ML SAC III-Supplemental

closed

This supplemental grant for the Third Structural Adjustment Credit Project for Mali will contribute to financing the additional gap that emerged in 2003 due to the persistence of the civil strife in Cote d'Ivoire beyond the first quarter and through the second quarter of 2003, which continues to impact negatively on Mali's economy and balance of payments. The grant enhances the impact of the original operation and maintains the integrity of the overall reform program during the transition to, and preparation of, the proposed Fourth Structural Adjustment Credit Project. The Supplemental Grant would be disbursed in one tranche upon effectiveness, and will follow the simplified IDA procedures for adjustment operations. In addition to the standard effectiveness conditions, the Grant will have two overall conditions: (i) continued satisfactory macroeconomic performance and (ii) continued satisfactory implementation of the SAC111 reform programs. There are no specific conditions attached to the grant. There are three main risks to the project. The first risk is that of continued negative impacts of the Cote d'Ivoire crisis on Mali's economy, fiscal balance, and balance of payments, which would continue to put Mali's overall program in danger. The proposed supplemental grant along with additional resources forthcoming from other donors (notably the European Union), would help mitigate this risk. The second risk is posed by weak institutional capacity and governance in Mali. This risk of slower-than- required program implementation stemming from capacity constraints will be reduced through continued technical support by the World Bank and other donors to strengthen capacity. The third risk, albeit low, is that the government's current strong commitment to cotton sector liberalization and CMDT privatization could wane, resulting in some loss of momentum in implementing the program. This risk is being mitigated through the Bank team's regular dialogue with the authorities, to enable early detection of issues hampering progress, and to enable early resolution of those issues.