Press Release No. 05/134

Press Release: Statement by IMF First Deputy Managing Director Anne O. Krueger at the Conclusion of a Visit to Republic of Madagascar

June 7, 2005

Ms. Anne O. Krueger, First Deputy Managing Director of the International Monetary Fund (IMF), made the following statement today in Antananarivo:

"I am very glad to have the opportunity to make my first visit to Madagascar. Although very brief, the visit has given me the chance to have very productive discussions with President Marc Ravalomanana and senior members of the government and the central bank. I was also able to meet members of the donor community. And I was able to see at first hand some of the work being done by the Conseil de Developpement d'Andohatapenaka (CDA) in the provision of medical and educational assistance to some of those most in need.

"Much progress has been made in Madagascar in recent years. I was able to congratulate President Ravalomanana for the successful completion of the economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF). The government's program also enabled Madagascar to reach completion point under the Heavily Indebted Poor Countries initiative last October. As a result of this, the country has received substantial debt relief amounting to US$836 million in net present value (NPV) terms from all its creditors.

"Madagascar has experienced real GDP growth of over 5 percent a year since 2003, and real GDP is forecast to grow by 6.3 percent this year. Inflation has started to decline. This is good economic performance; as the government persists with its policies, it will bring increased rewards.

"But there are significant challenges ahead if Madagascar is to meet the Millennium Development Goals (MDGs) and to achieve substantial and lasting reductions in poverty. A stable macroeconomic environment with low inflation is an essential prerequisite for the higher rates of growth that Madagascar needs.

"The President and his colleagues impressed me with their determination to respond to the challenges they face. They stressed the importance of learning from the successful experience of other countries. They also emphasized the need for good governance.

"We discussed the importance of providing a level playing field for all economic actors and of raising the ratio of revenue to GDP while simplifying the tax system and eliminating tax exemptions. This would also help strengthen the tax and customs administration. And expenditure control and fiscal discipline can be strengthened.

"We also discussed the need to increase private sector investment and export opportunities; and to help augment the capacity needed to absorb increases in aid flows.

"I told the President that the IMF stands ready to provide further financial support for Madagascar's growth and poverty reduction strategy. I indicated that discussions on a new program could begin later this month. In addition, the Fund stands ready to provide assistance with capacity building as appropriate.

"Madagascar is a country blessed with substantial natural and human resources. Given the appropriate policies, the opportunity exists to bring about macroeconomic stability and more rapid growth and so make possible the lasting reduction in poverty we all want to see."