AFRICAN DEVELOPMENT FUND

EMERGENCY GOVERNANCE AND ECONOMIC RECOVERY SUPPORT PROGRAMME (EGERSP) COUNTRY: MALI APPRAISAL REPORT

Date: August 2014

Appraisal

Team

Programme Officer:

Carine DOGANIS, Principal Governance Officer and Task Manager for Mali, OSGE.1

Programme Team: Abdoulaye KONATE, Principal Country Economist,

ORWA/MLFO

Hamaciré DICKO, Senior Macroeconomist, ORWA/MLFO

Mamadou SAKHO, Country Programme Officer, ORWA/MLFO Emmanuel NYIRINKWAYA, Operations Specialist, ORTS.1 Hammadoun Amadou DIALL, Investment Officer, OPSM.5/MLFO Maximin Enagnon Codjo ANASSIDE, Senior Procurement Officer ORPF.1/MLFO

Mohamed Aliou DIALLO, Senior Financial Management Officer, ORPF.2/MLFO Abdoulaye KANE, Principal Disbursement Officer, FFCO.3 Dilys ASUAGBOR, Senior Public Sector Legal Counsel, GECL.1

Director Isaac LOBE NDOUMBE OSGE Ag. Director Director

Janvier LITSE Sibry TAPSOBA

ORWA ORTS

Resident Representative Hélène N’GARNIM-GANGA MLFO OIC Division Manager Abdoulaye COULIBALY OSGE.1

Peer

Reviewers

Emanuele SANTI, Chief Regional Economist, ORWA Emile Chancelier KEMAYOU, Principal Political Economist, ORTS.2 Alain EKPO, Principal Macroeconomist, OSGE.1/CMFO

Translated Document

AFRICAN DEVELOPMENT FUND

MALI

EMERGENCY GOVERNANCE AND ECONOMIC RECOVERY SUPPORT PROGRAMME (EGERSP)

APPRAISAL REPORT

OSGE DEPARTMENT

August 2014

Table of Contents

I. PROPOSAL .............................................................................................................................. 1

II. COUNTRY AND PROGRAMME CONTEXT ....................................................................... 2 2.1 Recent Political, Social and Economic Developments, Prospects, Constraints and

Challenges............................................................................................................................... 2 2.2 Government’s Overall Development Strategy and Medium-Term Reform Priorities. .......... 5 2.3 Bank Group’s Portfolio Status ............................................................................................... 6

III. RATIONALE, KEY DESIGN ELEMENTS AND SUSTAINABILITY ................................ 6 3.1 Linkages with CSP, Country Readiness Assessment and Analytical Underpinnings ............ 6 3.2 Collaboration and Coordination with the Other Donors ........................................................ 8 3.3 Outcomes and Lessons from Similar Completed or Ongoing Operations ............................. 8 3.4 Relationship to other Bank Group Operations ....................................................................... 9 3.5 Bank Group Comparative Advantages and Additionality ...................................................... 9 3.6 Good Practice Principles for the Application of Conditionality ............................................ 9

IV. PROPOSED PROGRAMME AND EXPECTED OUTCOMES ........................................... 10 4.1 Programme Goal and Objectives .......................................................................................... 10 4.2 Programme Components, Operational Objectives and Expected Outcomes ....................... 10

4.3 Financing Requirements and Arrangements ........................................................................ 14 4.4 Programme Beneficiaries ..................................................................................................... 15 4.5 Gender Impact ...................................................................................................................... 15

4.6 Environmental Impact .......................................................................................................... 15

V. IMPLEMENTATION, MONITORING AND EVALUATION ............................................ 15 5.1 Implementation Arrangements ............................................................................................. 15 5.2 Monitoring and Evaluation Arrangements ........................................................................... 17

VI. LEGAL DOCUMENTS AND LEGAL AUTHORITY ......................................................... 17

6.1 Legal Documents ............................................................................................................. 17 6.2 Conditions Associated with Bank Group’s Intervention ................................................. 17 6.3 Compliance with Bank Group Policies ........................................................................... 18

VII. RISK MANAGEMENT ......................................................................................................... 18

VIII. RECOMMENDATION ........................................................................................................ 18

Tables Table 1 Crisis Response Budget Support Eligibility Conditions 7 Table 2 Financing Requirements and Sources for 2014 (in billion CFAF) 14 Table 3 Summary Table of Fiduciary Risk Assessment and Mitigation Measures 17 Table 4 Summary Table of Risks and Mitigation Measures 18 Boxes Box 1 Main Objectives of 2013-2014 PAPU 5 Annexes Annex 1 Letter of Development Policy I Annex 2 Programme Matrixes of Measures IX Annex 3 Note on Country’s Relations with IMF X Annex 4 Administrative Map of Mali XI

Fiscal Year

1 January - 31 December

Currency Equivalents October 2014

UA 1 US$ 1.48 UA 1 EUR 1.18 UA 1 CFAF 772.87

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Acronyms and Abbreviations

ADB African Development Bank ADF African Development Fund ANICT API ARV

National Territorial Communities Investment Agency Investment Promotion Agency Antiretroviral

AU BCEAO BL CFAA CFAF CNPM CPAR CPI CPIA CRBS CSO CSP CTRCA DGABE DGDP DGI DNB DNMP DNTCP EC ECF ECOWAS EDM-SA EERSP GDP GPRSP II GPRSSP HDI IBL IIAG IMF

MDGs MEF MINUSMA MLFO NA NAPAE NCB ODHD/LCP PAG PAGE PAGAM/GFP PAP PAPU PBOs

African Union Central Bank of West African States Budget Law Country Financial Accountability Assessment BCEAO CFA Franc National Employers’ Council of Mali Country Procurement Assessment Review Transparency International Corruption Perceptions Index Country Policy and Institutional Assessment Crisis Response Budget Support Civil Society Organization Country Strategy Paper Business Framework Reform Technical Committee Directorate-General of Administration of State Property Directorate-General of Public Debt Directorate-General of Taxation National Directorate of the Budget National Directorate of Public Procurement National Directorate of the Treasury and Public Accounting European Community Extended Credit Facility Economic Community of West African States Energie du Mali (Mali Power Utility) Emergency Economic Recovery Support Programme Gross Domestic Product Second Generation Growth and Poverty Reduction Strategy Paper Growth and Poverty Reduction Strategy Support Programme Human Development Index Initial Budget Law Ibrahim Index of African Governance

International Monetary Fund Millennium Development Goals

Ministry of Economy and Finance United Nations Multidimensional Integrated Stabilization Mission in Mali Bank’s Country Office in Mali Not Applicable National Action Plan on Aid Effectiveness National Competitive Bidding Sustainable Human Development and Poverty Reduction Observatory 2013-2018 Government Action Programme Economic Governance Support Programme Government Action Plan to Improve and Modernize Public Financial Management Priority Action Plan Emergency Priority Action Plan Programme-Based Operations Public Expenditure and Financial Accountability

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PEFA PRED PRSP-TU

Plan for the Sustainable Recovery of Mali Poverty Reduction Strategy Paper-Technical Unit

RCF Rapid Credit Facility SBL SCCS SIB SIGMAP TFPs TOFE

Supplementary Budget Law Accounts Chamber of the Supreme Court Special Investment Budget Integrated Public Procurement Management System Technical and Financial Partners Central Government Consolidated Financial Operations Table

TSA TYIP UA UNDP UNO WAEMU WB

Single Treasury Account Three-Year Investment Plan Unit of Account United Nations Development Programme United Nations Organization West African Economic and Monetary Union World Bank

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Loan and Grant Information

Client information BORROWER: Republic of Mali EXECUTING AGENCY: Ministry of Economy and Finance Financing Plan

Institution Source/Amount

Instrument Status

ADB ADF Loan: UA 8.263 million Crisis Response Budget Support

Pending approval

ADB ADF Grant: UA 6.340 million Crisis Response Budget Support

Pending approval

European Union EUR 100 million Budget Support Approved World Bank USD 63 million Budget Support Approved France EUR 4 million Subsidy

EUR 40 million Loan EUR 64,8 million Monetary Debt Conversion

Approved

ADF Key Financing Information

Loan/Grant Currency

UA

Interest Rate Type NA Base Rate NA Interest Rate Spread NA Funding Margin NA Commitment Fee (Loan) 0.50% Service Charge (Loan) 0.75% Loan Tenor 40 years Grace Period (Loan) 10 years Grant Currency UA Interest Rate Type NA Base Rate NA Interest Rate Spread NA Funding Margin NA

Indicative Timeframe

Activities Date 1. Loan and Grant Agreement Negotiations November 2014 2. Board Presentation December 2014 3. Effectiveness December 2014 4. Single Tranche Disbursement December 2014 5. Supervision March 2015 6. Completion Report June 2016

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Programme Summary

Programme Overview

Programme Name / Number: Emergency Governance and Economic Recovery Support Programme (EGERSP) Geographic Scope: Countrywide Total Period: 12 months, from 1 December 2014 to 30 November 2015 Financing: UA 14.603 million (ADF Loan: UA 8.263 million and ADF Grant: UA 6.340 million) Operational Instrument: Crisis Response Budget Support (CRBS) Sector: Governance, Economic and Financial Reforms

Programme Description

Despite some progress, Mali still displays the characteristics of a country in crisis on both the politico-military and socioeconomic fronts: weakened institutions, ‘fragilized’ infrastructure in the North of the country and erosion of the Government’s capacity to provide the population with essential basic services. To address that situation, the Bank prepared a 2013-2014 Transition Management Support Strategy for Mali based on the 2013-2014 Plan for the Sustainable Recovery of Mali, as well as the Government’s

2013-2014 Emergency Priority Action Plan. In 2013, Mali was awarded emergency budget support (Crisis Response Budget Support) of UA 40 million from ADF resources: the Emergency Economic Recovery Support Programme (EERSP). The measures planned under that support operation have been implemented satisfactorily. The related completion report is being finalized. This operation for an amount of UA 15 million from ADF resources (ADF Loan: UA 8.263 million and ADF Grant: UA 6.340 million), is also an emergency budget support operation: the Emergency Governance and Economic Recovery Support Programme (EGERSP). The EGERSP aims to consolidate the achievements of the EERSP and contribute to the implementation of the above-mentioned transition plans and strategies. It has two main components: I – to improve public management governance; and II – to consolidate the economic recovery.

