Bamako, August 11, 2000

Mr. Horst Köhler
Managing Director
International Monetary Fund
Washington, D.C. 20431

Dear Mr. Köhler,

1. The Executive Board of the International Monetary Fund approved on August 6, 1999 a third three-year arrangement for Mali under the Enhanced Structural Adjustment Facility (ESAF).¹ This arrangement was in support of Mali’s economic and financial adjustment program for the period April 1, 1999–March 31, 2002. In accordance with this arrangement, the government of Mali has conducted with a Fund mission a review of the program covering the period April 1, 1999–March 31, 2000. The review covered the progress made in implementing the program during the last nine months of 1999 and the first quarter of 2000, as well as the outlook and economic and financial measures to be implemented by end-2000. The government of Mali remains determined to implement the policies and measures described in the medium-term policy framework paper (1999-2002), as well as in the memorandum attached to this letter, which supplements the memorandum of July 12, 1999.

2. In order to create the conditions for strong, durable, and more equitable economic growth, the government of Mali is committed to preparing and implementing, for the period April 1, 2000–December 31, 2002, the policies and measures defined in the interim poverty reduction strategy paper (PRSP), sent to you under separate cover. The government has also prepared the memorandum attached herewith, setting forth its economic and financial objectives and policies for the period from April 2000 to end-2000.

3. The government remains committed to widely disseminating its memorandum on economic and financial policies for 2000 and authorizes the IMF to publish it also, including on its website.

4. All the quantitative performance criteria and benchmarks set for end-September 1999, end-December 1999, and end-March 2000 were observed, except for the criterion and benchmark related to net bank credit to the government for end-September 1999 and end-December 1999, respectively. There have also been delays in implementing the structural reforms. In particular, the performance criteria for end-November 1999 concerning the signing of a new government-CMDT-producers performance contract, including the elements of the action plan based on the technical audit of the sector; the call for bids for opening up the capital of the national electricity and water company (EDM); and the opening up of the telecommunications sector to competition by granting at least one cellular telephony operating license to private operators, as well as the structural performance criterion for end-March 2000 on the completion of audits of the Malian Retirement Fund (CRM) and the National Social Security Agency (INPS), were not observed.

5. We have reached understandings on the economic and financial measures to be implemented in order to ensure achievement of the economic objectives of the program for the remainder of 2000, as set forth in the attached memorandum. Based on these indications, we request that the appropriate waivers be granted in the context of the completion of the review.

6. The government will provide the Fund with any information it may request on progress made in implementing its economic and financial policies and in achieving the program objectives. Accordingly, it will regularly submit data on the operations of key public enterprises.

7. The government of Mali believes that the policies and measures set forth in the attached memorandum will enable it to achieve its program objectives. Moreover, it will take any additional measures that may prove necessary to this end. The government of Mali will, of its own accord or at your request, engage in consultations on the adoption of any further measures that may be deemed appropriate. Mali and the International Monetary Fund will also conduct a review of the country’s economic program, which is to be completed no later than December 31, 2000.

Sincerely yours,

         /s/

Bacari Koné
Minister of Economy and Finance
Chevalier de l’Ordre National

MALI

Memorandum on Economic and Financial Policies for 2000

August 11, 2000

1. The 1999/2000 economic and financial program was prepared within the framework of the medium-term adjustment strategy described in the policy framework paper (PFP) for 1999-2002. This strategy aims at ensuring sustainable economic growth, reducing poverty, and achieving domestic and external financial viability in the medium term through the implementation of rigorous fiscal policies, as well as the deepening of structural and social reforms. The program envisaged a real GDP growth rate of about 6½ percent in 1999 and 5 percent in 2000; maintenance of the average inflation rate below 2½ percent; and a reduction in the external current account deficit (excluding official transfers) from 9½ percent of GDP in 1998 to 8½ percent in 2000. The program also aimed at raising the investment ratio from 21 percent of GDP in 1998 to 22 percent in 2000, and at increasing the domestic savings rate from 10¹/₃ percent of GDP in 1998 to 12¾ percent in 2000.

