IMF Executive Board Completes Sixth Review Under the Extended Credit Facility (ECF) for the Republic of Madagascar and Concludes 2019 Article IV Consultation
IMF News, January 30, 2020
Source details
- Canonical URL
- IMF Executive Board Completes Sixth Review Under the Extended Credit Facility (ECF) for the Republic of Madagascar and Concludes 2019 Article IV Consultation
Other formats
Bibliographic details
- Published: January 30, 2020
Review completion and financing
- On January 29, 2020, the Executive Board completed the sixth review under the ECF arrangement for Madagascar and the 2019 Article IV consultation.
- The completion enables the disbursement of SDR 31.43 million (about US$43.2 million).
- Total disbursements under the arrangement now stand at SDR 250.55 million (about US$344.5 million).
ECF arrangement background
- The 40 month-ECF arrangement was approved on July 27, 2016 for SDR 220 million (about US$305 million, or 90 percent of Madagascar’s quota).
- Additional access of 12.5 percent of Madagascar’s quota was approved on June 28, 2017, bringing access to SDR 250.55 million (about US$347 million) at that time.
- The Executive Board approved a three-month extension of the ECF arrangement to February 26, 2020 on November 4, 2019, to allow time to conclude discussions to complete the 6th and last review.
Statement by Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair — key messages
- Assessment of recent performance:
- “Madagascar’s performance under its economic program supported by the Extended Credit Facility (ECF) arrangement has been broadly satisfactory with solid growth, moderate single-digit inflation, and a robust external position.”
- Policy priorities and reform agenda:
- Commitment to strong policies and an ambitious agenda to complete outstanding structural reforms is crucial to mitigate risks and achieve higher, sustainable, and inclusive growth.
- The Plan Emergence Madagascar aims to raise economic growth through increased public and private investment, strengthening human capital, and improving governance.
- Create additional fiscal space by:
- further improving revenue mobilization through a medium-term tax revenue strategy,
- containing lower-priority spending,
- enhancing investment implementation capacity.
- Scale up priority investment and social spending in education, health, and housing.
- Fiscal and debt risks:
- Need resolute actions to contain risks to macroeconomic stability and debt sustainability, including reducing fiscal risks from the public utility JIRAMA and containing liabilities to fuel distributors.
- Implement an automatic fuel pricing mechanism to avoid budget costs, accompanied by mitigating measures to limit impacts on the poorest, including scaling up social safety net programs.
- Governance and resilience:
- Effective and impartial enforcement of the new anti-corruption legal framework is needed to improve the business climate and attract private investment.
- Continue progress to strengthen public financial management.
- Prioritize measures to increase resilience to natural disasters.
- IMF engagement:
- The authorities’ ongoing reform agenda should continue to benefit from continued IMF engagement, including technical assistance.
Executive Board Assessment — directors’ views and recommendations
- Directors welcomed:
- broadly satisfactory implementation of the economic reform program,
- peaceful political transition,
- solid macroeconomic performance.
- Concerns and calls for action:
- Regretted slowdown in progress on structural reforms and continued underperformance on priority social spending.
- Emphasized need for further efforts to place Madagascar on a path of sustainable and inclusive growth given high poverty, stagnant per capita income, and vulnerability to natural disasters.
- Welcomed Plan Emergence Madagascar and authorities’ commitment to strengthen macroeconomic stability and debt sustainability.
- Fiscal policy recommendations:
- Remain focused on creating fiscal space to scale up priority social and investment spending (education, health, housing).
- Improve revenue mobilization via credible medium‑term tax revenue mobilization plans.
- Contain lower‑priority spending and enhance investment implementation capacity.
- Reduce transfers to JIRAMA and finalize and implement its medium‑term recovery plan.
- Improve sustainability of the civil servant pension fund and contain liabilities to fuel distributors.
- Adopt the planned fuel pricing mechanism without further delays, with mitigating measures and social safety nets for the poorest.
- Monetary and financial sector recommendations:
- Continue improving the monetary framework and foreign exchange market operations.
- Gradually phase out the surrender requirement on export proceeds.
- Strengthen bank supervisory framework and implement new banking and financial stability laws.
- Continue efforts to improve financial inclusion.
- Governance and resilience:
- Urged effective and impartial enforcement of the anti‑corruption legal framework.
- Continue to strengthen public financial management.
- Prioritize measures to increase resilience to natural disasters.
- Capacity development:
- Enhanced capacity development will be essential to support the authorities’ objectives.
- Directors welcomed the intention to start discussions on a successor arrangement.
Economic outlook and risks
- Recent performance:
- After a smooth transition of power and conclusion of Parliamentary elections in end-May, economic developments remained favorable with sustained growth, contained inflation, and sustainable fiscal and external positions.
- Medium-term outlook:
- Growth expected to gradually increase to about 5.5 percent, supported by public investment scaling-up and good prospects for private investment.
- Key risks:
- Social fragility,
- materialization of fiscal risks,
- vulnerability to exogenous shocks including to terms of trade and natural disasters.
- Policy priorities to support the outlook:
- Renewed reform efforts aligned with Plan Emergence Madagascar to:
- create fiscal space for investment and social spending,
- strengthen monetary and exchange rate policy effectiveness,
- improve financial sector development and resilience,
- promote better governance and an improved business climate.
Key economic indicators (Selected Economic Indicators, 2017–21)
- National account and prices (percent change, unless otherwise indicated)
- GDP at constant prices: 2017: 3.9; 2018: 4.6; 2019 Est.: 4.8; 2020 Proj.: 5.2; 2021 Proj.: 5.4
- GDP deflator: 2017: 8.6; 2018: 5.9; 2019 Est.: 7.2; 2020 Proj.: 6.5
- Consumer prices (end of period): 2017: 10.6; 2018: 6.9; 2019 Est.: 6.0; 2020 Proj.: 6.2
- Money and credit
- Broad money (M3) growth (percent of beginning of period money stock (M3)): 2017: 17.8; 2018: 11.2; 2019 Est.: 12.3; 2020 Proj.: 16.2; 2021 Proj.: 14.9
- Net foreign assets: 2017: 9.2; 2018: 0.3; 2019 Est.: 7.6
- Net domestic assets: 2017: 6.4; 2018: 12.0; 2019 Est.: 9.3
- Credit to the private sector (percent of GDP): 2017: 8.4; 2018: 8.7; 2019 Est.: 9.0; 2020 Proj.: 7.3; 2021 Proj.: 5.8
- Public finance (percent of GDP)
- Total revenue (excluding grants): 2017: 10.3; 2018: 10.5; 2019 Est.: 11.7
- Tax revenue: 2017: 10.0; 2018: 10.2; 2019 Est.: 10.4; 2020 Proj.: 10.9; 2021 Proj.: 11.3
- Grants: 2017: 2.5; 2018: 2.4; 2019 Est.: 1.4
- Budget grants: 2017: 0.7; 2018: 0.9; 2019 Est.: 0.8; 2020 Proj.: 0.0
- Total expenditures: 2017: 14.3; 2018: 14.4; 2019 Est.: 16.4; 2020 Proj.: 17.3
- Current expenditure: 2017: 8.9
- Capital expenditure: 2017: 4.7; 2018: 5.0; 2019 Est.: 8.3
- Overall balance (commitment basis): 2017: -2.1; 2018: -1.3; 2019 Est.: -1.4; 2020 Proj.: -2.7; 2021 Proj.: -4.2
- Domestic primary balance1: 2017: -0.9; 2018: 0.1; 2019 Est.: [not listed in table]
- Total financing: 2017: 2.0; 2018: 1.7; 2019 Est.: 2.7; 2020 Proj.: 3.8
- Foreign borrowing (net): 2017: 1.2; 2018: 1.5; 2019 Est.: 2.2; 2020 Proj.: 3.3
- Domestic financing: 2017: 0.5; 2018: 0.4
- Financing gap: 2017: -0.5
- Savings and investment (percent of GDP)
- Investment: 2017: 18.1; 2018: 18.8; 2019 Est.: 19.1; 2020 Proj.: 22.0; 2021 Proj.: 23.0
- Gross national savings: 2017: 15.4; 2018: 20.3; 2019 Est.: 19.0; 2020 Proj.: 20.5; 2021 Proj.: 21.5
- External sector (percent of GDP)
- Exports of goods, f.o.b.: 2017: 21.3; 2018: 21.9; 2019 Est.: 19.5; 2020 Proj.: 20.1
- Imports of goods, c.i.f.: 2017: 27.4; 2018: 27.6; 2019 Est.: 26.6; 2020 Proj.: 27.0; 2021 Proj.: 27.3
- Current account balance (exc. grants): 2017: -2.9; 2018: -1.9; 2019 Est.: -2.6; 2020 Proj.: -4.0
- Current account balance (inc. grants): 2017: -0.4; 2018: -0.1; 2019 Est.: -1.5
- Public debt (percent of GDP)
- Public debt: 2017: 40.0; 2018: 39.9; 2019 Est.: 40.1; 2020 Proj.: 39.8; 2021 Proj.: 40.8
- External Public Debt: 2017: 25.7; 2018: 26.7; 2019 Est.: 27.2; 2020 Proj.: 29.1
- Domestic Public Debt: 2017: 13.2; 2018: 12.8; 2019 Est.: 12.2; 2020 Proj.: 11.6
- Reserves and external coverage
- Gross official reserves (millions of SDRs): 2017: 1086; 2018: 1221; 2019 Est.: 1238; 2020 Proj.: 1390; 2021 Proj.: 1552
- Months of imports of goods and services: 2017: 4.0; 2018: 4.3; 2019 Est.: 4.4; 2020 Proj.: 4.5
- GDP per capita (U.S. dollars)
- 2017: 516; 2018: 528; 2019 Est.: 525; 2020 Proj.: 557; 2021 Proj.: 588
IMF Executive Board Completes Sixth Review Under the Extended Credit Facility (ECF) for the Republic of Madagascar and Concludes 2019 Article IV Consultation