Expected Programme Outputs and Beneficiaries

The EGERSP will contribute to the consolidation of the public management governance and economic recovery actions implemented by the Malian authorities under the crisis recovery process. The Programme’s specific expected outcomes are: (i) improvement of public management governance in terms of transparency and accountability; (ii) consolidation of the economic recovery, in particular by the revival of growth which is expected to rise from 1.7% in 2013 to 5.5% in 2015 (IMF – Press Release No. 14/438 of 25 September 2014). The Programme’s main beneficiary will be the population of Mali as a

whole. Needs Assessment Relevance of Programme

The successive crises in Mali have created urgent needs with respect to investments, infrastructure and the capacity of central Government and the public administration. These repeated crises have considerably degraded the country’s economic and social fabric. The financial support provided through this Programme will help to create the necessary fiscal space to enable the Malian Government to honour its commitments and build the resilience of the Malian population, in particular the most disadvantaged to withstand these crises. Implementation of the EGERSP, backed by financial support of UA 14.603 million (ADF loan: UA 8.263 million and ADF Grant: UA 6.340 million), will be bolstered by institutional support of UA 9.97 million (the Economic Governance Support Project - PAGE), approved by the Board of Directors in 2013.

Bank’s

Comparative Advantages and Additionality

The Bank’s comparative advantages stem from the experience it has acquired in the implementation of

reform support programmes in emergency contexts and post-conflict situations (Côte d’Ivoire, Republic

of Guinea, Guinea-Bissau, Liberia and Madagascar). The Bank has proven experience in this type of operation aimed at assisting countries to restore the authority of the Government and contribute to economic recovery. The Bank’s added value also lies in its responsiveness in formulating budget support

operations to meet the priorities of countries in a crisis situation. The Bank also has a field office in Mali allowing it to maintain regular dialogue with the authorities and support them in providing appropriate responses to their population’s most pressing needs.

Institutional Developments and Knowledge Building

This Programme, whose implementation will be backed up by a capacity building project (the PAGE), will help to strengthen institutions, particularly in terms of economic and financial governance. The analytical work, as well as the different draft texts examined for the formulation of this Programme, has contributed to knowledge sharing and improvement of the Programme’s quality.

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RESULTS-BASED LOGICAL FRAMEWORK

Programme Name and Country: Mali – Emergency Governance and Economic Recovery Support Programme (EGERSP) Programme Goal: Enable Mali to strengthen its resilience by improving public management governance and consolidating economic recovery.

RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF

VERIFICATION

RISKS/ MITIGATION MEASURES

Indicators (including CSI)

Baseline Situation Target

IMP

AC

T

Conditions met to enable Mali to emerge from its transitional situation

GDP growth rate 1.7 % in 2013 5.5% in 2015 MEF reports Risks : Political risk linked to the country’s

transitional situation Mitigation Measures: Adoption of a transitional roadmap to restore the country’s

territorial integrity and the organization of general elections ensured the smooth conduct of legislative and Presidential elections in 2013 Risks: Macroeconomic risk related to Mali’s

vulnerability to external shocks Mitigation Measures: Partners’

support to Government efforts aimed at maintaining productive investments will strengthen the population’s

resilience and ensure that the necessary conditions for economic recovery are met. Risks: Risks relating to the country’s

absorptive capacity and its ability to implement reforms Mitigation

Human Development Index (HDI)

0.407 in 2013 0.410 in 2015 UNDP report

OU

TC

OM

ES

Outcome I : Public management governance has improved and is more transparent

Extent of unreported central Government operations (PI-7-PEFA) (Amount of extra-budgetary expenditure expressed as a % of total expenditure)

Baseline situation in 2010: B+

A in 2014 A in 2015

PEFA and PAGAM/GFP data

Outcome II: The economic recovery is consolidated by support to public and private investment

Public Investment rate as % of GDP

15.3% in 2013 16% in 2015 MEF data

OU

TP

UT

S

COMPONENT I : Improved Public Management Governance

I.1 – Improved quality of public expenditure

Draft 2015 BL taking into account basic social spending on education and health at a higher level than the amended budget of September 2014 (SBL of September 2014)

CFAF 188.8 billion spent on basic education, CFAF 93.6 billion on secondary and higher education and CFAF 105.9 billion on health in the September 2014 amended budget

At least CFAF 188.8 billion spent on basic education, CFAF 93.6 billion on secondary and higher education and CFAF 105.9 billion on health in the draft 2015 BL

MEF and sector ministry data

Order specifically determining the list of expenditure items before payment authorization and the modalities for their settlement

Existence of extra-budgetary expenditure not included in the central Government budget and not yet settled

Signature, before the end of 2014, of an Order determining the list of expenditure items before payment authorization and the modalities for their settlement*

MEF data

I.2 – Strengthening of public management transparency mechanisms

Clearance by the Accounts Chamber of the Supreme Court (SCCS), of the public accountants’ management

accounts from 1960 to 2008

Validation of public accountants’ accounts

from 1960 to 1991 by Act no. 2013-001 of 15 January 2013

Finalization, in 2014, by SCCS, of the clearance of public accountants’ accounts

from 1960 to 2008

SCCS data

Decree establishing the regime for works, supplies and services contracts outside the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations

Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations

Signature, before the end of 2014, of a Decree establishing the regime for works, supplies and services contracts outside the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations*

MEF data

COMPONENT II : Consolidation of the Economic Recovery

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II.1. – Support to priority public investment

Operationalization of the development project and programme monitoring committee through the establishment and operation of the technical committee for the selection of public investment programmes and projects in Mali

Decree No. 2013-778/PM-RM of 2 October 2013 on the establishment, responsibilities, organization and operating modalities of the development project and programme monitoring committee

Signature, before the end of 2014, of a decision concerning the establishment and operation of the technical committee for the selection of public investment programmes and projects in Mali*

MEF and sector ministry data

Measures: The Economic Governance Support Project (PAGE), which will be implemented by the Bank and complements the EGERSP, will help to build the capacity of the structures responsible for implementing the reforms recommended by the EGERSP

Special Investment Budget (SIB) incorporating in the 2015 BL priority investment projects (social, education, health, infrastructure and water sectors) for amounts above or equal to CFAF 100 million

SIB (external financing) of CFAF 315.5 billion and SIB expenditure on domestic financing of CFAF 151.3 billion in the SBL of October 2014 (second supplementary)

Inclusion in the Special Investment Budget of the 2015 BL of priority investment projects (social, education, health, infrastructure and water sectors) for amounts above or equal to CFAF 100 million

MEF and sector ministry data

II.2 – Support to the revival of private sector activities

Provision in the 2014 SBL for the clearance of EDM-SA suppliers’ debts

Assessment report on domestic debt arrears as at 31 December 2012

Inclusion of a provision in the 2014 SBL for the clearance of EDM-SA suppliers’

debts *

MEF and sector ministry data

Revision of Decree 2009-127 amended by Decree 2011-142 on the establishment of the Joint Business Framework Reform Monitoring Committee

Decree 2009-127 amended by Decree 2011-142 on the establishment of the Joint Business Framework Reform Monitoring Committee

Revision of Decrees on the establishment of the Joint Business Framework Reform Monitoring Committee before the end of 2015

MEF and sector ministry data

Inputs: UA 14.603 million (ADF loan: UA 8.263 million and ADF grant: UA 6.340 million)

(*): Condition precedent to Programme’s presentation to the Board of Directors

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REPORT AND RECOMMENDATIONS OF MANAGEMENT TO THE BOARD OF DIRECTORS REGARDING A PROPOSAL FOR A LOAN AND A GRANT TO TO THE REPUBLIC OF MALI TO FINANCE THE EMERGENCY GOVERNANCE AND ECONOMIC RECOVERY SUPPORT PROGRAMME (EGERSP)

I. PROPOSAL

1.1 This proposal of an amount of UA 14.603 million for a loan of UA 8.263 million and a grant of UA 6.340 million from the resources of the African Development Fund (ADF) to finance the Emergency Governance and Economic Recovery Support Programme (EGERSP) is submitted to the Board for approval. This is an emergency budget support operation (Crisis Response Budget Support) aimed at helping Mali to emerge from its transitional situation and gradually strengthen its resilience through the improvement of public management governance (Component 1) and the consolidation of the economic recovery (Component 2). The EGERSP will be implemented over a twelve-month period.

1.2 Despite some progress, Mali still displays the characteristics of fragility on both the politico-military and socioeconomic fronts: weakened institutions, ‘fragilized’ infrastructure in the North of the country and erosion of the Government’s capacity to provide the population with essential

basic services1. In addition to these challenges, the recent outbreak of the Ebola virus disease in Mali accounts for a public health issue to be addressed urgently in order to prevent uncontrolled Ebola virus spread in the country2. Should Ebola virus spread occur in Mali, there would be a significant risk in terms of country capacity to maintain and consolidate a number of macroeconomic and social achievements. To address this situation, the Bank prepared a 2013-2014 Transition Management Support Strategy for Mali based on the 2013-2014 Plan for the Sustainable Recovery of Mali, as well as the Government’s 2013-2014 Emergency Priority Action Plan. The EGERSP will contribute to the implementation of the above-mentioned plans and strategies.

1.3 This operation also aims to consolidate the achievements of the Emergency Economic Recovery Support Programme (EERSP), an emergency budget support (Crisis Response Budget Support) operation of UA 40 million from ADF resources from which Mali benefited in 2013. Implementation of the proposed measures under the EERSP was satisfactory: budgeting of provisions for the rehabilitation of the premises used by public administration services and of allocations to basic social services; redeployment of public sector employees into the northern regions of Mali; establishment of a consultative framework for the selection of public investment programmes and projects; production of monthly reports on the status of Government payments to private suppliers; assessment of domestic debt arrears as at 31 December 2012; revision of Decrees and Orders aimed at improving procedures for the award, execution and settlement of public contracts and public service delegations3. The EERSP Completion Report is being finalized.

1.4 The EGERSP will contribute to the consolidation of the governance and economic recovery measures implemented by the Malian authorities as part of the ongoing transition and foster the country’s revival. The Programme aims to support the authorities’ efforts in the areas of public management transparency and accountability aimed at restoring the CPIA ‘governance’ score for transparency, accountability and corruption in the public sector to at least 4 in 2015 as well as their desire to revive growth which is expected to rise from 1.7% in 2013 to 5.5% in 20154. The EGERSP’s

specific objectives are to: (i) enhance public expenditure quality; (ii) strengthen public management transparency mechanisms; (iii) support priority public investments; and (iv) support the revival of private sector activities. The Programme’s main beneficiary will be the population of Mali as a whole.

1.5 The EGERSP is part of a concerted effort by the international community to restore the central Government’s authority, foster economic recovery and help Mali to address the

deterioration of the humanitarian situation caused by the successive crises the country has

1 See technical annex on the country fragility assessment matrix. 2 See technical annex on the Ebola virus situation in Mali. 3 For more details, see technical annex on the outcomes of past operations. 4 IMF – Press Release No. 14/438 September 25, 2014.

