This paper presents 2019 Article IV Consultation with the Republic of Madagascar and its Sixth Review Under the Extended Credit Facility (ECF) Arrangement. Madagascar’s performance under its economic program supported by the ECF arrangement has been broadly satisfactory with solid growth, moderate single digit inflation, and a robust external position. As a fragile, low-income country, Madagascar continues to face risks associated with weak implementation capacity, potential fiscal slippages, social fragility in a context of widespread poverty, and vulnerability to exogenous shocks including to terms of trade and natural disasters. Going forward, a commitment to strong policies and an ambitious agenda to complete outstanding structural reforms remains crucial to mitigate internal and external risks, strengthen macroeconomic stability, and achieve higher, sustainable, and inclusive growth. The authorities’ economic reform agenda summarized in the Plan Emergence Madagascar aims to raise economic growth through increased public and private investment, strengthening human capital, and improving governance. Creating additional fiscal space by further improving revenue mobilization through a medium-term tax revenue strategy, containing lower priority spending, and enhancing investment implementation capacity is essential for scaling-up priority investment and social spending in education, health, and housing.
Despite some electoral cycle-related uncertainties—the preparation and holding of the Presidential election in December 2018 and Parliamentary elections in May 2019—economic developments remained favorable in 2018 and the first months of 2019. Macroeconomic slippages were limited, with spending strictly contained within budget limits. The stable functioning of public institutions allowed for continued implementation of the economic reform program.
This paper discusses Republic of Madagascar’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement. Madagascar’s performance under its economic program supported by the ECF arrangement has remained generally strong. Discussions focused on the recently adopted 2019 revised budget law, which reflects the priorities of the new government and accommodates additional investment spending without undermining the main program objectives, as well as on the two main challenges relating to fuel pricing and the losses of the public utility JIRAMA. Other issues discussed included the strengthening of social safety nets, reforms in the financial sector, and progress on governance. 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.
This paper discusses Madagascar’s Fourth Review under the Extended Credit Facility (ECF) and Request for Modification of Performance Criteria. Madagascar’s economic recovery continued in 2018, notwithstanding challenges related to the presidential election in November/December 2018. While some economic pressures developed in the second half of 2018, economic conditions remained generally positive. The discussions focused on maintaining progress on the key objectives of the program, especially boosting fiscal space for priority investment and social spending by containing lower priority spending. The main challenges involved fuel pricing and transfers to the public utility, JIRAMA. Other issues included structural reforms to promote inclusive growth, most notably in investment capacity, the financial sector, and governance. The outlook continues to be generally positive. Pursuit of economic reforms should yield results, while the pressures in 2018 from higher oil prices and pre-electoral weakness in confidence abate under the baseline. As a low-income country with an open economy, Madagascar remains vulnerable to exogenous shocks.
The gradual economic recovery in this fragile state has persisted, with solid
growth for the second consecutive year. Fiscal performance has been strong, inflation
contained, and the external position robust. Implementation of the authorities’
economic program, supported by an Extended Credit Facility (ECF) arrangement
approved in July 2016, has been generally strong, buttressing the recovery.
This Selected Issues paper surveys the economic costs of corruption in Madagascar, and provides a few ideas on how to advance anticorruption reforms. Madagascar’s governance indicators weakened significantly during the transition period 2009–13. Governance indicators that generally were on par with middle-income countries in Sub-Saharan Africa (SSA) ten years ago have regressed and converged to the average of fragile SSA countries. After the return of constitutional order in 2014, the government has started to address corruption, mainly through the introduction of new laws so far. More emphasis is needed on effective implementation and raising sufficient resources to fight corruption.
This 2017 Article IV Consultation highlights that economic developments in Madagascar were encouraging in 2016. Driven by public investment, increasing textile exports, and accelerating activity in agroindustry, economic growth reached 4.2 percent in 2016—the highest level since 2008. Reforms continued in revenue administration, and fiscal revenue exceeded targets. Inflation was contained at 7.0 percent at end-2016. The external position strengthened significantly, benefitting from a positive shock to vanilla export prices and strong growth in manufacturing exports. In spite of current challenges, the medium term outlook is favorable. Growth is projected to accelerate, driven by the investment scaling up, tourism, garments and other light manufacturing, mining, and productivity gains in agriculture.
The staff report for the First Review Under the Three-Year Arrangement for the Republic of Madagascar reviews economic and financial policies. The 2007 economic program is designed to sustain growth, promote fiscal consolidation, and reduce poverty while keeping inflation to single digits and reducing the economy’s vulnerability to shocks. Central bank interventions will be limited to smoothing large variations in the exchange rate and meeting the program’s foreign reserve target. Planned spending reductions should offset any shortfall in revenues, which would allow the domestic financing target to be met.