Prepared by Brian Ames.
Using the standard World Bank poverty line of one U.S. dollar per day in purchasing power terms.
For a more detailed discussion of the first PRS and assessments of its implementation, see Madagascar ‐ Poverty Reduction Strategy Paper, Country Report No. 03/323, October 2003; Madagascar ‐ Poverty Reduction Strategy Paper ‐ Joint Staff Assessment, Country Report No. 04/43, February 2004; Republic of Madagascar ‐ Poverty Reduction Strategy Paper Annual Progress Report, Country Report No. 04/402, December 2004; Republic of Madagascar ‐ Poverty Reduction Strategy Paper Annual Progress Report ‐ Joint Staff Assessment, Country Report No. 04/403, December 2004, Republic of Madagascar ‐ Poverty Reduction Strategy Paper Annual Progress Report ‐ Joint Staff Advisory Note, Country Report No. 06/304, August 2006; and Republic of Madagascar ‐ Poverty Reduction Strategy Paper Annual Progress Report, Country Report No. 06/303, August 2006.
Estimates of the cost of achieving the MDGs in Madagascar can be found in “Le Cadre de Dépense a Moyen Terme du Secteur de la Santé 2006-2008,” Ministry of Health and Family Planning, Antananarivo, Madagascar, 2005 (for health-related MDGs), “Plan Education pour Tous: Situation en 2005: Actualisation des objectifs et stratégies,” Ministry of Education, Antananarivo, Madagascar, 2005 (for education-related MDGs), and “Direction de l’ eau de l’ Assainissement,” Ministry of Energy and Mining, Antananarivo, Madagascar, 2005 (for water- and sanitation-related MDGs).
The eight MAP commitments are: (1) responsible governance; (2) connected infrastructure; (3) educational transformation; (4) rural development and a green revolution; (5) health, family planning, and the fight against HIV/AIDS; (6) high growth economy; (7) cherish the environment; and (8) and national solidarity.
The authorities also expect the population to contribute to the MAP with its labor and creativity and have been conducting mobilization workshops throughout the 22 regions and 116 districts to this end.
The authorities assume 15 percent of total expenditure for each of the eight MAP commitments are for recurrent spending, with the remaining 85 percent constituting capital expenditure.
See “Maquette for MDG Simulation (MAMS),”World Bank, October 2006.
These include the use of a constant factor (15 percent) for recurrent expenditure requirements across all sectors, the lack of use of sector-specific deflators in estimating annual investment costs, the need to consider sequencing between essential public infrastructure and private investment, etc.
IMF Country Report No. 06/306, August 2006. For a detailed discussion on the determinants of FDI, the determinants of economic growth, and the impact of FDI on economic growth, see Noorbakhsh, F., Paloni, A., et. al. (2001). “Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence.” World Development 29(9): 1593-610; Wheeler, D. and Mody, A. (1992) “International Investment Location Decisions:the Case of U.S. Firms.” Journal of International Economics 33:57-76; Barro, Robert J., (2003). “Determinants of Economic Growth in a Panel of Countries.” Annals of Economics and Finance; Block, Steven, (1997). “Does Africa Grow Differently?” Journal of Development Economics; Ndulu et. al., (2006). “Challenges of African Growth.” World Bank (forthcoming); De Gregorio, J. and Lee, J-W., (1998). “How Does Foreign Direct Investment Affect Economic Growth?” Journal of International Economics, Vol. 45(1): 115-135, Elsevier; and http://rru.worldbank.org/PapersLinks/Impact-Foreign-Direct-Investment/.
These poverty statistics are based on the national definition of poverty which differs from the World Bank definition (percentage of people whose income is less than $1 per day). See “Republic of Madagascar - Poverty Reduction Strategy Paper Annual Progress Report,” Country Report No. 06/303, August 2006.
For a further discussion on the problems and policy options regarding Dutch Disease and scaling-up effects such as a currency appreciation, see Adam and Bevan, “Aid, Public Expenditure and Dutch Disease,” www.bepress.com/csae/paper184/.
It should also be noted that productivity-enhancing measures such as road construction can be expensive and may divert resources away from supporting other MDGs. Trade facilitation could also facilitate imports and thereby reduce the appreciation pressure on the exchange rate, although there is likely to be little scope here as the Malagasy trade regime is already fairly liberal.
For a more detailed discussion on of the spend-and-absorb approach, see “The Macroeconomics of Managing Increased Aid Inflow,” IMF Occasional Paper No. 253, 2007.
The cost would be the central bank losses arising from the difference between the rate of return earned on the newly acquired foreign assets and the interest that would have to be paid on the domestic instruments used for mopping up the excess liquidity.
The question arises, however, as to whether a donor would provide additional budget assistance in cases where the authorities are not in a position to spend it and/or the economy is not in a position to absorb it.
As in the case of budget assistance, the question arises as to whether a donor would disburse project assistance if the project was not able to be implemented in the period ahead.
Staff from the African Department at the IMF have prepared a comprehensive checklist for practitioners on the macroeconomic analysis of scaling-up aid to Africa. See “Macroeconomic Challenges of Scaling Up Aid to Africa: A Checklist for Practitioners,” Sanjeev Gupta, Robert Powell, and Yonzheng Yang, International Monetary Fund, Washington, D.C., 2006.