Press Release No. 19/303

IMF Executive Board Completes Fifth Review of Extended Credit Facility Arrangement for Madagascar

July 26, 2019

• The completion of the review enables an immediate disbursement of US$43.7 million.
• Economic conditions continued to improve in 2018, and implementation of the Fund-supported program remained generally strong.
• Enhancing revenue mobilization, improving the quality and composition of spending, and actively managing fiscal risks is crucial for creating more fiscal space.

On July 26, the Executive Board of the International Monetary Fund (IMF) completed the fifth review under the Extended Credit Facility (ECF) Arrangement for Madagascar. The completion of this review enables the disbursement of SDR 31.428 million (about US$43.7 million), bringing total disbursements under the arrangement to SDR 219.12 million (about US$304.5 million).

Madagascar’s 40-month arrangement for SDR 220 million (about US$305 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 to SDR 250.55 million (about US$347 million) at that time. This arrangement aims to support the country’s efforts to reinforce macroeconomic stability and boost sustained 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 (ECF) arrangement has remained generally strong. Growth has been solid, inflation has been moderate, and the external position has remained robust. Going forward, the authorities’ continued commitment to strong policies and an ambitious structural reform agenda will be key to mitigating internal and external risks, strengthening macroeconomic stability, and achieving higher, sustainable, and inclusive growth.

“The authorities’ economic reform agenda requires continued efforts to enhance investment capacity, essential for scaling up priority investment spending. Increasing social spending, as planned in the revised budget law, and developing social safety nets is also crucial. Further enhancing revenue mobilization through tax collection is central to this strategy and warrants renewed efforts to avoid eroding the tax base.

“Resolute actions are needed to contain risks to macroeconomic stability and debt sustainability, including fiscal risks from the financial situation of JIRAMA, the sustainability of the civil servant pension fund, and liabilities to the fuel distributors. On the latter, the recent progress towards the implementation of an automatic fuel pricing mechanism while limiting its impact on the poorest is encouraging.

“The recent adoption of the law on illicit asset recovery brings the anti-corruption legal framework into closer alignment with international standards. The authorities should continue to build on these efforts. Making further progress on modernizing public financial management and improving the business climate will be essential to promote good governance. Allocating sufficient human and financial resources will allow for effective enforcement of this framework.

“The ongoing reform agenda should continue to benefit from IMF technical assistance in various areas, such as fiscal policy, governance, and the monetary and financial sectors.”