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World > Africa > Mali > Economy (Notes)

Mali - Economy (Notes)


ECONOMY
Mali's per capita gross domestic product (GDP) of $470 (2006 est.) places it among the world's 10 poorest nations. Its potential wealth lies in mining and the production of agricultural commodities, livestock, and fish. Agricultural activities occupy 70% of Mali's labor force and provide 36% of the GDP. Cotton, gold, and livestock made up 80%-90% of total export earnings in Mali in 2006. Small-scale traditional farming dominates the agricultural sector, with subsistence farming--of cereals, primarily sorghum, millet, and maize--on about 90% of the 1.4 million hectares (3.4 million acres) under cultivation. The high cost of petroleum products, the fall in the world market price for cotton and gold, and corresponding loss of customs revenues put pressure on the economy and led the government to be very tight on cash disbursements in recent years. In addition, the 2002-2003 closure of the main import/export route to the port of Abidjan increased the pressure on the fragile Malian economy. Nonetheless, a focus on quality cotton production and double-digit increases in cereal and gold production boosted real GDP growth from 2.2% in 2004 to 5.1% in 2005.

The most productive agricultural area lies along the banks of the Niger River between Bamako and Mopti and extends south to the borders of Guinea, Cote d'Ivoire, and Burkina Faso. Average rainfall varies in this region from 50 centimeters per year (20 in.) around Mopti to 140 centimeters (55 in.) in the south near Sikasso. This area is most important for the production of cotton, rice, millet, corn, vegetables, tobacco, and tree crops.

Rice is grown extensively along the banks of the Niger between Ségou and Mopti, with the most important rice-producing area at the Office du Niger, located north of Ségou toward the Mauritanian border. Using water diverted from the Niger, the Office du Niger irrigates about 80,000 hectares of land for rice and sugarcane production. About one-third of Mali's paddy rice is produced at the Office du Niger.

The Niger River also is an important source of fish, providing food for riverside communities; the surplus--smoked, salted, and dried--is exported. Due to drought and diversion of river water for agriculture, fish production has steadily declined since the early 1980s. The government has started plans to develop fish breeding, mainly in the Niger delta, in order to boost fish production.

Sorghum is planted extensively in the drier parts of the country and along the banks of the Niger in eastern Mali, as well as in the lakebeds in the Niger delta region. During the dry season, farmers near the town of Diré have cultivated wheat on irrigated fields for hundreds of years. Peanuts are grown throughout the country but are concentrated in the area around Kita, west of Bamako.

Mali's resource in livestock consists of millions of cattle, sheep, and goats. Approximately 40% of Mali's herds were lost during the great drought in 1972-74. The level was gradually restored, but the herds were again decimated in the 1983-85 drought. The overall size of Mali's herds is not expected to reach pre-drought levels in the north of the country, where encroachment of the desert has forced many nomadic herders to abandon pastoral activities and turn instead to farming. The largest concentrations of cattle are in the areas north of Bamako and Ségou extending into the Niger delta, but herding activity is gradually shifting southward, due to the effects of previous droughts.

With the technical support of U.S. Agency for International Development (USAID)-funded projects, private cooperatives developed a regional border market in the southern city of Sikasso. Livestock professionals contributed to a steady increase in cattle exports. Sheep, goats, and camels are raised to the exclusion of cattle in the dry areas north and east of Timbuktu.

Until the mid-1960s, Mali was self-sufficient in grains--millet, sorghum, rice, and corn. Diminished harvests during bad years, a growing population, changing dietary habits, and, most importantly, policy constraints on agricultural production resulted in grain deficits almost every year from 1965 to 1986. Production has rebounded since 1987, however, thanks to agricultural policy reforms undertaken by the government and supported by the Western donor nations. Liberalization of producer prices and an open cereals market have created incentives to production. These reforms, combined with adequate rainfall, successful integrated rural agriculture programs in the south, and improved management of the Office du Niger, have led to surplus cereal production over the past 5 years. Except for 2002 and 2004, annual rainfall, critical for Mali's agriculture, has been at or above average since 1993. Cereal production, including rice, grew annually until 2002, when the country experienced a food production deficit, alleviated by donors' massive contributions to food security stocks. Locust infestation during the 2004 agricultural campaign prompted the government to seek assistance from the donor community in order to fill the gap in the regions that had a significant production deficit. The government anticipates a record harvest of 3.4 million tons in 2006/2007 due to abundant rainfall, 16% more than the average production of the past 5 years. Mali?s cotton production grew from 500,000 tons in 1997 to a record 620,000 tons in 2003-2004, making Mali the largest cotton producer on the African continent. In 2004-2005 and 2005-2006, cotton production retreated respectively to 590,000 and 500,000 tons as the parastatal cotton company CMDT focused on quality of harvested cotton rather than quantity.

Mining is still a growing industry in Mali, with gold accounting for some 80% of mining activity. There are considerable proven reserves of other minerals not currently exploited. In 2002, gold briefly became Mali's number one export, before cotton and livestock. There are two large private investments in gold mining: Anglo-American ($250 million) and Randgold ($140 million), both multinational South African companies located respectively in the western and southern part of the country.

