Front Matter Page
IMF Country Report No. 17/223
REPUBLIC OF MADAGASCAR
2017 ARTICLE IV CONSULTATION, FIRST REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUESTS FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION, MODIFICATION OF PERFORMANCE CRITERION, AND AUGMENTATION OF ACCESS—PRESS RELEASE; STAFF REPORT; INFORMATIONAL ANNEX, DEBT SUSTAINABILITY ANALYSIS, AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR REPUBLIC OF MADAGASCAR
July 2017
In the context of the 2017 Article IV Consultation, First Review Under the Extended Credit Facility Arrangement, and Requests for Waiver of Nonobservance of Performance Criterion, Modification of Performance Criterion, and Augmentation of Access, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board and summarizing the views of the Executive Board as expressed during its June 28, 2017 consideration of the staff report on issues related to the Article IV Consultation and the IMF arrangement with the Republic of Madagascar.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 28, following discussions that ended on April 21, 2017, with the officials of Republic of Madagascar on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 14.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.
A Statement by the Executive Director for Republic of Madagascar.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of Republic of Madagascar*
Memorandum of Economic and Financial Policies by the authorities of Republic of Madagascar*
Technical Memorandum of Understanding*
Selected Issues
Economic Development Document
Economic Development Document Assessment Letter by the World Bank
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2017 International Monetary Fund
Front Matter Page
REPUBLIC OF MADAGASCAR
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION, FIRST REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUESTS FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION, MODIFICATION OF PERFORMANCE CRITERION, AND AUGMENTATION OF ACCESS
June 14, 2017
Executive Summary
Context. To assist in the economic recovery from a prolonged political crisis, Madagascar launched an ECF-supported program in July 2016. The program aims to break a cycle of low investment and low growth. Macroeconomic policy has faced unexpected challenges in 2016 and early 2017 however, including a cyclone, a drought (that hit hydropower production), and a costly restructuring of the national airline.
Article IV consultations. There was broad agreement on policies for: inclusive growth, especially scaling up investment and social spending; creating fiscal space, especially boosting revenue and cutting low productivity spending; enhancing governance and fighting corruption; and strengthening financial sector development and stability.
Program Performance and Modifications. Despite capacity constraints in this fragile state, program implementation has generally been strong. The authorities have achieved key macroeconomic targets and advanced on structural reforms, although more slowly than planned in a few cases. To respond to the unexpected challenges, the authorities are requesting to modify the fiscal balance target for end-June 2017, to modify the fiscal framework for 2017 to accommodate additional one-off expenditures, and to receive an augmentation in access (12.5 percent of quota or SDR 30.55 million) to counter the balance of payments difficulties from the natural disasters.
Risks. As a fragile, low-income country, Madagascar faces risks associated with weak implementation capacity, fiscal slippages (including losses at the public utility or other SOEs), political instability (particularly ahead of 2018 presidential elections), shifting terms of trade, natural disasters, and a reliance on donor funding and trade preferences.
In light of program performance and commitments, staff supports the authorities’ requests for completion of the first review under the ECF arrangement, modification of a performance criterion, waiver for non-observance of performance criterion, and an augmentation of access.
Approved By
David Owen and Zuzana Murgasova
Discussions on the authorities’ economic and financial program took place in Antananarivo during March 8-24, 2017 and in Washington DC during April 19-21, 2017. The IMF staff team included Messrs. Mills (head), Engstrom, and Oestreicher (all AFR), Ms. Baum (FAD), Ms. Esquivel Soto (LEG), and Mr. Eugster (SPR). The mission was assisted by Mr. Imam (Resident Representative) and Ms. Rasoamanana (local economist). Mr. Owen (AFR) joined during March 15-17, 2017 to participate in outreach activities and meet the Prime Minister. Messrs. Razafindramanana and Ismael (both OED) participated in the discussions. The IMF team met with President Rajaonarimampianina, Prime Minister Solonandrasana, Minister of Finance and Budget Rakotoarimanana, Minister of Economy and Planning and acting Minister of Energy and Hydrocarbons Raveloharison, Central Bank of Madagascar Governor Rasolofondraibe, the Economic Advisor to the President and Commissioner General, Mr. Rajaobelina, and other senior officials, as well as representatives of Parliament, civil society, private sector and development partners.
Contents
CONTEXT: A STRATEGY FOR INVESTMENT SCALING UP AND IMPROVED GOVERNANCE
RECENT ECONOMIC DEVELOPMENTS, OUTLOOK, AND RISKS
PROGRAM PERFORMANCE
POLICY DISCUSSIONS
A. Promoting Inclusive and Sustainable Growth
B. Creating More Fiscal Space
C. Enhancing Economic Governance
D. Strengthening Financial Sector Development and Stability
E. Statistics
PROGRAM ISSUES, SAFEGUARDS, AND RISKS
STAFF APPRAISAL
BOXES
1. Key Recommendations of the 2014 Article IV Consultation and Current Status
2. Key Topics of Policy Discussions
3. Summary of FSAP Recommendations and Follow Up
FIGURES
1. Real Sector Developments, 2006-17
2. Fiscal Developments, 2006-17
3. External Sector Developments, 2006-17
4. Monetary Developments, 2015-17
5. Medium-Term Macroeconomic Prospects, 2008-22
TABLES
1. Selected Economic Indicators, 2015-22
2. National Accounts, 2015-22
3. Fiscal Operations of the Central Government, 2015-22 (Billions of Ariary)
4. Fiscal Operations of the Central Government, 2015-22 (Percent of GDP)
5. Balance of Payments, 2015-22
6. Monetary Accounts, 2015-22
7. Balance Sheet of the Central Bank 2015-18
8. Financial Soundness Indicators, 2009-17
9. Quantitative Performance Criteria and Indicative Targets for the ECF Arrangement, September 2016-March 2017
10. Structural Benchmarks Under the Program through End-February 2017
11. External Financing Requirements and Sources, 2015-19
12. Proposed Schedule of Disbursements and Timing of ECF Arrangement Reviews
13. Indicators of Capacity to Repay the Fund, 2017-31
14. Projected External Borrowing, 2017-18
ANNEXES
I. External Balance Assessment
II. Risk Assessment Matrix
III. Vulnerability to Natural Disasters
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies, 2017-19
Attachment II. Technical Memorandum Of Understanding
Front Matter Page
REPUBLIC OF MADAGASCAR
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION, FIRST REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUESTS FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION, MODIFICATION OF PERFORMANCE CRITERION, AND AUGMENTATION OF ACCESS—INFORMATIONAL ANNEX
June 14, 2017
Prepared By
African Department
In collaboration with other departments, the World Bank, and the African Development Bank.
Contents
FUND RELATIONS
RELATIONS WITH THE WORLD BANK GROUP
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK GROUP
STATISTICAL ISSUES
Front Matter Page
REPUBLIC OF MADAGASCAR
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION, FIRST REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUESTS FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION, MODIFICATION OF PERFORMANCE CRITERION, AND AUGMENTATION OF ACCESS—DEBT SUSTAINABILITY ANALYSIS
June 14, 2017
Approved By David Owen and Zuzana Murgasova (IMF) and Paloma Anos Casero (IDA)
Prepared by the Staffs of the International Monetary Fund and the International Development Association 1
Contents
INTRODUCTION
RECENT DEVELOPMENTS AND CURRENT DEBT SITUATION
UNDERLYING ASSUMPTIONS
EXTERNAL DSA
PUBLIC DSA
CONCLUSION
Front Matter Page
Press Release No. 17/254
FOR IMMEDIATE RELEASE
June 28, 2017
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