Mali - Mali - Sud Agricultural Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-1949-MLI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALI FOR A MALI-SUD AGRICULTURAL PROJECT December 2, 1976 This document has a restricted distibution and may be used by recipients only In the performace of | | their official duties. Its contents may not otherwise be disclosed without World Dank authorizaton.  CURRENCY EQUIVALENTS Currency Unit = Mali Franc US$1 = MF 490 MF 1 = US$o.00204 WEIGHTS AND MEASURES 1 kilometer (km) = 0.6215 mile 1 centimeter (cm) = 0.033 feet 1 hectare (ha) = 2.47 acres 1 metric ton (t) - 2,205 lbs 1 kilogram (kg) = 2,205 lbs ABBREVIATIONS BADEA Banque Arabe pour le Developpement Economique en Afrique BDM Banque de Developpement du Mali CCCE Caisse Centrale de Cooperation Economique CFDT Compagnie Francaise pour le Developpement des Fibres Textiles CMDT Compagnie Malienne pour le Developpement des Textiles COMATEX Compagnie Malienne des Textiles FAC Fonds d'Aide et de Cooperation FED Fonds Europeen de Developpement FGR Federation des Groupements Ruraux ICRISAT International Crops Research Institute for the Semi-Arid Tropics IER Institut d'Economie Rurale IITA International Institute of Tropical Agriculture IRAT Institut de Recherches Agronomiques Tropicales et des Cultures Vivrieres IRCT Institut de Recherches du Coton et des Textiles Exotiques ITEMA Industrie Textile du Mali PAR Point d'Appui de la Recherche PEP Point d'Experimentation Permanente PMI Protection Maternelle et Infantile OACV Operation Arachide et Culture Vivrieres OPAM Office des Produit Agricoles du Mali ORSP Office de Regularisation et de Soutien des Prix SCAER Societe de Credit Agricole et d'Equipement Rural SEPOM Societe d'Exploitation des Produits Oleagineux du Mali SOMASAC Societe Malienne de Sacherie SOMIEX Societe Malienne d'Importation et d'exportation ZER Zone d'Expansion Rurale Fiscal CMDT October 1 - September 30 Ministere du Developpement Rural January 1 - December 31 Project January 1 - December 31  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALI FOR A MALI-SUD AGRICULTURAL PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Mali in an amount equivalent to US$15.5 million on standard IDA terms to help finance an agricultural development project. The IDA credit will be on-lent by Government to the Compagnie Malienne pour le Developpement des Textiles (CMDT) for 20 years at an interest rate of 9%. The French Fonds d'Aide et de Cooperation (FAC) would make a grant equivalent to US$1.8 million; the African Development Fund (ADF), the Arab Bank for Economic Development in Africa (BADEA) and the Caisse Centrale de Cooperation Economique (CCCE) would provide loans of US$6.0 million, US$5.0 milion and US$3.1 million respectively. This document ha a retricted distribution and may be ued by rmcipients only in the perfomance of their official duties. Its contents may not othemein be diucled without Woid ank authorimton.  -2- PART I: THE ECONOMY Background 2. A report on "Recent Economic Developments in Mali" (233a-MLI) was distributed to the Executive Directors on September 27, 1973. An Economic Memorandum will be distributed to the Executive Directors shortly. 3. With a per capita GNP of $95 Mali is one of the poorest countries of Africa and amongst the 29 least developed countries identified by the United Nations. It is handicapped by serious obstacles to, development. The extreme variability of rainfall causes sharp fluctuations in crop and livestock production. Access to foreign markets is made difficult by its landlocked position and the long distances - more than 1000 km - to the nearest seaports, Abidjan and Dakar. Development is also constrained by the shortage of skilled manpower and the narrow domestic market for indus- trial products. 4. About 90% of the population depends for livelihood on crop farm- ing, animal husbandry, forestry and fishing. Exports consist almost entirely of agricultural commodities and livestock. In 1972, the primary sector accounted for 43% of GDP. The relative contribution of the primary sector declined in 1973 and 1974 owing to widespread drought; and even after the recovery of agricultural production in 1975 it remained somewhat lower than in 1972. 5. Over the last fifteen years economic growth has barely kept ahead of the growth of population. During the 1960s GDP, in real terms, increased at an average annual rate of 2.8% as compared to the average population growth rate of 2.1%. During the drought of the early seventies, GDP declined, but it is estimated to have risen by more than 12% in 1975 with the return of adequate rainfall and the recovery of agricultural production. 6. The economic problems of Mali were aggravated in recent years not only by the drought but also by international inflation, excessive credit expansion and growing budget and balance of payments deficits. The Govern- ment of Mali (GOM) has initiated action to redress major financial imbalances through credit restraint, substantial reduction of the subsidy element in the prices of essential consumer goods, fertilizers and agricultural equipment and improved tax collection. Good crop seasons in 1975 and 1976 should facilitate the implementation of these measures. Recent Developments 7. All economic sectors have in varying degrees been affected by the recent drought, and their recovery is following different patterns. From an estimated 5.5 million heads in 1971 the cattle population was reduced to only 3.5 million head in 1974. The reconstitution of the livestock herd has begun, but this is inevitably a long-term process. With the return to normal  - 3 - rainfall primary production as a whole increased in 1975 by more than 20%. The output of cereals rose by nearly a third ensuring adequate supplies of staple food. There was an equally sharp increase in the production of cotton and groundnuts. Industrial output which largely depends on local raw mate- rials has also recovered following the return of normal rainfall. 8. During the drought years the rate of investment was maintained at about 16% of GDP with the aid of an increasing inflow of external resources. The resource gap is estimated to have widened to nearly a third of GDP in 1974. It did narrow in 1975, but still remains extremely large at about 20% of GDP. Public dissaving continued to increase as growth of revenues lagged behind fast rising expenditures, particularly expenditure on person- nel. The wage bill increased rapidly because of cost of living adjustments and the policy of government to serve as residual employer of nationals who complete secondary or higher education. Current revenues did increase as a result of efforts to improve tax collection, but not enough to keep pace with rapidly growing expenditures. The current budget deficit widened from 3.6 billion MF (US$7.2 million) in 1972 to 7.6 billion MF (US$17.8 million) in 1975, or about 27% of total current revenues. 9. Money supply expanded unusually fast after 1972 mainly as a result of the rapid increase in bank credit to state enterprises, most of which incurred heavy losses, partly because of the Government's policy of sub- sidising prices of important consumption goods and other essential commodi- ties. Monetary expansion slowed down in 1975, but prices during the year recorded the steepest increase in many years, partly as a result of the Government's new policy to reduce consumer subsidies. 10. Drought combined with the sharp rise in import and energy prices led to a serious aggravation of the external deficit. Cereal imports shot up from 64,000 tons in 1972 to 235,000 tons in 1974, while the average import price trebled; the value of petroleum imports nearly doubled. Imports of cereals and most other foodstuffs declined substantially in 1975, but owing to higher imports of materials and investment goods payments for goods and services fell by only about 12%. Exports could not benefit fully from the highly favourable market conditions in 1973 and 1974 because the drought had reduced supplies available for export. Still, owing to high prices, particularly for cotton, export earnings increased from 22.7 billion MF ($45 million) in 1972 to 30.8 billion MF ($64 million) in 1974. Though cotton and groundnut supplies improved markedly in 1975, world prices of these commodi- ties declined and the total value of exports is estimated to have fallen marginally during the year. Foreign capital and Debt 11. Public investment is mainly financed by foreign aid. During most of the sixt4ies the USSR and the People's Republic of China were the most important aid donors. At the end of 1973, they held about one-third each  -4- of Mali's external public debt disbursed and outstanding. New disbursements (grants and loans) from DAC sources increased from US$23 million in 1969 to US$70 million in 1973. Roughly half came from bilateral sources (mainly France, United States, Germany, and Canada). 12. Official grants have become the most important financing item in Mali's balance of payments. Their total amount more than trebled (to 37.2 billion MF or about US$87 million) between 1972 and 1975. Net official borrowings on the other hand increased by only 2.4 billion MF to about 8.5 billion MF during the same period. Despite the substantial inflow of grants and growing net official borrowing the overall payments deficit increased sharply from 2.6 billion MF (US$5.2 million) in 1972 to 14.5 billion MF (US$30.2 million) in 1974. Such overall deficits are financed mainly through drawings on the French Treasury under the Operations Account arrangement. Mali's outstanding indebtedness to the Operations Account (including accumu- lated interest) went up from 31.5 billion MF (US$62.4 million) at the end of 1972 to 86.8 billion MF (US$176.6 million) in September 1976. At the end of June 1976, net foreign assets were negative by nearly 90 billion MF (US$190 million). 