Via IMF (Den Internationale Valutafond)

IMF Staff Completes 2019 Article IV and Program Review Mission to Madagascar

November 25, 2019

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

  • IMF staff and the authorities reached staff-level agreement for the sixth program review, subject to approval by IMF management and the Executive Board
  • The implementation of the authorities’ program supported by the Extended Credit Facility (ECF) arrangement has remained satisfactory.
  • The authorities’ plan to increase public investment and social spending requires continued efforts to raise revenue and contain transfers to the fuel and electricity sectors.

An International Monetary Fund (IMF) mission led by Charalambos
Tsangarides, mission chief for Madagascar, visited Antananarivo from
November 11 to 25 to conduct discussions for the 2019 Article IV
consultation and the sixth and final review of Madagascar’s economic reform
program supported by the ECF arrangement.

At the end of the mission, Mr. Tsangarides issued the following statement:

“The discussions have allowed the authorities and the IMF staff to reach
staff-level agreement for the sixth program review, subject to approval by
IMF management and the Executive Board. Consideration by the IMF’s
Executive Board is expected in January 2020.

“Despite a temporary slowdown in the first half of the year, mainly due to
slow budget execution, the macroeconomic outlook has remained favorable.
For 2019, growth is expected to improve to 4.8 percent, supported by
dynamic credit conditions, and positive developments in mining,
transportation, and services. In a context of decreasing vanilla prices,
the current account is expected to record a small deficit. After peaking in
late 2017, inflation has continued to steadily decelerate and is expected
to be contained to 6 percent by end-year. For 2020, economic prospects
remain positive, with real growth expected to reach 5.2 percent, supported
by increased public spending on infrastructure, health and education, and
increasing private sector activity especially in tourism, other services,
and light manufacturing.

“The implementation of the ECF-supported program that expires in early
2020 has remained satisfactory. The authorities met all the June 2019 performance criteria, as well as
the indicative target on tax revenue collection. However, the indicative
target on domestically financed priority social spending was missed by a
significant margin; despite recent improvements in execution, the year-end
objective will not be met. The central bank has continued to successfully
reduce exchange rate volatility and support gradual accumulation of
reserves, and manage liquidity through timely interventions, thus
contributing to macroeconomic stability. The authorities made some progress
on the structural reform agenda, albeit at a slower pace than envisaged.
Despite the successful renegotiation of distribution margins on fuel
prices, a remaining gap between reference and pump prices led to continued
accumulation of small liabilities to distributors.

“Staff welcomed the authorities’ commitment to strengthen growth, enhance
revenue collection, and foster social inclusion. Supporting economic
activity will require the strict prioritization and timely implementation
of growth-enhancing investment projects. Meeting the authorities’ ambitious
tax revenue targets will critically depend on stepping up collection
efforts, cross-checking information between customs and domestic tax
administrations, and revising tax expenditures and exemption regimes.
Reducing poverty will necessitate strong public spending execution in the
health and education sectors, as well as containing lower priority public
spending such as subsidies to fuel and electricity operators.

“Staff underscored the need to adopt a pricing mechanism that aligns pump
prices with world price developments and to settle existing liabilities
with distributors to avoid budget costs. Staff emphasized that such a
mechanism would need to be implemented along with targeted social measures
to protect the poor from the impact of potential future price adjustments.
To improve the operational and financial situation of the public utility
JIRAMA and ensure it does not weigh on the budget, an encompassing strategy
to raise revenues and improve governance is needed. Staff also support
ongoing cost-cutting measures, including through the renegotiation of
contracts with electricity and fuel suppliers, and the audit of the
company’s arrears.

“Staff encouraged the authorities to continue improving governance,
including by stepping up the fight against corruption, a key element to
strengthen the business climate and attract private investment. In this
respect, staff commended the authorities for adopting an ordinance on
illicit asset recovery and urged its operationalization through the speedy
adoption of the implementation decree. To consolidate and deepen
significant structural reforms undertaken at the central bank to strengthen
the monetary policy framework and boost financial inclusion, staff welcomed
the authorities’ plans to submit the new banking law and the financial
stability law to Parliament.

“The mission met with President Andry Rajoelina, Prime Minister Christian
Ntsay, Minister of Economy and Finance Richard Randriamandrato, Interim
Minister of Energy, Water, and Hydrocarbons Christian Ramarolahy, outgoing
Central Bank of Madagascar Governor Alain Rasolofondraibe and new Governor
Henri Rabarijohn, senior officials, development partners, as well as
representatives of the private sector and civil society.

“The mission would like to thank the Malagasy authorities for their strong
cooperation and the constructive discussions.”

IMF Communications Department

PRESS OFFICER: Lucie Mboto Fouda

Phone: +1 202 623-7100Email:


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