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The evolution o f Mali’s debt-to-export ratio i s also very sensitive to the terms o f new financing. A second alternative scenario therefore assumes a decreased provision o f capital grants equivalent to half a percentage point o f GDP from 2004 onwards, and an equivalent increase inthe level o f concessional borrowing.

Figure 1 illustrates the impact o f these scenarios. Inthe case o f the lower exports scenario, in the absence o f any moves to constrainnew borrowing, the debt-to-exports ratio would increase gradually and inexorably for the foreseeable future, passing the 150ratio in 2014. Inthe case o f the less concessional financing scenario, the debt-to-export ratio would peak at 151 percent in2017. The debt-to-export ratio would stand 12 percentage points above the baseline scenario at the end o f the projection period in2021.

Figure 1: Sensitivity Analysis of Debt-to-Export Ratio

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Giventhat debt service over the next five years i s expected to average $64 million per year while 2002 exports stood at just under $1 billion, debt servicing ratios inthe mediumterm are not expected to presentmajor difficulties. However, the results highlight that given the combination o f highlevels o f poverty reducing spendingplanned inM a l i and the narrowness

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    f the country’s export base, an increase inborrowing, even on highly concessional terms,

could lead to debt sustainability problems inthe long term. It i s therefore vital that inthe event the key ratios beginto show a clear upward trend, the authorities respond with a policy

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    f curtailing new borrowing, replacing loans with grants, and appropriate measures to

encourage growth.

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