Statement by the Staff Representative on Republic of Madagascar, November 18, 2015

This paper discusses Madagascar's Staff-Monitored Program (SMP) and Request for Disbursement under the Rapid Credit Facility (RCF). Madagascar's economic recovery has failed to gain momentum in 2015, largely due to external shocks, persistent political instability, and weak governance. Nonetheless, the authorities have implemented an adequate policy mix that has broadly maintained macroeconomic stability. In light of urgent balance of payments needs, the Malagasy authorities are requesting a second disbursement under the RCF, accompanied by a SMP. The IMF staff supports the authorities' request for a disbursement under the RCF based on the policy track record over the past six months.

Abstract

This paper discusses Madagascar's Staff-Monitored Program (SMP) and Request for Disbursement under the Rapid Credit Facility (RCF). Madagascar's economic recovery has failed to gain momentum in 2015, largely due to external shocks, persistent political instability, and weak governance. Nonetheless, the authorities have implemented an adequate policy mix that has broadly maintained macroeconomic stability. In light of urgent balance of payments needs, the Malagasy authorities are requesting a second disbursement under the RCF, accompanied by a SMP. The IMF staff supports the authorities' request for a disbursement under the RCF based on the policy track record over the past six months.

1. This statement reports on new developments since the staff report was issued:

  • Since the discontinuation of all buyback operations in the foreign exchange market in early September (a continuous structural benchmark under the staff-monitored program), the official exchange rate has been determined exclusively by market transactions and has remained relatively stable in October and the first half of November. From end-September to November 10, the central bank made cumulative purchases of foreign exchange in the market of about US$18 million, in keeping with its objective of gradual reserves accumulation.

  • The draft revisions to the 2015 budget and the draft 2016 budget were submitted to parliament on October 30. The two draft budget documents included all of the agreed revenue measures in paragraph 18 of the MEFP, and the related prior action (MEFP Table 2) has been completed. In addition, the draft 2016 budget law provides for the setting up of an escrow account at the Central Bank for the reimbursement of VAT refunds starting in January 1, 2016 (structural benchmark). The main parameters of the draft budget are in line with those assumed for the staff-monitored program.