II. Recent Economic Developments

2. In 1999, the economic and financial situation was marked by a significant deterioration in the terms of trade and serious difficulties in the key cotton and electricity sectors. The terms of trade deteriorated by 11 percent in 1999, as compared to 1998, notably reflecting a 19 percent drop in cotton fiber export prices and a 27 percent increase in the import prices of petroleum products. In the cotton sector, weak financial management and overinvestment resulted in a marked increase in the production costs of the Compagnie Malienne pour le Développement des Textiles (CMDT), as compared to the level projected on the basis of the technical audit completed at end-1998. These slippages were reported only in the last quarter of 1999 and contributed to a large consolidated cotton sector deficit of about CFAF 32½ billion (equivalent to 2 percent of GDP) for the 1999/2000 crop year. Measures have been taken to reduce this deficit, notably a lowering of the announced floor price of seed cotton from CFAF 160 per kilogram to CFAF 150 per kilogram; the implementation of a set of measures to reduce the CMDT’s costs by about CFAF 10 billion; the suspension of the value-added tax (VAT) exemption for cotton fiber; and an increase in the sale price of cotton seeds to the oil and soap company (HUICOMA) from CFAF 11 per kilogram to CFAF 20 per kilogram. The remainder of the consolidated deficit was covered by a CFAF 15.1 billion loan from the Cotton Sector Stabilization Fund. In the electricity sector, serious managerial shortcomings and delays in implementing the rehabilitation plan for the sector resulted in power cuts that had a severe impact on economic activity.

3. Real GDP growth in 1999, while higher than in 1998, remained below expectations at an estimated rate of 5½ percent, against 6½ percent under the program. Improved weather conditions resulted in a large increase in cereal production of 20 percent, while seed cotton production stabilized at around 520,000 metric tons. Growth was moderate in the secondary sector, mainly reflecting the effects of the power cuts on industrial activities. Gold output increased from 22.8 metric tons in 1998 to 25.3 metric tons in 1999. The harmonized consumer price index for Bamako fell by about 1 percent during 1999, largely because of the good harvest of food crops. In the external sector, despite an increase in the export volume of cotton fiber and gold, and a moderate increase in that of imports, the external current account deficit (excluding official transfers) rose to 10½ percent of GDP, 2 percentage points higher than foreseen.

4. Program implementation in 1999 was mixed, notably with regard to the structural reforms (Tables 1 and 2). The quantitative performance criteria and benchmarks, as well as most of the indicative financial targets established for September and December 1999 and March 2000, were observed, except for the criterion and benchmark on net bank credit to the government for end-September and end-December 1999, respectively. However, none of the structural performance criteria established for end-November 1999 and end-March 2000 were met, and only two of the seven structural benchmarks were observed. Regarding the structural performance criteria, a one-year performance contract for the cotton sector was signed on October 21, 1999 by the government, the CMDT, and the producers. However, additional measures are needed, as this performance contract does not include all the elements of the action plan for the cotton sector adopted by the government in July 1999, nor does it take account of the CMDT’s higher production costs. The call for bids to open up the capital of Énergie du Mali (EDM) to the private sector and the opening up of the telecommunications sector to competition by granting at least one cellular telephony operating license to private operators, both of which were programmed for end-November 1999, were postponed to 2000. Lastly, audits of the Caisse de Retraite du Mali (CRM) and the Institut National pour la Prévoyance Sociale (INPS) were not completed at end-March 2000, as planned.

5. Regarding the structural benchmarks, a steering committee with private sector participation was established on September 8, 1999, with the goal of simplifying administrative procedures and reducing the time required for setting up new enterprises. In addition, the call for bids to open up 49.98 percent of the capital of the Banque Malienne de Crédits et de Dépôts (BMCD) to the private sector was launched in September. In contrast, the restructuring of the Banque Internationale pour le Mali (BIM-SA), planned for August 1999, could not be completed. Instead, the government decided to place the bank under temporary receivership, in order to prepare its privatization. Implementation of the other measures established as structural benchmarks was also delayed. These refer to the adoption of an action plan for financial sector reform; the preparation of a financing plan to implement the ten-year development program for education (PRODEC); the launching of the call for bids for the privatization of the management of Aéroports du Mali (ADM); and the appointment of new associate judges at the commercial courts, including representatives from the banking and insurance sectors. To give Mali’s economic program a fresh boost, the government has taken the corrective measures described below on in this memorandum.

6. The government’s financial situation in 1999 was affected by the unfavorable economic environment, particularly as regards fiscal revenue. The overall fiscal deficit (commitment basis and excluding grants) increased to 9 percent of GDP, compared with the 7½ percent envisaged under the program. Budgetary revenue was CFAF 12 billion below target (¾ of 1 percentage point of GDP). This shortfall reflected a decline in tax receipts from the cotton sector and the larger-than-foreseen impact of the application of the new West African Economic and Monetary Union (WAEMU) imports classification system and the abolition of the customs service fee (CPS) following the introduction of the VAT at the single rate of 18 percent in April 1999.

