News Brief: IMF Completes Madagascar's Review Under the PRGF Arrangement and Approves US$14 Million Disbursement
December 5, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Madagascar's performance under the three-year Poverty Reduction and Growth Facility (PRGF)1 arrangement. As a result, Madagascar will be able to draw up to SDR 11.35 million (about US$14 million).
Madagascar's three-year program was approved on March 1, 2001 (see Press Release No. 01/7), for SDR 79.4 million (about US$101 million). So far, Madagascar has drawn SDR 11.4 million (about US$14 million) under the arrangement.
After the Executive Board's discussion on Madagascar, Anne Krueger, First Deputy Managing Director and Acting Chair, stated:
"The Malagasy authorities are to be commended for the good overall economic and financial performance in 2001. Economic growth has picked up further, inflation has sharply abated, exports have accelerated, and international reserves have increased. In addition, nearly all program performance targets in the first half of the year were met. Only government revenue fell short of the program target. Budgetary management was strengthened and further progress was achieved under the comprehensive privatization program.
"Tax administration needs to be further strengthened, by building on the efforts undertaken recently, such as the upgrade of the customs software in key offices and more rigorous crosschecks of tax returns by customs and the internal taxation directorate.
"The strong export performance in the last two years, especially by the manufacturing sector, has contributed to employment creation and income growth. Continued expansion of the manufacturing export sector will require that the regulatory framework be further streamlined and the infrastructure improved. These measures are all the more necessary in light of the expected adverse impact of the global slowdown on manufactured exports and tourism in 2002.
"Notwithstanding the improvement in overall economic performance in recent years, poverty remains pervasive in Madagascar. Lasting success in reducing poverty will hinge on the achievement of sustained high growth. This requires further progress in the implementation of structural reforms, prudent macroeconomic policies, and substantial foreign investment inflows. It is therefore essential that the privatization of the telecommunications, sugar, and cotton companies be completed rapidly, and that the ongoing reform of the regulatory framework and the judiciary system be vigorously pursued.
"The poverty reduction strategy paper, presently under preparation in close consultation with civil society and the donor community, will be a key instrument in guiding the government's poverty alleviation efforts. It should include prioritization and costing of action plans in the social sectors and in rural development. The authorities should make every effort to ensure that the HIPC completion point is reached by end-2002 as envisaged," Ms. Krueger said.
1 On November 22, 1999, the IMF's facility for low income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. Following the preparation of Madagascar's interim PRSP in November 2000, extensive consultations with civil society and the donor community have been undertaken during the current year as the basis for the preparation of the full PRSP. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period for principal payments.