Chapter

MADAGASCAR

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of January 31, 2004)
Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 18, 1996.
Exchange Arrangement
CurrencyEffective July 31, 2003, a new currency, the ariary, began to circulate together with the Malagasy franc; the two are convertible at the rate of ariary 1 per FMG 5. All accounts will continue to be denominated in Malagasy francs until January 1, 2005, when they will be converted into ariary.
Other legal tenderYes.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate is determined freely in the official interbank market. The euro is the only currency quoted on this market, and the exchange rates of other currencies are determined on the basis of the cross-rate relationships of the currencies concerned in the Paris exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThere are limited arrangements for forward cover against exchange rate risk. Importers may buy foreign currency 120 days prior to settlement from their bank.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currency
For capital transactions
Credit operationsYes.
Use of foreign exchange among residentsYes.
Payments arrangements
Bilateral payments arrangements
InoperativeThere is an arrangement with Mauritius that has been inoperative for some time.
Regional arrangementsMadagascar is a member of the Regional Integration Facilitation Forum.
Barter agreements and open accountsRegulations prohibit barter trade.
Administration of controlExchange control is administered by the Exchange Operations Monitoring Unit of the General Directorate of the Treasury, which also supervises borrowing and lending abroad by residents, and the issue, sale, or introduction of foreign securities in Madagascar. Approval authority for exchange control has been delegated to authorized intermediaries, except for capital operations, which require prior MOF authorization, and all exchange transactions must be effected through such intermediaries.
International security restrictionsn.a.
Payments arrears
OfficialYes.
PrivateYes.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeApproved collectors acting in their own name and on their own account may purchase gold within the country from holders of valid gold mining titles, from authorized holders of Gold Board gold washing rights, and from agencies for approved collectors.
Controls on external tradeImports and exports of gold require prior authorization from the Ministry of Commerce after review by the Directorate of Energy and Mines. Exempt from this requirement are (1) imports and exports by or on behalf of the Central Bank of Madagascar (CBM), and (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles). Travelers are authorized to export 50 grams or 250 carats of gold jewelry or gold articles a person, and 50 grams or 250 carats of numismatic items a person. Imports of gold, whether licensed or exempt from license, are subject to customs declaration. Holders of a valid gold mining title or a gold washing permit or rights thereto are free to sell any gold recovered to any approved collector. However, Malagasy authorities or their agents have first rights to purchase gold produced in the country. The Gold Board and agencies authorized by the Ministry of Mining may export gold in all its forms. Jewelers, goldsmiths, and private sector professionals who use gold may export it only in worked form, with the approval of the Minister of Mining.
Controls on exports and imports of banknotes
On exports
Domestic currencyEffective August 29, 2003, resident and nonresident travelers may take abroad up to FMG 2 million in Malagasy banknotes (previously, FMG 25,000).
Foreign currencyResident and nonresident travelers may take abroad any amount of foreign currency, but a declaration is required if the amount exceeds the equivalent of €7,622.45.
On imports
Domestic currencyEffective August 29, 2003, residents and nonresidents may bring in up to FMG 2 million (previously, FMG 25,000).
Foreign currencyResident and nonresident travelers may bring in any amount of foreign currency, but a declaration is required if the amount is the equivalent of €7,622.45 or more.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResidents may freely open foreign currency accounts with local commercial banks. Only transfers from abroad or from another foreign currency account, as well as foreign banknotes or traveler’s and bank checks, may be deposited in these accounts without documentation. These accounts may be freely debited either for conversion into Malagasy francs through a sale on the interbank market or by transfer to a foreign account in Madagascar or abroad. Conversion into foreign banknotes is allowed only within the limits stipulated under the applicable foreign exchange control regulation and requires prior MOF approval.
Held abroadThe authorization of the MOF is required for opening foreign exchange accounts in foreign banks.
Approval requiredYes.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents are treated the same as residents for the purpose of opening these accounts.
Convertible into foreign currencyNo.
Domestic currency accountsTransactions between residents and enterprises in the free-trade zone are conducted either through the enterprises’ special accounts in Malagasy francs or through their foreign exchange accounts.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementsThe requirement applies to all imports.
