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Box 3: The Cotton Sector and the Reform Program (cont d)

Accordingto analysisconductedjointly by the World Bank, the IMF and the International Cotton Advisory Committee, cotton producers in developing countries face annual losses o f about US$9.5billion as a result o f subsidiesbenefitingrich countries. Total losses to developingcountry producershave amountedto US$23 billion over the past four years. Removalo f direct subsidies worldwide would have a net positiveeffect o f 3 1 cents per pound on average international cotton prices. Despite the successfulefforts of the cotton industry to expand the demand for cotton, which will reacha record in2002-2003, and despite an expectedreductiono f supply and higher economic growth in major economies, excess productionwill continue to affect prices in international markets and cottonprices are expectedto remainwell below the long-runaverage for the next several years.

Future P o l i c y O r i e n t a t i o n .


The G o M aims to continue structural reforms to: (ipromote strong and sustainable

economic growth; (iireduce poverty and raise living standards inthe long term; and (iiiensure financial viability inthe medium term. New sources o f growth will needto be

promoted, as cotton and gold production alone will be insufficient to ensure high sustainable growth. Inaddition to promoting diversification o f export products, the G o M intends to encourage and support efforts inprocessing o f primary products prior to sale domestically or in export markets. Particular emphasis i s beingplaced on targeting the West African regional market where some o f Mali’s potential export products have a comparative advantage. Efforts will also be intensifiedto improve facilitation o f trade and transport systems. The G o M i s working towards continuing to improve market mechanisms and toward establishing a sound and transparent judicial and regulatory environment conducive to national and foreign private investment, as well as to increased investment in infrastructure and human resource development. Monetary policy, consistent with the fixed exchange rate

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    f the WAEMU, will aim to increase the efficiency o f the banking system by improving

financial intermediation. The G o M intends to continue to promote the sound development o f micro-finance, inparticular by reinforcing the supervisory capacity. It also intends to better manage new loan commitments through, inter alia, pursuingfinancing sources that maximize the grant element o f future commitments.

Macroeconomic Outlook.


Mali’s current dependency on a narrow export base and its highvulnerability to

drought and international commodity markets make the achievement o f sustained growth fragile. The growth prospects for 2003 are less favorable than anticipated as a result o f a

combination o f external factors: (iinsufficient rainfall at the start o f the 2002-03 season2, (iidepressed world prices for cotton, (iiiexpected decline in gold production (given current information on reserves), and (iv) negative impacts from the crisis inCBte d’Ivoire with respect to trade, transport, public finances and Malian workers’ remittances from CBte

d’Ivoire. Beyond 2003, two macroeconomic scenarios have beenprepared based on different

assumptions about the impact o f the crisis inneighboring CBte d’Ivoire.

As a result, cotton production i s now expected to fall by about 25 percent to 430,000 tons, instead o f remaining at the 2001/02 level o f 571,000 tons, and cereal production i s forecast to fall by 3.7 percent.

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