Mali: Mali Outlook for 2013-14

The country (Mali) It has borders with Burkina Faso for 1000 km, Cote d'Ivoire for 532 km, Algeria for 1376 km, Guinea for 858km, Mauritania for 2237 km, Niger for 821 km and Senegal for 419 km.
It is situated in Western Africa, southwest of Algeria.
Land in Mali is mostly flat to rolling northern plains covered by sand; savanna in south, rugged hills in northeast.
Malian land covers an area of 1240000 km².

The climate is subtropical to arid, hot and dry (February to June), rainy, humid, and mild (June to November), cool and dry (November to February).

Outlook for 2013-14

Following a coup on March 22nd and the loss of the north to rebel Tuareg and Islamist groups, restoring security, retaking the north of the country and holding elections within a year will dominate domestic politics. The government may be forced to revisit its development-focused domestic strategy for dealing with the northern security issue and boost military action in the region. Real GDP increase will suffer, slowing from an estimated 5.4% in 2011 to 4.1% in 2012 as agricultural production is hit by poor rains. Assuming a normal harvest, increase should rebound to 4.3% in 2013. Elevated gold prices and higher output will see the current-account deficit hold at 9.1% of GDP in 2012, before lower import prices cause the deficit to shrink to 8.7% of GDP in 2013.

The political scene

On March 22nd the again president, Amadou Toumani Touré, was deposed weeks before planned elections in a coup mounted by mutinous junior army officers angered by the government's failure to allocate sufficient resources to address the security situation in the north of the country. The putsch prompted a collapse in military morale and command structures, allowing rebel groups-the Tuareg Mouvement national pour la libération de l'Azawad (MNLA), together with the Al-Qaida in the Islamic Maghreb-affiliated (AQIM) Ansar Dine-to sweep across all north of the country. The brief imposition of sanctions by the Economic Community of West African States (ECOWAS) forced the junta to cede power to an interim civilian government led by the speaker of the National Assembly, Dioncounda Traoré. The new prime minister, Cheick Modibo Diarra, named a new cabinet on April 24th.

Economic policy

Domestic economic policy has been sidelined by the escalation of the security situation. The creation of an interim government may allow the IMF extended credit facility to get back on track, but, other than ensuring economic stability at this time, this will not be a priority. Economic sanctions imposed by ECOWAS were short-lived, serving only to force out the junta.

Mali signed a new, US$46m, three-year extended credit facility (ECF) programme with the IMF in December. The government has proposed a series of reforms aimed at boosting tax receipts and broadening the tax base. The biggest policy change under the ECF is the effort to mobilise non-concessional finance for infrastructure projects that offer a high economic rate of return. The 2012 budget plans for total revenues and grants of CFAfr1.13trn (US$2.18bn) and total spending of CFAfr1.29trn, resulting in a deficit of around 2.9% of GDP.

The domestic economy

The rebel conquest of northern Mali has provoked a major humanitarian crisis. Between mid-January and late April additional than 268,000 people had fled their homes. Food security was by presently elevated owing to poor rains.

Rainfall has been below initial expectations this year and government officials have been forced to revise radically their estimates of cereal production for the 2011/12 crop time(October-September) from 8.9m tonnes to 5.02m tonnes. The government indicated that 160 municipalities were at risk of famine.

Foreign trade and payments

The rebel takeover of northern Mali has not forced the shutdown of the significant gold mining industry, as all the major sites are located in the west or the south, areas under government. However, it has put in jeopardy international investors' search for oil and uranium in the Sahara.

Medou Mining Corporation, which is owned by a Malian businessman, has entered a joint venture with a UK-based company, Gold Tang, to develop a new gold mine at Bambadala, in Yanfolila district, near Sikasso. The partners plan to invest EUR15m (US$18.9m) in the initial phase of the project, which should hereafter produce 3m troy oz/year. In October the Algerian national hydrocarbons company, Sonatrach, confirmed its intention to begin drilling in Block 20 of the Taoudeni block in the Malian Sahara during 2012.

Outlook for 2013-14

• Following the loss of the north to rebel Tuareg and Islamist groups and a coup on March 22nd 2012, restoring security, retaking the lost territory and holding elections within a year will dominate domestic politics.
• A French-led military operation has completed significant success in pushing back the Islamists, but the politics in the capital, Bamako, will remain fractious, undermining its effectiveness and that of the transition process.
• Real GDP will rebound modestly in 2013 next contracting in 2012. Mining will remain largely unaffected, but public spending has been slashed. With better harvests and security, we expect increase to accelerate to 5.9% in 2014.
• The interim government has slashed revenue and spending projections given the security context. We estimate that the deficit will narrow to an average of 0.9% of GDP in 2013-14.
• As a result of elevated gold prices and higher output, inclunding weak consumer import request, the current-account deficit will narrow to 6.1% of GDP in 2013, before higher import prices widen it to 7.9% of GDP in 2014.

Review

• Discussions between West African mediators, led by Burkina Faso, and Ansar Dine, a Tuareg Islamist group, began on November 5th in the Burkinabè capital, chaired by the Burkinabè foreign minister, Djibril Bassolet.
• The prospect of an ECOWAS military intervention initially created discord part the three major Islamist rebel groups, with Ansar Dine prepared to reject terrorist activities, despite refusing to split from their jihadi allies.
• Arrested on the orders of Captain Amadou Sanogo, Cheikh Modibo Diarra resigned as prime minister on December 11th. A government negotiator, Diango Sissoko, was named as the new prime minister on December 12th.
• On December 20th the UN Security Council approved military intervention led by ECOWAS.
• In early January Islamist fighters pushed south to take control of key towns before under government control, potentially threatening Bamako.
• In response, France launched air strikes on Islamist-held positions. Douentza has been retaken, and jihadis pushed out of Diabaly and Konna, in the west.
• Mali has lost preferential access to US markets under the African Increase and Opportunity Act, but the impact on exports will be marginal.