Preshipment inspectionYes.
Letters of creditYes.
Import licenses and other nontariff measuresThere is a short list of imports subject to administrative control, primarily for health and security reasons.
Import taxes and/or tariffsEffective September 1, 2003, certain construction materials; livestock; automobiles; agricultural, domestic, and industrial products; and materials for tailoring are exempt from all taxes for a period of two years. On January 4, 2004, the customs duty, import tax, stamp duty of imports, and statistical surcharge on imports were collapsed into two categories, the customs duty and the import tax (the latter includes the previous import tax, stamp duty, and statistical surcharge), with combined rates of 5%, 10%, 20%, and 25%. Previously, the tariff structure had seven rates (3%, 8%, 13%, 18%, 23%, 28%, and 33%); some imports, mostly luxury goods, were subject to excise import taxes of 10% to 120%, and a pretax of 3% to 5%, deductible from the corporate tax, was paid on all imports.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsAll export proceeds must be repatriated within 90 days of the shipment date.
Financing requirementsNo.
Documentation requirements
Letters of creditAll exports, excluding free deliveries, require either a collection on delivery or settlement against delivery of documents.
DomiciliationThis requirement applies only to exports exceeding FMG 2.5 million.
Preshipment inspectionYes.
Export licensesNo.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsAll proceeds must be repatriated within 30 days of the due date.
Restrictions on use of fundsn.a.
Capital Transactions
Controls on capital transactionsCapital movements between Madagascar and foreign countries and between residents and nonresidents are subject to prior authorization from the MOF. There are no capital market regulations, since there is no capital market.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsPrior authorization of the MOF is required for issue or sales of shares in Madagascar.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsn.r.
Controls on credit operations
Commercial credits
By residents to nonresidentsCurrently these operations do not take place.
To residents from nonresidentsCredits for export prefinancing operations are permitted.
Financial credits
To residents from nonresidentsBorrowing abroad by natural or juridical persons, whether public or private, requires prior authorization from the MOF, although loans contracted by authorized banks or credit institutions with special legal status are exempt. Enterprises in the free-trade zone are permitted to contract and service foreign loans freely, and interest and amortization payments on foreign loans contracted directly by these companies are not restricted.
Controls on direct investment
Outward direct investmentInvestments abroad by Malagasy nationals, including those made through foreign companies directly or indirectly controlled by persons resident in Madagascar and those made by overseas branches or subsidiaries of companies located in Madagascar, are subject to prior authorization from the MOF.
Inward direct investmentInvestments, including those made by companies in Madagascar that are directly or indirectly under foreign control and those made by branches or subsidiaries of foreign companies in Madagascar, as well as corresponding transfers, may be freely conducted within Madagascar without authorization or investment approval.
Controls on liquidation of direct investmentThe total or partial liquidation of these investments, whether Malagasy investments abroad or foreign investments in Madagascar, must be reported to the MOF. Proceeds from the liquidation of foreign investments may be repatriated with the prior authorization of the MOF.
Controls on real estate transactions
Purchase abroad by residentsThese transactions are prohibited, unless a waiver is granted by the MOF.
Sale locally by nonresidentsThe transfer of proceeds of sales requires the prior authorization of the MOF.
Controls on personal capital transactionsn.a.
Provisions specific to commercial banks and other credit institutionsControls are implemented through bank supervision.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 2003
Exchange arrangementJuly 31. A new currency, the ariary, began to circulate together with the Malagasy franc. The Malagasy franc will continue to circulate and to serve as the unit of account until January 1, 2005, when accounts in francs will be converted into ariary.
Arrangements for payments and receiptsAugust 29. The amount of domestic currency that resident and nonresident travelers may import or export was increased to FMG 2 million from FMG 25,000.
Imports and import paymentsSeptember 1. Selected items were made exempt from all taxes for a period of two years.
Changes During 2004
Imports and import paymentsJanuary 4. The customs duty, import tax, stamp duty of imports, and statistical surcharge on imports were collapsed into two categories, the customs duty and the import tax (the latter includes the previous import tax, stamp duty, and statistical surcharge), with combined rates of 5%, 10%, 20%, and 25%.

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