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experienced since 2012. Indeed, as a result of these crises, there has been a significant deterioration regarding poverty reduction and the achievement of the Millennium Development Goals (MDGs). According to some estimates, almost five million Malians have been directly affected by the crises, 1.63 million of whom live in the regions which were occupied by armed groups5.

1.6 Through this operation, the Bank will be able to maintain dialogue with the country with a view to resuming reforms following the transitional period. Implementation of the EGERSP’s activities will be facilitated by the existence of the Economic Governance Support Project (PAGE), an institutional support operation for an amount of UA 9.97 million signed in November 2013 aimed at restoring and building the capacity of the public administration to enable it to provide essential services to the population and economic operators.

II. COUNTRY AND PROGRAMME CONTEXT

2.1 Recent Political, Social and Economic Developments, Prospects, Constraints and Challenges

Political Context

2.1.1. On the political front, following two decades of stability marked by successful changes at the highest level of the State, Mali has, since March 2012, experienced an exceptional and difficult situation in the wake of a coup d’état and security crisis as a result of the occupation for several months of the country's northern regions by armed rebel groups. This situation has considerably affected the functioning of the country’s political institutions. In order to emerge from the crisis, the transitional authorities adopted a roadmap in January 2013 with two objectives: (i) restoration of the country’s territorial integrity by reconquering the country’s northern regions; and (ii) the organization of general elections before 31 July 2013. These two objectives were successfully achieved with international community support. Thus, the Presidential6 elections held in July-August 2013, marked by the victory of Mr. Ibrahim Boubacar Keita, and the legislative elections held in November-December 2013, enabled the country to begin to return to constitutional order.

2.1.2. On the security front, the situation has improved but remains very fragile in the North with persisting sporadic attacks perpetrated by armed groups against the positions of the forces of the Malian army and its allies. The advance of the armed groups towards the centre of the country was stopped in January 2013. In July 2013, in order to consolidate peace and security in the liberated territories, the international community established an international force under the United Nations Multidimensional Integration Stabilization Force in Mali (MINUSMA). While these actions have achieved some stabilization in the country, the security situation has seriously deteriorated once again since May 2014 due to violent clashes between Malian armed forces and armed rebel groups. While the signature on 23 May 2014 of a ceasefire under the auspices of the African Union ended the hostilities, armed groups remain highly active in the North where attacks against the UN peacekeeping forces have resulted in 20 fatalities since the start of their mission and the security problem remains unresolved, especially in the region of Kidal. With a view to reaching a global peace agreement that will lead the country towards a situation of long-term stability, negotiations in the context of the inclusive inter-Malian dialogue between the Government and armed groups which began on 16 July 2014 are continuing in Algiers under the mediation of Algeria with assistance from the International Community (ECOWAS, AU and UN). However, the peace consolidation and national reconciliation process is faced with major challenges, particularly in terms of State-building, trust in institutions, rule of law and checks and balances.

Fragility factors

2.1.3. Mali displays, at present, a number of signs of fragility on the economic, social, political and environmental fronts, raising the issues of inclusion and equity, particularly with regard to access to basic public services, and challenging the State's capacity to address them7. Thus, despite

5 Estimates of the Sustainable Human Development and Poverty Reduction Observatory (ODHD/LCP). 6 Following the signature, on 18 June 2013, of the Ouagadougou Agreement between the Government and armed rebel groups. 7 See technical annex on the country fragility assessment matrix.

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the fact that the 2013 presidential and legislative elections were held as agreed, trust in institutions has declined, State-building is still a priority and security issues remain a major challenge with regard to ensuring Mali's territorial integrity and restoring peace at national level. Strengthening the rule of law, combatting corruption and impunity, reinforcing the judicial system, establishing checks and balances are still major issues to be addressed. There is also a need to take action in view of consolidating the foundations of the country's economy and the resilience of its population. In this respect, the improvement of public financial governance, which is at the center of this Programme, is a key challenge, both in terms of domestic resource mobilization and quality of public expenditure.

Economic Context

2.1.4. As a result of the multidimensional crisis experienced by Mali in 2012, the country recorded a zero GDP growth rate. A timid recovery began in 2013, with the real GDP growth rate estimated at 1.7%, compared to a forecast 5.1%8. As a result of the crisis, the Malian economy posted a zero GDP growth rate in 2012 following an average growth rate of about 5.5 % between 2001 and 2011, above the WAEMU average (3.9%). In 2013, growth was mainly driven by the tertiary sector. Implementation of the stringent policy of the Central Bank of West African States (BCEAO), coupled with the good 2012-2013 crop year, helped to control inflation (0.6% in 2013 compared to 5.3% in 2012). However, even though the economy has shown resilience to the country’s environmental, security

and political crises, it remains fragile especially because of its dependence on agriculture which, while providing livelihoods for almost 90% of the population, remains family-oriented.

2.1.5. Fiscal policy for 2014 was designed to preserve macroeconomic stability and contribute to economic recovery. In the SBL of October 2014 (second budget amendment in 2014), the revised target for economic growth was 5.8% compared to 6.5% in the first budget amendment (SBL of September 2014). The new target for the fiscal deficit (on a cash basis) is 5.6% compared to 4.9% of GDP in the first budget amendment and for the basic fiscal deficit will be 0.9% compared to 0.7% of GDP in the first budget amendment. The increases also took into account the country’s resource leveraging capacity in the WAEMU financial market.

2.1.6. According to the 2013 Debt Sustainability Analysis9, the country’s risk of over-indebtedness

remains moderate. Mali’s external debt is entirely public (30% of GDP in 2013) and domestic debt remains low at about 3.7% of GDP. The authorities remain very cautious about incurring debt, and are striving to maintain it at a sustainable level. The Government has, therefore, undertaken to limit the external financing of its operations to grants and concessional loans. Regarding the external accounts, the current account deficit (including grants) is expected to deteriorate further in 2014 (6.8% of GDP compared to 5.2% of GDP in 2013) because of a drop in the value of exports (fall in gold and cotton prices) and a slight deterioration in the terms of trade, i.e. -0.7% in 2014 compared to -12.9% in 2013.

Governance

2.1.7. Governance has deteriorated since the 2012 crisis, and the progress made under the 2011-2015 Government Action Plan to Improve and Modernize Public Financial Management (PAGAM-GFP) 2011-2015 has been jeopardized. The country’s ranking according to the Ibrahim

Index of African Governance (IIAG) has deteriorated, bringing the country down from 27th position with a score of 50.7 out of 100 in 2013 to 28th position out of 52 countries with a score of 49.5 in 2014, which is below the average score for West Africa (52.5). The score for governance in the Country Policy and Institutional Assessment (CPIA) was 4 in 2013 compared to 4.1 in 2011. The perception of corruption remains high and Mali was ranked 127th out of 177 countries in 2013 with a score of 28 according to Transparency International’s Corruption Perceptions Index (CPI).

2.1.8. More specifically, between March and September 2014, the governance situation in Mali deteriorated as a result of the revelation of a number of transactions, particularly extra-budgetary transactions. These mainly concerned the purchase of an aircraft (CFAF 20 billion), an army equipment contract (supplies other than arms and ammunition) for CFAF 69 billion and a Government guarantee of

8 IMF – Press Release No. 14/438 September 25, 2014. 9 The sustainability analysis was carried out jointly by the IMF and World Bank.

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CFAF 100 for a public contract relating to that and other contracts. This has created a climate of uncertainty which has also delayed the reviews of the authorities’ economic programme supported by

the IMF Extended Credit Facility (ECF) approved in December 2013.

2.1.9. However, the situation has evolved positively in recent months following the authorities’

commitment to a governance improvement process10. The Bank fielded a mission to Bamako in September 2014 at the same time as the IMF mission to assess the situation, especially with regard to economic and financial governance. A technical meeting on the issue was also held between the Bank and IMF in Washington on the sidelines of the 2014 Annual Meetings of the World Bank Group and IMF. Following its mission to Mali in September 2014, the IMF stated in its Press Release no. 14/438 of 25 September 2014 that it had reached an agreement with the Malian authorities that would enable it to submit to its Executive Board in December 2014, the conclusions of the first and second reviews of the ECF-supported programme, and that "a resolution was found for the issues raised by the extra-budgetary spending—on a presidential plane and a military contract—which delayed the first review, originally scheduled for June". This resolution included the publishing of the two independent audit reports on these transactions; reporting on the sanctions process; redressing the overbilling in the military contracts; subjecting future military procurement to stringent controls; incorporating all extra-budgetary spending in the budget, and stopping such practices in the future. At the Bank’s request, an

assessment letter was also issued by the IMF.

Social Context

2.1.10. On the social front, as a result of the successive crises that have affected the country, Mali has experienced significant reversals, especially regarding achievement of the Millennium Development Goals (MDGs). Prior to these crises, the country was on track to achieving some of these goals, particularly universal primary education (MDG 2), combating HIV/AIDs, malaria and other diseases (MDG 6) and improving access to safe drinking water (MDG 7). It was, however, unlikely that Mali would achieve the goals of reducing child mortality by two-thirds (MDG 4) and maternal mortality by three-quarters (MDG 5). As a result of the above-mentioned crises, it has now been confirmed that Mali will be unable to attain the MDG targets, even those towards which it had made significant progress.

2.1.11. The social situation in Mali which was already fragile has deteriorated since the 2012 politico-institutional crisis and the occupation of the northern regions. Even though the poverty level is lower than in 2006 when it was 47.5%, it remains worrisome with rates of between 41.7% in 2011 and 42.7% in 2012. With regard to human development, Mali must address significant challenges. According to the UNDP 2013 Human Development Report, the country is ranked 182nd out of 187 countries, with a Human Development Index (HDI) of 0.34. The humanitarian situation is characterized by: (i) food insecurity and malnutrition with immediate food aid requirements affecting almost 1.4 million people, including almost 500,000 under-5 children threatened with acute malnutrition and (ii) the return of refugees and displaced persons under difficult conditions. In 2013 through the EERSP, the Bank helped to build the Government’s capacity to provide basic social services by recommending, in particular, the budgeting in the 2013 SBL of resources of at least CFAF 380 billion to be allocated to the social sectors (education and health).

2.1.12. The Ebola outbreak shows worrying signs of progress in Mali with regard to the country's fragility factors11. The Malian authorities have strengthened surveillance and monitoring measures following the confirmation in October 2014 of the first case of Ebola in the country. According to WHO analysis, in mid-November 2014, out of the six suspected or confirmed cases of Ebola in Mali, five have resulted in deaths12. Though it is urgent to deal with this situation to avoid the uncontrolled spread of the virus which is typical of a number of neighboring countries, this is hindered by the limited capacity of public administration to develop and implement appropriate emergency measures.

