Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

MADAGASCAR

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of January 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 18, 1996.
Exchange Arrangement
CurrencyEffective January 1, 2005, the currency of Madagascar is the ariary, which circulated together with the Malagasy franc since July 31, 2003; the two were convertible at the rate of ariary 1 per FMG 5. All accounts were denominated in Malagasy francs until January 1, 2005, when they were converted into ariary.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate is determined freely in the official interbank market. The euro and, effective July 30, 2004, the dollar are the only currencies quoted on this market, and the exchange rates of other currencies are determined on the basis of the cross rate of these currencies in the Paris exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketImporters may buy foreign currency 120 days prior to settlement from their bank.
Arrangements for Payments and Receipts
Prescription of currency requirements
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 RIFF.
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. All exchange transactions must be effected through such intermediaries.
International security restrictionsn.a.
Payments arrears
OfficialAn arrangement with Paris Club creditors was reached on November 16, 2004, cancelling most of Madagascar’s debt.
PrivateYes.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeApproved collectors acting in their own names and on their own accounts 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 currencyResident and nonresident travelers may take abroad up to FMG 2 million in Malagasy banknotes.
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 currencyResidents and nonresidents may bring in up to FMG 2 million.
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 open freely foreign currency accounts with local commercial banks. Only transfers from abroad, foreign banknotes, and traveler’s and bank checks may be deposited in these accounts without documentation. These accounts may be freely debited for conversion into domestic currency through a sale on the interbank market. Conversion into foreign banknotes is allowed only within the limits stipulated under the applicable foreign exchange control regulation and requires prior MOF approval. Effective June 7, 2004, transfers of foreign exchange from one resident’s foreign currency account to another are no longer permitted. Transfers from one account to another between residents and nonresidents are also no longer permitted, with the following exceptions: (1) transfers between free trade areas, (2) payments within free trade areas, (3) payments made by international institutions or embassies in favor of foreign consultants with resident status, and (4) transfers for which payments procedures are governed by special conventions signed by the government on August 24, 2004.
Held abroadThe authorization of the MOF is required for opening foreign exchange accounts in foreign banks.
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.
Domestic currency accountsTransactions between residents and enterprises in the free-trade zone are conducted either through the enterprises’ special accounts in domestic currency or through their foreign exchange accounts.
Convertible into foreign currencyNo.
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.
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 tariffsCertain construction materials; livestock; automobiles; agricultural, domestic, and industrial products; and materials for tailoring are exempt from all taxes for a period of two years beginning September 1, 2003. On January 4, 2004, the customs duty, import tax, stamp duty on 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 natureControls apply to all these transactions.
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—except authorized banks or credit institutions with special legal status—requires prior authorization from the MOF. 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 by resident-owned foreign companies and their overseas branches or subsidiaries, are subject to prior authorization from the MOF.
Inward direct investmentInvestments, including those made by nonresident-owned companies in Madagascar and their Malagasy branches or subsidiaries, as well as corresponding transfers, may be conducted freely 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.
Lending locally in foreign exchangeYes.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 2004
Exchange arrangementJuly 30. The exchange rate for the dollar was quoted in addition to the euro in the official interbank market
Arrangements for payments and receiptsNovember 16. An arrangement with Paris Club creditors was reached, canceling most of Madagascar’s official debt.
Resident accountsJune 7. Transfers of foreign exchange from one resident’s foreign currency account to another were prohibited. Transfers from one account to another between residents and nonresidents were also prohibited, with certain exceptions.
August 24. The government signed special conventions on payments procedures.
Imports and import paymentsJanuary 4. The customs duty, import tax, stamp duty on 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%.
Changes During 2005
Exchange arrangementJanuary 1. The ariary became the currency of Madagascar. All accounts previously denominated in Malagasy francs were required to be converted into ariary.

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