Republic of Mali 'B' L-T, 'B' S-T Ratings Affirmed On Prudent Economic Policy; Outlook Stable

August 14, 2006
Standard & Poor's Ratings Services
said today it affirmed its 'B' long-term and 'B' short-term sovereign credit
ratings on the Republic of Mali. The outlook is stable.
"The ratings on Mali are constrained by a low level of economic
development and a lack of fiscal flexibility," said Standard & Poor's credit
analyst Sarah N'Sondé. "That said, the country has benefited from a global
boom in gold prices, which has partially offset the oil import price shock."
Mali's development indicators compare unfavorably with those of peers. In
2006, per capita income is projected at $405, and economic diversification is
limited, with exports relying heavily on gold, cotton, and livestock.
Moreover, the private sector is underdeveloped and banking intermediation is
low.
The fiscal deficit (including grants) is projected at 4.3% of GDP in
2006. The country is highly dependent on donor flows (grants, debt relief, and
concessional loans) to finance deficits. In 2005, donor flows represented
about 11% of GDP. Moreover, expenditure pressures will remain high in the
medium term, due to the heavy development needs. In addition, the presidential
and parliamentary elections in 2007 are likely to place further upward
momentum on spending.
By contrast, the ratings are supported by the substantial reduction in
the country's debt burden, in particular under the Multilateral Debt Relief
Initiative. Combined with the debt relief already accorded to the country by
the Heavily Indebted Poor Countries initiative, net general government debt is
expected to decrease to 18.6% of GDP at year-end 2006, from 63.8% of GDP at
year-end 2005. As a result, the debt-servicing burden will be further reduced.
Indeed, general government interest payments are projected at 1.7% of revenues
in 2006, compared with 3.2% in 2005.
The ratings on Mali could come under pressure in case of significant
fiscal slippage or if the reform process, notably regarding the public
enterprises, were significantly disrupted. In addition, Mali's economy remains
vulnerable to external shocks linked to cotton, gold, and oil prices. In the
context of rising oil prices, adequate energy policy implementation to avoid
putting the budget at risk is important.
"Absent such a policy, the sovereign ratings on Mali could come under
downward pressure," said Ms. N'Sondé. "Conversely, if Mali's economic
indicators move into line with those of its peers more quickly than currently
expected, the ratings could be raised."


Company — Mali
  • Full name
    The Republic of Mali