10 See annex on the country's relations with the IMF. 11 See technical annex on the Ebola virus situation in Mali. 12 WHO, "Ebola Response Roadmap Situation Report", 19 November 2014.

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Prospects, Constraints and Challenges

2.1.13. The macroeconomic medium-term prospects appear positive, with a projected growth rate of 5.5% in 201513. These prospects are dependent on agriculture and gold sector performances and the revival of tertiary sector activities. There are, however, risks that could jeopardize these fairly positive prospects, including: (i) political instability which could create possible social tensions; (ii) the fragile security conditions in the northern regions; (iii) difficulties relating to the mobilization of external financing and; (iv) possible external shocks such as climate change, fluctuations in gold and cotton prices as well as in the EUR/USD exchange rate.

2.1.14. One of the main constraints which Mali will have to address stems from the lack of central Government financial resources to meet the population’s most pressing needs. The freeze for much of 2014, due to some deterioration in the country’s relations with the IMF (see the above section on ‘governance’), of official development assistance which constitutes one of the country’s main

financial flows, the suspension of many investment projects, difficulties in mobilizing domestic resources and the drop in economic operators’ activities have had a serious impact on the population’s

living conditions. The lifting of these constraints is closely linked to the financial resources that the Government can mobilize to successfully implement its transition strategies and programmes. To that end, the Government is counting on its technical and financial partners’ support (see the section below on ‘financing requirements’), but it is also necessary to reduce its dependence on official development assistance.

2.1.15. To support the country’s emergence from crisis and its transition, and in an emergency context, the Bank intends, with this Programme, to help the Malian authorities to address the two challenges of: (i) improving public management governance and (ii) consolidating the economic recovery. Improvement of public expenditure quality and strengthening of the public management transparency mechanisms should help to build trust and confidence among internal and external stakeholders (citizens, investors, technical and financial partners, etc.) and encourage their acceptance of Mali’s transition process. Support to priority public investments and the revival of private sector activities should consolidate the foundations for inclusive and sustainable economic recovery (in particular, for women and young people), which will create jobs, with a view to overcoming fragility.

2.2 Government’s Overall Development Strategy and Medium-Term Reform Priorities

2.2.1. The medium-term reference framework for Mali’s development policy is the Second

Generation Growth and Poverty Reduction Strategy Paper (GPRSP II) adopted in December 2011 for the 2012-2017 period. The GPRSP II is accompanied by a Priority Action Plan (PAP), in which priorities had to be radically changed as a result of the crisis the country experienced in 2012. The 2013-2014 Emergency Priority Action Plan (PAPU), prepared by the Government in March 2013, refocuses the GPRSP II medium-term actions and serves as a national reference framework for development actions over the 2013-2014 period. In coherence with the GPRSP 2012-2017, the new authorities drafted and are implementing the 2013-2018 Government Action Programme (PAG).

Box 1: Main Objectives of 2013-2014 PAPU

In addition to the two major objectives related to the political transition, consisting in re-establishing the country's territorial integrity by reconquering the North and in organizing transparent and credible elections, PAPU’s main objectives are to: (i) achieve social peace; (ii) contribute to economic recovery; (iii) improve the living conditions of the population of the North (emergency assistance, education and health); and (iv) create conditions for return to normal life in the liberated zones through rehabilitation of the administrative, economic and social infrastructure, as well as redeployment of Government employees.

Expenditure priorities remain the minimum functioning of public administration, military spending for the re-conquering of the northern regions, payment of domestic and external debt to preserve the Government’s credibility, safeguarding

achievements in access to basic social services, and rehabilitation of infrastructure.

13 IMF – Press Release No. 14/438 September 25, 2014.

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2.3 Bank Group’s Portfolio Status

2.3.1. As at 30 September 2014, the Bank Group’s active portfolio in Mali comprised twelve

operations for a total amount of UA 214.68 million. The overall disbursement rate is 45.12%. In terms of commitments, the active portfolio covers five sectors: i) four rural development support projects (34.62%); ii) three water and sanitation sector projects (39.31%); iii) two social sector projects (6.99%); iv) two energy sector studies (0.45%) and v) a multi-sector project (18.63%). The overall portfolio performance is satisfactory with a score of 2.13 on a scale of 0 to 3. The average age of operations is currently 4.86 years, compared to 3.82 years in 2012. It should be noted that the improvement in the average portfolio age in 2012 was partly due to the portfolio's restructuring. The current portfolio includes two ageing projects, namely the PROGEBE14 (8.6 years old) and the PADEC15 (8.10 years old). The closure of these two projects is scheduled for December 29 and 31, 2014 respectively.

2.3.2. When cooperation with Mali resumed, the Bank and Malian authorities jointly decided to restructure underperforming portfolio projects16 and to reallocate resources thus made available. Nine operations facing implementation difficulties were therefore restructured and seven operations were reshuffled and/or extended. This has been done with a view to increasing the impact of the Bank's interventions in client countries by adapting operations to changing situations in the field. The assessment of the implementation progress of recommendations stemming from the April 2013 review, following the portfolio restructuring, showed that some recommendations had not been implemented yet, which accounted for a slight downgrading of the portfolio's overall performance, with an average score of 2.2. in 2013, compared to 2.35 in 2012.

III. RATIONALE, KEY DESIGN ELEMENTS AND SUSTAINABILITY

3.1 Linkages with CSP, Country Readiness Assessment and Analytical Underpinnings

3.1.1. The EGERSP is in line with the Bank’s operations strategy for Mali. This strategy is reflected in the 2013-2014 Transition Management Support Strategy focused on the following two pillars: (i) mitigate the impact of the crisis and strengthen the population’s resilience; and (ii) consolidate

the State's stability and the foundations for economic recovery. The EGERSP is in line with the Bank’s

Transition Management Support Strategy since it aims, on the one hand, to improve public management governance to ensure greater transparency and effectiveness of public policies in favour of the population (Component 1) and, on the other hand, to consolidate the foundations of economic recovery by prioritizing public investments and providing support to private sector activities (Component 2).

3.1.2. The EGERSP is in line with the Bank's Group Strategy 2014-2019 for Addressing Fragility and Building Resilience in Africa, based on an understanding of "fragility as a condition of elevated risk of institutional breakdown, societal collapse or violent conflict". This Programme is also consistent with the operational priorities of the Bank’s 2013-2022 Strategy, especially governance and private sector development, as well as with the three pillars of the Bank’s 2014-2018 Governance Strategic Framework and Action Plan (GAP II), approved in May 2014, aimed at promoting good governance and accountability for the transformation of Africa, i.e.: Pillar 1 – public financial management and economic management; Pillar 2 – sector governance; and Pillar 3 – investment and business climate.

3.1.3. The proposed operation, which is a Crisis Response Budget Support (CRBS), is in line with the Bank’s policy on budget support operations. The review of the country’s readiness status

described in the following Table confirms that Mali meets the CRBS eligibility conditions.

14 Multinational Project on Sustainable Management of Endemic Ruminant Livestock - Mali. 15 Community Development Support Project. 16 According to the Bank's policy on portfolio review and restructuring (ADF/BD/95/01/Rev.3 et ADF/BD/95/01/Rev.3/Corr.1).

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Table 1 - Crisis Response Budget Support Eligibility Conditions Conditions Assessment of fulfilment of the different conditions Government commitment to poverty reduction

The Malian Government is strongly committed to the development of the country and to poverty reduction. The reference framework for Mali’s development policy is the Second Generation Growth and Poverty Reduction

Strategy Paper (GPRSP II), adopted in December 2011 for the 2012-2017 period. The Government prepared a 2013-2014 Emergency Priority Action Plan (PAPU), following a prioritization exercise on the Priority Action Plan (PAP) of GPRSP II, to take into account the impact of the successive crises which have affected the country. The authorities are focusing their efforts on the implementation of priority measures in favour of economic recovery, but also intend to pursue the structural economic management reforms initiated before the crisis. In keeping with the 2012-2017 GPRSP, the new authorities have prepared and are implementing the 2013-2018 Government Action Programme (PAG).

Macroeconomic stability

The medium-term macroeconomic prospects appear positive, with a projected growth rate of 5.5% in 2015. These prospects are dependent on agriculture and gold sector performances and the revival of tertiary sector activities. There are, however, risks that could jeopardize these fairly positive prospects, including: (i) political instability which could create possible social tensions; (ii) the fragile security conditions in the northern regions; (iii) difficulties relating to the mobilization of external financing and; (iv) possible external shocks such as climate change, fluctuations in gold and cotton prices as well as in the EUR/USD exchange rate. The IMF mission to Mali in September 2014 reached an agreement with the authorities that enabled IMF to submit to its Executive Board in December 2014 the conclusions of its first and second reviews of the programme supported by the Extended Credit Facility (ECF) approved in December 2013.

Satisfactory fiduciary risk assessment

In accordance with the provisions of its policy document on PBOs, the Bank conducted a fiduciary assessment, the result of which is presented in the technical annex on the detailed fiduciary risk analysis. Mali has made substantial progress in public financial management mainly as a result of the implementation of the Government Action Plan to Improve and Modernize Public Financial Management (PAGAM-GFP). However, the situation of institutional fragility caused by the 2012 crisis has led to a deterioration of the country’s fiduciary environment. The assessment concluded, therefore, that the fiduciary risks were high. In the context of the recent dialogue initiated with the development partners culminating in the conclusions of the recent IMF mission to Mali in September 2014, the Malian authorities agreed with the TFPs upon urgent and operational actions to be implemented to mitigate these risks and restore the public financial management framework. The measures included in the EGERSP, together with the reform programme supported by the IMF’s Extended

Credit Facility (ECF) and the World Bank's PBOs, will help to significantly mitigate the fiduciary risks. The main measures are: (i) the conduct of two independent audits by, respectively, the Accounts Chamber of the Supreme Court and the Office of Mali’s Auditor-General and the publication of two audit reports on the extra-budgetary transactions; (ii) the correction of any irregularities observed and incorporation of all extra-budgetary expenditure in the Government’s budget by a supplementary budget law; (iii) the enforcement of strict controls on future military contracts mainly by revising the provisions of the procurement Code establishing the regime for works, supplies and services contracts outside the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations; and (iv) the communication on the sanctions procedure. All these measures have already been implemented with the exception of the measure relating to the sanctions procedure which requires more time and which will be jointly monitored by the TFPs.

