IMF Staff Reviews Progress of Madagascar’s Economic Program

September 26, 2018

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
  • Economic growth is expected to exceed 5 percent this year, the highest in 10 years.
  • Containing lower priority spending and further boosting revenue remain essential to continue scaling up public investment and social spending.
  • Combating corruption remains critical to improving governance and avoiding a substantial economic impact.

A team from the International Monetary Fund (IMF) led by Marshall Mills, Mission Chief for Madagascar, visited Antananarivo and Toamasina on September 12-26, 2018. The team held discussions with the authorities on the fourth review of Madagascar’s economic reform program supported by the IMF’s three-year Extended Credit Facility (ECF [1]).

At the end of the mission, Mr. Mills issued the following statement:

“Economic conditions have continued to improve. Growth is expected to exceed 5 percent this year, the highest level in 10 years. This outcome is driven by a rebound in agricultural production, especially for rice, as well as growing public investment. Despite rising international oil prices, external developments have remained favorable, with a strong export performance underpinned by high prices and production for vanilla and mining. After peaking in late 2017, inflation has been falling steadily toward 7 percent by year-end. Raising living standards for the population will nevertheless require sustained and inclusive growth.

“The implementation of the ECF-supported program remains broadly satisfactory. All program targets for the first half of the year were met, except for a temporary shortfall in social spending. In particular, the Central Bank continued building up foreign exchange reserve buffers, which reached an all-time high. The budget was executed largely as planned. Progress also continues on the structural reform agenda, as exemplified by the opening of the first anti-corruption center.

“Continuing the shift from less productive public spending to investment and social spending remains a core program objective. Delays in adjusting fuel pump price – in a context of rising world oil prices, social difficulties, and continuing discussions on the price structure – are leading to a significant, unfunded liability to distributors. Staff urged the authorities to minimize the impact on the budget and priority spending by progressively aligning pump prices with cost recovery and eliminating the liabilities as expeditiously as conditions permit. The authorities are considering measures to alleviate the impact of price adjustments on the most vulnerable. While the public utility, JIRAMA, has made progress in reducing its needs for government transfers, staff stressed the importance of intensifying efforts to limit transfers for next year, in line with the authorities’ plans.

“In addition, the mission and the authorities conferred on the important reforms underway in monetary policy, the financial sector and public financial management, with the support of IMF technical assistance. The Central Bank is steadily strengthening its operational frameworks to better manage bank liquidity and to limit volatility in the foreign exchange market while building reserves.

“The authorities and staff agreed on the continuing priority of strengthening governance and the fight against corruption. Staff stressed the vital importance of adopting before the end of the year the two laws that the government submitted to parliament on illicit asset recovery and anti-money laundering. Failure to adopt these laws would expose Madagascar to potentially far-reaching economic consequences, particularly on the cost of cross-border transactions.

“The mission met with Acting President Rivo Rakotovao, Prime Minister Christian Ntsay, Minister of Finance and Budget Vonintsalama Andriambololona, Central Bank of Madagascar Governor Alain Rasolofondraibe, other senior officials, as well as private sector representatives, civil society, and development partners.

“The mission would like to thank the Malagasy authorities for their strong cooperation and the constructive discussions.”


[1] The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems

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