Annual Report on Exchange Arrangements and Exchange Restrictions, 2007


International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: September 18, 1996.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
Other security restrictionsn.a.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe 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.
Exchange rate structureUnitary.
Managed floating with no predetermined path for the exchange rateThe exchange rate is determined in the official interbank market. The euro and 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. The Central Bank of Madagascar (CBM) is a net supplier of dollar funds to the foreign exchange market and intervenes to smooth large exchange rate fluctuations and meet foreign reserve targets.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketImporters may buy foreign currency from their bank 120 days prior to settlement.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currencyn.a.
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.
Payments arrears
Controls on trade in gold (coins and/or bullion)
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.
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 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 up to 50 grams or 250 karats of gold jewelry or gold articles a person, and up to 50 grams or 250 karats 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.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResidents may freely open 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. Transfers of foreign exchange from one resident’s foreign currency account to another’s are not permitted. Transfers from one account to another between residents and nonresidents are also not permitted, with the following exceptions: (1) transfers between free trade areas, (2) payments by free-trade zone enterprises within the national customs territory, (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.
Approval requiredYes.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
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. Transactions by free-trade zone enterprises for residents through special domestic currency accounts are limited to settlements of domestic costs and charges, servicing of domestic loans, and amounts due to the government and resident shareholders.
Convertible into foreign currencyNo.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementThe requirement applies to all imports.
Preshipment inspectionYes.
Import licenses and other nontariff measures
Licenses with quotasn.a.
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. A customs duty and import tax are levied with combined rates of 5%, 10%, 20%, and 25%.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsAll merchandise export proceeds must be repatriated within 90 days of the date of shipment for resident enterprises and within 190 days for free-trade zone enterprises.
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 1 million.
Preshipment inspectionYes.
Export licensesNo.
Export taxesNo.
References to legal instruments and hyperlinksCircular No. 1570-MEFB/SG/DGT/DOF/SSOC amending Circular No. 0093-MEFB/SG/DGT/DOF/SSOC of February 13, 2002, Amending and Supplementing Some Provisions of Circular No. 005 of June 30, 1994, on Domiciliation and Payments for Exports.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
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.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsCapital transactions between Madagascar and foreign countries and between residents and nonresidents are subject to prior authorization from the MOF. There are no capital market regulations, because there is no capital market.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating natureControls apply to all these transactions.
Bonds or other debt securitiesn.r.
On money market instrumentsn.r.
On collective investment securitiesn.r.
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.
Guarantees, sureties, and financial backup facilitiesn.a.
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.
Purchase locally by nonresidentsn.a.
Sale locally by nonresidentsThe transfer of proceeds of sales requires the prior authorization of the MOF.
Controls on personal capital transactions
Gifts, endowments, inheritances, and legaciesn.a.
Settlements of debts abroad by immigrantsn.a.
Transfer of assetsn.a.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsControls are implemented through bank supervision.
Maintenance of accounts abroadn.a.
Lending to nonresidents (financial or commercial credits)n.a.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchangen.a.
Differential treatment of deposit accounts held by nonresidents
Liquid asset requirementsn.a.
Interest rate controlsn.a.
Credit controlsn.a.
Investment regulationsn.a.
Open foreign exchange position limitsn.a.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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