Political Stability On the political front, following two decades of stability marked by successful changes at the highest level of the State, Mali has, since March 2012, experienced an exceptional and difficult situation in the wake of a coup d’état and security crisis as a result of the occupation for several months of the country’s northern regions by armed rebel groups. This situation has considerably affected the functioning of the country’s political

institutions. In order to emerge from the crisis, the transitional authorities adopted a roadmap in January 2013 with two objectives: (i) restoration of the country’s territorial integrity by reconquering its northern regions; and (ii) the organization of general elections before 31 July 2013. The Presidential elections held in July-August 2013, marked by the victory of Mr. Ibrahim Boubacar Keita, and the legislative elections held in November-December 2013, enabled the country to begin to return to constitutional order with international community support.

Harmonization Following resumption of IMF cooperation with Mali, especially further to the IMF’s mission to Mali in September 2014, the donors confirmed their financial support with a view to harmonizing their operations during the transitional period. Thus, the consultative frameworks existing before the crises, in particular the budget support framework arrangement launched in 2012, were re-launched. The objectives of the multi-donor budget support programmes have been harmonized in order to provide the authorities with coordinated support during the transition. Thus, the EGERSP shares the same objectives as the emergency programmes of the World Bank and European Union and most of these measures are joint. The technical and financial partners have also agreed to adopt a common matrix of measures following resumption of multi-year programme-based operations from 2015 onwards.

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3.1.4. The proposed operation is underpinned by a number of analytical studies and consultations. These include: (i) a study on the economic and financial impacts of the security and political crisis in Mali conducted in November 2012 by the Government and UNDP; (ii) a study on the country’s fragility and resilience assessment carried out by the Bank's Transition Support Department17; (iii) the 2013-2014 Transition Management Support Strategy prepared by the Bank. The main findings of these analytical studies reveal a significant deterioration of the humanitarian and social situation in the country and the urgent need to support the authorities in restoring the central Government's capacity and ensuring that economic recovery conditions are met.

3.2 Collaboration and Coordination with the Other Donors

3.2.1. Mali’s technical and financial partners (TFPs) have established mechanisms to coordinate their efforts towards political dialogue, alignment and harmonization of their operations. These mechanisms remain operational on the whole, despite the situation affecting the country. They are structured at three levels: (i) the political and diplomatic level through the committee of ambassadors, heads of agencies and missions under the leadership of a "troika" of three TFPs (leader, outgoing leader and future leader) to which MINUSMA is exceptionally added; (ii) the sector and thematic level through group coordinators appointed for a renewable term of two years; and (iii) at the level of different sub-sectors through sub-group coordinators. As part of the follow-up to the international donor conference to aid Mali’s development held in Brussels in May 2013 which generated 3.285 billion Euros in support, a specific mechanism was established to ensure the quarterly monitoring of financial commitments. The Bank plays a key role as the coordinator of the ‘Economy and Finance’

thematic group responsible for the joint monitoring of activities relating to economic and financial reforms. As regards general budget support, this group contributes to the preparation of the joint budget reviews and the drafting of the common matrix of measures, and participates in the meetings of the PAGAM/GFP technical committee, as well as in the GPRSP annual reviews.

3.2.2. It should be noted that, like the Bank, the World Bank, the European Union and France have pledged to provide budget support operations in 2014 (see financing plan above). The related measures have been jointly defined among the donors and in coordination with the authorities. The upcoming joint budget review, scheduled to take place among TFPs in December 2014, reflects the concerted efforts to coordinate and harmonize approaches, in line with the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action. Thus, the measures supported by this Programme reflect the comparative advantage and value added of each stakeholder.

3.3 Outcomes and Lessons from Similar Completed or Ongoing Operations

3.3.1. The lessons learned from implementation of past operations have been reflected in the design of this Programme. The EERSP completion report is being finalized. It should be noted that all the EERSP measures agreed upon in 2013 have been completed. The main achievements of the EERSP are: (i) budgeting of provisions for the rehabilitation of the premises used by public administration services and for allocations to basic social services; (ii) redeployment of a number of public sector employees into the northern regions of Mali; (iii) establishment of a consultative framework for the selection of public investment programmes and projects; (iv) the production of monthly reports on the status of Government payments to private suppliers and assessment of domestic debt arrears as at 31 December 2012; and (v) revision of Decrees and Orders aimed at improving procedures for the award, execution and settlement of public contracts and public service delegations18. The formulation of this Programme took into account the lessons learned from the previous Crisis Response Budget Support operation in Mali (EERSP) and also the emergency budget support operations financed by the Bank in recent years in Guinea (PAREF), Guinea-Bissau (PUARB), Côte d’Ivoire (PURSSAB) and Madagascar (PURE)19. The main lessons reflected in the respective completion reports are as follows:

17 Also see technical annex on the country fragility assessment matrix. 18 For more details, see technical annex on the outcomes of past operations. 19 PAREF - Guinea: Economic and Financial Reforms Support Programme (2011); PUARB - Guinea-Bissau: Emergency Budget Reform Support

Programme (2010); PURSSAB - Côte d’Ivoire: Emergency Programme to Restore Basic Social and Administrative Services (2011); PURE - Madagascar: Emergency Economic Recovery Programme (2014).

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(i) The need to ensure selectivity for operations adapted to the fragile and emergency context of a crisis exit and transitional situation. The proposed Programme will support the authorities in implementing a limited series of measures aimed at meeting the population’s urgent needs related to the country’s transitional situation.

(ii) The need to maintain continuing dialogue with the authorities on the Programme’s

objectives. The Bank has maintained intensive dialogue with the authorities to adjust their crisis exit priorities and identify the population’s most pressing needs, especially through the active role played by the Bank's field office in Mali (MLFO), or during the CSP mission in June 2014, which ensured greater attention to Government priorities in future CSPs, and during the missions to Mali in March 2014 and September 2014 which more specifically assessed the situation regarding governance and economic and financial reforms. This dialogue was extended to the private sector and civil society in a concern to take stakeholder diversity into account.

(iii) The need for collaboration with the other partners in the operation’s formulation and

implementation. In addition to the meetings held in the ‘Economy and Finance’ thematic group and the budget support framework arrangement, the Bank consulted the multilateral and bilateral donors to ensure that the different operations are coordinated when collaboration is resumed.

3.4 Relationship to Other Bank Group Operations

3.4.1. The proposed support is in line with the Bank’s other operations. The main aim of the EGERSP is to consolidate the Government’s capacity to fulfill its public service mission through improved, more transparent and effective public management. This will allow for resumption of normal implementation of public investment projects supported by Mali’s technical and financial partners, including the Bank. This Programme also aims to assist the authorities in their efforts to meet the population’s most pressing needs which is a continuation of the EERSP. The EGERSP objectives are also in keeping with those of the sector operations recently approved by the Bank, in particular the Koulikro Region Food Security Strengthening Project under the Global Agriculture and Food Security Programme (GAFSP), and the Regional Programme to Build Resilience to Food and Nutrition Insecurity in the Sahel.

3.4.2. Implementation of the reforms recommended by the EGERSP will be facilitated by an institutional support of UA 9.97 million, the Economic Governance Support Project (PAGE), approved by the Board of Directors in 2013, the objective of which is to help restore and rebuild public administration capacity to provide the population and economic operators with essential services. The PAGE will be implemented over a longer period than the EGERSP to allow for consolidation of its results and ensure their sustainability.

3.5 Bank Group Comparative Advantages and Additionality

3.5.1. The Bank’s comparative advantage stem from the experience it has acquired in the implementation of reform support programmes in emergency contexts as well as post-conflict and fragility situations (Côte d’Ivoire, Guinea, Liberia, Guinea Bissau, Madagascar). The Bank has proven experience in the design of this type of short-term, targeted operation aimed at assisting countries to gradually emerge from fragile situations and meet their populations’ most pressing needs. The Bank’s

added value also lies in its responsiveness enabling it to rapidly design budget support operations to respond to crises and in its flexibility to adjust its project portfolio to meet the country’s priorities. The maintenance by the Bank, through its field office in Mali (MLFO), of continuous dialogue with the authorities in order to support them in providing the most appropriate response to their assistance needs also represents significant added value. The combination of crisis response budget supports (EERSP, EGERSP) and institutional supports (PAGE) is particularly important in terms of support to Mali’s

transition.

3.6 Good Practice Principles for the Application of Conditionality

3.6.1. The Programme design has taken into account good practice principles for the application of conditionality, especially regarding the country’s ownership of the reforms. The Malian authorities have displayed a strong commitment to the implementation of important measures to

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safeguard the country’s macro-economic fundamentals, a necessary condition for the implementation of any other reforms. Similarly, despite the exceptional situation experienced by the country in the wake of successive crises, and despite a significant budgetary contraction, the authorities have endeavored as far as possible to safeguard priority expenditure in the social sector and the payment of public sector employees. In light of these efforts and due to the emergency nature of the reconstruction needs caused by the successive crises that have affected the country, there will be no conditions precedent to disbursement of the Programme’s single tranche. Only those conditions precedent to presentation of the

operation to the Board of Directors have been retained in order to maintain the authorities’ commitment

to implement the priority reforms.

IV. PROPOSED PROGRAMME AND EXPECTED OUTCOMES

4.1 Programme Goal and Objectives

4.1.1. Rationale. Since 2012, Mali has experienced a series of crises (security, political and institutional) whose economic and social consequences have been very serious with, in particular, weakened institutions, erosion of the Government’s ability to provide the population with essential

services, displaced populations, degraded social fabric, disorganized health and education systems and infrastructure destroyed in some regions. With support from its development partners, including the Bank, through the EERSP, implementation of the first year of the Government’s 2013-2014 Emergency Priority Action Plan (PAPU) has made it possible to meet the most pressing social and economic needs resulting from these crises. These actions have helped to gradually restore the normal functioning of the administration and the population’s access to basic social services. However, much remains to be done to enable the country to sustainably emerge from its situation of fragility, as it is still faced with considerable challenges.

4.1.2. This operation is justified by the need to: (i) consolidate the reforms supported under the EERSP by strengthening the public financial management systems and intensifying domestic resource mobilizaton in order to build central Government’s capacity to provide the population with basic social

services and, (ii) support the implementation of priority investments and public policies likely to contribute to the economy’s recovery. Through its support, the Bank, like the other partners, will contribute to the implementation of the second and final year of the Emergency Priority Action Plan (PAPU).

4.1.3. Goal and Objectives. The overall goal of EGERSP, which is an emergency support operation, is to enable Mali to strengthen its resilience by improving public management governance and consolidating economic recovery. As part of the concerted interventions of the international community in Mali to restore the Government’s authority, foster economic recovery and help the country to address

the deterioration of its social fabric, the Programme aims to support the authorities’ efforts regarding public management transparency and accountability targeted at restoring the CPIA ‘governance’ score for transparency, accountability and corruption in the public sector to its pre-crisis level, as well as in their desire to revive growth, which is expected to increase from 1.7% in 2013 to 5.5% in 201520.

