Impact of new IDA lending
IDA i s the single largest creditor to Mali, accounting for 42 percent o f the country’s borrowing in 1999-2002. Inassessing the size o f the program, therefore, debt sustainability must be a major consideration. The estimates suggestthat assuming 29 percent o f the IDA- 13 allocation comes inthe form o f grants, the NPV o f debt as o f end-2007 would be $79 million higher inthe highcase than inthe low case lendingscenario, and around $25 million higher inthe high case than inthe base case. The difference betweenthe highand l o w case lending scenarios would be equivalent to slightly over 5 percent o f the debt stock inNPV terms. However, ifthe failure to maintain a good macroeconomic environment such as would trigger the low case lending scenario were to reduce the rate o f export growth by a third, then despite the lower rate o f disbursements the debt-to-export ratio would be 5 points higher inthe l o w case than inthe base case by 2007, and by 2015 the debt-to-exports ratio would stand at 170 percent as compared with 142 percent inthe base case scenario. Furthermore, as indicated inthe CAS theme on promoting growth, the Bank’s program itself i s aimed at assisting the diversification o f the Malian economy and stimulating further sources o f growth.
The sensitivity analysis would suggestthat the evolution o f Mali’s key debt ratios should be watched carefully, to ensure that ifthe growth projections turn out to be optimistic, they do not encourage over-lending by IDA or over-borrowing by the country. Inthe event that exports do not increase at the level projected inthe baseline scenario for reasons outside the control o f the country, it i s essential that the international community respond with a greater level o f concessional finance inorder to avoid the reemergence o f an unsustainable debt burden.