(Ecofin Agency) - Mali has defaulted on the payments of CFA2.7 billion in interest to its WAEMU creditors. The finance ministry accuses the bloc’s sanctions.

In a note signed on February 1, 2022, Mali's Ministry of Economy and Finance announced that the country has been unable to pay a total of CFA2.7 billion ($4.65 million), representing interest due on January 28, 2022, to its WAEMU creditors. The statement attributes this situation to the sanctions currently being imposed on the country. 

"Despite sufficient assets in its books, the Central Bank has not settled the due date for the payment of the coupon on treasury bonds [...], for a total amount of CFA2.69 billion [...] The State of Mali deplores this practice, which is contrary to the rules of the sub-regional financial and monetary market, and its detrimental consequences on investors," the document reads.

A few weeks ago, Agence Ecofin had predicted such a situation, saying that the sanctions could make it difficult to repay nearly 300 billion CFA francs in debts due in 2022 to WAEMU financial investors. The Ministry of Finance disclaims its responsibility while accusing the BCEAO of violating the provisions of Article 4 of its statutes, which prohibits it from following any instruction from "governments" and other "institutions" in the exercise of its missions.

Following the ECOWAS and WAEMU extraordinary summits held on January 9, 2022, in Accra, BCEAO decided, among other things, to block all transfers from the Malian government through its payment systems. This measure carries collateral risks for both Mali's internal and external creditors. It is not known whether the Central Bank has extended its payment restrictions to the country's international bonds.

Mali indicates that it will only be able to continue to honor its commitments once the sanctions are lifted. This situation places the central bank in an unprecedented position, and recent developments in Burkina Faso could lead to similar cases if the recent military takeover results in the same level of sanctions. Also, the situation puts to the test the degree of independence of the BCEAO which, in theory, is a key element for the optimal functioning of this type of institution.

This is not the first time that Mali has been subject to widespread sanctions. A similar decision was taken in August-September 2020, following the first coup led by Colonel Assimi Goïta. This weighs heavily on Mali, whose easy access to exports depends on the ports of Abidjan in Côte d'Ivoire and Dakar in Senegal. Without exports, the country cannot generate foreign exchange revenue.

The settlement of this issue depends on the duration of the sanctions. The regional bloc says they will only be lifted if the ruling military proposes a reasonable timetable for the organization of elections. In the meantime, Mali can still count on air traffic (which has resumed) to carry out its gold exports (50% of the country's external revenues), and on Mauritania for other exports. Even then, it will need access to the fiduciary currency (bills and coins) issued by the BCEAO, for current transactions within its economy.

Idriss Linge