4.2 Programme Components, Objectives and Expected Outcomes

4.2.1. The specific objectives of the EGERSP are to: (i) improve public expenditure quality; (ii) strengthen the public management transparency mechanisms; (iii) support priority public investments; and (iv) support the revival of private sector activities.

4.2.2. The EGERSP has two main components: (i) Improvement of public management governance and (ii) Consolidation of the economic recovery.

Component I – Improvement of Public Management Governance

4.2.3. Component I of the EERSP aimed to restore the normal functioning of the public administration and rebuild the Government’s capacity to provide basic social services through measures

such as budgeting of provisions for the rehabilitation of the premises of the public administration services and allocations for the basic social sectors, or the redeployment of a number of public 20 IMF – Press Release No. 14/438 September 25, 2014.

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employees to the northern regions of Mali. Component I of the EGERSP aims to consolidate these achievements through enhanced public management governance by: (i) improving public expenditure quality and (ii) strengthening the public management transparency mechanisms.

Sub-Component I.1 – Improvement of Public Expenditure Quality

4.2.4. Context and Challenges: In order to encourage the redeployment of the central Government’s

administrative services to Mali’s northern regions which had been occupied by armed groups, a budget

provision of CFAF 11.5 billion for the rehabilitation of the premises accommodating the public administration services was made in the 2013 SBL, CFAF 10.5 billion of which have been disbursed. Despite the difficulties related to the destruction and deterioration of infrastructure in the northern regions of Mali, the public administration employees were deployed. Furthermore, in order to rebuild central Government’s capacity to provide basic social services, budget allocations to the basic social sectors represented over CFAF 400 billion in the 2013 SBL, including CFAF 165.2 billion for basic education, CFAF 92.8 billion for secondary and higher education and CFAF 84.6 billion for health. In order to address the degradation of Mali’s socio-economic fabric and the need to improve the population’s living conditions, it will be necessary to maintain a significant level of basic social

expenditure, particularly in the areas of health and education, in order to ensure public expenditure quality. Thus, the revised budget of September 201421 includes provisions of CFAF 188.8 billion for basic education expenditure, CFAF 93.6 billion for secondary and higher education and CFAF 105.9 billion for health. It will be necessary to confirm, or exceed, these amounts in the 2015 draft BL.

4.2.5. Furthermore, the issue of extra-budgetary expenditure, revealed in the exchanges between March and September 2014 which took place between Mali and the IMF staff team on a number of transactions (purchase of an aircraft for an amount of CFAF 20 billion, a contract for supplies other than arms and ammunition awarded by the Ministry of Defence for CFAF 69 billion and a Government guarantee of CFAF 100 billion for a public contract relating to that and other contracts), constitutes an additional challenge with regard to public expenditure quality. As a result, the IMF recommended that all extra-budgetary spending be incorporated in the budget, and such practices stopped in the future by requesting the drafting, in light of current practices in WAEMU, of an Order establishing a detailed (and limited) list of expenditure paid prior to authorization and the modalities for its settlement.

4.2.6. Programme Measures: In this context, and to address these challenges, the EGERSP proposes to support the following measures to assist the Government in pursuing its efforts to improve the quality of public expenditure: (i) the inclusion in the 2015 draft BL of a higher level of basic social expenditure on education and health than in the budget amendment of September 2014 (SBL of September 2014); (ii) the signature, before the end of 2014, of an Order establishing a detailed (and limited) list of expenditure paid prior to authorization and the modalities for its settlement.

4.2.7. Expected Outcomes: It is expected that at least CFAF 188.8 billion for expenditure on basic education, CFAF 93.6 billion for expenditure on secondary and higher education and CFAF 105.9 on health will be incorporated in the 2015 draft BL. These measures, backed by the EGERSP, should help to build the Government’s capacity to provide the population with basic social services, especially in the areas of health and education. They will also help to preserve Mali’s results obtained before the 2012

crisis in terms of health coverage and school enrolment. Furthermore, the signature of an Order establishing a detailed (and limited) list of expenditure paid before authorization and modalities for its settlement should bring to an end the existence of non-regularized extra-budgetary expenditure and thus help to improve public expenditure quality.

Sub-Component I.2 – Strengthening of Public Management Transparency Mechanisms

4.2.8. Context and Challenges: The Malian authorities are committed to the strengthening of the mechanisms to ensure transparency of public management and the accountability of public administrators, especially through the implementation of the Government Action Plan to Improve and Modernize Public Financial Management (PAGAM-GFP 2011-2015). Significant efforts have been made in the areas of: (i) external control (validation of accounts of public accountants from 1960 à 1991

21 Act no. 2014-047 of 06 September 2014 amending Order no. 2013-021/P-RM of 03 December 2013 on the 2014 Budget Law.

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by Act no. 2013-001 of 15 January 2013; availability of reports of the Accounts Chamber of the Supreme Court (SCCS); swearing in of public accountants; assignment to the SCCS of external auditors from private firms to support it in its missions; (ii) financial transparency and combating corruption (Act no. 2013-031 on the approval of the public financial management transparency Code adopted by Parliament on 23 July 2013; Act no. 2014-015 on the prevention and suppression of illicit enrichment, promulgated on 27 May 2014 by the President of the Republic; preparation by the Government of a national policy framework document on transparency in the public administration.

4.2.9. Furthermore, the above-mentioned issue of extra-budgetary expenditure concerning, among others, spending of a military nature which resulted in the freezing of IMF aid to Mali for much of 2014 underscored the importance of strengthening control of public procurement, especially military contracts.

4.2.10. Programme Measures: In this context, the Programme supports the authorities’ commitment

to: (i) the finalization in 2014 by the Accounts Chamber of the Supreme Court (SCCS) of the clearance of the public accountants’ management accounts from 1960 to 2008; (ii) the signature, before the end of 2014, of a Decree establishing the regime for works, supplies and services contracts outside the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations.

4.2.11. Expected Outcomes: Clearance by the SCCS in 2014 of the public accountants’ management

accounts from 1960 to 2008 should highlight any management errors and ensure appropriate action is taken (e.g. final discharge to accountants no longer in service, granting discharge to public accountants remaining in service for their management). This clearance should also ensure the normal appraisal of accounts from 2015 thereby strengthening jurisdictional control of public management. The signature of a Decree establishing the regime for works, supplies and services contracts outwit the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations should, in particular, provide a framework for contracts awarded under the seal of ‘defence secrecy’ or ‘vital interests of the State’ which are not subject to the

selection methods or controls of the organs stipulated in the procurement Code, which will strengthen the public management transparency mechanisms, including areas covered by ‘defence secrecy’ or ‘vital

interests of the State’.

Component II - Consolidation of the Economic Recovery

4.2.12. Component II of the EERSP aimed to support the establishment of the required conditions for a rapid recovery of the economy through measures such as the establishment of a consultative framework for the selection of public investment programmes and projects, the production of monthly reports on the length of time taken by the Government to pay private suppliers and assessment of domestic debt arrears as at 31 December 2012, or the revision of Decrees and Orders aimed at improving procedures for the award, execution and settlement of public contracts and public service delegations. Under Component II of the EGERSP, these achievements will be consolidated in order to lay the foundations for economic recovery through: (i) support to priority public investments and (ii) support to the revival of private sector activities.

Sub-Component II.1 – Support to Priority Public Investment

4.2.13. Context and Challenges: Public investment is a key driver of economic policy in the context of Mali’s transition characterized by public demand-led growth. The drop in capital expenditure has led to the deterioration of the social and development indicators with respect to the MDGs. Supported under the EERSP, Decree no. 2013-778/PM-RM of 02 October 2013 on the establishment, responsibilities, organization and operating modalities of the development project and programme monitoring committee established a single consultative framework for the selection of public investment programmes and projects which will be operationalized through a public investment programme and project selection technical committee under the oversight of the Ministry of Planning. The purpose of this technical committee is to examine, assess and select the files of public investment projects to be included in the Three-Year Investment Programme (TYIP) and the Special Investment Budget (SIB). In the SBL of October 2014 (second budget amendment), the SIB (external financing) is CFAF 315.5 billion, whereas

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SIB expenditure on domestic financing is CFAF 151.3 billion and includes the financing of infrastructure financing (e.g. construction work on the dry port in Guinea-Conakry) and social sector investments (construction of social housing, artisanal villages, investment in a multifunctional rural poverty reduction platform etc.).

4.2.14. Programme Measures: By backing priority public investments, the EGERSP aims to support: (i) operationalization of the development project and programme monitoring committee by the signature, before the end of 2014, of a decision effectively establishing the technical committee for the selection of public investment programmes and projects in Mali; (ii) the inclusion in the 2015 BL Special Investment Budget of priority investment projects which mainstream gender (social, education, health, infrastructure and water sectors) for which the allocation is equal to or above CFAF 100 million.

4.2.15. Expected Outcomes: The establishment of the technical committee for the selection of public investment programmes and projects in Mali will contribute to the operationalization of the consultative mechanisms for the selection of public investment programmes and projects through mechanisms for collecting documents on public investment programmes and projects, support to project formulation, the analysis and appraisal (feasibility studies) of projects and requests in accordance with clearly defined economic and financial rate of return criteria. This should have an impact on the improvement of public demand with the public investment rate rising from 15.3% of GDP in 2013 to 16% of GDP in 2015. The investment prioritization and monitoring and evaluation approach adopted will contribute both to the streamlining of public expenditure to provide the country with fiscal leeway and promote an attractive partnership for the private sector as a new source of growth. Furthermore, the inclusion in the 2015 BL Special Investment Budget of priority investment projects for amounts equal to or above CFAF 100 million will consolidate support to the social, education, health, infrastructure and water sectors in favour of the population.

Sub-Component II.2 – Support to the Revival of Private Sector Activities

4.2.16. Context and Challenges: The Malian private sector has been seriously affected by the successive crises experienced by the country leading to job losses and falling incomes. The crisis has affected the private sector in several ways: suspension of official development assistance and of many investment projects, declining domestic resources, a reduction in budget allocations and public procurement, the closure of many economic units, destruction of industrial production capacity in different locations throughout the country. Cash flow difficulties in the area of public finance have led to an increase in private operators’ claims vis-à-vis the administration. The series of shocks suffered by companies has impacted negatively on the banking sector which has experienced a significant increase in outstanding claims. As a result of these difficulties, economic activity has contracted, accompanied by a significant drop in private sector investments. Government support to the revitalization of private investment and revival of private sector activities should lead to the rapid payment of Government financial commitments to private suppliers especially in key sectors such as energy (case of EDM-SA). It should be noted that the assessment report on domestic debt arrears as at 31 December 2012 (a measure backed by the EERSP) has been finalized. Moreover, the fact that the monthly reports on the length of time taken by Government to pay its private suppliers have been published regularly represents significant progress. Support to the revival of private sector activities requires the honouring by the Government of its financial commitments to the private sector and the establishment of business environment reform coordination and monitoring tools.

