Post-Crisis PFM Reforms in Mali
Posted by Christian Josz
This is the second article on the blog in a series about the views of IMF area department staff on PFM reforms in “their” country. In this article Fiscal Affairs Department technical assistance advisor, Benoit Taiclet, speaks with IMF mission chief for Mali, Christian Josz, about the importance of PFM technical assistance in keeping the IMF program on track.
Mali ranks among the poorest countries in the world, and has been under a succession of IMF programs for more than two decades. External funding has always played a significant role in the country’s development with grants reaching more than three percent of GDP. More recently, in 2011 the economy traversed a very difficult period when the country was hit by a drought and terrorist attacks. Following the 2012 military coup, fueled by military defeats, persistent corruption and failing institutions, donors suspended or dramatically reduced their support. By the end of 2012, despite the fiscal austerity measures taken by the government, including the cutting of almost all capital spending, substantial arrears had accumulated, and the country’s debt rose markedly.
Faced with such concerns, the Fund seized the opportunity of last year’s slight recovery to re-settle in the country, with the reinstatement of our Resident Representative’s office in late 2012. We stepped up our involvement in early 2013 when the military situation was resolved with the fielding of an international coalition against rebel separatists and terrorists.
In the first quarter of 2013, the recommitment of IMF support through a rapid credit facility helped trigger the return of a number of donors whose pledges for funding reached US$ 4 billion in May. Now we hope the economy will rebound, as the authorities move to overcome the challenges ahead, and the production of gold and agricultural products increases. But political and security risks still cast a cloud over the nascent recovery.
Do you think the assistance delivered by the Fund in the PFM area can help the country keep the program on track, and more generally contribute to the country’s recovery?
It has been instrumental.
Mali faces severe challenges in the PFM area: the scarcity of public resources, with donors funding 14 percent of the budget; the great demand for public goods and services with a population growing at 3.5 percent per year; the poor quality of public goods and services provided; and severe corruption in the public administration hindering business development.
Every year since 2009, FAD has fielded one or two major missions from headquarters plus half a dozen short-term expert visits. It also assigned a long-term expert to the Treasury Department of the Ministry of Finance. Thanks to this steady support the Ministry has made commendable progress. An MTBF, linked with the budget, has been designed, implemented at central government level, and presented to the Parliament in the context of a mid-year budget debate. Departmental program budgets were reviewed in 2010-2011 and the authorities intend to complete the switch to a program-based budget in 2014. An inventory of government bank accounts was prepared as an initial step in establishing a Treasury Single Account (TSA). A new computerized accounting system has been developed, interfacing with budget execution, payroll and tax collection, and is progressively being rolled out across the government.
Most recently, in February 2013, while military operations were still ongoing, FAD fielded a rapid-response mission to assist with urgent post-crisis needs in the TSA, cash management and the control of arrears. This mission was instrumental in restoring the confidence of donors in budget planning and execution, and played a significant role in their decision to resume aid, culminating in the success of the May 2013 conference in Brussels.
As Mali works its way out of the present crisis, PFM reforms will be central to the government’s strategy: a rationalization and streamlining of public finances must create room for public investment and better financial accountability, and should foster further improvements in donor confidence.
How closely have you worked with FAD in the delivery of TA? Have FAD’s priorities in the PFM area always been in line with the program’s requirements?
Our collaboration with FAD is excellent. On a yearly basis, we express our priorities in a strategic note that helps determine FAD’s programming of resources. FAD is a regular participant in inter-departmental meetings to discuss the harmonization of TA and lending strategies. We are closely involved in the preparation of specific TA activities on PFM and other issues. We are in contact with FAD staff on a daily basis before, during and after missions to coordinate the TA work and exchange ideas. Indeed, I would say that the Mali mission chief and the chief of the PFM division in FAD are close colleagues working side by side toward the same goal.
Looking ahead, what are the key challenges in putting the PFM reform strategy back on track, fostering the economic recovery, and rebuilding donors’ confidence?
In the aftermath of the crisis, the PFM reform plan has fallen behind its original implementation schedule. Steps need to be taken to get the reform program back on track, building on past achievements with respect to the MTBF, program budgeting, strengthened internal control, and the computerized information systems. Inevitably, there has been a need to adjust relevant deadlines. In 2013, work priorities include amending the PFM legal framework in compliance with the WAEMU directives, and resuming work on establishing the TSA. In 2014, we plan to complete work on rolling out program budgets across government. Finally, during the next several years we shall start the process of moving the accounting system from a cash basis to an accrual basis.
Have you any advice to further improve the future cooperation between FAD and the African Department of the IMF?
I do not think the modalities of our cooperation need much improvement! Nevertheless, we have to rethink the priorities of the TA, not only in the area of PFM.The previous AFR program to Mali focused on the quality of public investment by improving the selection, monitoring and ex-post assessment of investment projects, which we may want to intensify. We also have to continue reforms to simplify tax policy and improve tax and customs administration. In addition, however, there is a need to address the issue that public perceptions of corruption are too high. We believe that this issue has not been sufficiently addressed by Mali’s stakeholders and development partners, including the Fund, to the detriment of improved economic and fiscal performance. The next program should therefore do more to address corruption by focusing TA on how to raise government accountability, foster transparency and good governance, and help the authorities implement an appropriate framework for dealing with this challenging array of issues.
 Mission Chief for Mali, African Department, IMF.