On July 27, 2016 the Executive Board of the International Monetary Fund (IMF) approved the equivalent of SDR 220 million (about US$304.7 million, or 180 percent of current quota) under a 40-month Extended Credit Facility (ECF) arrangement for Madagascar, to help reinforce macroeconomic stability and boost sustainable and inclusive growth.
Following the Board’s decision, SDR 31.428 million (about US$43.5 million) is available for immediate disbursement; the remaining amount will be available in phases over the duration of the program, subject to semi-annual reviews.
The Executive Board was also informed about the Managing Director’s approval of the first and final review under the six-month Staff-Monitored Program (SMP) covering the period from September 2015 up to the end of March 2016. During this time, the country built a satisfactory track record of sustained reforms, with progress in most areas.
Following the Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“The new arrangement for Madagascar under the Extended Credit Facility aims to reinforce macroeconomic stability and promote sustainable and inclusive growth. Weak revenue collections, substantial low-priority spending, and the need for strengthened economic governance all pose challenges to medium-term economic development. Against this background, rigorous and sustained reform implementation will be crucial.
“Rapid growth and sustained poverty reduction will require more investment in infrastructure and broader access to education and health care, in addition to structural reforms. It will be essential to increase tax revenue and to contain and then reduce lower-priority spending, including transfers to state-owned enterprises, such as the utility company JIRAMA. While substantial external borrowing is appropriate to finance development, debt sustainability must be preserved and the authorities should rely as much as possible on external grants and concessional financing.
“Reforms to strengthen governance are also central to the success of the economic program. Key actions include strengthening public financial management and procurement practices, increasing budget transparency, carefully managing the fiscal implications of Public Private Partnerships, and reinforcing the institutions and legal framework for combatting corruption.
“Creating a solid foundation for further financial deepening will be crucial for reinforcing economic growth and stability. This will require more frequent and deeper supervision of banks and nonbanks, establishment of a legal and operational framework for institutions in difficulty, and promotion of modern payment methods.
“The central bank has been strengthened by increased legal independence and growing international reserves. The authorities should remain vigilant about maintaining price stability, and continue to improve the operational framework for monetary policy implementation, including by establishing a well-functioning money market.”