BAMAKO, July 26, 2023 — Mali’s economy showed signs of resilience despite Economic Community of West African States (ECOWAS) sanctions, high food inflation, and parasite infestations that affected cotton production. According to the World Bank’s 2023 Economic Update for Mali, entitled “Strengthening Financial Resilience of Pastoralists to Drought,” GDP growth is estimated at 1.8%, driven by the recovery of food agriculture and the resilience of the gold and telecommunications sectors. Average annual inflation increased to 9.7% in 2022, owing primarily to rising food prices.
In terms of projections, the report notes that the outlook for 2023 is fraught with risks associated with the electoral timetable and tighter financial conditions. The rising cost of financing on the regional market, given Mali’s high gross domestic financing needs, is a significant risk that has emerged in the last 12 months. Tighter monetary policy has resulted in higher yields for 6 to 12-month Treasury bills and 5-year Treasury bonds for West African Economic and Monetary Union (WAEMU) countries. Liquidity and rollover risks and the ensuing public finance difficulties could produce a drag on the wider economy and on society by cutting social spending and investment and potentially increasing the accumulation of arrears.
The second chapter of the report focuses on disaster risk financing and insurance instruments designed to reduce the adverse socioeconomic impacts of climate shocks. It notes that Mali experienced at least 40 major climate shocks between 1970 and 2020 and that each year droughts are estimated to have affected about 400,000 persons and reduced crop revenues by $9.5 million. Financial resilience to drought could, however, be strengthened by establishing instruments to protect key sectors such as pastoralism and agriculture.
Disaster risk financing and insurance provide mechanisms aimed at reducing the adverse socioeconomic impacts of climate shocks.
“These mechanisms can provide timely and targeted financing in response to or in anticipation of a shock. Approximately 15% of Mali’s land area is ideally suited to index-based disaster risk financing and insurance for pastoralists, while another 10% could be deemed suitable following an in-depth analysis,” says Daniel Pajank, Senior Economist and coordinator of the 2023 Economic Update for Mali.