7. Budgetary expenditure in 1999 remained slightly below the programmed level. Current expenditure was contained at CFAF 193 billion, compared with CFAF 197½ billion foreseen, essentially reflecting a lower wage bill and interest charges. The government granted a 7 percent increase in civil service base pay, effective September 1, 1999, which is compatible with the programmed wage bill for 1999/2000. In fact, the 1999 wage bill remained below the program ceiling on account of delays in implementing special regulations for certain categories of civil servants, and in making certain promotion-related payments. Payments arising from the enforcement of court rulings against the government totaled CFAF 4.5 billion in 1999, and the amount outstanding at year’s end is estimated at about CFAF 14 billion. Overall investment expenditure was slightly above the level envisaged, with, however, a lower-than-expected execution rate for foreign-financed investment. Verified domestic payments arrears were eliminated as planned, and, despite the low level of repayments of on-lent loans, all public debt-service obligations were paid on time, including higher-than-expected amortization payments, notably because of payments made early in anticipation of the Year 2000 (Y2K) bug. In addition, CFAF 11.7 billion in payments orders issued in 1999 was paid in early 2000 during the supplementary period. External budgetary assistance slightly exceeded the programmed amount, and privatization receipts totaled CFAF 10½ billion. In 1999, advances to the CRM reached CFAF 5 billion, reflecting its structural deficit. In total, recourse to net bank credit amounted to CFAF 3.8 billion at end-1999.

8. Implementation of tax reforms in 1999 was satisfactory. Effective January 1, 1999, Mali instituted a system of imports classification in preparation for the entry into force in January 2000 of the common external tariff (CET) within the WAEMU.² Regarding intracommunity trade, the tariff reduction for approved industrial products of WAEMU origin was raised in 1999 to 80 percent of the rates applicable to third countries, and these customs duties were eliminated in 2000. Customs revenue losses are estimated at 1 percent of GDP in 1999 and at about ½ of 1 percent of GDP in 2000. Other reforms pertained to the modernization of the direct and indirect taxation system, particularly through the introduction of a VAT at a single rate of 18 percent beginning on April 1, 1999 and a reduction in the number of VAT-exempt commodities. Furthermore, measures aimed at strengthening tax administration and improving collection were pursued with Fund technical assistance at the tax department. The large enterprise division was fully computerized, and tax collection from large enterprises was transferred from the treasury to the tax department in January 2000, while the extension of the new taxpayer registration system using a single fiscal number for each taxpayer continued. The new customs code, aimed at simplifying procedures and intensifying the fight against fraud, was adopted by the government in February 2000. Regarding expenditures, the payroll records were merged with the civil service roster on September 30, 1999, as scheduled.

9. The demand for money was weaker than expected in 1999, as reflected in broad money growth of 1¹/₃ percent, against 9 percent projected and 4¹/₃ percent in 1998. Net credit to the government was higher than programmed, and credit to the economy increased by 14½ percent, much more than projected and reflecting, in part, delays in the repayment of cotton sector crop credits in the wake of the CMDT’s financial difficulties. These developments resulted in a marked decrease in the net external assets of the banking system.

10. The health of Mali’s banking system has improved since 1995, and most of the banks showed profits in 1999. However, their situation remains precarious, especially in regard to certain banks’ compliance with the prudential ratios set by the WAMU Banking Commission and the level of gross nonperforming loans. At end-December 1999, these amounted to 25 percent of the banks’ portfolio of credit to the economy. Loan loss provisions amounted to 61 percent of the amount of nonperforming loans. In addition, the CMDT’s financial difficulties in 1999 further weakened the banks, and, for most of them, the claims on the CMDT exceeded actual equity capital. Conscious of the risks inherent in this situation, the government is committed to taking the necessary measures to financially rehabilitate the CMDT and to pursue the reform of the financial sector in a determined manner. Accordingly, the consultations with the World Bank on an action plan for the financial sector were concluded. This action plan is aimed at improving the sector’s legal and judicial environment, fully divesting the government’s interests in the commercial banks by end-2004, and determining the measures to be taken to resolve the problem of banks’ nonperforming loans and ensure compliance with prudential ratios.

