Statement by IMF Staff Mission to the Republic of Madagascar

Press Release No. 07/217
October 3, 2007

A mission by the International Monetary Fund (IMF) visited Madagascar during September 20-October 3, 2007 to hold discussions for the second and third reviews under the IMF's Poverty Reduction and Growth Facility (PRGF).1 Mr. George Tsibouris, the mission chief for Madagascar, issued the following statement today in Antananarivo:

"Over the past two weeks, the mission held constructive discussions with Minister of Finance and Budget Benjamin Radavidson, Minister of Economy, Plan, Private Sector and Trade Harison Randriarimanana, Central Bank of Madagascar Governor Frédéric Rasamoely, and other senior officials of the Government of the Republic of Madagascar. It also met with representatives from the private sector, non-governmental organizations, labor unions, and the donor community.

"Under the impetus of the Madagascar Action Plan (MAP) launched late last year, the economy has continued to perform well and the authorities' fiscal and monetary program remains on track. This good performance reflects, to an important extent, prudent macroeconomic policies, the start up of construction for large mining projects, and progress in structural reforms. Inflation has continued on its downward path, aided in part by the appreciation of the nominal exchange rate as large foreign direct investment flows increased the demand for the ariary and boosted Central Bank foreign currency reserves. At the same time, higher liquidity has resulted in a sharp decline in Treasury bill rates. Going forward, economic growth is likely to accelerate further in 2008, with inflation continuing on its declining path.

"The mission reached preliminary understandings on a set of policies that could underpin the economic program for the remainder of 2007 and for 2008. Such policies include: (i) a prudent budget for 2008, which incorporates a simplification of the tax code aimed at widening the tax base and enhancing fiscal equity; (ii) further reforms of the tax and customs administrations; (iii) strengthened public financial management; (iv) an appropriately tight monetary policy to entrench single digit inflation; and (v) measures to foster private sector growth, including those aimed at addressing the urgent need to restructure and rehabilitate the public utility (JIRAMA).

"Discussions on the second and third reviews of the PRGF program will continue during the IMF Annual Meetings in Washington in October 2007."


1 The PRGF is the IMF's concessional lending facility for low-income countries. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½ year grace period on principal payments.



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