Washington, DC: The
Executive Board of the International Monetary Fund (IMF) completed
yesterday the fourth review of Madagascar’s economic program under the
Extended Credit Facility (ECF). The completion of the review enables the
disbursement of SDR 24.44 million (about US$ 32.7 million) to cover
external and fiscal financing needs, bringing total disbursements under the
arrangement to SDR 171.08 million (about US$ 228.7million).
In completing the review, the Executive Board approved waivers of
nonobservance for two performance criteria at end-December 2022: (i) the
floor on the domestic primary balance was missed mostly due to the
nonpayment in 2022 of oil customs taxes by oil distributors; and (ii) the
floor on the central bank’s net foreign assets (NFA) was missed by a small
margin in a context of a rapid depreciation of the exchange rate which has
since stopped. The waivers of nonobservance were approved based on remedial
actions taken by the authorities and the minor nature of the NFA breach,
respectively.
Madagascar’s growth has decelerated, and inflation remains high. Growth is
expected to stabilize at 4.0 percent and average annual inflation to exceed
10 percent in 2023. The growth slowdown and JIRAMA’s losses are weighing on
the fiscal balance. The slowdown in vanilla exports has affected FX
inflows, putting pressure on the exchange rate.
Risks to the outlook are skewed to the downside ahead the November
elections and amid heightened global uncertainty. Madagascar also remains
very vulnerable to extreme climate events.
Following the Executive Board discussion, Ms. Antoinette Sayeh, Deputy
Managing Director and Acting Chair made the following statement:
Madagascar continues to face a challenging environment, with multiple
climate shocks, slower growth, and strong inflationary pressures, burdening
the most vulnerable segments of the population. The authorities made
progress in advancing structural reforms, but further efforts are needed to
improve budget execution and governance, better control inflation, and
strengthen policies for climate resilience.
Mobilizing domestic revenue, including through the implementation of tax
administration reforms and reduction of costly tax expenditures, along with
spending containment measures, will be key to reach the program fiscal
targets.
The authorities settled cross-liabilities with oil distributors and the
resumption of the payment of oil customs taxes should help improve the
fiscal balance in 2023. Going forward, the implementation of an automatic
fuel pricing mechanism in early 2024 and reforming JIRAMA should help
mitigate fiscal risks and create much needed space for social and
developmental spending.
The authorities should accelerate public financial and debt management
reforms. It is important to further streamline the budget execution
process, respect budget annuality, and enhance cash management to prevent
the accumulation of arrears. Reinforcing the effectiveness of the
anti-corruption framework is crucial to improve accountability.
A data-driven monetary policy is needed amidst persistent inflationary
pressures. The successful transition to an interest rate targeting
framework requires improving the functioning and transparency of the public
debt market, strengthening the communication of the central bank, and
reaffirming its independence.
The authorities should continue their strong reform momentum. Further
efforts are needed in strengthening the AML/CFT and anti-corruption
frameworks and implementing financial sector reforms in line with
international standards.
A multi-prolonged approach is needed to improve resilience to climate
shocks and address food insecurity, including through the
operationalization of a system of food reserves and the rehabilitation of
road infrastructure.
|
Table 1. Madagascar: Selected Economic Indicators, 2019–24
|
|
|
|
2019
|
|
2020
|
|
2021
|
2022
|
|
2023
|
2024
|
|
|
|
|
Est.
|
|
Proj.