11. Regarding the other structural reforms, progress was made in implementing the action plan to reform the public enterprise sector that was adopted in June 1999. The Hôtel de l’Amitié was sold in December 1999, and the Société Nationale des Tabacs et Allumettes du Mali (SONATAM) was partly privatized in March 2000 through the sale of 35 percent of its capital to a strategic partner; the government is determined to continue divesting itself fully from the capital of this company. In addition, the Société Malienne de Matériel de Travaux Publics (SLMTP) and the Office des Relais Touristiques (ORT) were put up for liquidation in 1999, and, in January 2000, the government adopted the draft law on the liquidation of the Société Nationale de Recherche et d’Exploitation Minière (SONAREM). In contrast, the government’s adoption of the draft laws on the fundamental principles of privatization and the issuance of the call for bids for privatizing the management of Aéroports du Mali (ADM) and the Usine Malienne des Produits Pharmaceutiques (UMPP) did not take place at end-December 1999, as planned. Finally, there were also delays in establishing the Société d’Exploitation du Trafic International (SETI), a company with majority private shareholding that will operate international traffic on the Bamako-Dakar railroad.

12. Given the unsatisfactory results achieved in 1999, the government has taken corrective measures to reinvigorate program implementation and ensure that the objectives for 2000 are met. Despite a sizable decline in cotton production in 1999/2000, real GDP is projected to grow by about 4½ percent, essentially because of the good grain harvest anticipated for 2000. Inflation, as measured by the harmonized consumer price index for Bamako, should remain below 3 percent on a year-on-year basis. In the external sector, the terms of trade are expected to further deteriorate, owing to the large rise in the import prices of petroleum products and the ongoing decline in cotton fiber export prices. While gold exports will rise slightly, cotton fiber shipments will be below their 1999 level. Import volumes should increase moderately, with a larger increase in construction materials related to the starting of major public investment projects. Thus, the external current account deficit (excluding official transfers) should widen further to 14½ percent of GDP in 2000, against 10½ percent in 1999. Taking into account the net capital inflows expected in 2000, the overall balance of payments deficit would amount to CFAF 77 billion, against the CFAF 1 billion initially projected.

13. In the public finance area, the government is determined to avoid a further deterioration of its financial situation. Specific measures have already been taken to limit revenue shortfalls and reduce nonpriority spending. On this basis, the program aims at increasing the basic budgetary surplus from 0.2 percent of GDP in 1999 to 0.6 percent in 2000. Taking into account a level of foreign-financed public investment that is 1 percent of GDP higher than in 1999, the overall budget deficit (commitment basis and excluding grants) will be maintained at a level equivalent to 9 percent of GDP in 2000.

14. Regarding budgetary revenue, projections without additional measures indicate a revenue shortfall on the order of 1½ percent of GDP, mainly due to the drop in taxes from the CMDT, implementation of the petroleum products’ taxation system in such a fashion as would result in stable retail prices, and lower economic growth than initially forecast. To limit the fall in revenue from petroleum products, the government decided in March 2000 to increase their retail prices by 12-18 percent. The government has also decided to reexamine its policy of taxing petroleum products, in the context of actions under way in the WAEMU. By end-October 2000, it will adopt a new system that will automatically reflect import price changes in retail prices. This system will be implemented in 2001.

15. The government is determined to ensure that the tax reforms undertaken in 1999 and the CET are implemented effectively, and to continue taking measures aimed at improving the efficiency of the tax collection agencies. Application of the variable tax on imports (TCI) will be limited to wheat, flour, and sugar, and the administrative value tax to petroleum products. Other measures envisaged at customs include: continuing the staff reorganization and increasing its resources; implementing the new customs code once it has been approved by the National Assembly; and strictly limiting exemptions not based on international agreements. The tax administration will continue with the introduction of the single taxpayer identification number and the modernization of the large enterprise division. Based on these measures, total government revenue in 2000 should amount to CFAF 290 billion, equivalent to 17 percent of GDP.

16. On the expenditure side, the government has decided to reduce nonpriority spending, including on supplies, travel, and domestically financed public investment, by CFAF 10 billion as compared to the 2000 finance law levels. Following discussions with trade unions in 1999, the government has adopted a new salary scale for the 16,000 civil servants not covered by special regulations. This adjustment implies a 15 percent rise in the monthly wage and has been in effect since May 1, 2000. Nonetheless, the wage bill will be strictly limited to CFAF 73.1 billion (4¼ percent of GDP), within the ceiling envisaged under the initial program. Social sector spending will amount to 37 percent of current expenditure, including 9 percent and 23 percent for the health and education sectors, respectively. Social safety net expenditures will be maintained at their initial program level. Moreover, the government remains determined to monitor closely the costs related to the administrative decentralization and is committed to strictly limiting transfers to the municipalities to CFAF 1½ billion. In addition, in view of the disturbing trend in payments resulting from court rulings against the government in recent years, these obligations will be closely monitored, and the legal department will be strengthened.

