Press Release No. 25/44

IMF Executive Board Completes the First Review Under the Extended Credit Facility and the Resilience and Sustainability Facility, and Concludes the 2024 Article IV Consultation with the Republic of Madagascar

February 26, 2025

• The IMF Executive Board yesterday completed the First Reviews under the Extended Credit Facility (ECF) arrangement and the Resilience and Sustainability Facility (RSF) arrangement for the Republic of Madagascar, allowing for an immediate disbursement of US$101 million. The Board also concluded the 2024 Article IV Consultation.
• After stabilizing at 4.2 percent in 2024, the Malagasy economy is expected to rebound to 4.6 percent in 2025. Inflation is projected to gradually decline in 2025.
• Madagascar’s performance under the ECF and RSF programs has been adequate albeit uneven. The implementation of an automatic fuel price adjustment mechanism will create fiscal space for social spending and investment. The reform of JIRAMA remains a priority.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded yesterday the Article IV consultation[1] with the Republic of Madagascar. The Board also completed the First Reviews under the 36-month Extended Credit Facility (ECF) arrangement and under the Resilience and Sustainability Facility (RSF) arrangement. The ECF and RSF arrangements were approved by the IMF Executive Board in June 2024.

The completion of the reviews allows for the immediate disbursement of SDR 36.7 million (about US$48 million) under the ECF arrangement and of SDR 40.7 million (about US$53 million) under the RSF arrangement.

Madagascar’s growth is estimated to have stabilized in 2024, while inflation pressures have persisted. The fiscal balance improved, supported by a settlement of fuel distributors’ tax arrears following an agreement reached in December and despite continued high transfers to JIRAMA. The current account deficit widened, owing primarily to a decline in exports.

Medium-term growth prospects appear favorable, bolstered by the reforms supported by the RSF and the ECF, including government programs aimed at boosting agricultural productivity, increasing access to electricity, and improving road infrastructure. Risks to the outlook are tilted to the downside, amid uncertain domestic and global environments. Madagascar also remains very vulnerable to climate shocks.

Discussions under the 2024 Article IV consultation focused on: (i) anchoring fiscal sustainability by increasing domestic revenue, reducing fiscal risks, building buffers to enhance resilience to shocks, and strengthening fiscal institutions and public financial management, (ii) strengthening governance and the fight against corruption, (iii) consolidating monetary and financial stability, (iv) fostering stronger and more inclusive growth, and (v) bolstering resilience to climate change.

At the conclusion of the Executive Board discussion, Mr. Nigel Clarke, Deputy Managing Director, and Acting Chair, made the following statement:

“Madagascar continues to face important development needs amid its high poverty rate and vulnerability to climate shocks. A faster pace of reform is needed to spur growth, which remains well below its medium-term potential. Program performance at end-June 2024 was broadly assessed as mixed, stressing the need for continued strong political ownership to support program implementation.

“The continued implementation of the automatic fuel pricing mechanism will help contain fiscal risks and create space for more public investment and social spending. In addition, further efforts are needed to continue improving domestic revenue mobilization and firmly secure the financial recovery of JIRAMA.

“Reinforcing public financial and investment management processes is critical to improve budget execution and traceability. Better cash flow projections and management should facilitate spending and limit the accumulation of arrears. Continued improvements in governance, building on the ongoing Governance Diagnostic Assessment, and the implementation of the newly published Anti-Corruption Strategy for 2025-30 will support efforts to fight corruption and promote transparency.

“The central bank (BFM) should stand ready to raise its policy rates to keep inflation on a downward path. Further improvements in the liquidity management framework and better communication about monetary policy decisions would bolster BFM’s credibility.

“Further building adaptation and resilience to climate shocks as well as mobilizing climate finance should continue to be a key priority. The new decree on environmental and social impact assessments provides a framework to evaluate and select investment projects, which should be applied to new investments, including road projects.

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed Madagascar’s resilient growth, while noting that the economic outlook is subject to downside risks and that the country continues to face important development needs and high vulnerability to climate shocks. While broadly acknowledging reform progress under the IMF‑supported programs, Directors called for continued strong ownership. They stressed the need to sustain prudent policies and press ahead with the implementation of structural reforms—supported by a tailored capacity development strategy—to promote macroeconomic stability and economic resilience.

Directors welcomed the authorities’ efforts to shore up fiscal sustainability. They underscored the need to create fiscal space for public investment and social spending. To this end, Directors recommended further efforts to advance domestic revenue mobilization and enhance public financial management and budget execution. They also encouraged the authorities to consider developing a medium‑term fiscal strategy anchored on a debt target consistent with Madagascar’s debt servicing capacity. To help contain fiscal risks, Directors emphasized the importance of continued settlement of cross liabilities with fuel distributors, the continued implementation of the automatic fuel price adjustment mechanism, and strengthening governance and transparency in state‑owned enterprises. In particular, they urged the swift adoption and implementation of JIRAMA’s recovery plan.

Directors emphasized the need to stand ready to raise policy rates to keep inflation on a downward path. They agreed that clear, transparent, and timely communication by the central bank would help raise the credibility and effectiveness of its monetary policy. Directors recommended enhancing the functioning of the new monetary policy operational framework. They concurred that the flexible exchange rate regime serves well as a shock absorber and encouraged further enhancing the effectiveness of the foreign exchange market. Directors noted the importance of safeguarding financial stability and looked forward to the results of the Financial Sector Stability Review. They also encouraged the authorities to strengthen the AML/CFT framework.

Directors called on the authorities to press ahead with structural reform implementation. They welcomed the adoption of the new anti‑corruption strategy and stressed that the publication of the forthcoming Governance Diagnostic Assessment will be crucial to bolster efforts to strengthen governance. Directors agreed that enhancing the legal business environment and investing in human capital are critical to promote private investment. Noting that Madagascar has benefited from the IMF‑World Bank Group’s enhanced cooperation framework, they supported the authorities’ efforts to strengthen resilience to climate shocks and mobilize climate finance.

It is expected that the next Article IV consultation with the Republic of Madagascar will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

Madagascar: Selected Economic Indicators

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in the summing-up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm