BAMAKO, August 11, 2021 - According to a recent report of the World Bank on Mali’s economy, the COVID-19 pandemic and the August 2020 coup have led to an economic recession in 2020.
The report titled "Mali Economic Update: Protecting the vulnerable during the recovery’’ points out that measures adopted by authorities to contain the spread of the COVID-19 virus, did not prevent the slowdown of Mali’s economy. Following a sustained period of expansion with economic growth averaging 5.1% between 2013 and 2019, real GDP contracted by 2% in 2020. The agricultural campaign resulted in a 79% decline of cotton output in 2020, due to lower international prices and disputes over fertilizer subsidies to farmers. Non-priority investment spending was reined in to accommodate additional pandemic-induced spending needs and the retrenchment of donor support after the military coup. The postponement of foreign aid led to a higher reliance on domestic financing on the regional bond market. On the demand side, private consumption declined on account of lower remittance inflows and the response of households to the health hazard and containment measures.
‘’All drivers of economic growth in Mali were severely affected by the COVID-19 pandemic. The slowdown in global economic activity and disruptions to international trade were strongly felt by Malian households, who experienced an abrupt welfare deterioration ‘’ highlights Xun Yan, economist at the World Bank and author of the report. ‘’The health crisis is estimated to have pushed an additional 900,000 people into poverty, reversing much of the poverty reduction progress achieved in Mali over the last decade‘’ adds Eliakim Kakpo, economist at the World Bank and co-author of the report.
The economic recession and the slowdown in international trade induced a mechanic decline in fiscal revenues. Additional spending in the context of the COVID-19 emergency program (2.3% of GDP), drove up the fiscal deficit to 5.5% of GDP in 2020. Public debt rose to reach 44.1% of GDP in 2020.
Income loss for firms
According to the Business Pulse Survey (BPS), designed to measure the pulse of businesses during the health crisis, more than 83% of interviewed enterprises signaled a loss of revenue in June 2020, while 12% were forced to shut down. “Medium-sized firms have been the most severely impacted in terms of business closure and reduction of permanent workforce”, mentions Diletta Doretti, Senior Private Sector Development Specialist at the World Bank and co-author of the report.
On the social front, the report highlights that school closures and the loss of household income, particularly in rural areas, restricted access to education for school-aged children. ‘’If nothing is done, many students risk abandoning school permanently due to their parents’ loss of income. Girls in particular, risk not reintegrating schools, and being exposed to early marriage and pregnancies‘’ insists Aly Sanoh, senior poverty economist at the World Bank and co-author of the report, who adds that school-aged children today are likely to experience lower lifetime income due to the pandemic.
To mitigate the adverse effects of the crisis, the report recommends adopting more effective remote-learning strategies and a rapid catch-up period when children return to school. A higher performing and more equitable education system can be achieved with the implementation of remedial education, accelerated learning programs, and revision of the academic calendar and examination schedules to allow effective school continuity particularly in poor and conflict areas
The report recommends redirecting private sector support to the improvement of infrastructures and the business climate, which implies a strategic choice between social protection expenditures and spending channeled at micro enterprises.
Finally, the government must balance between the needs for security, social and investment spending, while maintaining budget sustainability. To achieve this, further reforms are needed in the management of public finances, and to improve the efficiency of social spending.