 12.7 2.0 9.2 4.4 Government finance (% of GDP, includescurrentgrants) Current revenue 75.9 16.3 16.6 17.6 Current budget balance 24.9 4.9 5.4 5.6 Overallsurplus/deficit -29.0 -8.0 -9.6 -3.8 TRADE 1982 1992 2001 2002 /US$ millions) and import levels (US$ mill.) Total exports(fob) 645 362 739 766 I Cotton 282 151 111 203 8W Gold 267 60 498 429 700 Manufactures 6W Total imports(ci0 903 719 500 498 429 400 Food 118 97 116 3w Fueland energy 116 84 147 200 Capitalgoods 253 201 280 100 0 Export priceindex (1995=100) 73 93 77 76 96 97 98 99 W 01 import price index /1995=100J 66 97 102 104 W Exports lmporto Tens of trade /1995=100) 85 97 75 73 BALANCE of PAYMENTS 1982 1992 2001 2002 /US$ millions) Surrent account balanceto GDP (Oh) Exportsof goods and services 190 440 829 858 Importsof goods and services 395 937 1,100 1,156 Resourcebalance -205 -497 -271 -298 Net income -12 -7 -133 -122 Net currenttransfers 20 288 112 86 Current account balance -197 -216 -291 -334 Financingitems (net) 199 305 320 387 Changes in net reserves -2 -69 -28 -53 12 1 Memo: Reserves including gold (US$ millions) 25 315 377 419 Conversionrate (DEC, local/US$) 328.6 265.3 728.0 711.5 EXTERNAL DEBTand RESOURCEFLOWS 1982 1992 2001 2002 /US$ millions) 1 Composition of 7.001 debt (US$ mill.) Total debt outstanding and disbursed 875 2,699 2,382 2,333 IBRD 0 0 0 IDA 154 611 981 1,134 I F. 3 G 103 Total debt service 65 64 65 67 IBRD 0 0 0 0 IDA 2 7 22 21 B 981 Compositionof net resourceflows E 998 Officialgrants 94 357 156 Officialcreditors 131 133 Privatecreditors 7 14 0 Foreigndirect investment 2 -9 84 Portfolioequity I D:126 C:171 World Bank program Commitments 46 113 A. IBRD E Bilateral - Disbursements 14 62 71 91 B D Other multilateral . F Private - ~ Principalrepayments 0 3 14 13 C IMF .-IDA G Short-term Net flows 14 59 56 78 interestpayments 1 4 8 8 Net transfers 13 54 48 70 DevelopmentEconomics 7/7/03 - 59 - CAS Annex B2 Mali - Selected Indicators* of Bank Portfolio Performance and Management As Of Date 0613012003 Indicator 2000 2001 2002 2003 Portfolio Assessment Number of Projects Under Implementation a 16 15 14 11 Average Implementation Period (years) 3.5 4.2 3.9 4.2 Percent of Problem Projects by Number a , c 6.3 0.0 21.4 9.1 Percent of Problem Projects by Amount a, 7.6 0.0 41.3 4.0 Percent of Projects at Risk by Number a , d 6.3 0.0 28.6 9.1 Percent of Projects at Risk by Amount a, 7.6 0.0 42.0 4.0 Disbursement Ratio (%) e 20.6 14.7 15.3 17.5 Portfolio Management CPPR during the year (yedno) No No No Yes Supervision Resources (total US$ '000) 1106 1089 1434 1291 Average Supervision (US$ '000/project) 69 64 84 92 Memorandum Item Since FY 80 Last Five FYs Proj Eva1by OED by Number 44 8 Proj Eva1by OED by Amt (US$ million) 989.2 234.0 % of OED Projects Rated U or HU by Number 38.6 12.5 % of OED Projects Rated U or HU by Amt 31.2 35.2 a. As shown in the Annual Report on Portfolio Performance (except for 2003). From July 1, 2003, there are only 10 projects under implementation; the eleventh closed on June 30, 2003. b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. - 60 - CAS Annex B3a Mali - IBRDIIDA ProgramSummary