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      Mali’s macroeconomic performance has generally beenwithin the GoM’s targets and

it has managed to attract bothmultilateral and bilateral funds aimed at deepening structural reforms and enhancing its socio-economic situation. The fifth review o f Mali’s PRGF concluded inFebruary 2003 that M a l i continued to implement its program in a 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) in line with a shortfall inrevenues owing to the Cote d’Ivoire crisis. The sixth and final review i s underway and i s expected to be completed by August 2003. The Bank i s continuing to 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 Cotton Sector and the Reform Program

Cotton production in Mali has expanded remarkably inthe years following the devaluation o f the CFA Franc in 1994, from 293,021 tons of seed cotton in 1994/95 to 522,903 tons in 199811999 and 459,123 tons in 1999/2000. Inthe 1990s, Mali became the first exporter of cotton lint in Sub-Saharan Africa. However, from 1999 to 2001, the sector experienceda severe financial crisis, due in part to the fall in world cotton prices and also to weak management of CMDT, the cotton parastatalcompany. The crisis took a dramatic turn in June 2000 with the decision o f a large number of farmers to boycott cotton cultivation for the 2000/2001 cropping season due to the fact that CMDT was offering a relatively low price for seed cotton because of its financial difficulties. As a result, production for 2000/2001 decreasedto 241,000 tons of seed cotton, i.e. barely more than halfthe production o f the previous year.

With the support o f the World Bank, the GoM preparedand adopted a comprehensive restructuring 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 make the transition from the monopsony organization and restorethe sector’s profitability, sustainability and competitiveness. It includes: (i the downsizing o f CMDT, as well as structural reforms to change the sector’s organization; (iidisengagingthe state and involving the private sector and farmers associations; (iiibreaking up the monopoly into regional entities through the sale o f agro-industrial assets to private operators; and (iv) liberalizing seed and oil trade through, inter alia, privatization of the oil seed company. The GoM established a unit, the Mission de Restructuration du Secteur Coton (MRSC), reporting directly to the Prime Minister, to manage the implementation of the restructuring plan. The reform program is supported by the Bank’s Third Structural Adjusfment Credit (SAC-3): the latest supervision o f the SAC-3 indicated that the cotton sector reforms are broadly on track.

As far as the next stages of the reform process are concerned, the MRSC and the GoM indicated that it is preparing a comprehensiveplan to lead to the full privatizatiodliberalization of the sector by 2005/2006, as foreseen in the letter o f sector policy development. This plan would comprise: (ithe full privatization of CMDT in the next 12 to 18 months (ii the full liberalization of the sector over a 3-4 year transition period, allowing for severalkey functions to be progressively and safely transferredto the private sector and farmers organizations; and (iii continued and increased support to 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 o f its most painful periods for producers in developing countries. Average international cotton prices last season were the lowest since 1972-73 and, when adjusted for inflation, rank as the lowest in history, halving the incomes o f 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-Saharan Africa is most deeply affected. The cotton farmers o f western and central Africa are among the lowest cost producers in the world. Yet, despitethis comparative advantage, the cotton industry in Africa i s losing world market share and cotton farmers are falling further into poverty.

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