13. Mali's external public debt outstanding at the end of 1973 (exclud- ing drawings on the Operations Account with the French Treasury) was US$368 million, including an undisbursed amount of US$85 million. IDA's share in the total amount disbursed and outstanding was 17.4%. Repayments of principal and interest due in 1973 would have claimed about 19% of foreign exchange earnings (15% in 1972), but actual debt service payments were small (1.5% in 1972, 1.7% in 1973) owing to the rescheduling since 1970 of Chinese, Russian and some other debts under short to medium-term arrangements. Mali received five stand-by credits from the IMF between 1964 and 1971, of which SDR 2.00 million are outstanding. In March 1974 the IMF agreed to reschedule SDR 2.50 million of payments due in 1974 and 1975. A further postponement of payment commitments totaling SDR 2 million was approved in January 1975. Apart from the stand-by credits Mali drew SDR 5.00 million under the 1974 oil facility and obtained another credit of SDR 3.99 million under the 1975 oil facility. Development Prospects 14. The short run outlook for the economy has improved after two years of good rainfall and a high level of agricultural production. Industrial growth has been helped by better availability of agricultural raw materials for processing. Power generation has continued to expand at a fairly high rate. With good management, adequate rainfall and well focussed external assistance the country should be able to overcome the extremely difficult economic situation in which it finds itself at present.  15. Agriculture has considerable potential for expansion both in the South where rainfed agriculture meets favorable conditions and in the vast inland delta of the Niger river. The river also offers much potential for power development to support industrial and mineral development. Planned investment in new capacity for cotton seed oil extraction, cotton textiles for export and sugar production, together with growing crop and livestock production, will eventually strengthen the balance of payments. Mineral resources (iron ore, phosphates) remain at present unexploited but offer interesting longer term development possibilities. 16. The Five-Year Social and Economic Development Plan (1974-78) gives high priority to agriculture, water and power development, industries process- ing agricultural materials and road transport. The pattern of investment is well conceived, and allocation conforms broadly to the resource endowment of the economy, but the investment target of MF 270 billion (about $356 million) in 1972 prices is no doubt over-ambitious, which means that difficult choices will have to be made. Implementation of the plan has encountered serious internal and external resource constraints. In the short run, priority has to be given to stabilization measures, ans the growth of public and private consumption will need to be restrained. With regard to new investments priority should be given to projects and policies that will help correct over time the structural weakness of the balance of payments. This will require greater emphasis on export crops, animal husbandry, minor irrigation works and the more efficient manufacturing activities. 17. The prospects for the Malian economy have improved following the marked increase in output over the last two years and the stabilization measures taken by the Government. Nevertheless, sustained and viable growth in the longer run depends crucially on investments that will strengthen the economy's export base and reduce its dependence on imports. Mali's capacity to finance new investment, however, is severely constrained by the difficult balance of payments position and a limited savings potential resulting from the extremely low per capita income level. Moreover, borrowing on conven- tional terms would add considerably to the burden of servicing an already sizeable external debt. External aid, accordingly, should be on soft terms and finance, besides foreign exchange outlays, a significant proportion of local currency costs.  - 6 - PART II: BANK GROUP OPERATIONS IN MALI 18. The proposed credit would be IDA's twelfth operation in Mali, which would bring total commitments of IDA funds to US$108.7 million. Actual com- mitments so far amount to US$93.2 million, most of which during the past three years. Of this amount, US$48.5 million has been disbursed as of October 31, 1976. A summary statement of these credits as well as notes on the execution of ongoing projects are set out in Annex II. 19. Experience with ongoing projects has generally been satisfactory although a telecommunications project had experienced some difficulties which have not been remedied as reflected in an amendment which was approved by the Board on July 21, 1976. Some problems also remain in the execution of the Second Highway Project for which the Board of Directors approved in June 1975 a supplementary Credit of US$8.3 million to cover the Association's share of a cost overrun. Unfortunately, works have been delayed by more than one year, and there is a dispute between the contractor and the Government. Extensive discussions have been held between the two parties, which should soon lead to an agreement. Other items of the project are either completed or well under way. 20. The proposed Mali-Sud Agricultural project covers the south of Mali and is designed to provide benefits to about 91,000 farm families. Its primary aim is to intensify and expand cotton and kenaf production and to improve cereal production through the introduction of better cultivation techniques and practices. A Third Railway project and a Second Education project are currently under preparation. Besides, there are a number of potential projects in agriculture, transport and other sectors for which the Government will be seeking Bank Group financing. Due to the shortage of IDA funds, the Association is also actively promoting co-financing with other donors for those projects.  -7- PART III: THE AGRICULTURAL SECTOR 21. About 90% of Mali's population depends for livelihood on agriculture and allied pursuits which accounted for 43% of GDP in 1972. Raw or processed agricultural commodities and livestock form the largest part of exports. Cotton, the single most important exchange earner, accounts for more than 30% of the value of exports, which is nearly as much as the total export proceeds from groundnuts and livestock, the other major export commodities. 22. There are some two million hectares under permanent cultivation, 90% of which are rainfed and the rest irrigated. Rainfed cultivation , used on small family farms cultivated traditionally, has 90% of its area under cereal crops (millet and sorghum) and the rest under cotton and groundnuts, the main cash and export crops. Of the area under irrigated cultivation, some 60% is cultivated traditionally by individual farmers, with the rest under the "Operations de Developpement Rural" where improved methods are applied. Almost all irrigated lands are under rice and no cotton is presently grown under irrigation. 23. Development efforts until recently were directed mostly at export crops while cereals suffered from comparative neglect. Cash crop production developed more rapidly and was less affected by the recent drought than cereal farming. Total production of cereals declined from 1.1 million tons in 1967/68 to an average 0.8 million tons during the drought years 1972-74; but seed cotton outputs increased from 42,000 to 65,000 tons, while the groundnut crop fell only from 118,000 tons to 104,000 tons. 24. Agricultural production increased substantially over the last two years as a result of good rainfall and higher producer prices. Production of cereals, including paddy, is estimated to have recovered to 1.15 million tons in 1974/75 and 1.2 million tons in 1975/76. Cotton and groundnut crops in 1975/76 reached the unprecedented levels, of 103,000 and 200,000 tons re- spectively. Pricing, Marketing and Subsidies 25. The agricultural sector is subjected to fairly extensive price regulation. Price controls over cereals, cash crops and agricultural com- modities are intended to restrain the rise in prices of essential consumer goods and to provide farmers with incentives to use improved inputs. Pro- ducer prices for the crop year are specified, along with taxes and levies, marketing and handling charges, in comodity price schedules known as "baremes." The system of administered prices functions essentially through the Societe Malienne d'Importation et d'Exportation (SOMIEX), Office des Produits Agricoles du Mali (OPAM) and the Societe de Credit Agricole et d'Equipement Rural (SCAER), the state trading enterprises handling domestic and foreign trade in agricultural commodities.  - 8 - 26. SOMIEX is the monopoly importer and sole distributor of essential commodities other than foodgrains, and the monopoly exporter of various agri- cultural commodities, particularly groundnuts and cotton. It is the largest state-owned enterprise with a size and diversity of operations enabling it to subsidize, in adherence with Government's price policy, consumer goods of prime necessity. 27. For the first time since 1972/73 SOMIEX is faced with the problem of dealing with large surpluses of cotton. As retail prices of imported consumer goods rose sporadically and price schedules for cotton and groundnuts were only partially adjusted in response to sharply rising world prices, SOMIEX made substantial profits from export operations. In 1975/76 the world market demand for cotton and groundnuts softened and the international prices dropped sharply. This fall coincided with increased production, reducing the effec- tiveness of SOMIEX's operations. 28. OPAM has been vested with the monopoly of domestic and foreign trade in cereals at prices fixed by Government. However, OPAM has not been able to enforce its monopoly in the domestic market due to rigid and often unrealistic pricing of cereals and its own inability to handle large grain surpluses. An IDA-financed study of cereal marketing in Mali has just been completed under Credit 491-MLI and recommends that OPAM intervention in the cereal market be more flexible in order to dampen fluctuations in prices and availability. Conclusions of the study and implementation of its recommenda- tions will be discussed with the Government. 