Proposed IBRDIIDA Base-Case Lending Program a Fiscalyear ProjID us$(M) Rewards Risks (H/M/L) Implementation b (H/M/L) 2004 Household Energy 35.8 H M Interim Transport 38.7 H M SAC Ill Supplemental 15.0 H M GDLN 2.5 H L HIV/AIDS MAP 15.0 H M SAC IV 55.0 Result 162.0 2005 Rural Community Based Development 50.0 H M Agric. Diversification & Competitiveness 35.0 H M Sources of Growth 55.0 H M Result 140.0 2006 Transport Sector II 63.0 H M PRSC 1 25.0 H L Result 88.0 Overall result Result 390.0 a. This table presents the proposed program for the next three fiscal years. b. For each project, indicate whether the strategic rewards and implementation risks are expected to be high (H), moderate (M), or low (L). - 61- Mali IFC and MIGA Program, FY 2000-2003 - CAS Annex B3b 2000 2001 2002 2003 IFC approvals (US$m) 1.79 5.92 1.8 Sector (YO) , I FINANCE & INSURANCE 98 NONMETALLICMINERAL 2 Total 0 100 0 0 Investmentinstrument(%) Loans 80 Equity Quasi-Equity 20 Other Total 0 20 0 0 MIGA guarantees (US$m) 50.00 0.00 35.7 - 62- CAS Annex B4 Summary of Non-lending Services Product Completion Cost FY US$ '000 Audience a Objective IRecent completions Study Liberalization Cotton Sector 2003 146 CFAA 2003 132 HlPC Monitoring/Completion Point 2003 20 IDF GenderILegaVLiteracy 2003 15 Macro Modelling 2003 29 PER/MTEF 2003 63 PRSP Review 2003 176 IUnderway Private Sector Strategy Note (CNS) 2004 46 Cotton Poverty Study (PSIA) 2004 36 Livestock Poverty Growth 2004 25 Senegal River Water Resources Mgt 2004 83 Support to Poverty Reduction Info. System (PRIS) 2004 41 Transport Support to Growth & Equity 2004 92 Integrated Framework for Trade 2004 36 Planned PRSP Progress Report 1 Review 2004 20 IDF Support to Min. Women 2004 10 CEM/Sources of Growth with Equity (RPT) 2004 200 CPAR 2004 50 JSDF Support to NGOs 2004 15 Support to PER (CNS)/MTEF 2004 50 UNDP Roundtable Preparation 2004 50 New Health/Education ESW 2005 50 New Urban ESW 2005 120 PRSP Progress Report 2 Review 2005 20 Strategic Gender Assessment 2005 30 CPPR 2005 185 STATCAP 2005 30 New Poverty Assessment 2006 80 Niger River Basin Support 2006 180 PRSP 2 Review 2006 200 Regional Program Traditional Energy Sector 2006 20 a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving. - 63 - CAS Annex B6a Mali : Key EconomicIndicators Gross domestic producta 100 100 100 100 100 100 100 100 Agriculture 46 47 41 38 43 42 42 43 Industry 17 17 21 26 25 24 24 23 Services 36 37 38 36 32 34 34 34 TotalConsumption 85 84 90 90 84.9 89.5 86.4 85.2 Gross domestic fixed investment 20 20 22 21 21.4 18.3 20.7 20.3 Government investment 9 9 10 10 9.4 9.2 9.7 9.5 Private investment 11 11 12 11 12.0 9.1 11.0 10.8 E X ~ O (GNFS)~ ~ ~ S 23.6 23.6 25.7 31.5 29.2 30.0 28.2 26.4 Imports(GNFS) 32.9 34.1 37.5 42.3 39.3 39.3 36.7 34.3 Gross domestic savings 14.6 16.2 9.7 10.3 14.7 10.0 13.1 15.5 Gross nationalsavings' 15.8 17.4 13.7 9.0 14.8 10.7 14.0 15.5 Memorandum items Gross domesticproduct 2699 2713 2450 2626 3627 3077 3706 4027 (US$ million at current prices) GNP per capita (US$,Atlas method) 250 250 250 230 250 250 270 300 Realannualgrowth rates (%, calculatedfrom 1987prices) Gross