Press Release No. 18/286

IMF Executive Board Completes Third Review of Extended Credit Facility Arrangement for Madagascar and Approves US$44.25 Million Disbursement

July 11, 2018

• This arrangement aims to support the country’s efforts to reinforce macroeconomic stability and boost sustainable and inclusive growth.
• The authorities’ efforts to enhance governance and fight corruption remain central to the success of their program
• Reforms underway to promote financial sector development and inclusion will enhance growth.

The Executive Board of the International Monetary Fund (IMF) today completed the third review under the Extended Credit Facility (ECF) Arrangement for Madagascar. The completion of this review enables the disbursement of SDR 31.43 million (about US$44.25 million), bringing total disbursements under the arrangement to SDR 156.26 million (about US$220.02 million).

Madagascar’s 40-month arrangement for SDR 220 million (about US$304.7 million, or 90 percent of Madagascar’s quota), was approved on July 27, 2016 (see Press Release No.16/370) . Additional access of 12.5 percent of Madagascar’s quota was approved by the Executive Board in June 28, 2017, bringing Madagascar’s access under the ECF arrangement to SDR 250.55 million (about US$347.1 million) at that time. This arrangement aims to support the country’s efforts to reinforce macroeconomic stability and boost sustainable and inclusive growth.

Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:

“Madagascar’s performance under its economic program supported by the Extended Credit Facility arrangement has remained generally strong. Recent economic developments were favorable, and the structural reform agenda is advancing. The outlook also remains positive, with risks arising from higher oil prices, other terms of trade shocks and natural disasters.

“The authorities have continued to strengthen revenue mobilization and the quality of spending. A small, one-off reduction in the primary domestic fiscal surplus is appropriate for 2018, considering higher oil prices and the need to address social pressures. Further action will be needed to improve the quality of spending, including increased investment capacity, automatic fuel price adjustments, and sustained reforms of the public utility company (JIRAMA) to reduce its need for transfers. New tax incentives for investment should be carefully managed to safeguard revenue mobilization. These efforts will create fiscal space for high-priority investment and social spending which are central to the strategy for growth and poverty reduction.

“Reforms underway to promote financial sector development and inclusion will enhance growth. These reforms include strengthening supervision, modernizing the banking law, enhancing the monetary policy operational framework , and developing the foreign exchange market.

“The authorities’ efforts to enhance governance and fight corruption remain central to the success of their program. Completing the modernization of the legal framework by enacting draft laws on AML/CFT and asset recovery is a priority. Moreover, it is vital to develop the institutions necessary for effective enforcement. Continuing improvements in public financial management can play a key role in enhancing economic governance.”