4.2.17. Programme Measures: To that end, this Programme supports: (i) the clearance of Government payment arrears owed to its suppliers; and (ii) the revision of Decree 2009-127 amended by Decree 2011-142 establishing the Joint Business Framework Reform Monitoring Committee.

4.2.18. Expected Outcomes: The clearance of Government payment arrears owed to its suppliers, in particular in key sectors such as energy (case of EDM-SA), will enable private enterprises to repay their debts owed to the banking sector and provide the latter with capacity to finance the activities of economic operators, particularly in the priority sectors such as energy and water. These expected outcomes should enable the private sector to contribute to the economy’s rapid recovery. Revision of the Decrees establishing the Joint Business Framework Reform Monitoring Committee will help to lay solid

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foundations for the revival of private sector activities and the recovery of the economy in terms of reform monitoring and coordination in order to improve the business environment.

4.3 Financing Requirements and Arrangements

4.3.1. In 2014, the Government has pursued a prudent fiscal policy mainly mobilizing domestic resources. According to the 2014 initial budget law, financing requirements for 2014 amount to CFAF 41.8 billion as indicated in the Table below. The operation proposed by the Bank for a total amount of UA 14.603 million (i.e. CFAF 11.3 billion) will help to meet 27.8% of the financing requirements under the 2014 Initial Budget Law. The remaining financing requirements will be covered by the budget support operations of the other partners which will support the efforts made by the international community to restore central Government’s authority and foster economic recovery.

4.3.2. Examined at the extraordinary session of the Council of Ministers on 23 October 2014, the second amendment to the 2014 Budget Law, following that authorized by Act No. 2014-047 of 06 September amending Order no. 2013-021/P-RM of 03 December 2013 on the 2014 Budget Law, is justified by the concern to improve exhaustiveness and transparency in budget management. It also aims to: (i) increase the general budget’s revenue by CFAF 47.232 billion as a result of the transfer of resources from the account earmarked for the ‘repayment of VAT credits’ in the amount of CFAF

25.80 billion to take into account the real level of repayment with respect to the implementation status in order to include it in the tax revenue of the general budget; an increase of CFAF 21.432 billion in general budget support projections to take into account the revised pledges of some technical and financial partners (TFPs), increasing projected general budget support from CFAF 168.668 billion to CFAF 190.100 billion under the second amendment; and (ii) to include CFAF 41.365 billion in credits in the general budget to cover the supplementary subsidy of CFAF 7.00 billion to EDM-SA to clear the company’s supplier and tax debts; CFAF 0.850 for the programme to build 50,000 social houses; CFAF 0.170 billion for the artisanal village construction work; CFAF 2.00 billion for the Administrative Civil Status Census (RAVEC); CFAF 0.759 billion for other projects (support to the development of fish farming in the area of the Niger Basin Authority and support to retail traders); CFAF 0.021 billion for the multifunctional rural poverty reduction platform project; multi-year military contracts concluded for equipment delivered in 2014 for CFAF 22.00 billion; CFAF 1.147 billion for payments due for the construction of the dry port in Guinea-Conakry; protocols for the construction of sports facilities commissioned in 2014, in particular the Sports Centre and AfroBasket stadium for respective amounts of CFAF 6.076 billion and CFAF 1.342 billion. The second budget amendment amounts to CFA 1,682.437 billion in revenue and CFAF 1,823.048 in expenditure, i.e. a gap of CFAF 140.611 billion. These increases took into account macroeconomic and sustainability objectives of fiscal policy for the 2014 fiscal year.

Table 2 – Financing Requirements and Sources for 2014 (in billion CFAF) 2011 2012 2013 2014

Initial Budget

Amended Budget

IBL SBL IBL SBL 2

Total Revenue and Grants 1060.5 1220.3 941.3 1079.2 1204.2 1305.0 1448.8 Total Revenue 866.6 997 937.1 1018.3 1018.6 1106.4 1126.1 Grants 193.9 223.3 4.2 60.8 185.6 199 .1 322.8

of which Projects 97.1 145.3 3.6 60.8 60.1 48 117.0 of which Budget Support 96.9 78 0.6 0 138.5 91.3 132.8

from ADF 11.25 6.6 0 0 15 - 4.9 from World Bank - - - - 25 - - from European Union - - - - 78 65.7 78.7 from other donors - - - - 20.5 16.4 20 Netherlands

- 10.5

Canada

6.3 10.0 Denmark

2.9 2.8

Spain

3.3 France

2.6

Total Expenditure and Net Loans 1247.4 1432.8 970.9 1207.6 1358.3 1438.7 1717.6 Current Expenditure 710 793.5 738.3 772.6 850.3 851.7 874.7 Investment Expenditure 437.9 538.9 140.9 336.8 397.4 492.1 684.1 From Domestic Resource 184 180.8 136.6 163.5 208.4 251.6 296.4 Other Expenditure incl. Variations in arrears -8.2 14.2 -10.4 -15.1 -29.8 -20.9 -63.9

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Overall Fiscal Balance (on a cash basis incl. grants) -192.8 -226.7 -43.4 -143.6 -163.1 -154.1 -331.1 Financing 192.8 226.7 125.1 89 133.1 112.2 331.1

External 136.9 187 -35.8 74.7 86.3 146.9 221.0 Of which Budgetary Loans

24.7 45 56.3

from ADF

15 10 6.4 from World Bank

35 28.5

AFD

16.4 Other Budgetary Loans 9.7 Domestic 55.9 39.7 0.5 14.3 46.8 -34.6 115.0

Financing Gap 0 0 -81.8 54.6 30 41.8 0.0 Memorandum Items

Memorandum Item: Nominal GDP 5028 5529 5243 5642 5651 Source : Analysis by Bank’s services, MEF and IMF Data

4.4 Programme Beneficiaries

4.4.1. The direct beneficiaries comprise: (i) the public administration’s structures responsible for

the promotion of public financial management transparency and efficacy (Accounts Chamber of the Supreme Court, technical committee for the selection of public investment programmes and projects); (ii) private sector development support structures (Joint Business Framework Reform Monitoring Committee); and (iii) the private sector through the actions to improve the business climate and clear central Government debt arrears owed to its suppliers. The Programme will indirectly benefit the Malian population as whole, i.e. about 15.4 million inhabitants and, in particular, the most disadvantaged segments of the population (including women) who have been deprived of basic public services as a result of the conflict. More specifically, they are people living under difficult circumstances due to the absence of basic public services in the affected areas and the congestion of public services in the areas which accepted the displaced persons.

4.5 Gender Impact

4.5.1. The EGERSP measures will help to mitigate the impact of the crisis on the most vulnerable segments of the Malian population, including women. Indeed, consolidation of the Government’s authority will enable it to restore its sovereignty over the entire territory and fulfil its public service missions, especially in favour of displaced persons, the majority of whom are women and children. In the past, regarding public services, Mali had achieved significant results in terms of girls’

enrolment, with a school enrolment ratio of 75%. The proposed Programme will indirectly help to consolidate these achievements and mitigate the negative impact of the successive crises since 2012 on women’s access to basic social services. Moreover, as part of its support to public and private investment, the EGERSP fosters the inclusion in the 2015 BL Special Investment Budget of priority investment projects which mainstream gender in various sectors (social, education, health, infrastructure and water sectors) for which the allocation is equal to or above CFAF 100 million.

4.6 Environmental Impact

4.6.1. The proposed Programme is a Crisis Response Budget Support Operation. Since it concerns general budget support, it will have no environmental impact and is classified in Category III.

V. IMPLEMENTATION, MONITORING AND EVALUATION

5.1 Implementation Arrangements

5.1.1. Institution Responsible: The Ministry of Economy and Finance (MEF) will be responsible for implementation of the EGERSP. To that end, it will ensure that the relevant Ministries and other bodies of the Malian administration fully play their roles in implementing the specific measures falling within their respective areas of competence. Day-to-day monitoring and evaluation will be the responsibility of the Directorate-General of Public Debt (DGDP), which also sees to the implementation of all the partners’ programmes. This structure has satisfactorily implemented the

previous Programmes financed by the Bank, and has adequate capacity to ensure proper EGERSP monitoring. The proposed Programme will be implemented over a 12-month period from its effectiveness date.

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5.1.2. Disbursements: The UA 14.603 million financing, comprising UA 8.263 million in the form of a Loan and UA 6.340 million in the form of a Grant, will be disbursed in a single tranche subject to fulfilment by the Borrower of the related general and specific conditions as mentioned below. The choice of a single tranche disbursement is mainly justified on the following grounds: (i) the need to cover the most urgent financing needs in a year of transition in order to mitigate the impacts of the crises on the population, and foster rapid economic recovery: (ii) the Government’s strong

commitment to implement urgent measures backed by the concerted efforts of the international community to restore the Government’s authority, foster economic recovery and help the country to

address the deteriorating humanitarian situation. At the Borrower’s request, the Bank will disburse the funds into a Treasury Account.

5.1.3. Procurement of Goods and Services: Since the EGERSP is a Crisis Response Budget Support Operation (CRBS), its implementation does not raise any direct procurement issues. The Bank’s review of the national public procurement system in 2010, and continuously updated since then,

concluded that most of the national regulations were compliant with the Bank’s norms and standards,

with the exception of a few shortcomings related to the non-operationalization of the Integrated Public Procurement Management System (SIGMAP) or the absence of a physical archiving system for procurement documents22. The system was not seriously affected by the crisis and, during the crisis, public procurement complied with the existing legal and regulatory framework. Issues relating to reliability of the public procurement system will continue to be monitored during EGERSP supervision missions.

5.1.4. Financial Management and Auditing: Since this Programme is a budget support operation, the resources allocated to it will involve the entire public expenditure circuit (allocation of resources, expenditure chain and control). The MEF will be responsible for the administrative, financial and accounting management of the resources. Since the 2014 budget has already been prepared, the amount of this operation will be entered in the 2014 Supplementary Budget Law which will have a line ‘ADB support’ for the amount of the operation. A copy of this Law will be sent to the

Bank for information following its enactment. The funds will be recorded through the Integrated Expenditure Management System, which permits on-line preparation of the budget as well as budget execution monitoring in real time. At expenditure chain level, it is worth noting that the appropriations are periodically opened (quarterly), thus allowing the payment authorization officer to visualize the available credits prior to commitment, validation, authorization of the expenditure and issuing of a mandatory payment order. These different stages receive the prior approval of the financial control, which acts as the system’s internal comptroller. Budget execution reports are published quarterly. The

EGERSP will be audited in accordance with the provisions of the framework arrangement for general budget support operations which provides for the use of the national mechanism, namely the Accounts Chamber of the Supreme Court which audits budget execution. The fiduciary risk in Mali was assessed as high although the implementation of some financial management safeguard actions will help to lower it23 (see Table hereafter).