domesticproduct at marketprices 5.9 6.8 3.7 1.4 9.7 -1.5 5.8 5.5 Gross Domestic Income 5.8 3.6 3.4 1.6 5.8 0.2 7.4 6.4 Realannualper capitagrowthrates (%, calculatedfrom 1987 prices) . - Gross domesticproduct at marketprices 3.4 413 1.2 -0.9 7.1 -2.6 4.4 3.6 Totalconsumption 1.9 2.1 -7.1 -0.2 2.3 1.7 1.3 4.0 Privateconsumption 3.4 0.1 -12.3 2.4 2.7 1.7 1.5 4.4 Balance of payments(US $ millions) E X P O ~ ~(GNFS)~ S 644 680 631 829 858 928 972 987 MerchandiseFOB 561 596 547 739 766 836 882 890 Imports(GNFS)~ 912 989 955 1100 1156 1212 1264 1280 MerchandiseFOB 558 632 595 727 750 802 849 855 Resource balance -267 -309 -324 -271 -298 -284 -292 -293 Net currenttransfers 115 107 127 112 86 98 100 119 Current account balance -203 -247 -227 -291 -334 -298 -304 -282 Netprivate foreigndirect investment 16 16 89 84 54 75 92 101 Long-termloans (net) Official 67 158 154 131 Private Other capital(net, incl. errors&ommissions) Change inreservesd 61 56 19 -28 -53 Memorandum items Resourcebalance(% o f GDP) -9.9 -11.4 -13.2 -10.3 -10.1 -9.2 -8.5 -7.8 Realannualgrowth rates (%, calculatedfrom 1987 prices) Merchandiseexports(FOB) -2.0 9.8 -1.7 24.7 24.5 -5.8 6.6 6.8 Merchandiseimports(CIF) -3.6 19.5 2.7 24.3 6.3 1.3 7.4 5.0 C o ntinuedi - 64 - CAS Annex B6a Mali - Key EconomicIndicators (Cont'd) Estimate Projected Indicator 1998 1999 2000 2001 2002 2003 '2004 2005 Public finance (as O ho f GDP at market prices)e Current revenues 16.2 17.2 15.5 16.6 17.6 19.0 19.1 19.5 Current expenditures 11.9 11.6 11.3 12.6 12.9 12.3 12.2 12.1 Current account surplus (+) or deficit (-) 4.3 5.6 6.1 5.4 5.6 7.9 7.9 8.2 Capital expenditure 12.2 12.1 13.9 15.0 11.2 11.2 11.8 11.7 Foreign financing 8.1 7.7 7.7 9.3 7.5 7.2 6.6 6.0 Monetaryindicators M2/GDP 22.6 21.8 23.5 25.3 18.3 Growth of M2 (%) 4.3 1.2 12.0 19.2 -17.2 Private sector credit growth / 114.9 87.1 685.1 65.7 49.1 total credit growth (%) Price indices(YR 87=100) Merchandiseexport price index 86.2 83.4 92.0 101.0 95.8 97.7 99.9 101.5 Merchandiseimport price index 102.6 91.5 105.7 107.6 104.9 105.7 107.9 109.5 Merchandiseterms oftrade index 84.0 91.1 86.7 93.5 90.8 92.0 92.1 92.2 Real exchange rate (US$/LCU)f 590.0 615.7 710.0 732.0 750.0 Real interestrates Consumer price index (% change) 4.1 -1.2 -0.7 5.2 4.9 5.1 2.5 2.5 GDP deflator ("?change) 4.1 -1.8 0.4 9.2 4.4 4.9 3.O 2.5 a GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includesnet unrequitedtransfers excluding official capital grants. d. Includesuse o f IMF resources. e. Consolidatedcentralgovernment. f. "LCU" denotes "local currencyunits."An increase inUS$/LCU denotes appreciation. - 65 - CAS Annex B6b Mali- Selected Indicators Table Base-case (mosr like!,j projection Estimate Projection Projection Projection 1998 1999' 2000 2001 2002 2003 2004 '2005 Part A: Main Macro Aggregates Annual growth rates (%, calculatedfrom 1987prices) GDP (mp) per capita 3.4 4.3 1.2 -0.9 7.1 -2.6 4.4 3.6 Total consumptionper capita 1.9 2.1 -7.1 -0.2 2.3 1.7 1.3 4.0 GDP at market prices 5.9 6.8 3.7 1.4 9.7 -1.5 5,8 5.5 Total consumption 4.4 4.6 -4.8 2.1 4.7 3.9 3.5 6.2 Privateconsumption 5.9 2.6 -10.2 4.8 5.1 3.9 3.7 6.7 Gross domestic investment(GDI) 6.1 4.5 48.9 -0.4 10.1 -15.0 22.6 6.4 Gross dom. fixed investment(GDFI) 6.1 4.5 48.9 -0.4 10.1 -15.0 22.6 6.4 Exports(GNFS) -2.5 14.3 -0.2 24.7 24.5 -5.8 6.6 6.8 of which Goods Imports (GNFS) -5.2 5.4 -2.0 24.0 6.3 1.3 7.4 5.0 of which Goods Savings-investment balances, aspercentage of GDP Gross Domestic investment 20.1 20.1 21.5 21.1 21.2 18.1 20.8 20.9 of which Government investment 9.1 8.9 9.5 10.1 9.3 9.3 9.8 9.6 Foreignsavings 7.5 9.1 9.3 11.1 11.4 9.7 8.8 7.6 Gross national savings 12.6 11.0 12.2 10.0 9.8 8.4 12.0 13.3 Government savings 4.3 5.6 6.1 5.4 5.6 7.9 7.9 8.2 Non government savings 8.3 5.4 6.1 4.6 4.2 0.6 4.1 5.1 Gross domestic savings 14.6 16.2 9.7 10.3 15.1 10.5 13.6 14.8 Other GDP inflation 4.1 -1.8 0.4 9.2 4.4 4.9 3.0 2.5 Annual average exchange rate (LCUiUS%) 590.0 615.7 710.0 732.0 750.0 746.0 735.0 735.0 Index real average exchange rate Terms of trade index 84.0 91.1 86.7 93.5 90.8 92.0 92.1 92.2 Incrementalcapital-outputratio (GDI based) Import elasticity with respect to GDP Money growth 4.3 1.2 12.0 19.2 10.4 5.5 Part B: Government Finance Indicators Percentage of GDP Total revenues, of which 16.2 17.2 15.5 16.6 17.7 19.0 19.1 19.5 Tax revenues 14.1 14.1 13.4 14.5 14.7 15.8 16.0 16.5 Total expenditures, of which 24.1 23.6 25.2 27.6 27.0 27.2 26.8 26.4 Consumption 6,8 7.2 6.0 7.6 8.4 8.2 8.8 9.1 Deficit(-)/Surplus(+) -7.9 -6.4 -7.9 -9.6 -5.2 -4.5 -4.7 -4.1 Financing: 7.9 6.4 7.9 9.6 3.9% 3.8% 3.2% 3.4% Foreign 8.1 7.7 7.7 9.3 4.0% 5.5% 4.9% 4.8% Monetarysector -0.1 0.2 0.3 0.5 -0.5% 0.6% -0.6% -0.5% Other domestic -0.1 -1.5 -0.1 -0.2 0.3% -1.9% -1.0% -0.9% Other Total DebtiGDPmp Total interest paymentsiTax revenues 5.29 5.95 6.87 5.18 6.63 6.32 5.09 4.88 Part C: Debt & Liquidity Indicators Total DOD and TDS DOD (US$millions) 2941.0 3017.8 2948.0 2382.4 2333.4 1979.7 2181.6 2389.3 DOD/ GDPmp ratio 109.0 111.2 120.3 90.7 64.3 64.3 58.9 59.3 TDS (US$millions) 120.6 49.1 54.2 65.2 67.0 59.1 62.1 64.8 TDS /exports (XGS) ratio 17.9 7.1 8.3 7.6 7.6 6.2 6.2 6.4 Total gross reserves (months' imports G&S) 3.9 4.2 3.9 3.7 4.6 4.2 4.9 5.5 Part D: External Financing Plan (US$,millions) Officialcapital grants 124.1 111.7 97.2 99.4 104.0 105.0 105.0 95.0 Privateinvestment(net) 22.2 23.1 96.1 93.1 63.2 84.3 101.4 108.9 Net Longterm borrowing excl IMF Adjustmentsto scheduled debt service 0.0 0.0 3.7 31.5 38.6 30.8 32.7 33.3 All other capital flows FinancingRequirements(incl IMF) 142.2 191.4 208.4 319.9 387.0 329.5 328.2 339.2 of which current account deficit 203.2 246.9 227.4 291.5 334.0 298.4 303.6 282.0 - 66 - CAS Annex B7 Mali Key ExposureIndicators - Estimate Projected Indicator 1998 1999 2000 2001* 2002 2003 2004 2005 Total debt outstandingand 2941 3018 2948.0 2382.4 2333.4 1979.7 2181.6 2389.3 disbursed(TDO) (US$m)a Net disbursements (US$m)' 54 150 135 133 139.0 161.0 175.0 177.0 Total debt service (TDS) 120.6 49.1 54.2 65.2 67.0 59.1 62.1 64.8 (US$m)a Debt and debt service indicators ("/.I TDO~XGS~ 437.6 434.2 448.7 278.3 263.4 207.1 218.2 234.5 TDO/GDP 109.0 111.2 120.3 90.7 64.3 64.3 58.9 59.3 TDS~XGS~ 17.9 7.1 8.3 7.6 7.6 6.2 6.2 6.4 Concessional/TDO 89.6 90.3 95.4 95.6 IBRD exposureindicators("h) IBRD DS/public DS 0.0 0.0 Preferredcreditor DS/public 48.3 59.7 ... 