Photo: Mali, Region of Mopti, Commune of Sévaré, 23 April 2020, Visit to Loloni cooperative by Maya, one of the SMEs supported by the UNCDF IELD Programme.
The COVID-19 pandemic has resulted in unprecedented global health, economic and financial repercussions. Among other features, the current crisis is characterized by a sharp slowdown economic activity around the world and Mali has been no exception.
Official forecasts estimate the growth rate of the Malian economy at 0.9%, compared to an initial projection of 5.0%. All sectors would be affected, with a sharp drop in output in the secondary and tertiary sectors. The growth of the tertiary sector would fall from 5.5% to 0.8%.
The underperformance would mainly result from the expected slowdown in supplies to certain industries and the restrictive measures seriously affecting hotels, transport, restaurants and tourism sectors. There is also a rise in and speculation about prices, which would result in an inflation rate of between 0.3% and 4.9%.
Impacts of COVID-19 on 2020 macroeconomic prospects
The economic and financial consequences of COVID-19 are expected to result in budgetary and cash flow shortfalls. A fiscal revenue gap of XOF 182.2 billion (US$300 million) is expected at the end of the first half of 2020 compared to the initial forecasts, mainly due to the downward revision of domestic and import tax collections. In addition, new expenditures related to the pandemic are planned:
1.upgrading the technical platform of hospitals for patients;
2.quarantine or containment measures, if necessary;
3.measures to support the economy and/or vulnerable populations;
4.increased support to the electricity and drinking water supply sectors to avoid untimely disruptions in this hot period.
The increase in health, social and economic emergency expenditure in response to COVID-19 may lead to a budget deficit of XOF 606.6 billion (US$1 billion), or 5.8% of GDP against the initially planned 3.8%.
Measures taken by the central government
As soon as the pandemic was declared, the Government of the Republic of Mali, through the Ministry of Health and Social Affairs, drew up an Action Plan for the prevention and response to COVID-19.
On the economic front, in order to mitigate the effects of the pandemic, budgetary policy will intervene to provide considerable assistance to the people and businesses most affected including those in the informal sectors. Regulatory and supervisory measures aim to preserve financial stability and the solidity of the banking system while supporting economic activity.
Mali, like the other Sahel countries, is already facing security problems, the cost of which weighs heavily on the State budget. In addition, Mali is encountering difficulties in mobilizing internal revenue. The following tax relief measures have been granted to companies in good tax standing:
1.Three-month suspension of VAT on water and electricity;
2.Postponement of the deadline for payment of the installment from March 31 to May 31 without increase;
3.Postponement of the deadline for payment of vignettes (automobile and TTR) from March 31 to May 31 without penalties;
4.Deferral of the payment of the summary tax from March 31 to May 31 without penalties;
5.Efforts by the Treasury to pay certain outstanding warrants of companies in difficulty;
6.Continuation of tax controls but payment terms to be negotiated on a case-by-case basis.
Increased local government responsibilities
The President announced a special fund of XOF 100 billion (US$170 million) for the most vulnerable families in the 703 communes. In the meantime, at the local level, expectations are high in terms of assistance, support and most importantly delegation of prerogatives to local authorities as stated in the law on decentralization.
The introduction of prevention equipment and hand washing kits in public places such as markets, community sports venues, public buildings, etc. should be systematized. They are working with local economic actors (e.g. handicraft houses) to raise awareness and promote protective attitudes at different levels. The reconfiguration of civil registration centers (neighborhood, village) to raise awareness and inform users is being carried out. Furthermore, measures to limit social gatherings (weddings, baptisms, funerals, etc.) are organized to curb the spread of the disease.
Significant organizational, financial and material efforts are expected from local authorities to carry out these initiatives in a satisfactory manner. It is imperative for them to be provided the tools and means necessary for the emergency response and to prepare the post-COVID recovery phase. UNCDF is deploying its tools for local government finance and other support such as water access and SME finance.
Through the Local Climate Adaptive Living Facility (LoCAL), UNCDF is already in partnership with 4 communes to facilitate water access and availability for the population. Those communes will be supported in:
1.hygiene and hand washing;
2.awareness of beneficiaries, communities and technical services of measures to fight COVID-19 (official messages);
3.providing training in local languages to prevent the spread of COVID-19 (Fulani, Bambara, Soninke) in accordance with the norms of social distancing;
production of awareness-raising and training messages broadcast on local radio stations;
4.distribution of hygiene kits (hydro-alcoholic gel, mask, gloves);
training to produce masks and visors with local materials, support for the local 5.production of soaps to promote local practices and craftsmanship.
This initiative supplements existing intergovernmental fiscal transfers (in this case the Performance Based Climate Resilient Grants of the LoCAL mechanism) as operational expenditure block grants in line with the guidance note on COVID19 and Local Government Finance issued by UNCDF.
Under the Inclusive and Equitable Local Development Programme (IELD), UNCDF is planning to deploy several activities:
1.Setting up financing mechanisms with grants to domestic financial institutions to enable SMEs or local authorities to have access to financing (loans, guarantees, etc.);
2.Appointment of COVID-19 focal points among the beneficiaries for community projects and training in the use of computer equipment;
3.Encouragement to beneficiaries to provide a budget line for the allocation of hygiene equipment (kits, soap, hydro-alcoholic gels);
4.Support for the formalization of projects (banking, structuring, business plan) so that the projects are sustainable and reach financing-ready stage;
5.Support for the manufacture of hygiene equipment (gels, masks, gloves, etc.) or medical equipment and income-generating activities;
6.Training beneficiaries on the use of phones and mobile applications for remote transactions.
This initiative also applies some of the principles of the guidance note on COVID19 and local government finance
NOTE SUR LES IMPACTS DU COVID-19 SUR LES PERSPECTIVES MACROECONOMIQUES EN 2020, Ministère de l’Economie et des Finances, République du Mali.
Blog entry written by Ass Malick Sall (firstname.lastname@example.org) and edited by Nan Zhang (email@example.com).