17. Mali will host the African Nations Cup (CAN) in 2002, which is a major challenge. The authorities are committed to strictly limiting the annual budgetary contribution to CFAF 10 billion in 2000-02 (½ of 1 percent of GDP annually). A significant share of the financing of the public investments needed to organize this event will come from external partners in the form of grants and concessional loans. Moreover, in May 2000, the authorities contracted two concessional loans to finance the construction over the 2000-02 period of an administrative center, housing the Prime Minister’s office and 12 ministries. In total, externally financed public investment in 2000 is projected to be CFAF 17½ billion (1 percent of GDP) higher than in 1999. Thus, total expenditure and net lending would amount to CFAF 445½ billion; in terms of GDP, they would be kept at 26 percent.

18. The government also intends to adopt, by end-2000 and in consultation with the World Bank, a three-year public investment program (PIP) for the period 2001-03. Under this new PIP, priority would be given to the agricultural and infrastructure sectors and to human resources development. The authorities will also strengthen their monitoring of project execution in close collaboration with donors and creditors.

19. The monetary policy of the Central Bank of West African States (BCEAO) will continue to be prudent, in accordance with the objectives of the pegged exchange rate between the CFA franc and the euro, and consolidation of the union’s external position. Broad money should increase by about 4 percent in 2000, somewhat less than the growth of nominal GDP. Based on the expected fiscal outcomes, net credit to the government should reach CFAF 10.3 billion at end-December 2000, allowing for an adequate allocation of credit to the private sector. Credit to the economy could increase by some 17½ percent. The net foreign assets of the banking system are projected to show a decline of CFAF 53 billion, compared with end-1999.

20. In the financial sector, the government adopted in June 2000 the action plan for the reform of the sector, prepared in collaboration with the World Bank. This action plan contains specific measures to resolve the problem of nonperforming loans and induce the banks to comply with the WAMU Banking Commission’s prudential ratios. Regarding government withdrawal from the banking sector, it is envisaged that the government will reduce its participation in the capital of the BMCD and the BIM-SA to a maximum of 20 percent by end-June 2001. Because of the structural financial difficulties of the CRM and the financial fragility of the INPS, an action plan for their rehabilitation will be prepared by end-October 2000, based on the results of audits of both institutions, which began in June and early August 2000, respectively.

21. The government is determined to continue implementing structural reforms with greater vigor, in order to make up for the delays incurred in 1999. In the cotton sector, the government ordered an independent financial audit which was completed in July 2000. Based on the conclusions and recommendations of the financial audit, the authorities will prepare a set of measures aimed at strengthening the transparency and effectiveness of the CMDT’s financial management and markedly reducing its production costs. It is also expected that the seven studies identified in the action plan for the cotton sector, notably the industrial and commercial technical audit of the CMDT and the study on a strategy for withdrawal of the CMDT from providing public services, will be completed by end-September 2000. This will make it possible to sign a new performance contract for the cotton sector in December 2000, that will include all the elements of the sectoral action plan adopted in 1999, particularly with regard to increased participation by private operators and preparation of the sector for competition.

22. In the electricity sector, reforms are under way, and the final call for bids to privatize at least 60 percent of the EDM’s capital was launched in August 2000. Meanwhile, measures were taken to safeguard against a further deterioration in the company’s financial situation. Regarding the telecommunications sector, the government adopted, on April 12, 2000, a new legal and regulatory framework opening up the sector to competition. In addition, the government has frozen the activities of the company MALITEL-SA (a subsidiary of SOTELMA), which was to provide cellular telephony services with private sector participation and was created under conditions that were not consistent with the principles set forth in the policy statement on the telecommunications sector adopted in 1998. The government is determined to establish transparency and fair competition in the sector by transforming this company, MALITEL-SA, into a subsidiary whose capital will be held entirely by the government (SOTELMA), and to resume the process of opening up the sector by means of an international call for bids in order to grant at least one cellular telephony operating license to private operators by end-November 2000. Finally, the government intends to launch the call for bids to privatize SOTELMA by end-June 2001.