69.4 58.7 59.0 61.4 57.6 DS ("A)' IBRD DSiXGS .,. ... ,.. ... ... ... . * . ... IBRD TDO (US$mld Of which presentvalue of guarantees (US$m) Share of IBRD portfolio(%) IDA TDO (US$m)d 1009 1035 957 981 1134 1236 1336 1433 IFC (US$m) Loans Equityandquasi-equitye MIGA MIGA guarantees(US$m) * Source(2001-2005) :Mali :EnhancedHeavilyIndeptedPoor ContriesInitiative Completionpoint document - February2003. a. Includespublic and publiclyguaranteeddebt, privatenonguaranteed, use of IMF credits andnet short- term capital. b. "XGS" denotes "exports of goods, services and income". c. Preferredcreditorsare defined as IBRD, IDA, the regionalmultilateraldevelopment banks, the IMF, andthe Bank for InternationalSettlements. d. Includespresentvalue of guarantees. e. Includesequity and quasi-equitytypes of both loan and equity instruments. - 67 - CAS Annex B8 (IFC) Mali Statement ofIFC's HeldandDisbursedPortfolio As of 5/3 1/2003 (InUSDollarsMillions) Held Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1996 AEF GGG 0.36 0 0.36 0 0.36 0 0.36 0 1994/97 Hotel Bamako 0.8 0 0 0 0.8 0 0 0 0 PAL-Graphique Id 0.69 0 0 0 0.69 0 0 0 0 PAL-Rabelais 0.18 0 0 0 0.18 0 0 0 0 PAL-SANKE 0.61 0 0 0 0.61 0 0 0 1997 SEF 3T 0 0 0 0 0 0 0 0 1995 SEMOS 0 4.8 0 0 0 4.8 0 0 Total Portfolio: 2.64 4.8 0.36 0 2.64 4.8 0.36 0 Amrovals PendingCommitment Loan Equity Quasi Partic fn m m c -0 9 v) C W Ee ~- n v) v) .-CE W c 7J (i 0 hx E z 0 kil 2iE a2 .I Y eb m m 1 a z9E c, I a2 9) 4ki 0 .I Y .I m a r 21 u 9) %a L a s, 5x 0 n a - 0 d I 0 b I P $ a 0 6 W E I M b I z"3 3s + w 3 - 75 - Mali -CAS Annex B10 CAS Summary of DevelopmentPriorities As of 03/18/2003 Country Majorissue Country Bank priority Network area performancea priority Poverty Reduction & Economic Management Poverty reduction Fair Ruralgrowth High High Economicpolicy Good Stable growth High High Public sector Fair Decentralization Moderate High Gender Fair Inequality Moderate High Human Development Department Education Good Quality High High Health,nutrition & population Good Access High High Social protection Fair Vulnerable groups Moderate Moderate Environmentally & Socially Sustainable Development Rural development Fair Diversification High High Environment Fair Desertification,soils Moderate Moderate Socialdevelopment Fair Inequality Moderate High Finance, Private Sector & Infrastructure Financialsector Fair Financialintermediation Moderate Moderate Privatesector Fair Investment risk Moderate High Energy & mining Good Private Investment Moderate Moderate Infrastructure Fair Roads and maintenance High High a. Use "excellent," "good," "fair," or "poor." b. Indicate principal country-specific problems (e.g., for poverty reduction, "rural poverty;" for education, "female secondary completion;" for environment, "urban air pollution"). c. To indicate priority, use "low," "moderate," or "high." d. Give explanation, if priorities do not agree; for example, another MDB may have the lead on the issue, or there may be ongoing dialogue. Template created on 7/9\2003 MAP SECTION