During the colonial period, private capital investment was virtually nonexistent, and public investment was devoted largely to the Office du Niger irrigation scheme and to administrative expenses. Following independence, Mali built some light industries with the help of various donors. Manufacturing, consisting principally of processed agricultural products, accounted for about 24% of the GDP in 2005.

Tourism remains a small part of Mali's economy; it is a sector with significant potential. Mali's national parks, its ancient cities and archeological sites, Niger River cruises, cultural festivals, and magnificent desert landscapes are major attractions. Mali also is home to a rare herd of elephants that continues its unique annual migration to the edges of the Sahara Desert in the northern part of the country.

Economic Reforms
With the encouragement of the major donors and international financial institutions, the Government of Mali initiated a series of adjustment and stabilization programs beginning in 1982. Measures were introduced to reduce budgetary deficits, public enterprise operating losses, and public sector arrears.

Under the economic reform program signed with the World Bank and the IMF in 1988, the government has taken a number of steps to liberalize the regulatory environment and thereby attract private investment. For example, applications for the establishment of business enterprises now enjoy 'one window'--guichet unique--processing through a single ministry, allowing a business to be established in a matter of days. In addition, price controls on consumer goods have been progressively eliminated; the last price control, on petroleum products, was removed on July 1, 1992. Import quotas were eliminated in 1988, and export taxes were dropped in 1991. The Commerce Code was revised in 1991 to remove impediments to commercial activity. The investment and the mining codes also were revised in the early 1990s in order to present a good investment climate. Also in 1991, a system of commercial and administrative courts was established to handle private trade complaints and claims against the government.

During the period 1988-96, the government implemented a large reform program of the public enterprise sector, including the privatization of 16 enterprises, the partial privatization of 12, and the liquidation of 20; others were restructured. Among the 20 enterprises left, eight were privatized, including the largest--the electricity and water company (Energie du Mali, or EDM), and the textile company (Industry Textile du Mali, or ITEMA). The privatization of EDM was initially considered as a success, but the company returned to the government portfolio in mid-2005 when the French concessionaire SAUR and the Government of Mali agreed to end the 20-year concession. The government completed the concession of the railroad company to the Salt Lake City-based Savage Corporation in 2005. The privatization process for the cotton seed oil factory (Huilerie Cotonniere du Mali, or Huicoma), was completed in June 2005. The privatization completion date for two major companies--Societé de Telecommunications du Mali (SOTELMA) and the Cotton Ginning Company (CMDT)--is still uncertain, although target dates are set for 2008.

In 1999, the executive board of the IMF approved a 3-year loan for Mali under the enhanced structural adjustment facility (ESAF) to support the government's economic reform program, for a total of $63 million. For the third ESAF covering the period April 1999-March 2002, the IMF board of directors urged the Malian authorities to persevere with their policy of fiscal consolidation, including the modernizing of the tax system, and to deepen and accelerate structural reforms and rehabilitate the judicial system. Mali was selected in 1999 as an eligible country to the Highly Indebted Poor Countries (HIPC) program and has been benefiting from the program since FY 2000 as a budgetary support. In April 2003, Mali reached the HIPC completion point with the result that former debt payments will now be used to fund poverty alleviation programs. Total debt relief under the original and the enhanced HIPC initiative will amount to about $539 million, representing a 37% reduction. As one of 14 African nations that have reached the HIPC completion point, Mali will benefit from multilateral debt forgiveness under the G8 Gleneagles debt forgiveness agreement.

Foreign Aid
Mali is a major recipient of foreign aid from many sources, including multilateral organizations (most significantly the World Bank, the African Development Bank, and Arab Funds), and bilateral programs funded by the European Union, France, United States, Canada, Netherlands, and Germany. Before 1991, the former Soviet Union had been a major source of economic and military aid, including construction of a cement plant and the Kalana gold mine. Currently, aid from Russia is restricted mainly to training and provision of spare parts. Chinese aid remains high, and Chinese-Malian joint venture companies became more numerous during the period 1999-2002, leading to the opening of a Chinese investment center. The Chinese are major participants in the textile and the sugar refinery industries and in large-scale construction projects, including irrigation infrastructures in the Niger Valley Authority (Office du Niger), a bridge across the Niger, a conference center, an expressway in Bamako, a new national stadium in Bamako, four regional stadiums completed for the Africa Cup competition in 2002, and three regional stadiums to be completed by June 2007.

In 2003, U.S. assistance reached $44.2 million: This included $40.7 million in sector support made available through U.S. Agency for International Development (USAID) programs; a Peace Corps program budget of $2.8 million for 190 volunteers serving in Mali; Self-Help and the Democracy Funds of $153,000; and State Department Public Diplomacy Funds of $300,000 for educational opportunities and local projects. Military assistance includes $100,000 for the International Military Education Training (IMET) program, and $200,000 for the Regional Defense Counter Terrorism Fellowship (RDCTF) program. The Department of State dedicated $1.05 million to train militaries of the Pan Sahel countries, including Mali. Mali was granted eligibility for funding from the Millennium Challenge Account (MCA) in 2004 and 2005. The Millennium Challenge Corporation (MCC) and the Government of Mali signed a compact in October 2006 for a U.S. $460 million grant to support Mali?s proposal for an agro-business development, airport modernization and extension, and an industrial zone development. Mali was also granted eligibility for funding from the President?s Malaria Initiative for about U.S. $75 million.


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