|
|
|
|
(Percent change; unless otherwise
indicated)
|
|
National Account and Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
GDP at constant prices
|
|
4.4
|
|
-7.1
|
|
5.7
|
4.0
|
|
4.0
|
4.8
|
|
|
GDP deflator
|
|
6.5
|
|
4.3
|
|
6.6
|
7.0
|
|
9.1
|
7.7
|
|
|
Consumer prices (end of period)
|
|
4.0
|
|
4.6
|
|
6.2
|
10.8
|
|
9.3
|
8.6
|
|
|
Money and Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
Broad money (M3)
|
|
7.3
|
|
12.1
|
|
12.2
|
13.8
|
|
15.8
|
16.0
|
|
|
|
|
(Growth in percent of
beginning-of-period money stock (M3))
|
|
|
Net foreign assets
|
|
-2.6
|
|
2.1
|
|
1.0
|
0.8
|
|
6.5
|
5.4
|
|
|
Net domestic assets
|
|
9.9
|
|
10.0
|
|
11.2
|
13.0
|
|
9.3
|
10.7
|
|
|
of which: Credit to the private
sector
|
|
10.3
|
|
5.6
|
|
11.1
|
9.8
|
|
8.7
|
8.3
|
|
|
|
(Percent of GDP)
|
|
Public Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (excluding grants)
|
|
10.8
|
|
9.9
|
|
10.2
|
9.6
|
|
13.1
|
12.2
|
|
|
of which: Tax revenue
|
|
10.6
|
|
9.5
|
|
9.9
|
9.3
|
|
12.8
|
11.8
|
|
|
Grants
|
|
3.1
|
|
2.5
|
|
0.7
|
1.3
|
|
1.7
|
1.6
|
|
|
of which: budget grants
|
|
0.7
|
|
0.9
|
|
0.0
|
0.0
|
|
0.0
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenditures
|
|
15.4
|
|
16.4
|
|
13.7
|
17.3
|
|
18.6
|
17.1
|
|
|
Current expenditure
|
|
9.5
|
|
9.6
|
|
8.4
|
11.3
|
|
11.1
|
9.9
|
|
|
Capital expenditure
|
|
5.8
|
|
6.8
|
|
5.3
|
6.0
|
|
7.5
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall balance (commitment basis)
|
|
-1.4
|
|
-4.0
|
|
-2.8
|
-6.5
|
|
-3.8
|
-3.3
|
|
|
Domestic primary balance 1
|
|
0.3
|
|
-1.9
|
|
-0.1
|
-2.8
|
|
0.7
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing
|
|
1.3
|
|
3.5
|
|
3.2
|
4.7
|
|
5.0
|
3.3
|
|
|
Foreign borrowing (net)
|
|
1.3
|
|
1.8
|
|
2.3
|
2.5
|
|
3.1
|
2.6
|
|
|
Domestic financing
|
|
0.0
|
|
1.7
|
|
0.8
|
2.3
|
|
2.0
|
0.7
|
|
|
Financing gap
|
|
0.0
|
|
0.0
|
|
0.0
|
0.0
|
|
0.0
|
0.0
|
|
|
Savings and Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
21.2
|
|
19.5
|
|
23.2
|
21.3
|
|
24.1
|
23.2
|
|
|
Gross national savings
|
|
20.4
|
|
12.3
|
|
10.2
|
15.8
|
|
19.8
|
18.6
|
|
|
External Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
Exports of goods, f.o.b.
|
|
18.5
|
|
15.0
|
|
18.6
|
23.3
|
|
23.3
|
23.6
|
|
|
Imports of goods, c.i.f.
|
|
26.9
|
|
24.3
|
|
28.7
|
34.2
|
|
32.8
|
33.4
|
|
|
Current account balance (exc. grants)
|
|
-5.4
|
|
-7.9
|
|
-5.5
|
-6.8
|
|
-6.1
|
-6.2
|
|
|
Current account balance (inc. grants)
|
|
-2.3
|
|
-5.4
|
|
-4.9
|
-5.5
|
|
-4.4
|
-4.6
|
|
|
Public Debt
|
|
41.3
|
|
52.0
|
|
51.8
|
54.9
|
|
56.1
|
55.3
|
|
|
External Public Debt (inc. BFM
liabilities)
|
|
27.3
|
|
36.3
|
|
34.3
|
36.7
|
|
39.6
|
40.0
|
|
|
Domestic Public Debt
|
|
13.9
|
|
15.7
|
|
17.5
|
18.3
|
|
16.5
|
15.3
|
|
|
|
(Units as indicated)
|
|
Gross official reserves (millions of
SDRs)
|
|
1196
|
|
1338
|
|
1630
|
1601
|
|
1588
|
1687
|
|
|
Months of imports of goods and services
|
|
4.2
|
|
6.0
|
|
5.8
|
4.2
|
|
4.0
|
4.0
|
|
|
GDP per capita (U.S. dollars)
|
|
532
|
|
477
|
|
517
|
523
|
|
536
|
559
|
|
|
Sources: Malagasy authorities; and IMF
staff estimates and projections.
|
|
|
1 Primary balance excl. foreign-financed
investment and grants. Commitment basis.
|
|