23. Regarding the action plan for the other public enterprises, the government will issue the call for bids to privatize UMPP and the management of the ADM by end-2000. Furthermore, the SETI is expected to begin operations by end-September 2000.

24. Work on the strategy to reform the civil service will be pursued vigorously and the action plan for implementing this strategy will be prepared by end-2000. Moreover, the merit-based promotion system will continue to be applied equitably and rigorously. Furthermore, the government adopted, in consultation with the World Bank, the financing plan for the education sector in June 2000.

25. Private sector activity is encouraged by the establishment of a credible, impartial, and transparent legal and judicial system. Aware of this, the government is determined to strengthen the inspection of legal services, computerize the clerks’ offices at commercial courts, and, by end-September 2000, appoint new associate judges in commercial courts, including representatives from the banking and insurance sectors. The government has also decided to improve the procedures for providing budgetary funds for road maintenance. It has further decided to create a Road Authority that will operate without resorting to earmarked budgetary resources. The modalities for private sector participation in the financing and management of this authority will be determined by end-2000.

26. The government will continue its policy of prudent external debt management and will have recourse only to grants or concessional loans. To this end, no external loans with a grant element of less than 35 percent will be contracted or guaranteed, except for nonconcessional loans within the ceiling indicated in Table 3 attached, normal short-term import credits, and loans related to the rescheduling or refinancing of external debt. In addition, all new loans contracted or guaranteed by the government will continue to be subject to authorization by the Minister of Finance. The government will discharge its public debt obligations on a timely basis and will not accumulate any payments arrears.

27. In the context of the Initiative for Heavily Indebted Poor Countries (HIPC Initiative), the authorities, in collaboration with IMF and World Bank staff, have updated the results of the debt sustainability analysis based on debt data at end-1998 and end-1999, and have examined the progress achieved in implementing the reforms envisaged under the original HIPC Initiative. On the basis of this work, it appears that Mali has satisfied the necessary conditions for reaching the completion point under this Initiative.

28. To allow Mali to benefit as quickly as possible from the additional assistance available under the enhanced HIPC Initiative, the authorities have prepared an interim poverty reduction strategy paper (PRSP) based on the National Strategy for the Fight against Poverty (SNLP) adopted by the government in 1998 and the PFP for 1999-2002. The latter is presented under separate cover.

29. The authorities will continue to participate actively in all the initiatives aimed at promoting regional integration and will endeavor to implement those that have been adopted. In particular, this concerns the implementation of the CET, which entered into force on January 1, 2000; the harmonization of the business law through the Organization for the Harmonization of Business Law in Africa (OHADA) uniform acts; the harmonization of indirect taxation within the WAEMU; the elimination of nontariff barriers; the adoption of a common investment code; the development of the regional financial market; and the strengthening of multilateral surveillance.

30. Efforts undertaken in recent years to improve the quality, coverage, and availability of economic and social statistical data will be continued. Particular emphasis will be placed on the national accounts, public investment monitoring, and the compilation of balance of payments statistics. To ensure that data are available within the required time frames, the authorities will revitalize the statistical coordination committee by implementing legal provisions against economic agents who fail to communicate information within prescribed deadlines.

31. Execution of the 2000 program will be monitored through quarterly quantitative performance criteria and benchmarks as specified in Table 3 (attached), including (a) a ceiling on net bank credit to the government; (b) the nonaccumulation of domestic and external payments arrears; (c) the nonrecourse to short-term external credits (excluding normal import credits and loans related to debt-relief operations); and (d) a ceiling on nonconcessional external debt having a maturity of one year or longer, contracted or guaranteed by the government and certain public enterprises. The above variables relating to end-September 2000 will constitute performance criteria. The performance criterion on nonaccumulation of domestic and external payments arrears will be applied on a continuous basis. In addition, quarterly financial indicators will be established for tax revenue, the wage bill, and the basic budgetary surplus (the latter is defined as the overall fiscal deficit, excluding grants and externally financed investment spending).

32. To ensure the success of the program, the authorities have taken the following actions: (i) the completion of the CMDT’s financial audit; (ii) the launch of the final call for bids to privatize at least 60 percent of the EDM’s capital; (iii) the official announcement by the government of the new reform plan for the telecommunications sector (see paragraph 22); and (iv) the start of the financial audits of the CRM and the INPS. The program will also include a certain number of structural performance criteria and benchmarks, which are described in Table 4.