29. SCAER is the sole purchaser of agricultural equipment and other inputs which in turn reach the farmers of the projects under the "Operations de Developpement Rural". The difference between the purchase and sales price is supposed to be covered by a levy collected through the "bareme" for cotton and groundnuts. Because of the cessation of external finance for agricultural credit, SCAER is experiencing cash shortfalls. This in turn has led to the inability of SCAER to purchase all inputs and equipment requested by farmers for 1975/76. Government is aware of the inadequacy of the present arrange- ments and is currently considering a major reform of SCAER and of agricul- tural input procurement. Among the alternatives being considered are the conversion of SCAER into a procurement department within the Ministry of Rural Development and the decentralization of the procurement function to make each "Operation" responsible for its own procurement. The government has agreed that if, after one year of project implementation, provision of agricultural equipment and inputs to farmers is unsatisfactory, Government and IDA would agree on measures satisfactory to IDA to remedy the situation. 30. Subsidies on agricultural inputs have been progressively reduced and now only fertilizers and insecticides are subsidized to the extent of 32% and 55% of their respective costs delivered to farmers. These sub- sidies, which are in any case low compared to other countries in the region,  - 9 - are more than offset by levies and taxes on cotton and groundnuts. Neverthe- less, because of budgetary difficulties Government proposes to further reduce and eventually eliminate all subsidies: this will not affect farmers' use of inputs as the benefits of these inputs have been demonstrated and producer prices for cash crops have been increased sufficiently (by 50% for cotton and 33% for groundnuts) to allow farmers to bear the full cost of inputs. Agricultural Strategy 31. The development strategy adopted by Government accords high priority to agriculture. Major objectives of the Five-Year Economic and Social Devel- opment Plan launched in 1974 are: (a) to achieve self-sufficiency in food; (b) to generate adequate supplies of agricultural raw materials for processing; and (c) to ensure increasing surpluses of primary products for export. Government intends to meet objective (a) through heavy investments in irriga- tion projects for paddy production. However, this objective was conceived during the drought years and does not take sufficient account of the high cost of irrigation, the traditional consumption pattern which prefers the cheaper coarse grains (millet and sorghum) to rice, or Mali's potential for rainfed agriculture: indeed Mali has already reattained self-sufficiency in cereals and this could be maintained in the long-run by the development of millet and sorghum under rainfed conditions coupled with grain storage facilities. Objectives (b) and (.c) would be met by the development of livestock, groundnuts and cotton for export.  - 10 - PART IV: THE PROJECT 32. The project was identified and prepared by the Malian Institut d'Economie Rurale (IER) and appraised in November 1975. Negotiations were held from October 11 to 15, 1976, with a Malian delegation led by H. E. Sory Coulibaly (Minister of Rural Development). The staff project report (No. 1171-MLI) is being circulated separately to the Executive Directors. Annex III provides a credit and project summary. Project Concept 33. Project Area. The project would cover the so-called Mali-Sud area, which extends over three administrative regions, and where remarkable results have already been achieved in the development of cotton and kenaf production under rainfed cultivation. Both crops benefited from substantial investments made by the French Fonds d'Aide et de Cooperation (FAC) for cotton, and Fonds Europeen de Developpement (FED) for kenaf. 34. Objectives and components. The project integrates and coordinates the efforts of the various foreign aid donors interested in the future devel- opment of Mali-Sud, and seeks to build up CMDT from both a financial and or- ganizational standpoint to carry out the proposed project and to ensure that the project benefits are maintained after the project disbursement period. The project covers the period May 31, 1976 - December 31, 1980. Investments in the period after the establishment of CMDT between January 1975, and May 31, 1976 were agreed between CMDT, FAC, and IDA, but were financed exclusively by FAC. The principal objectives of the project would be: (a) Increasing cotton and kenaf production through the intensification of improved methods used by farmers and expansion of the area under cotton from about 87,000 ha to 135,000 ha and under kenaf from 2,000 ha to 4,600 ha; increasing maize and rice production mainly through the intensification of improved cul- tivation methods: the improved maize area would increase from 6,500 ha (10% of the total maize area) to 15,000 ha (27%), and the improved rice area from about 4,000 ha to 12,000 ha. (b) Providing project farmers with technical advice, seed multiplication facilities, and applied research. The project would introduce research on maize through the financing of five man-years of expatriate technical assistance in agronomic research. The project would also provide credit for the purchase of new agricul- tural equipment and inputs.  - 11 - (c) Improving animal husbandry of cotton farmers, including use of draft oxen, stall fattening, improved cattle feeding through rational use of natural pastures, con- trolled burning, cultivation of fodder crops and use of crop byproducts. (d) Expanding physical infrastructure with the rehabilita- tion of one 10,000 ton ginnery and construction of one new 20,000 ton ginnery, improvement of kenaf retting ponds, construction of a 3 ton/hour rice mill, provi- sion of storage for inputs, procurement of 151 vehicles for CMDT, and improvement of some 500 km annually of farm-to-market agricultural tracks. (e) Undertaking studies for the future development of the areas freed from onchocerciasis, including the prep- aration of an inventory of resources to constitute a data bank, a broad development plan for the next ten years and the preparation of a number of projects within the framework of the development plan. (f) Improving the rural health services in the area by equipping and training their staff and financing an initial stock of drugs. (g) Training of CMDT staff, and of the rural population through young farmers' and blacksmiths' training and a functional literacy program. Special Features 35. One of the project's objectives would be the build-up of CMDT finances to make it possible for CMDT (i) to carry out the project including the added activities of procurement of inputs for cotton farmers should this prove necessary, (ii) to keep operating at a satisfactory level after the project disbursement period, and (iii) to cover adequately the cost of the subsidy on inputs to cotton farmers until such time as the subsidy has been eliminated. The 1977/78 commodity price schedule or "bareme" applying to cotton lint would be modified substantially to reflect this objective. As cost allocations under the "bareme" for cotton lint have usually been kept too low and resulted in losses for CMDT, a condition of effectiveness would be that the government has demonstrated that the "baremes" applicable to CMDT's products are being calculated on the basis of actual costs incurred by CMDT during the preceding campaign as adjusted for subsequent economic changes. (Section 6.01 (e) of the draft Development Credit Agreement). This condition of effectiveness would be fulfilled if Government demonstrates that the baremes for 1976/77, which have already been approved were based on the actual costs incurred in 1975/76, and that it will be possible to make neces- sary adjustments to changing conditions.  - 12 - 36. In addition to the losses incurred in the application of the "bareme" for cotton lint, CMDT's difficult financial position has resulted from inadequate equity capitalization and late payments by its customers (SOMIEX and the local textile manufacturers). During negotiations, it was agreed that a condition of the credit becoming effective would be that Government would have taken measures necessary so that overdue debts owed by SOMIEX, ITEMA and COMATEX to CMDT will be paid within six months of credit signing, overdue debts being defined as those beyond the delays specified in the agreements between CMDT and its customers, in which the latter indicate their planning of'monthly purchases of lint and payments to CMDT. (See Section 6.01 (d) of the draft Development Credit Agreement.) During negotia- tions assurances were also obtained that the terms of the agreements between CMDT and SOMIEX, ITEMA and COMATEX would be acceptable to IDA and adhered to, and that CMDT equity would be increased to 10% of the overdraft facilities required by CMDT from the Central Bank by 1979/80. this being the minimum set by the banking regulations. The increase in equity would be through an increase in the commission that CMDT earns on cotton lint and by addition of non-distributed retained earnings to equity. Project Cost and Financing 37. Total project costs excluding duties and other clearly-identifiable taxes are estimated at US$44.6 million. The foreign exchange cost is US$31.3 million or 70%. The financing plan is sumarized below: US$ million Amount % of total IDA 15.5 35 Farmers 7.0 16 Government 6.2 14 ADF 6.0 13 BADEA 5.0 11 CCCE 3.1 7 FAC 1.8 4 44.6 100% It would be a condition of effectiveness of the IDA credit that assurances satisfactory to IDA had been received with respect to the FAC, BADEA, ADF and CCCE financing. (Section 6.01 (c) of the draft Development Credit Agree- ment). FAC financing would be on a joint basis with IDA. BADEA, ADF, and CCCE financing would be on a parallel basis. Government would finance local staff salaries and part of the credit requirement for inputs. Farmers would contribute down payments for the purchase of agricultural equipment. BADEA would finance mainly the kenaf, livestock and health subprojects; ADF, the rice component, and CCCE the new cotton ginnery. IDA and FAC would finance  - 13 - the cotton development program and the research program (see Annex III, page 2 for breakdown). Credit repayments would go into a revolving fund earmarked for the purchase of new agricultural equipment. (Section 3.05 of the draft Development Credit Agreement). 