• Impacts of SA

Impacts of structural adjustment

In the last three years, Mali’s debt stock has been reduced significantly as a result of the country’s participation in the Heavily Indebted Poor Countries (HIPC) initiative and later on the Multilateral Debt Relief Initiative (MDRI). This note looks at the implications of debt in Mali, and the consequences of conditionality following debt relief. It also looks at future prospects and challenges in financing poverty reduction, including in relation to new lenders such as China.

Based on statistics for 2004, the paper finds that more than 60% of what Mali received in fresh loans that year went straight back to donors as debt service, leaving Mali with less than 40% of fresh resources to combat poverty.  Creditors taking part in the HIPC initiative and MDRI have together pledged to cancel US$1,652 million, which equals about half of Mali’s debt in 2004.

The paper argues that the debt relief under HIPC is accompanied by unfair conditions imposed by the International Monetary Fund and the World Bank. The most controversial condition is the privatisation of the agriculture, banking and telecommunications sectors. This is particularly troubling, it argues, as Mali has experienced previous failures at privatisation in electricity, water and transportation, including:

• the failure of a French multi-national to run the company according to contract which resulted in renationalisation
• a substantial reduction in passenger access following the privatisation of Mali’s railway, placing additional strain on the country’s infrastructure

The author concludes that substantial gains in poverty reduction could be made if debt relief was unconditional and aid commitments were honoured. The paper also notes that new lenders such as China (now involved in financing infrastructure in Mali) do not impose such conditions, making their loans more attractive.

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