IMF Approves $15 Million Loan to Boost Mali’s Recovery

Interest-free emergency loan to back policies assisting economic recovery

IMF loans help catalyze resumption of donor support of more than $4 billion

Any setbacks to democratic transition could hit confidence, derail recovery

The loan is being made under the Rapid Credit Facility, the IMF’s concessional window for countries that have experienced serious economic disruptions and need rapid support.

The new loan for Mali follows another of $18 million that the IMF Board approved in January. Both loans have helped to catalyze the resumption of donor support for the post-conflict West African country totaling more than $4 billion.

In recent years, Mali has experienced one of the most serious crises in its modern history. Following a devastating drought in 2011 and resulting food insecurity that affected close to one-third of its population, the country suffered a security crisis as insurgents took control of the north in early 2012. A military coup in March 2012 further destabilized the already fragile political situation.

The security events had major humanitarian and economic consequences. In the north, about 400,000 refugees fled the fighting and about half of them found refuge in neighboring countries—Burkina Faso, Niger, Mauritania—and the other half became displaced inside Mali.

State finances under pressure

The economy slipped into recession as the deteriorating security situation prompted a sharp reduction of travel to Mali, hitting the commerce, hotel, and restaurant sectors. Government finances came under pressure, as tax revenues weakened and donors suspended budget support pending the authorities’ adoption of a clear roadmap for the return to a democratically elected government.

The compression of public investment—the first line of defense for the government to contain the budget deficit—contributed to a contraction in the construction and service sectors of the economy. Internal and external payment arrears emerged despite the government’s strenuous efforts to keep public spending in line with declining revenues.

Prospects improved in early 2013. French-led military intervention drove the rebels out of the towns in northern Mali and allowed the government to begin restoring control over the entire territory. The roadmap for organizing presidential elections next year was adopted by the transitional government of national unity and the national assembly.

Donor support

The IMF loan disbursement in January, along with the...