Base-Line Scenario: The assumption i s that the effects o f the closing o f the Bamako- Abidjan corridor will fade gradually during the third quarter o f 2003 and that economic activities will returnto their usual level by the end o f the year.
Downside Scenario: Even with a returnto a tenuous peace in C6te d’Ivoire, it i s possible that the crisis in C6te d’Ivoire will continue to have a negative impact throughout 2003 and beyond as it could take time to re-open the Bamako-Abidjan trade corridor and for the Ivoirian economy to regain momentum and positively impact neighboring economies such as Mali.
Base-Line Scenario. The macroeconomic framework presented inthe PRSP was
revised by the authorities late in2002 and the medium-termprojections were adjusted accordingly. The 2003 growth rate has beenrevised downward to -1.1 percent. Growth i s
expected to rebound in 2004 (see Annex l)and to average 3.5 percent a year over the
period 2003-05 as against 5.0 percent a year over the period 1994-2002. Potential sources o f this growth are expected to come from developing the industrial sector, especially for textiles and agribusinesses, from diversifying the agricultural export base into fruits, vegetables and Arabic gum, from expanding mining, from developing the tourism and handicrafts industries, and from promoting small and medium-sized enterprises in services. Inflationi s estimated to
average 3.0 percent over the period 2003-05, and the external current account deficit (excluding official transfers) to narrow from an average 11percent o f GDP over 2000-02 to seven percent over 2003-05.
Underpinningthe projections for growth i s the assumption that M a l i will be able to
attract foreign savings, including private capital, to supplement domestic saving. Gross
domestic saving would remain at a historically highlevel over the next few years, partly as a result o f higher government saving, and average about 14 percent o f GDP a year over the next 3-6 years. However, this growth rate will be insufficient to finance total domestic investment, which i s projected to average about 22 percent o f GDP a year. Hence, M a l i will
s t i l l needto continue to attract a high level o f foreign investment, with annual net foreign private capital inflows continuing to amount to about 2% percent o f GDP.
Fiscal policy reflects the poverty reduction targets that the G o M definedinthe PRSP.
This policy aims at increasingpoverty-reducing expenditures while lowering the basic fiscal deficit. Inorder to keep overall government spendingat about 27% o f GDP, the authorities intendto increase total government revenue by 1.8 percentage points o f GDP to 19.0% in 2003, with tax revenuerising by 1.6 percentage points o f GDP to 15.8%. About one-third o f the improvement i s expected to be due to a recovery intax receipts once the crisis in C6te d’Ivoire has ended. Inaddition, the G o M will seek to broaden the tax base by rationalizing the tax system, simplifying it for smaller enterprises, and increasing the efficiency o f the tax administration. To reduce shortfalls inthe mobilization o f domestic resources, the G o M will ensure the strict application o f laws and regulations governing the granting o f tax exemptions
to businesses and, more generally, intensify anti-fraudefforts. The effectiveness o f the tax reforms implementedinrecent years will be assessedand additional measures will be identified to help raise the tax revenue-to-GDP ratio. Measures will also be introduced to improve the quality o f macroeconomic accounting and analysis. Nevertheless, under this scenario, the G o M will need additional assistance in calendar year 2003 to support the implementation o f the PRSP program; the Bank could provide assistance through a