38. A subsidiary agreement would be concluded between Government and CMDT regarding the on-lending of IDA funds. (Section 3.01 (c) of the draft Development Credit Agreement). The conclusions of this agreement would be a condition of effectiveness. (Section 6.02 (b) of the draft Development Credit Agreement). 39. Initial Funding of the Project. Expenditures to be financed by IDA and FAC in the first year of the project would total some MF 2.5 bil- lion (US$5.1 million). The interim financing requirement, assuming a lag of three months between the time the expenditure is incurred and the time it is reimbursed, would be a minimum of MF 0.6 billion (US$1.2 million). Since CMDT or Government would be unable to provide such advance financing, it is proposed that IDA provide MF 0.6 billion in advance a part of its contribution to project financing. Other donors would be encouraged to prefinance their shares of project expenditures. Retroactive financing by IDA of up to US$0.3 million would be granted to cover project expenditures incurred after May 31, 1976, on agricultural research and technical assis- tance to CMDT. 40. The increases in yields and areas under improved cultivation would result in annual production increments amounting of 64,300 tons of seed cotton, 1,800 tons of kenaf, 7,300 tons of maize and 6,600 tons of rice paddy by 1980/81. Implementation 41. All agricultural projects in Mali are carried out by specific "Operations de Developpement Rural", which are administrative units under the general supervision of the Ministry of Rural Development. They enjoy considerable managerial autonomy and use an integrated approach in their provision of support services to farmers. While each operation concen- trates on a particular product like groundnuts, rice or cotton, all of them are responsible for the general agricultural development, including improvement of coarse grains, in their respective areas. There are 16 "Operations". They are generally well managed and have been fairly suc- cessful in implementing the development programs assigned to them. 42. Compagnie Malienne des Textiles (CMDT) is such as "operation". It was created in 1974 to take over the activities of the Compagnie francaise pour le Developpement des Fibres Textile (CFDT), which has successfully developed cotton cultivation in the south of Mali since 1947. CMDT inherited much of the staff, organization and momentum of cotton development left by CFDT. CMDT would carry out the main objectives of increasing cotton, kenaf, rice and maize production, and providing technical advice to project farmers. Other government agencies responsible for carrying out part of the project  - 14 - would be the Ministry of Public Works for assistance in the agricultural track component, the Ministry of Health for the health component and the Institut d7Economie Rurale for the research and studies financed under the project. 43. Technical Assistance. The agreed objective among CMDT shareholders (Government and CFDT) and the project financiers is to gradually phase out all expatriates employed by CMDT. Such replacement is progressing satisfactorily since the number of expatriates was reduced from 33 in 1973 prior to the crea- tion of CMDT to 16 at present. Today there are 8 expatriates either in executive positions or performing necessary training duties. This relatively large number of higher level expatriates is justified given the size of the area covered by CMDT, the complexity of its operation and the limited number of trained Malian executives. Technical assistance to CMDT would be provided by CFDT. The project would finance 30 man-years of technical assistance to CMDT over the project period at a total cost of US$1.7 million, or US$57,000 per man-year on the average. Base salaries account for 46% of this amount and the rest are social security charges and allowances associated with over- seas assignments. The eight lower level expatriates presently employed by CMDT in purely technical jobs would be phased out progressively. Mali is equally short of experienced agricultural researchers, and the project in- cludes 16 man-years of expatriate technical assistance for applied research at an average cost of US$59,000/man-year. 44. Training. The quality of CMDT staff, especially the extension staff, can be considered above average, and the training programs for CMDT staff would be relatively limited. Besides management in-service training, a number of scholarships for studies outside the country, either in Africa or Europe, would be made available to CMDT staff under the project. In addition the project would finance the on-going training programs already carried out by CMDT and aimed essentially at the lower CMDT staff echelons and the rural population. 45. Procurement. For the project items financed jointly by IDA and FAC the following would apply: orders or contracts for equipment, vehicles, compound fertilizer and construction with a value of more than US$50,000 would be through international competitive bidding in accordance with IDA guidelines. Such procurement is estimated to amount to US$5.0 million. Whenever feasible, contracts and orders would be bulked. Contracts of less than $50,000 would be procured on the basis of competitive bidding adver- tised locally and in accordance with local procedures satisfactory to IDA. Contracts procured under local competitive bidding should not exceed US$2 million. Efficient local building contractors exist and are carrying out most of the civil works built under the ongoing Integrated Rural Development Project (Credit 491-MLI). Malian contractors would be given a preference of 7.5% in the evaluation of tenders for civil works. Expatriate technical assistance (US$1.7 million) would be provided by CFDT for CMDT operations, by Institut de Recherche du Coton et des Textiles Exotiques (IRCT) for cotton and kenaf research (US$0.7 million), and by the International Institute of Tropical Agriculture (IITA) for maize research (US$0.2 mil- lion). The planning studies for the development of the areas freed from onchocerciasis would be carried out by consultants recruited internationally according to IDA guidelines (US$0.5 million).  - 15 - 46. Procurement of items financed by BADEA, ADE and CCCE would be carried out under their respective arrangements. It is not expected that procurement of goods financed by donors other than IDA would result in higher costs than if all procurement were made under IDA procedures. Disbursements 47. The IDA credit of US$15.5 million would be disbursed against 87% of the cost of management and training, cotton development (excluding local staff and the new ginneries), agricultural research, auditing and scholarships; 39% of the cost of the incremental requirements of compound fertilizers; and 100% of the foreign exchange cost of the studies for the development of the areas freed from onchocerciasis. Benefits and Risks 48. The project's direct benefits would be the increased production it would generate, resulting in higher incomes for some 108,000 farm families, 92,000 of which would be involved in cotton growing; 8,000 in kenaf develop- ment and 8,000 in swamp rice development. The incremental net foreign exchange earnings would total some US$25 million annually by 1980. The economic rate of return is estimated to be 25% for the livestock component, the cost of which is MF 0.4 billion (US$0.8 million), and 44% for the crop development component, the cost of which is MF 15.4 billion (US$31 million). The aggregate economic rate of return on these components, which account for 96% of project cost, is 44%. This aggregate return excludes the studies and health components for which no meaningful rate of return could be estimated because of the predominance of non-quantifiable effects. The sensitivity analysis indicates that the rates of return for both livestock and crop development are sensitive to variations in benefits or costs. Each variation of benefits or costs of 1% would result in an absolute change of about 0.6 and 1.1 percentage points in their respective rates of return. Shadow pricing the foreign exchange component of the economic calculations with a 1.20 factor would increase the rate of return of the project to 53%. 49. Yields and Production. Because rainfall was especially well- distributed in 1975/76 and in 1976/77 with concentration in June at the time of planting and in September just before harvesting, yields in these two years were exceptionally high, at about 1,200 kg/ha. The likelihood of an occurrence of another two years of very well-distributed rainfall is remote, and lower yields have been used as a base point for calculating expected production increases. The 905 kg/ha for seed cotton used for 1975/76 is the estimate of what the yield would have been if rainfall had been average in quantity and distributed normally. The small (17%) increase in seed cotton yields over the period 1975-1980 is slightly higher than the rate of increase over the period 1962-1974 and results from the wider adop- tion of improved agricultural methods. The yields for kenaf and food crops would not increase in the areas already under improved cultivation, but the surface of the areas under improved cultivation would expand with the extension of services to new farmers.  - 16 - 50. The project would have a number of secondary benefits which are not reflected directly in the economic rate of return calculations. Important among these are (a) the impact of the functional literacy and health training programs; (b) the demonstration effect of a concerted and integrated approach to rural development; (c) the planning of the development of the areas freed from onchocerciasis; (d) the expansion of non-farm rural employment, for about 500 persons, in blacksmithing and in CMDT's cotton ginneries and rice mill, and in the SOMASAC kenaf processing plant; and (e) the improvement of nutri- tion. 51. The technical risks attached to the project are not large, because the improved agricultural techniques that would be promoted have already been tested extensively by CMDT in the project area. The risk that farmers would not be provided with adequate supply of inputs on time is recognized by Govern- ment which is taking appropriate steps. Furthermore if supply of such inputs prove unsatisfactory after the first year of project implementation, Government and IDA have agreed to consult with each other' on how to best remedy the situa- tion. The financial risks associated with the weak state of CMDT finances will be remedied with an increase in the share capital of CMDT and in the in- crease in the marketing margin that CMDT will get on cotton lint sales. The commecial risks for CMDT is limited to his customers not paying on time for their purchases. Assurances have been obtained at negotiations that its major customers will pay CMDT within the period stipulated in the protocole agree- ments between CMDT and its major customers, ITEMA and COMATEX (60 days), and SOMIEX (90 days). Conclusion, Recommendations and Credit Conditions 52. The proposed project is economically and technically sound and seeks to improve the standard of living of large numbers of rural people who are poor by any standards. Its major objectives are to increase cotton pro- duction, Mali's major source of foreign exchange and to build up CMDT from both financial and organizational stand point. In line with these objectives, the Government has agreed to modify the price schedule applied to cotton lint in order to: (1) increase the marketing margin and therefore the profits of CMDT so as to improve its financial situation, (2) to adequately cover the cost of the subsidy to inputs. Government has also agreed that debts owed to CMDT by SOMIEX, ITEMA and COMATEX, would be settled within 6 months of credit signing. 53. Special conditions of the project are listed in Annex IV, Section III.  - 17 - PART V: LEGAL INSTRUMENTS AND AUTHORITY 54. The draft Development Credit Agreement between the Republic of Mali and the Association, the draft Project Agreement between the Association and Compagnie Malienne pour le Developpement des Textiles (CMDT), the Recom- mendation of the Committee provided in Article V, Section I (d) of the Articles of Agreement of the Association and the text of a draft resolution approving the proposed Development credit are being distributed to the Executive Directors separately. 55. The following will be special conditions of effectiveness: that assurances satisfactory to the Association have been received in respect of the financing to be provided by the co-donors (FAC, BADEA, ADF and CCCE); that a subsidiary agreement has been concluded between Government and CMDT regarding the on-lending of IDA funds; that the Baremes applicable to CMDT's products are to be calculated on the basis of actual costs incurred during the previous campaign as adjusted for subsequent economic changes; that the Borrower has taken the steps necessary to permit SOMIEX, ITEMA and COMATEX to pay within six months of Credit signing overdue debts owed to CMDT, and that the supplies of cotton lint and cotton seed sold by CMDT and produced during the 1975/76 campaign have been paid for. 56. I am satisfied that the proposed credit would comply with the articles of Agreement of the Association. PART VI: RECOMMENDATION 57. I recommend that the Executive Directors approve the proposed development credit. Robert S. McNamara President Attachments Washington, D.C. December 2, 1976   00 -i c tC O ac 0 .4CC ON .t @00 9 IC CS *I a w * eg~~~ e..cO.' ~0: a &'0C. E w a.- 5 o N ~~~~~4NS 9'U*5 4W Ae rc m a N.m 00 a C0 ca ,l Li g -0 aLi 41 *1~~~~~~~~~~~~~~~~~~~~i ~~ go a m ~ ~~pC5 C'i~c C. I* C' 000 ONE 0 I l O. CEO jjg C. to CC a-em CNN - - ~ ~ ~ . cC 0@~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ i0 CC -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o C. I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 11 wz . t . O j v M Z~~~~- 5 - aa S N21 ~~~~~~~~~~~~~~~~~~~: a ~ ~ ~ ~ ~ ~ ~ ~ 55~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~V " v2 4 CW * a.5- - 4.4.45, OW' - -~~~~~~~~~~~~~~~~~~~~~~~~~~com t - Z L - . Ce. -. C ace' S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~rZ Z j1 W W a*.0 -JI = O *g C ~~~~~~~~~~~~~~~~~~~~~~~~~wICM 4. a0 055 - 00 a. N NIA7% 0~~~~~~~~~~~~~~~~~ ce~~ OC "OC a * . . 000 ace! . C * 0 CL --wo 0- Ioa do - - 40 * -C~~~~~~~~~ - - mi-' ~~~~~~~~~~~1 ~ Ia I C...b . I W z e.g~~~~~~~~~~~~~~~~~~~~~~~~~~~M ~ w' amI ft'I SW _ o ac-c C -~~~~~~~~~~~~~_o 7 7ZflC A a~~~~~~~~w W O Zj AWS - 'C405 5 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ a~~~~~~~~~~~a P C o  Page 2 of I pages U.10, oth.M.ola noted. dat.a for 1960 refer to ary year between 1959 and 1961, for 1970 between 1968 and 1970 slid for Most hoent Zatimet.s b.twew 1973 and 1975. no len-gal haso been selected en en objective country nine. Its GNP? per capita (1970) is about three times that of Mali, setting an sebitious but -oLonelti target. Both countrl.n Iie Io the Sehette. none, Senegal being Hali e western neighbour1 barn similar production patternsa, with groudnuts playing a major role, and similar eoetory arreLngesenta with Frane. Their population. are rought compareble. MA LI 1960 /a 1962; Lb otato of population under 15 and 65 end over to tota labour force; /g Government personnel, including midwives end assiatant nureen; ZI Qovernaent hospital establiabsoute; &g 6-117-n 15-17 yeaje of age respectively; Lf Not Including private vocational echoole. 1970 ~gRatio of population under 15 end 65 and over to total labour force; & Govermaent bospitaLl eetabliehsents; ~j i96Jc-66; /d 6-tic and 15-17 years of age respectively. MOST7 R1ECENT 23TI 967.1; /a 1972; & Government; /c 1971; ZI 1969-71 average; /o 6-14. year" of age. 1. :111970 /. RaLio or population under 15 and 65 end over to total labour force; 1964o-66 Le 7-12 and 13-i9 yearn of ege respectively. AFKiCAN REP. 1970 /a Ratio or populetion under 15 end 65 and over to total labour force; I%1LJ-66; /c 5-10 and 11-17 yearn of age renpectively. SENEGAL 1970I / Ratio of population under 15 and 65 end aver to total labour force j GOwernment hospital statblihmeonta; ~c 196L-66; /d Unadjusted; t Lmowr secondary level. FS, September 15, 1976 PDEFIITIONqS OF SOCIAL nIDICATORS L.nd Area (tho. In2) Popultio per CtLxg Paerens - Population divided by omeber of practicing Tot,) - T.t.1 -ufa-e aracoprieleg toad area ..-.d LInted wtr.neenfassgraduate nurnsee "trained" or 'certifisd0 urges, and Agric. - Mont recent ntinte of agricultural area used tenporarily or euiliary pereomnnel with training or experience. p_..enetly for cropa, pasturesa, market 6 kitchen garden. or to lie ponitalatin ear hosits! bed - population divided by number of hospital beds fall ow. lieeket pbt and private generat end spectatteed hospital wA rekhbilit.tian centers; seludes nursing haes end estebiisbeets for CNP per -apit. (itS) - GNIP Per c.pite .ecimtara at current market prices, custodial and preventive cmrs. Ca~lcuLatd by the eeo conv-rnion method an Woald Rank Atlee (1913-75 Per capitta upplv of calorie. C of requirementa) - Conputsd from sawre hbast); 1960, 1970 aed 1975 data, equivAlent of net food supplies available in country per capita per day; avitabie supplies cosprise domatic production, imports loes exports, Poco lotion and vital attietics andl chaniges In stock; net supplies "clded animal feed, seed, quenti- PoPolation (etA-yr. e11iia) - As of July first: if not available, ties used In food processing end Ineane in distribution; reqoirmeta --grage of two end-year entimate.; 1960, 1970 end 1973 data. wer eatimeted by ?AO based on phystological seds for nonmal activity sand health considering enviromot.1 tenperetors, body meighte, ege end Pouato d" "Vt - pr nenr ka - ld-yner population per square kiln- sen distributions of population, sdallowing 101 for meats at bouses- ente:r (10 hectaren1) of .tota ars hold level. Ppoolatioa d... ity - per square be af aitrLc, land - Computed en above for Per capita supply of proti ( i rse day) - Proreim content of per loiulo at ed only. aptie Met supply of foodperds; Mt supply of food to defined as above; rsquirennots for .11 cotntrins estebliehed by usDA Economic vi:tal sttintico Raesereh Sgeices provide for a eiintm allekmm of 60 grame of total Crude birth rate per thouand - Aort51 Itve births per thousand of aid- protein per day, end 20 graen of anmewl an pouse protein, of ebich Year population; ten-year -rIthmetic average. ending in 1960 end 1970, 10 grms should be animal protsin; these etanftdad era Looem th andess .nd fiv-year averge ending Ln 1975 for e.ast recent astintst. of 75 gram of total protein end 23 gramm of animal protein me me Crude death rate par thousasnd - Annual deaths per thousand of mId-7ear average for die world, propmosd by PlO in dhe Third Vor1dFMA esaremy. population; tan-Yast ertthnetic averages ending in 1960 end 1970, end Per capita protein sufpply (r eniml end Palse - Protein suplLy of food fie-year -nrsee ending in 1975 for most recant estimate, derived Iron enmlm an .lses In green per day. Infnt ortlit ras /thou) - Annual deaths of infants under one Year of Met ;), .ng " _3jggg 4 - Asnoual deaths per thousand in age group ags er houendlive births. this age groPl eagimted me m indicator of LI fe .opect.ncy at birth (yr.) - Average a-bar of year. of life rmoeioing malnuctrtion. at birth; usually five-year aversge.. endig in 1960, 1970 .sd 1975 for deeloping countnina. Mdutation Gras, reprod-ction rate - Average number of live daughtrnr a mainnwl dotderlmn ai primr, shool- nollmenm fal gsm bear in her noel reproduc.tive period if she eaperienco. present age- pecnaeo rml colaepopulation; Includes children aged .pecitic fertility raetsn; usually five-year eavrgage ending in 1960, b-il yearsr hut adjusted for dIfferent lengths of priomer eadontla 1970 aad 1971 for developing canna.for emerrie with universal ed,c.tion, .nralelinst may rsed 1001 pPoelaion growth rate ill - total - Conpound enmm,s1 growth rates of aid- since . pupils are below or ahove, the official school age. yea pop.letion for 19)0-6f, 1960-70, end 1970-75. Ad uated enrollment ratio - nemondery school - Competed as sbows Pp.vlarioa grnath rate (1 rban - Cospeted like growth -rae of total nerondary eduaetion requiree at lest four years of epprosed prisery population; different definitions of urban mare nay affect compar- inatruction; provides general, vocational or teacher treining bililty of data amnog conotrie.. inatructimes for pupils of 12 to 17 yearn of ags; correspondenee Urban ppulattion (7. of total) - Ratio of urban to total population; couraa are generally secluded. dfif-et definition. of achs areas nay affect conparbility of data Yearn of schooling lprovided (fist and 6econd level) - Total year of -og co-trirs. achooling; at secondary level, vocational instruction may be per- Ag. ,tr-t-eur (pa-.te) - Chtldn.n (0-t4 year), uoktng-egn (15-6o years), tinIly or mpleptetly excluded. and retired (6) years and aver) as porcentage of id-year population. Vocational enrollment (7% of secondary) - Vocstionel Institutions 2Age dependenc.y ratio - gatlo of population under 15 and 65 sand ovr to Include technical, industrial or other progris tbLch operate tbhne of ages I) through 64. Independently or an depart-nts of secondary institutions. Etconoic dependenc ra tio - Ratio of population under 15 end 65 and over Ad;iMtlite:rate ~% ie stadults (able to read med writs) me to teLaborfoc in sge group of 15-64, yere. pecntage oftotalI adult population age 15 years end near. Feaml l,in cetr cm~ale hu Cimnul.tie nunber of accptors of birth-conto devce Vnd anspmne of natIonal family Hu - planning program sinc Inception. Person,e Per roon (average) - Average nmnber of prceme per room is Falily Planning-css(.o mridwnn Percentages of narried occupied conventional dwellings in urban areas; dwellings exclude io,.of chtld-heerlg ag y14. yers) wha use birth-control devices non.permnnen structures end unoccupied parts. to all --ried uneen in sun, age group. Occupied d-Illine without vised water ()- O.cupied conventional duelling. in urban and rural are. uLtiut minide or outside piped tnPlvvn-t ustec ftiltitL na P p.n.estege of all occupind duellings.. Total labor for- (thocased) - ftoonmic-lly active persona,, including Access to 1eletricity (7. of all duIll:8e) - Conventional dmllings arnd forces end unemployed but excluding housewive, Students, etc.; with electricity in liigmur ersa percent Of total dellinga in deinitions Is varini cojanris marenr caparable. urban and rural arm". Labor force in agricul.ture (7.) - Agriculturarl labor fotrm (in framing, Rura W ellmnnn comnneted to electricity Cl. - Conpot adsm dobw for froretry, hunting sand fishing) a. percentage of total labor force, rua dwlinsoly. tteneloy.d (7. of labor force) - Unemployed ar usually defIned as peraoca who are able and willing to take a job, out of a jab on s give day, Cncetn renamd out of a job, snd seeking work for a opcifiled mnimuam ported tem ecivr (Par thoupp - All type of receiner for radinrood nat enc.eding one week; nay not ho ronparoble between countries due to cats to general public per thousand of population; excluces ditfer.ot definitions of unnptopd sed court of datee.g. .. enplny- unlicessed receIver In countries and in years nbsn registration of sent office sttsis onanpie suvy. mopulauy unmampla,met in ac. redlo sete we. in effect; data for recant years may eat be comprable sinmco6t countries abolished lienesing. Incur diotrtbu-tton - Percentage of prtvste incure (bath in cash sav kind) Passeger tare (par thou poe) - Passenger care conprise mctor care receIved by richest 5?, richest 21)1, poorest 201, sad poorest 40O? of seating less then eight persona; excludes ambulances, hearses med households. military vehicles. E lectrictly C bwh/Vr earce) - Aaesesl conaiptios of induatrial, con Distribution of lend oanerehip - Percent.gen of l.Wandouad by wealthiest mril biced prvae lerrcicy in kilowatt haurs per capita, 10 sand Pooreat 10X of lend oweets. generally based on prdesdcto data, without ellemag for lessee be gr ids but allowing for imports a exports of electricity. Health and Nutrition Newsprint (kg/yr pe rcan) - Per capita moment cinsaption in kilograms fpool.tion pet physficia - Population dIvided by nonbr of practicing estimated fron dEmetic production plo net imkports of esieprint. phyi,ctena qualified fee a medical school at university level.  ANNEX I Page 3 of 4 pages ECONOMIC INDICATORS GROSS DOMESTIC PRODUCT IN 1975 ANNUAL RATE OF GROWTH (%, constant prices) us$ Mln. % 196 -6 1969 -75 1975 GDP at Market Prices!/ 604.2 100.0 3.3 12.7 Gross Domestic Investm7nta/ 98.4 16.3 1. 34.1 Gross Domestic Saving- - 13.1 - 2.1 b/ Current Account Balance -147.6 - 24.4 1ld/ EIports of Goods, NFc/ 122.9 20.3 11 6!/ 7 od/ Imports of Goods, NFS-/ 234.4 38.8 22.6-/ -10- d/ OUTPUT LABOR FORCE AND PRODUCTIVITY IN 1975 Value Added.'[ Labor Forcel/ V. A. Per Worker US$ Mln. Mln. Us $ % Agriculture 230.7 38.2 Industry and Construction 99.8 16.5 Services 273.7 45.3 Unallocated _ - 604.2 100.0 GOVERNMENT FINANCE General Government Central 8avernment (Billion MF) % of GDP ( Mln.) % of GDP 197T 1974 1972-74 197 197 196 - 7 Current Receipts 24.0 13.6 12.1 Current Expenditure 29.7 16.8 14.5 Current Surplus fl - 5.7 - 3.2 2.7 Capital Expenditure- 0.5 0.3 0.3 External Assistance&/ 6.6 3.7 2.4 MONEY, CREDIT and PRICES 1969 1970 1971 1972 1973 1974 (Billion MF outstanding, end of periodT Money and Quasi Money 28.8 31.2 35.0 39.1 57.T- 67.. Bank Credit to Public Sector 4o.5 40.8 41.1 43.1 46.o 45.4 Bank Credit to 'riy-ate Se&to3f R.4 9A. l. wh .9 21A P3.4 Bank Credit to State Enterprises 15.0 18.1 20.1 28.4 47.9 69.2 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 18.9 18.7 19.8 21.4 29.5 25.9 GDP Deflator (1969 = 100) 105.9 111.3 112.9 119.4 126.8 149.1 Annual percentage changes in: Bank Credit to Public Sector - 1.7 0.7 0.7 4.9 6.7 _ 1.3 Bank Credit to Private Sector 15.1 14.3 45.8 6.4 46.3 8.3 Bank Credit to State Enterprises 21.0 20.7 11.1 41.3 68.7 44.5 U9TE- A'-1 conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seeking their first job. not applicable a/ Staff estimates for 1973, 1974 and 1975. b/ Trend growth rate is not significant; domestic savings were negative in 1973, 1974 and 1975. c/ Includes estimates of unrecorded trade. d/ At current prices. e/ Staff estimates. f/ Excluding capital expenditures financed out of foreign aid which do not figure in the budget. g/ External official budget grants. h/ Money, Quasi-Money and Bank Credit data relate to the end of the third quarter of 1975.  ARg I Pa6 4 of 4 pages TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS NERCHANDISE EXPORTS (AVERAGE 1972-76) 1972 1973 1974 i9751/ us$ Mln. % (Billion MF) Cotton 19.2 33.0 Exports of Goods, NFS 34.0 35.9 39.3 39.4 Live Animals 10.4 17.9 Groundnuts and Products 7.7 13.2 Merchandise Exports, f.o.b.2/ 22.7 23.3 30.8 29.6 Fish (dried and smoked) 1.3 2.2 Exports of NFS 11.3 12.6 8.5 9.8 All other Goods 19.6 33.7 Imports of Goods, NFS 53.9 72.4 108.6 97.5 Total Recorded Exports 58.2 100.0 2/ Unrecorded Exports :U 18.9 Merchandise Imports,- c.i.f. 39.6 56.3 86.1 73.2 Total Merchandise Exports 79.5 Food 11.4 29.2 48.9 21.5 (Cereals) ( 3.3) (16.4) (35.0) ( 9.4) EXTM*L DEBT. DECEMER 31, 1973 Petroleum Products 4.1 4.9 7.6 10.0 Other Merchandise 24.1 22.2 29.6 41.7 US$ Mln. Imports of NFS 21.9 25.0 46.5 44.5 Public Debt, Disbursed and Outstanding 282.9 PUblic Debt, Undisbursed 85.1 Resource Gap _ 9.9 -36.5 -69.3 -58.1 Total Public Debt Outstanding4/ 3 O Investment Income Pa .ents (net) - 2.7 - 3.9 - 4.1 - 9.6 DEBT SERVICE RATIO FOR 19735./ 5 Net Private Transfers_/ 5.7 3.9 4.8 4.4 Net Official Transfers 10.6 21.7 48.2 37.2 Public Debt, incl. Guaranteed 1.7 Official Capital (net) 6.1 4.9 8.0 8.5 SDR Allocation 1.3 - - - IBRD/IDl LENDING, JULY 31, 1976 Use of IMF Oil Facility - - 2.2 0.5 Errors and Omissions (net) - 2.8 3.8 - 0.2 - 8.2 IBRD IDA (Mil-1lion U8T Change in Reserves (increase -) 2.6 10.4 14.5 26.3 Outstanding and Disbursed - 49.2 Undisbursed - 46.8 Nlet Reserves (end of period)1/ 37.0 47.4 61.9 88.2 Outstanding, incl. Undisbursed - 96.o RATE OF EXCHANGE8/ 1971: US$1 = MF 555.42 1972: US$1 = MF 504.42 1973: US$1 = MF 445.4o 1974: US51 = MF 480.99 1975: US$1 = MF 428.64 1/ Staff Estimates. 2/ Excluding unrecorded trade. 3/ Livestock, fish foodgrains (estimated). 4/ Includes US$29.2 million principal in arrears; excludes US$2.1 million interest in arrears. 5/ Ratio of debt service to exports of goods and non-factor services. 6/ Includes workers' remittancep. 7/ Net foreign assets of the banking system. P./ Peiiod averages.  ANNEX II Page 1 of 5 THE STATUS OF BANK GROUP OPERATIONS IN MALI A. Statement of IDA Credits as at September 30, 1976 (US$ million) Credit Amount (less cancellations) Number Year Borrower Purpose IDA undisbursed 95-MLI 1966 Republic of Mali Railway 9.1 197-MLI 1970 Republic of Mali Highway Maintenance 7.7 277-MLI 1972 Republic of Mali Rice Development 6.9 277-1 MLI 1975 Republic of Mali Amendment 2.6 1.2 321-MLI 1972 Republic of Mali Telecommuni- cations 3.6 1.8 383-MLI 1973 Republic of Mali Highway Reha- bilitation 9.5 2.7 383-1 MLI 1975 Republic of Mali Amendment 8.3 8.3 384-MLI 1973 Republic of Mali Railway 6.7 0.3 420-MLI 1973 Republic of Mali Education 5.0 3.6 443-MLI 1973 Republic of Mali Drought Relief 2.5 0.1 491-MLI 1974 Republic of Mali Integrated Rural Develop- ment 8.0 4.9 538-MLI 1975 Republic of Mali Livestock Project 13.3 12.8 599-MLI 1976 Republic of Mali Third Highway 10.0 9.0 Total 93.2 44.7 of which has been repaid Total now held by IDA* 93.2 Total undisbursed 44.7 * Prior to exchange adjustment  ANNEX II Page 2 of 5 B. Statement of IFC Investment as at September 30, 1976 NIL C. Projects in Execution Credit 277-MLI Mopti Rice Development Project. US$9.5 million Credit of January 6, 1972 (as amended on April 11, 1975); Effective Date June 26, 1972; closing Date May 31, 1978. Started in mid 1972, the project is progressing satisfactorily, with 93% of civil works completed. To meet $ devaluation, additional works and price inflation, a supplementary credit of $2.6 million was made in mid 1975. Project is expected to be completed as scheduled. Cropped area is likely to be slightly lower than the estimated at appraisal because of topo- graphy. This may be partly offset by higher yields. Credit 321-MLI Telecommunications Project. US$3.6 million Credit of June 28, 1972; Effective Date April 4, 1973; Closing Date July 1, 1976 Large cost overruns raised the cost of this project from US$4.3 million at appraisal to US$9.3 million recently estimated. Caisse Centrale de Cooperation Economique (CCCE) agreed to join in the financing of the project to a maximum of US$2.2 million equivalent. However, since the Government was unable to contribute the US$2.5 million required to close the gap in the financing plan, the Government and the beneficiary, Office des Postes et Telecomunications du Mali (OPTM), agreed that the project would be executed in two phases. The first phase of work would consist of the original project reduced by the Segou/Mopti section of the Bamako/Mopti microwave route and by the two principal automatic exchanges of Mopti and Kayes; the excluded works would be included in a second phase which could form part of a future second telecommunications project. As approved by the Executive Directors on July 21, 1976, the revised project will be financed from the original credit of US$3.6 million, the CCCE loan of US$2.2 million and US$1.0 million from OPTM's own resources. OPTM has changed the management of the telecommunica- tions service. The Government is prepared to support the introduction of measures for strengthening the organization and improving the efficiency of telecommunications operations. The closing date will be postponed to June 30, 1979. Credit 383-MLI Second Highway Project. US$17.8 million Credit of May 23, 1973 (as amended on June 12, 1975); Effective Date September 12, 1973; Closing Date July 19, 1977 The IDA-financed portion of the project consists of: (i) rehabili- tation of the Faladie-Segou road; (ii) consultant's services for supervision of road construction and additional technical assistance to the Public works  ANNEX II Page 3 of 5 Department; (iii) preinvestment studies of the Bamako-Kolokani road; (iv) a study of the trucking industry; and (v) procurement of highway equipment. Two other items of the project, rehabilitation of the Bamako-Bougouni road and purchase of more highway equipment, were to be financed with USAID assis- tance. However, bids for reconstruction of the Bamako-Boughouni road (155 km) were so high that it was decided to' drop that item, but the government is still seeking to finance purchase of maintenance equipment (estimated at US$3.4 million). Bids for reconstruction of the Faladie-Segou road (222 km) were also higher than expected, but despite this, the works were awarded to the lowest bidder. The Board of Directors approved in June 1975 a Supple- mentary Credit of US$8.3 million to cover the Association's share of the overrun. Unfortunately, works have been delayed by more than one year, and there is a dispute between the contractor and the Government. Extensive discussions have been held between the two parties, which hopefully should soon lead to an agreement. Other items of the project are either completed or well under way. Credit 384-MLI Second Railway Project US$6.7 million Credit of May 23, 1973; Effective Date September 12, 1973; Closing Date June 30, 1978 The project was expected to cost a total of about US$9.33 million, with IDA participation of US$6.7 million and FAC-financing of US$1.8 equiva- lent, the rest being provided under Railway's own financing. Bidding results disclosed a cost overrun of about US$3.5 million in the foreign exchange component of the project. The cost overrun was caused by (a) low original estimates; (b) sharp increases in world market prices; and (c) the fact that only single bids were received for some items. Additional bilateral financing obtained for part of the freight cars proposed under the project (Germany and France) and of the technical assistance (Canada) partly offset the cost overrun. However, several items included in the project which had to be deleted or significantly reduced will partially be financed under a third railway project which was appraised in July 1976. Presently all funds are committed and the execution of the project is satisfactory. Credit 420-MLI First Education Project US$5.0 million Credit of July 11, 1973; Effective Date November 15, 1973; Closing Date December 31, 1979 The project seeks to improve the quality of lower secondary school programs and strengthen the country's key middle level training institutions. The project also supports government efforts to develop a more efficient program of basic education. Construction of the lower secondary school science and technology centers and of the Central School for Industry and Commerce is expected to be completed by late 1977, and equipment procurement is underway. Construction costs are higher than anticipated at appraisal by some 60%, but savings on equipment and the postponement of five lower sec- ondary centers until other financing is found should permit the project to remain within the overall budget envisaged. Curriculum development work has been largely completed, and the training of teachers in the new programs will  ANNEX II Page 4 of 5 begin in summer 1977. The Basic Education Study is proceeding satisfactorily, and initial surveys and field research have been completed. Credit 443-MLI Drought Relief Project. US$2.5 million Credit of December 7, 1973; Effective Date June 30, 1976; Closing Date December 30, 1977 The project consists of a number of sub-projects intended to assist the country to reestablish the productive base of the areas that have been affected by the recent drought: (a) construction of small irrigation schemes; (b) preparation of hydrogeological and irrigation studies; (c) purchase of veterinary supplies and a livestock survey; and (d) construction of wells. Started in early 1974, the project has been progressing satisfactorily. Implementation is on schedule; 84% of the US$2.5 million credit has been disbursed. The various sub-projects have had a beneficial impact on their respective sectors. All sub-projects initially approved by IDA have been carried out; however, some had to be reduced in size because of price escala- tion and US dollar devaluation. Credit 491-MLI Integrated Rural Development Project. US$8.0 million Credit of July 1, 1974; Effective Date December 9, 1974; Closing Date September 30, 1978 The Credit will help improve principal farming activities especially the production of groundnuts and staple cereals in the west central part of Mali. It includes provision for extension and credit services; rural track improvement; agricultural research; functional literacy; medical and veterinary facilities; and evaluating unit; and a study on millet sorghum price structure and marketing arrangements. Although some project components have been delayed, specifically the livestock and the health program, the project is progressing satisfactorily with the tonnage of marketed groundnuts virtually on target and OACV taking steps to improve groundnut marketing; Government is being encouraged to foster greater cooperation between OACV and the two other state agencies involved in the groundnut sector, SEPOM and SOMIEX. Credit 538-MLI Livestock Project. US$13.3 million Credit of April 11, 1975; Effective Data July 24, 1975; Closing Date December 31, 1979 The Project aims at the rational use of land and water in the Fifth Region and will help rebuilding and improving herds of about 100,000 pastoral families in the Fifth Region to better protect them against future droughts. It includes provision for livestock extension services and grazing control; animal health services; construction of 70 wells and 50 ponds; con- struction of an abattoir and hide-drying facilities; construction for five livestock markets; functional literacy and the preparation of a second phase livestock project. This Credit became effective on July 24, 1975, and prog- ress is satisfactory, although slightly behind schedule. ODEM, the agency implementing the project is now almost fully staffed, and some procurement  ANNEX II Page 5 of 5 contracts have been approved. The veterinary component proceeds according to schedule, range management studies are underway, preparations for well pond and abattoir construction, and for development of a pasture trial station are underway. A project monitoring plan has been received. Credit 599-MLI Third Highway Project. US$10.0 million Credit of January Effective Date March 10, 1976; Closing Date June 30, 1979. The Project consists of (a) construction of 1,200 km feeder roads by force account; (b) elmination of backlog maintenance of about 944 km of, paved roads by force account; (c) procurement of various teaching and main- tenance equipment; and (d) technical assistance for maintenance and training programs and preparing a country-wide transport plan. The Credit became effective on March 10, 1976, and the Government has started implementing several items of the project according to the expected schedule.  ANNEX III Page 1 of 4 MALI MALI-SUD AGRICULTURAL PROJECT Credit and Project Summary Borrower: The Republic of Mali Beneficiary: Compagnie Malienne pour le Developpement des Textiles (CMDT) Amount: US$15.5 million equivalent Terms: Standard Relending Terms: The proceeds of the credit will be relent to CMDT at 9% interest for a term of 20 years, with a grace period of 4 years. Co-lenders: ADF, BADEA, CCCE and FAC Project Description: Expanding cotton, kenaf, maize and rice production mainly through the intensification of improved cul- tivation methods; providing project farmers with tech- nical advice, seed multiplication facilities applied research and credit; improving animal husbandry of cotton farmers; expanding cotton processing facilities, improvement of kenaf settling ponds, construction of a rice mill, provision of storage for inputs procurement of vehicles for CMDT and improvement of agricultural tracks; undertaking studies for the future development of the areas freed from onchocerciasis; improving the rural health services in the area; and training of CMDT staff, and of the rural population through young farmers and blacksmith's training and a functional literacy program. Estimated Costs: The estimated cost of the project, excluding taxes and duties, is US$44.6 million equivalent, including a foreign exchange component of US$31.3 million. Details are as follows:  ANNEX III Page 2 of 4 US$ Million Source oi Local Foreign % Foreign financing Cost Exchange Total Exchange Management Local staff Government 0.1 - 0.1 - Expatriates, civil works and equipment IDA/FAC 0.8 0.7 1.5 50 Training Services Staff, equipment, and operating costs IDA/FAC 1.2 1.4 2.6 54 Cotton Development Local extension staff Government 1.6 - 1.6 - New cotton ginnery Government/CCCE 0.4 2.7 3.1 87 Expatriate staff, equipment, civil works IDA/FAC 1.8 2.9 4.7 62 Rice Development Management, extension staff, rice mill, equipment ADF 1.0 1.7 2.7 63 Kenaf Development Management, extension staff, equipment BADEA - 0.4 0.4 80 Agricultural Credit New agricultural equipment ADF/Farmers 1.0 5.8 6.8 85 Incremental inputs Compound fertilizer IDA/Government 0.5 3.0 3.5 85 Urea B3ADEA 0.1 0.4 0.5 80 Insecticides BADEA 0.2 0.9 1.1 82. Agricultural Research Staff, equipment and operating costs IDA/FAC 0.7 1.2 1.9 61 Agricultural Tracks Maintenance crews and bridges BADEA 0.2 0.6 0.8 80 Livestock Development Staff, equipment, operating costs BADEA 0.3 0.6 0.9 67 Health Subproject Training expenses, equipmeuLL, drugs BADEA 0.1 0.2 0.3 67 Studies for the Development of the Oncho Areas. IDA - 0.5 0.5 100 Other Studies, Scholarships, Audit IDA/FAC - 0.5 0.5 100 Total Before Contingencies 10.0 23.5 33.5 70 Physical-Contingency 1.1 2.6 3.7 70 Expected Price Increases 2.2 5.2 7.4 70 Total After Contingencies 1,.3 31.3 AA.A 7n Priliminary Phase 0.5 1.2 1.7 70 Total With Preliminary Phase 13.8 32.5 46.3 70  ANNEX III Page 3 of 4 Financing Plan (net of taxes) % of total Project costs US$ Million (net of taxes) IDA 15.5 35 Farmers 7.0 16 Government 6.2 14 ADF 6.0 13 BADEA 5.0 11 CCCE 3.1 7 FAC 1.8 4 44.6 100% Estimated Disbursements: IDA Fiscal Year Cummulative Disbursements ----(in US$ Millions)---- 1977 0.5 1978 4.0 1979 10.5 1980 13.0 1981 14.5 1982 15.5 Procurement Arrangements: For the project items financed jointly by IDA and FAC, the following would apply: orders or contracts for equipment, vehicles, compound fertilizer and con- struction with a value of more than US$50,000 would be through international competitive bidding (ICB) in accordance with IDA guidelines. Such procurement is estimated to amount to US$5.0 million. Whenever feasible, contracts and orders would be bulked. Con- tracts of less than $50,000 would be procured on the basis of competitive bidding advertised locally and in accordance with local procedures satisfactory to IDA. Contracts procured under local competitive bidding would not exceed US$2 million. Efficient local building contractors exist and are carrying out most of the civil works built under the ongoing Integrated Rural Develop- ment Project (Credit 491-MLI). Malian contractors would be given a preference of 7.5% in the evaluation of tenders for civil works. Expatriate technical assis- tance (US$1.7 million) would be provided by CFDT for CMDT operations, by Institut de Recherche du Coton et des Textiles Exotiques (IRCT) for cotton and kenaf research (US$0.7 million), and by International  ANNEX III Page 4 of 4 Institute of Tropical Agriculture (IITA) for maize research (US$0.2 million). The planning studies for the development of the areas freed from onchocerciasis would be carried out by consultants recruited inter- nationally according to IDA guidelines (US$0.5 million). Procurement of items financed by BADEA, ADF, and CCCE would be carried out under their respective arrange- ments. It is not expected that procurement of goods financed by donors other than IDA would result in higher costs than if all procurement were made under IDA pro- cedures. Consultants: Total consultant's services would amount to about 46 man-years: (a)-30 man-years of technical assistance to CMDT to help in the general implementation of the project, and (b)-16 man-years of technical assistance for a research program (cotton, kenaf, maize). Rate of Return: Excluding studies and the health component which account for 4% of the project and for which no meaningful rate or return could be estimated, the overall rate of return on the project is estimated at 44%. Staff Project Report: Report No. 1171-MLI, dated November 16, 1976. Map: IBRD 12121R  ANNEX IV Page 1 of 2 SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the country to prepare the project: 12 months; (b) The agency which has prepared the project: Institut d'Economie Rurale in Mali (IER); (c) Date of first presentation to the Bank: December 1974; date of the first Bank mission to consider the project: April 1975; (d) Date of departure of Appraisal Mission: November 3, 1975; (e) Date of completion of negotiations: October 15, 1976; (f) Planned date of effectiveness: April 30, 1977. Section II: Special Bank Implementation Actions Soon after the Credit Agreement has been signed, a supervision mission will be sent. Since there are a number of co-financiers (ADF, BADEA, FAC, and CCCE), they will be asked to join this mission. This mission will pay particular attention to the fulfillment of the conditions of effective- ness of the IDA credit. Section III: Special Credit Conditions Assurances were obtained at negotiations that: (a) If after one year of project implementation, provision of agricultural equipment and inputs is unsatisfactory, Government and IDA would agree on measures satisfactory to IDA to remedy the situation (para. 29). (b) Farmers' repayments to CMDT would be kept in a revolving fund for the sole use of CMDT farmers (para. 37). (c) consultants required to conduct the studies for the development of the areas freed from onchocerciasis would have qualifications and experience acceptable to Government and IDA (para. 43). (d) The subsidiary agreement between Government and CMDT regarding the on-lending of IDA funds would be accept- able to IDA (para. 38). (e) A number of changes would be made in the "bareme" for cotton lint, starting in 1977/78, as follows: (para. 36).  ANNEX IV Page 2 of 2 (i) CMDT's commission would be increased to the present level of 5% of the ex-ginnery price so that the equity of CMDT, which would have been increased by the incorporation of retained earnings, amounts to 10% of the overdraft facilities given CMDT by the Central Bank by 1979/80; (ii) the "bareme" would include a provision for the depreciation of equipment; and (iii) the "bareme" would include a provision to cover subsidies given CMDT farmers for the purchase of agricultural inputs. (f) The terms of the agreements between CMDT, and SOMIEX, ITEMA and COMATEX would be acceptable to IDA and that they would be adhered to (para. 36). (g) Government would assure the provision of adequate credit facilities to CMDT (para. 37). (h) Satisfactory assurances have been received that the con- tributions of the other donors would be made (condition of effectiveness, para. 37). (i) A subsidiary agreement had been concluded between Gov- ernment and CMDT regarding the on-lending of IDA funds (condition of effectiveness, para. 38). (J) The "baremes" applicable to CMDT's products are to be calculated on the basis of actual costs incurred by CMDT during the preceding campaign as adjusted for subsequent economic changes (condition of effective- ness, para. 35). (k) Government would have taken measures satisfactory to IDA so that overdue debts owed to CMDT by SOMIEX, ITEMA and COMATEX would be paid within six months of credit signing, and that all stock of lint and cotton seed from the 1975/76 crop at charge to SOMIEX would have been paid for (condition of effectiveness, para. 36).   To 80 60 M, 24 Tenenkoa OPT'M A L I 140 K ro-/MALI SUD AGRICULTURAL PROJECT @R7 > assina Djenr / -1 . ' ' ' .RICE Kolkanl\~OBaamb \ _ //)_ 700 }COTTON 900- KENAF SnTOrninianf ~CMDT LIMIT 800 ~ ~ ~ ~ * PROJECT COTTON GINNERY 8W U g >,f- -8ZEXISTING COTTON GINNERIES "l-o 8- o ISOHYETS IN MILLIMETERS ana i~~~~~~mparana.j MAJOR ROADS BAMAK ( RIVERS - N a- - INTERNATIONAL BOUNDARIES r a~~~~~~~~~~~~~ 50 100 150 KILOMETERS ~~~~~~2 ~ ~ ~ 2 1200 ~ ~ ~~~~~~~~~~~~~l. ALGERIA IKASSC, = |0 I MAURITANIA MALI I: The booodones ~~~~~~~~~~~~~~~~~~~~~~~~~~boo'o 00~ ~ ~ ~~~~~~EE NIGERA1 U) ,-. ,, '*. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ IVORY~~~~~~~~VOT G E ~ .u N~o o. this sop do not IVRYI imply edos entr accepta by the , ,,*_-* *I?OO 40 Wctcld Rook aod its affiliates. ID~~~~~~~~~~~~~~~~~~~~14 a,~~~~~~~~~~~