IMF Staff Reviews Progress of Madagascar's Economic Program

February 15, 2019

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 in 2018 and 2019, reflecting in particular higher private sector activity.
  • The implementation of the IMF-supported program remained generally satisfactory last year, except for some weaknesses in revenue collection.
  • The new government’s plans to boost social and investment spending depend on a continuing effort to raise revenue and reduce lower priority spending, especially for subsidies in the fuel and electricity sectors.

A team from the International Monetary Fund (IMF) led by Marshall Mills, Mission Chief for Madagascar, visited Antananarivo on February 11-15, 2019. The team held discussions with the authorities on the fourth review of Madagascar’s economic reform program supported by the IMF’s Extended Credit Facility (ECF) [1].

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

“The discussions made good progress and are continuing, with a view to bringing the review to the Executive Board of the IMF for consideration in the coming weeks, as anticipated.

“Economic developments were generally favorable in 2018, notwithstanding the electoral period. Growth is estimated to have exceeded 5 percent due to a rebound in agricultural production and private sector activity, notably in construction, telecommunication and transport services. Despite higher oil prices, the external position strengthened thanks to strong vanilla and mining exports. After peaking in late 2017, inflation fell steadily to around 6 percent at end-December. Prospects remain positive for 2019, with growth again expected to exceed 5 percent and continuing stability, bolstered by improving political stability and the authorities’ commitment to economic reforms. Sustained and inclusive growth remains critical to raising living standards for the population.

“The implementation of the ECF-supported program remained generally satisfactory through end-year, except for some weakness in revenue collection later in the year. The Malagasy authorities met all of the program’s performance criteria for the first half of the year and made progress on key structural reforms, such as opening the first anti-corruption court in Antananarivo. In the second half of the year, budget execution was complicated by a shortfall in domestic revenue, related to the electoral period (this small shortfall came after the previous impressive progress on revenue under the program). As a result, the overall primary balance deteriorated slightly despite spending discipline. The central bank successfully accumulated foreign exchange reserves over the year, reaching record levels. Progress continued on the structural reform agenda but at slower pace than anticipated. In a context of social pressures and high world oil prices, delays in adjusting fuel pump prices led to significant, unfunded liabilities to distributors.

“The President and the new government stressed to staff their commitment to accelerate economic reforms under the ECF-supported program and to continuing cooperation with the Fund. The plans of the new government to boost social and investment spending are crucial for inclusive growth and are very much in line with core program priorities. These plans depend critically on continuing to raise tax revenue under the program, which in turn hinges on pursuing tax administration reforms, such as stronger revenue accounting procedures, and safeguarding revenue from losses due to tax expenditures and exemption regimes. A strict prioritization of investment projects and maintaining robust debt sustainability are also essential to the success of these plans.

“Gradually reducing lower priority public spending—particularly subsidies in the fuel and electricity sectors—is another key to boosting pro-growth spending. Staff urged the authorities to adopt a fuel pricing mechanism that keeps prices in line with costs, as well as a plan to eliminate the large existing liabilities to fuel distributors. Developing targeted social measures to protect the poor from the impact of future price adjustments is also a priority. In addition, the authorities and staff concurred on the need to continue bolstering the financial situation of the public utility, JIRAMA, by raising revenue, reducing costs, and improving governance.

“The authorities and staff also reiterated the need to continue strengthening governance and stepping up the fight against corruption, a key objective of the new government. In this respect, the adoption of the draft law on illicit asset recovery has become a priority to complete the legal framework to fight corruption.

“The mission met with President Andry Rajoelina, Minister of Economy and Finance Richard Randriamandrato, Ministry of Energy, Water and Hydrocarbons Vonjy Andriamanga, Central Bank of Madagascar Governor Alain Rasolofondraibe, and senior officials, as well as 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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