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 in food crop production. However, GDP growth in2002 rebounded and i s estimated at 9.7 percent due to the sharp increase in gold, cotton and cereal production. The fluctuations ingrowth reflect Mali’s economic structure, which i s biased towards agriculture (the main source o f livelihood for 75-80% o f the 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 in goods representing around 53% o f GDP in2002. The share o f manufacturing in GDP and exports has beenlimited, due to l o w productivity, highcosts and low quality o f basic services (energy, water, telecommunications), high overall transaction costs o f doing business, and a financial sector inadequately oriented to serve as intermediary betweensavings and investments.
Mali’s macroeconomic performance can be attributed to the effective implementation
f macroeconomic stabilization and economic liberalization policies since the 1994
devaluation o f 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 in the world export market share following the 1994 devaluation, experienced a severe financial and structural crisis in 2000 inthe wake o f the 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 o f the negative impact o f the cotton sector crisis.
Significant market reforms have been achieved 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 external tariff (CET) under the WAEMU agreement, which reduced import duties below a 20% ceiling and greatly simplifiedthe tariff structure. To modernize the tax system and offset the potential customs revenue loss related to the introduction o f the CET, the G o M successfully implementeda comprehensive tax reform program with Canadian assistance, including introduction o f the value added tax and simplification o f the tax structure. The economy responded positively to
these changes which reinforced the significant positive growth trend emanating from the 1994 devaluation. The combined effect o f these policies has created the foundations o f a market-led economy and encouraged private sector development.
Gold and cotton together comprise over 80 percent o f export earnings, while livestock - exported primarily to West Africa regional markets - accounts for about 8 percent o f export earnings. Cotton has historically been the number one export earner ahead o f gold, although gold has only recently surpassed cotton export revenues and today accounts for about 55 percent o f export receipts.