22 For more details, see technical annex on public procurement system assessment. 23 See technical annex on the detailed fiduciary risk analysis.

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Table 3 -Summary Table of Fiduciary Risk Assessment and Mitigation Measures Subject Initial Risk

Prior to Action

Action Residual Risk Following Action

Budget (Pillar 1)

High

(i) Application of administrative and legal sanctions to discourage and prevent any actions likely to undermine budget orthodoxy and transparency; (ii) Effective implementation of the measures recommended by the extraordinary session of the Council of Ministers of 19 September 2014, i.e. the auditing of all contracts under the seal of ‘defence secrecy’ by the General Control of Public Services and the annual production by the Ministries concerned of a report on the status of the said contracts for submission to the President of the Republic and the Prime Minister as from 2014.

Substantial

Auditing and Financial Information (Pillar 2)

Substantial

(i) Building the capacity of the Accounts Chamber of the Supreme Court (SCCS) in terms of staffing and equipment to enable it to fully fulfil its missions; (ii) Organization of training sessions for SCCS advisers with at least one session before the end of 2014; (iii) Submission to the National Assembly by the end of 2014 of the Organic Law determining the organization and operating rules of the Supreme Court and the procedure to be followed before it.

Moderate

Corruption (Pillar 4)

Substantial Accelerate the effective implementation of the legal measures (presented in detail in this document) taken by the Government to combat corruption, illicit enrichment and to foster financial transparency.

Substantial

Total Risk

Substantial Substantial

5.2 Monitoring and Evaluation Arrangements

5.2.1. The results-based logical framework will be the Programme’s common monitoring & evaluation framework. The MEF will be responsible for data collection and coordination of monitoring and evaluation, and will make the information available to the Bank. The Bank will field supervision missions in consultation with the other technical and financial partners to assess the progress made on the basis of agreed indicators in accordance with the Bank’s new framework for monitoring

implementation and outcomes. The achievement of the EGERSP’s expected outcomes will be

continuously monitored with support from the Bank’s field office in Mali (MLFO). It is also worth noting that a consultative framework involving the Government, TFPs, including the Bank, and civil society will be established to monitor and evaluate the implementation of emergency budget support operations. Close attention will be paid to the assessment of the expected outcomes of these programmes in the country’s northern regions. At the end of this Programme, a completion report will be prepared in collaboration with the Government.

VI. LEGAL DOCUMENTS AND LEGAL AUTHORITY

6.1 Legal Documents

6.1.1. The legal documents to be used for the Programme are: (i) a Loan Agreement between the Republic of Mali and the African Development Fund (the Fund); and (ii) a Grant Agreement between the Republic of Mali and the Fund.

6.2 Conditions Associated with Bank Group’s Intervention

6.2.1. Conditions precedent to the EGERSP’s presentation to the Board of Directors: On the basis of dialogue with the Government, it was agreed that the Government will fulfill a number of conditions prior to presentation of the Programme to the Board of Directors. These conditions are:

a) The signing of an Order establishing the list of expenditure paid before authorization and the modalities for its settlement;

b) The signing of a Decree establishing the regime for works, supplies and services contracts outside the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations;

c) The signing of a decision establishing the technical committee for the selection of public investment programmes and projects in Mali;

d) The inclusion in the 2014 SBL of a provision for the clearance of EDM-SA’s supplier

debts.

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6.2.2. Effectiveness: Loan effectiveness shall be subject to fulfillment of the conditions stipulated in Section 12.01 of the Bank’s General Conditions Applicable to Loan Agreements and Guarantee Agreements. Grant effectiveness shall be subject to fulfillment of the conditions stipulated in Section 10.1 of the Fund’s General Conditions Applicable to Grant Agreements.

6.2.3. Conditions precedent to Loan and Grant Disbursement: In addition to the effectiveness conditions stipulated above, the disbursement of Loan and Grant resources shall be subject to the following condition: Provide the references of the Treasury account for the payment of the Loan and Grant resources.

6.3 Compliance with Bank Group Policies

6.3.1. The EGERSP is in line with the operational priorities of the Bank’s 2013-2022 Strategy, in particular, governance and private sector development, as well as with the Bank’s 2014-2018 Governance Strategic Framework and Action Plan (GAP II), approved in May 2014, aimed at promoting good governance and accountability for the transformation of Africa. It also complies with Bank Group Policy on Programme-Based Operations, in particular the instrument relating to Crisis Response Budget Support. No waiver from these Guidelines has been requested in this proposal.

VII. RISK MANAGEMENT

7.1.1. The following Table presents the overall risks which might affect implementation of the Programme or achievement of outcomes.

Table 4 – Summary Table of Risks and Mitigation Measures Risks Mitigation Measures Political and Security Risk: This risk is related to

the political transition which could create tension at the highest level of the State and interference of the military in political issues. Liberation of the occupied territories of the North could lead to operations stemming from pockets of resistance of armed groups, and the subsequent bogging down of the military intervention in the North.

This risk was mitigated by the Presidential election in July 2013, marked by the victory of Mr. Ibrahim Boubacar Keita, and the legislative elections held in November-December 2013 which enabled the country to begin to return to constitutional order with the assistance of the international community. The presence of MINUSMA mitigates the security risk. The possible conclusion of a global peace agreement as a result of the ongoing negotiations between the Government and armed groups will contribute to the country’s stabilization.

Macroeconomic Risk: This risk is related to Mali’s

vulnerability to external shocks, which may have a negative impact on economic growth and public finance.

This risk is mitigated by development partners’ support for the

Government’s efforts to maintain productive investments so as to consolidate economic recovery and strengthen the population’s

resilience with a view to ensuring diversification.

Risk of Limited Capacity to Implement Emergency Measures: The Government’s limited

capacity, compounded by the malfunctioning of the public administration and the recent Ebola outbreak, could prevent implementation of the proposed emergency measures and lead to changes in Governmental priorities.

The EGERSP will help to build central Government capacity to fulfill its public service missions. Its implementation will be facilitated by the existence of an institutional support operation (PAGE) which provides for building the capacity of structures responsible for reform implementation. These operations, coupled with other operations of the technical and financial partners, will mitigate the limited capacity-related risk.

VIII. RECOMMENDATION

In light of the foregoing, it is recommended that the Board of Directors approves from ADF resources a Loan of UA 8.623 million and a Grant of UA 6.340 million as general budget support to the Republic of Mali to finance the Emergency Governance and Economic Recovery Support Programme (EGERSP).

I

ANNEX 1 Letter of Development Policy

II

III

IV

V

VI

VII

VIII

ANNEX II

IX

MALI – Emergency Governance and Economic Recovery Support Programme (EGERSP)

Programme Matrix of Measures The conditions precedent to the Programme’s presentation to the Board of Directors are shown in bold letters

Objective Programme Measures

Component I – Improvement of Public Management Governance

I.1 – Improvement of Public Expenditure Quality

Draft 2015 BL taking into account basic social spending on education and health at a higher level than budget amendment of September 2014 (SBL of September 2014)

Signing, before the end of 2014, of an Order establishing the list of expenditure paid before authorization and the modalities for its settlement

I.2 – Strengthening of Public Management Transparency Mechanisms

Finalization, in 2014, by the Accounts Chamber of the Supreme Court, of the clearance of public accountants’

management accounts from 1960 à 2008

Signing, before the end of 2014, of a Decree establishing the regime for works, supplies and services contracts outside the scope of Decree No. 08-485/P-RM of 11 August 2008 on the procedures for the award, execution and settlement of public contracts and public service delegations

Component II - Consolidation of the Economic Recovery

II.1 – Support to Priority Public Investment

Operationalization of the development project and programme monitoring committee by the signature, before the end of 2014, of a decision for the effective establishment and operation of the technical committee for the selection of public investment programmes and projects in Mali

Inclusion in the 2015 BL Special Investment Budget of priority investment projects which mainstream gender (social, education, health, infrastructure and water sectors) for which the allocation is equal to or above CFAF 100 million

II.2 – Support to the Revival of Private Sector Activities

Inclusion of a provision in the 2014 SBL for the clearance of EDM-SA’s supplier debt arrears

Revision, by the end of 2015, of Decree 2009-127 amended by Decree 2011-142 on the establishment of the Joint Business Framework Reform Monitoring Committee

ANNEX III

X

Note on Country’s Relations with IMF IMF Executive Board Completes First and Second Reviews Under the Extended Credit Facility Arrangement for Mali, Approves US$11.7 Million

Disbursement

Press Release No. 14/546

December 1, 2014

The Executive Board of the International Monetary Fund (IMF) today completed

the first and second reviews of Mali’s performance under an economic program supported by a three-year Extended Credit Facility (ECF) arrangement. The

Board’s decision enables the immediate disbursement of SDR 8 million (about US$11.7 million), bringing total disbursements under the arrangement to SDR 14

million (about US$ 20.5 million).

The Executive Board approved the ECF arrangement for Mali on December 18,

2013 for an amount of SDR 30 million (about US$ 43.9 million or 32 percent of quota, see Press Release No. 13/524).

Following the Executive Board’s discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:

“The economic recovery is under way, but remains fragile, and prospects are

clouded by a difficult security situation and the risk of an Ebola epidemic. Serious lapses in public financial management caused delays in the first review of the

Fund-supported program and the provision of general budget support. In order to restore business, consumer, and donor confidence, it is essential to tighten the

implementation of budget and procurement rules, building on the results of recent official audits.

“The 2015 budget puts public finances back on a sustainable path. It appropriately emphasizes revenue mobilization, priority spending for growth and human

development, and limited recourse to domestic financing, leaving room for bank financing of the private sector.

“Further efforts are urgently needed to strengthen public financial management. Tax policy and administration reforms need to be accelerated to raise the tax

yield. Tighter expenditure control, supported by improvements in Treasury management, will help prevent the accumulation of arrears. A conclusion of the

audit of the outstanding domestic arrears and their rapid clearance will support

the economic recovery.

“Reforms aimed at improving the business environment are essential to boost

Mali’s medium-term growth prospects. Progress in strengthening the financial system, lightening the administrative burden for taxpayers, placing the electricity

company’s finances on a sustainable footing, and combating corruption will be critical in the period ahead.”

ANNEX IV

XI

Administrative Map of Mali

This map has been provided by the staff of the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank Group and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders.