## cr17225 ## Source details **Canonical URL:** [cr17225](https://www.imf.org/-/media/files/publications/cr/2017/cr17225.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2017/cr17225.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2017/cr17225.pdf.json) --- ### Executive summary and strategy overview - Strategy addresses underlying causes of poverty: modest economic performance, inadequately inclusive growth, predominance of the subsistence economy, isolation of production areas, land tenure problems and deterioration of hydro-agricultural infrastructure, economic dualism, persistent inflation and erosion of purchasing power, limited coverage of the social protection system, an inefficient financial system, persistent governance problems, underdeveloped sanitation infrastructure, adverse impacts of climate change, and repeated political crises. - Approach: combine macroeconomic, sectoral, and structural elements to produce positive, direct impacts for poverty reduction. ### Key macroeconomic outcomes and indicators - Economic growth exceeded demographic growth by 2.8 percent: 4.1 percent in 2015 and 4.2 percent in 2016. - Inflation: 7.4 percent in 2015 and 6.7 percent in 2016. - Tax burden (tax revenue as percent of GDP): 9.9 percent in 2014; 10.1 percent in 2015; 10.9 percent in 2016. Forecasts: 11.2 percent in 2017 and 11.6 percent in 2018. - Fiscal deficit: 2.4 percent of GDP in 2014; 3.7 percent in 2015; 1.9 percent of GDP in 2016. - Investment ratio (investment to GDP): 15.6 percent in 2014; 13.1 percent in 2015; 15.1 percent in 2016. - International reserves: 2.5 months of imports in 2014; 2.9 months in 2015; 4.0 months in 2016; outlook for 2017 is 3.5 months. - World Bank Doing Business ranking: 164th of 189 countries in 2016 (gain from 166th in 2015). - UNDP Human Development Indicator: Madagascar ranked 154th of 188 countries in 2015 (169th of 175 countries in 2014). ### Fiscal policy: aims, priorities, and measures - Chief aim: increase revenue and rationalize budget expenditure to provide margins to finance priority spending, specifically social and infrastructure spending. - Priorities and measures: - Expand the tax base and continue reform of tax and customs administration. - Eliminate causes of inefficient public expenditure and underfunding of retirement and pension funds; planned reform of national public institutions (EPN). - Eliminate exemptions via a definitive list, except those serving the public interest. - Secure royalties from extractive and fishery exploitation. - Strengthen tax audits with risk management focus; severely sanction sales without invoice/receipt; systematic tax adjustments following audits. - Automate customs procedures; enhance physical inspections; accelerate collection of customs duty and import tax arrears; establish audit teams for ex post verifications; institute tablet use in physical inspections. - Implement a unique taxpayer identifier; establish a tax policy unit at the MFB; enhance cooperation between tax and customs administrations. - Budget priorities: health, education, infrastructure, social protection; continue MTEF process; OCSIF established to coordinate priority programs. - Measures to correct inefficient expenditure: policy of truth in pricing, including elimination of fuel subsidies; limit transfers to government-held corporations. - Pension and wage bill: objective to reduce the wage bill to the equivalent of 4.8 percent of GDP in 2019 and reduce retirement and pension fund deficits. - Programming and transparency: submit financial statements of major government-held corporations for 2015 and 2012–2014 to the Court of Audit; include information on public enterprises, PPPs, and EPNs in budget documentation. ### Monetary policy and central bank governance - Objective: regulate domestic liquidity to normalize trends in economic activities and achieve inflation targets of less than 10.0 percent. - Framework: monetary aggregate targeting through indirect instruments such as liquidity absorption auctions (AON) and liquidity injection auctions (AOP). - Exchange regime: free float of the local currency on a continuous market (free float in continuous trading from 9:00 a.m. to 3:00 p.m.). - Institutional improvements: enhance forecasting model and establish a communication mechanism at the Central Bank of Madagascar (BFM). - Tasks related to new BFM charter: - Implement organizational mechanisms (board of directors, audit committee, executive committee); reorganize directorates and divisional units. - Revise governance framework; preserve financial autonomy by limiting statutory advances to the equivalent of 5.0 percent of ordinary revenue starting in 2019. - Effectively increase capital; improve financial reporting and transparency; establish a business continuity plan. ### Financial system: structure, constraints, and strategy - Diagnosis: underdeveloped financial system; banking sector dominated by four large banks holding 88.4 percent of deposits, 86.2 percent of receivables, and 86.1 percent of total banking assets. - Financial depth and access: - Total outstanding loans average 8.0 percent of GDP (compared to 7.2 percent in sub-Saharan Africa and 60.0 percent in Mauritius). - Only 7.8 percent of the population over age 15 hold bank loans. - Interest rates average 14.9 percent for a three-year loan. - Banks’ funding structure is generally short term: 55.0 percent of the total stock of credits, compared to 45.0 percent for medium-term and long-term credits. - Strategy for stability, development, and resilience: - (i) Improved supervisory framework: reform legal/regulatory provisions, enhance on-site and off-site reviews, define stability indicators, increase supervisory staffing, strengthen cooperation with foreign supervisors. - (ii) Develop financial markets (interbank, foreign exchange, government securities) to improve transmission of monetary policy. - (iii) More flexible access to financing: align BFM policy rate and banks’ base lending rates; develop competition via branch expansion in rural areas; complete proposed electronic money law and implementing texts. - (iv) Promote mobile networks and mobile transactions to increase financial inclusion. - (v) Improve financial infrastructures: implement an operational credit reporting bureau; strengthen credit rating capacities; implement a credit bureau to compile credit histories. - (vi) Identify and develop products for households and SMEs: expand guarantee funds; capacity building for SMEs to produce simplified financial statements. - (vii) Establish a framework enabling corporations to issue debt securities. ### Debt management and public financing - Debt strategy: maximize use of concessional borrowing in accordance with the Medium Term Debt Strategy. - External debt contracted must have a grant element of 35.0 percent or more (highly concessional) or between a minimum of 20.0 percent and 35.0 percent. - Non-concessional borrowing limited to debt ceilings under the ECF arrangement. - Domestic financing emphasis: secure mainly through auctioned Treasury Bills; reduce statutory advances. - For 2017, limit on withdrawal of statutory advances is set at the equivalent of 5 percent of the government's ordinary revenue in 2016. - Strategy foresees no recourse to statutory advances in 2018. - Planned increase in public investment: - 7.9 percent of GDP in 2017 - 9.8 percent in [2018] - 10.5 percent in 2019 - Planned annual average investment equivalent to 9.5 percent of GDP during 2017–2019. ### Inclusive growth, private sector, and SEZs - Endowments: natural capital representing 25.0 percent to 30.0 percent of total wealth; human capital close to 48.0 percent of total wealth; arable land representing 40.0 percent of natural capital. - Priority sectors: renewable energies, transportation infrastructures, health, education, social protection expansion. - Special Economic Zones (SEZs): draft SEZ law to promote investment and job creation; SEZs exempt from all charges and operated under concession for a renewable term of three years. - Proposed SEZ benefits: tax and customs benefits, customs warehousing for 36 months renewable once, VAT exemption for imports, limits on expatriate non-management positions to 5 percent, protections from nationalism/expropriation, facilitation of foreign currency transactions and dispute resolution mechanisms. ### Macroeconomic performance and outlook - 2016 economic expansion: 4.2 percent, driven by agriculture, free-trade, tourism, and construction and public works. - 2017 outlook: - Growth expected at 4.3 percent (adjusted from initial forecast of 4.5 percent) due to drought and cyclone impacts. - Average growth projected at slightly above 5.0 percent during 2017–2019. - Per capita income: - US$402 in 2015 - US$405 in 2016 - US$416 in 2017 (expected) ### Poverty profile, household characteristics, and determinants - 2012 INSTAT estimates: - Roughly 71.5 percent of the population was poor in 2012. - Rural poverty: 77.3 percent. - Urban poverty: 48.5 percent. - Poverty threshold based on average annual income of MGA 1,388,000 (equivalent of US$1.00 per day, MGA 3802.0). - Extreme poverty: impacts 56.5 percent of the population; average annual income of MGA 328,160. - Average annual per capita consumption: MGA 404,000; Androy Region below MGA 200,000. - Regional poverty concentrations (2012): Androy 96.7 percent; Atsimo Antsiranana 93.1 percent; Diana 42.2 percent; Analamanga 47.0 percent. - Household characteristics by consumption quintile (Poorest, Poor, Average, Wealthy, Wealthiest, Overall): - Average household size: 6.4; 5.4; 4.8; 4.1; 3.2; 4.5. - Number of dependents (< age 15 or > age 65): 4.0; 3.1; 2.6; 2.2; 1.7; 2.7. - Average working-age members (age 15 to 65): 2.3; 2.3; 2.2; 2.2; 2.0; 2.2. - Head of household literacy rate (%): 42.5; 60.8; 65.0; 74.5; 83.0; 68.4. - Total households sampled by quintile: 2,359; 2,798; 3,190; 3,749; 4,818; 16,914. - Determinants of poverty include weak economic performance, economic disjunction and dualism, near-stagnant structural transformation, fiscal financing practices that crowd out private operators, political instability (average recovery time more than three years after a crisis), and institutional weakness enabling corrupt practices. ### Poverty reduction and social inclusion strategy (2017–2019) - Chief objective: restore growth and reduce poverty through macroeconomic stability, inclusive growth, good governance, a sound financial system, and reduced inflation. - National priority sectors: governance, control of corruption, integration, infrastructure, energy, water and sanitation, health, education, social protection, resilience to climate change. - Public policies: converge on cyclical policy to adjust the economy; government committed to raising tax revenue and rationalizing spending; BFM to regulate domestic liquidity. ### Rural development and agriculture - Sector indicators: - Employs 75.0 percent of the total population and 60.0 percent of youths. - Accounts for 86.0 percent of the total number of jobs. - Agricultural value added estimated at 27.0 percent of GDP. - Sector growth rate about 1.5 percent. - Area potentially available to large-scale production estimated at over 35 million hectares. - Key crops: - Rice: 1.2 million hectares; employs 2.0 million rural households; production of 4.0 million tons per year. - Cassava: 30.0 percent of cultivated land; production of 3.0 million tons per year. - Maize: 12.0 percent of cultivated areas; 75.0 percent consumed and 25.0 percent used for animal feed. - Strategic measures: - Increase productivity via quality inputs, research funding, irrigation investment, land tenure strengthening, farmer training, diversified financing. - Expand production areas: secure land tenure; promotion of investment zones. PSAEP preliminary study: an 86.0 percent increase in farming could generate a 40.0 percent increase in farm incomes and ensure food security for close to 20.0 percent of the rural population, requiring increasing cultivated land by 2 million hectares. - Strengthen food and nutritional security, agro-industry, collection/distribution systems, and sector governance. ### Resilience, risk, and disaster management - Historical impacts: - Six periods of drought between 1990 and 2013: 200 deaths and 3,515,290 affected. - Three major floods during 1990–2013: 45 dead, 82,987 persons affected, economic losses estimated at US$150 million. - FAO 2015: cyclones/heavy rains flooded 25,000 hectares of rice, reduced rice production by 6.0 percent; cassava and maize declined by an average of 10.0 percent; FAO estimated 1.9 million persons affected by food insecurity in 2015 (1.4 million moderate, nearly 450,000 severe). - Enawo cyclone provisional assessment (early March 2017): 80 deaths; over 160,000 injuries including over 32,000 in Antananarivo; 100 percent of vanilla plantations and 80.0 percent of rice crops in the northern part destroyed. - Strategy: - Strengthen national capacities and BNRGC regional offices; rely on local communities. - Develop early warning systems and comprehensive information systems; mobilize humanitarian and development assistance. - Institutionalize risk/disaster inclusion across development actors. - Establish financial mechanisms for real-time emergency and mitigation responses. ### Infrastructure, transport, and market access - Road and access indicators: - Percentage of communes accessible by road throughout the year roughly 40 percent for the last three years. - Percentage of the national highway network paved and in good condition: 45.0 percent. - Percentage of unpaved national roads in good condition: 14.0 percent in 2015. - Percentage of rural roads in good condition: 12.0 percent. - Priorities: rehabilitate rural roads, restore financial capacity of the Highway Maintenance Fund (FPR) by increasing its budget by 10 percent to 25 percent, and ensure access to high-potential production areas. ### Energy development - JIRAMA reform priorities: implement audit recommendations, lease thermal plants and generators, competitively recruit management, transition to hybrids or lower-cost fuel, prevent illegal connections/theft, reduce technical/non-technical losses, ensure transparency and governance in contracts, gradual tariff adjustment. - Renewable energy pillars: hydraulic, solar, wind. - Prepared financing plan for four priority projects: hydro-solar-wind project in the Grand Sud; Tana-Tamatave transmission line interconnection (250 kilometers); Fianarantsoa Mankara-Mananjary transmission line interconnection. - Strategy objectives: access to sustainable energy for all; rural/semi-urban/urban electrification; energy security and independence; improved regulatory/institutional framework; sustainable financing. ### Education, health, and social protection - Education objectives: increase enrollment; improve and expand educational infrastructure; raise quality of instruction; institute a year of preschool in public primary schools; construct/equip new classrooms; hire additional teachers; provide school kits. - Health objectives: expand health coverage with the goal of universal coverage; implement National Universal Health Coverage Strategy; implement national health insurance and National Health Solidarity Fund (CNSS); revitalize mutual health organizations. - Social protection: expand system to social sectors and vulnerable farmers; pilot mutual insurance; scale up performance-based financing; expand conditional cash transfer (TMC) program. - Health access: roughly 77.0 percent of EPM respondents state they have access to healthcare facilities; office visits free but medicines rarely available. ### Water, sanitation, and hygiene (WASH) - Sector access and indicators: - National rate of access to water and sanitation: 41 percent. - 2012 INSTAT: 27.7 percent of total population had access to drinking water (77.4 percent urban, 17.7 percent rural). - Regions with highest drinking water coverage: Itasy 92.0 percent; Analamanga 79.0 percent. - Rate of use of toilets estimated at 51.5 percent. - Constraints: inadequate investment, lack of maintenance, demographic growth in urban areas, lack of organized household waste collection, financing shortages. - Actions: clarify responsibilities between ministry and communes; improve sanitation service performance; adopt funding modes ensuring efficiency and cost recovery; reduce investment costs via appropriate technologies; manage environmental impacts; step up outreach and resource mobilization. ### Statistics, INSTAT reform, and monitoring & evaluation - INSTAT reform priorities: - Reorganization and capacity strengthening. - Amend legal provisions governing production and dissemination of statistics; national statistical development strategy covering 2016–2019. - Publish concepts/methodologies; prepare national accounts on a new basis and quarterly accounts; conduct general census of population and housing; develop index of industrial production; improve foreign trade statistics. - Conclude memoranda of understanding between the MFB, the BFM, and the Ministry of the Interior. ### Governance, anti-corruption, and asset recovery - Law 2016-020 on the fight against corruption approved; replaces 2004 law with expanded provisions on offenses, asset disclosure, disqualification of senior officials, protections for witnesses/whistleblowers, and strengthened BIANCO powers. - Anti-corruption institutional components: High Counsel on Integrity (CSI), BIANCO, National Financial Intelligence Unit (SAMIFIN), local anti-corruption centers (PACs), and agency in charge of asset recovery. - PACs to be gradually established in the six provincial capitals; Antananarivo PAC expected in 2017, others in 2018. - PACs’ jurisdiction extends to all offenses relating to corruption and money laundering. - Asset recovery law drafted; proposed law to be submitted to the legislature in May (year in source). - Implementation needs: shorten time to process anti-corruption cases; implement corruption statistics system; coordination, capacity building, and substantial budget appropriations required. ### Business climate and institutional reforms - Doing Business rankings: slipped from 157th in 2014 to 164th in 2015; ranked 169th in 2016 and improved to 167th in 2017. - Key constraints: electricity supply ranked last; access to financing ranked 180th; construction permits 177th; recording title to property 153rd; contract execution 146th. - Ongoing/planned reforms: PPP law, corporations law, ANCC decree, anti-corruption law, new mining code (not yet passed); automation of customs procedures; online VAT payments; JIRAMA reforms; law on production and dissemination of statistics planned; EDBM measures for online business creation and unique identification number. - Institutional dialogue mechanisms: public private dialogue (DPP), Strategic Dialogue Group (GDS), Commission on Business Law Reform, Partnership Framework for Budget Support (CPAB), Coordinating Committee on Business Climate Reforms, Reform Program Technical Monitoring Committee (CTSPR). ### Conditions for success, principal risks, and next steps - Conditions for success: - Domestic political stability as a precondition to increased private investment. - Widespread support from the Malagasy population and development actors; national and regional communication and outreach campaigns. - Principal risks: - Institutional weakness: inadequate human, financial, and technical resources reducing operational capacity and jeopardizing strategy implementation and poverty reduction objectives. - Unforeseeable international context changes affecting investment decisions. - Unavailability of reliable information to evaluate strategy performance. - Proliferation of equivalent planning documents raising doubts about consistency. - Next steps: - Organize regional workshops for information, communication, and discussion on prioritization of targets and choice of indicators; RGPH will supplement statistical bases. - Include SDG issues in the domestic resource mobilization strategy and the National Human Development Report. *Source: cr17225* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Strategy overview - The Economic Development Paper (DDE) describes the strategy adopted by the government to reverse the trend of modest economic performance, deteriorating social conditions, and persistent poverty observed in recent years. - The strategy addresses underlying causes of poverty: modest economic performance over the past several decades, inadequately inclusive economic growth, the predominance of the subsistence economy at the expense of the money economy, isolation of production areas, land tenure problems and deterioration of hydro-agricultural infrastructure, economic dualism, persistent inflation and erosion of purchasing power, limited coverage of the social protection system, an inefficient financial system that limits access to financing, persistent governance problems, underdeveloped sanitation infrastructure, adverse impacts of climate change, and repeated political crises. - The approach combines macroeconomic, sectoral, and structural elements to produce positive, direct impacts for poverty reduction. ### Key macroeconomic outcomes and indicators - Economic growth exceeded demographic growth by 2.8 percent: 4.1 percent in 2015 and 4.2 percent in 2016. - Inflation: 7.4 percent in 2015 and 6.7 percent in 2016. - Tax burden (tax revenue as percent of GDP): 9.9 percent in 2014; 10.1 percent in 2015; 10.9 percent in 2016. Forecasts: 11.2 percent in 2017 and 11.6 percent in 2018. - Fiscal deficit: 2.4 percent of GDP in 2014; 3.7 percent in 2015; 1.9 percent of GDP in 2016. - Investment ratio (investment to GDP): 15.6 percent in 2014; 13.1 percent in 2015; 15.1 percent in 2016; predominance of private over public investment noted. - International reserves: 2.5 months of imports in 2014; 2.9 months in 2015; 4.0 months in 2016; outlook for 2017 is 3.5 months. - World Bank Doing Business ranking: 164th of 189 countries in 2016 (gain from 166th in 2015). - UNDP Human Development Indicator: Madagascar ranked 154th of 188 countries in 2015 (169th of 175 countries in 2014). ### Fiscal policy (chief aims and priorities) - Chief aim: increase revenue and rationalize budget expenditure to provide ample margins to finance priority spending, specifically social and infrastructure spending. - Priorities: - Expand the tax base and continue reform of tax and customs administration. - Eliminate causes of inefficient public expenditure and underfunding of the retirement and pension funds. - Planned reform of the national public institutions (EPN). ### Monetary policy (objectives and framework) - Role: regulate domestic liquidity to normalize trends in economic activities and achieve inflation targets of less than 10.0 percent. - Policy basis: monetary aggregate targeting, chiefly through use of indirect instruments such as liquidity absorption auctions (AON) and liquidity injection auctions (AOP). - Exchange regime: free float of the local currency on a continuous market. - Institutional improvements: enhance the forecasting model and establish a communication mechanism at the Central Bank of Madagascar (BFM) to inform the market of policy effects and impacts. ### Financial system (challenges and objectives) - Diagnosis: underdeveloped financial system; banking system reflects excessive aversion to risk, serving a select customer base with safe, profitable products and refraining from medium- and long-term financing. - Challenges to address: - Competition within the sector. - Diversification of financial products. - Expanded access for economic agents, particularly SMEs. - Customer protection. - Sector resilience. ### Agriculture - Policy foundations: - Continue land tenure reform. - Use intensive and extensive farming methods. - Maintain and renovate hydro-agricultural infrastructures. - Intensify technical and financial support for agricultural training and research centers. ### Social sectors: education and health - Education objectives: - Increase enrollment. - Improve and expand educational infrastructure. - Raise the quality of instruction. - Health objectives: - Expand health coverage with the goal of universal coverage. ### Social protection - Expand the social protection system to the social sectors and vulnerable farmers to improve their resilience in the face of natural disasters. ### Water, sanitation, and hygiene - Access rates to drinking water and sanitation infrastructure are low, with coverage of less than half the population in 2015 because investment failed to keep up with demographic pressures. ### Local initiatives and resource mobilization - Combine local initiatives, promoted by outreach actions, with efforts to mobilize resources. ### Transport and communications infrastructure - Observed pervasive deterioration of communication and surface transportation infrastructures, evidenced by a steady decline in the number of accessible communes. - Strategy: integrate areas of potential production, especially by rehabilitating rural roads, and restore the financial capacity of the Highway Maintenance Fund (FER). ### Energy policy - Includes continued reform of the water and electric utility (JIRAMA) and a gradual shift toward renewable energies: hydropower, wind, solar, and biomass. - Financing for the energy shift: financed mainly by taxes. ### Disaster risk management and resilience - Strategy based on three areas of effort: - Strengthening the capacities of local communities and the National Bureau of Risk and Disaster Management (BNGRC). - Development of the early warning system. - Establishment of financial mechanisms to respond to emergencies. ### Governance and institutional strengthening - Rely on anti-corruption measures, notably: - Promulgation of the anti-corruption law (2016). - Proposed law for recovery of proceeds of illegal activity. - Planned creation of organizational structures: local anti-corruption centers (PAC) and the agency in charge of asset recovery. ### Poverty profile and determinants - Latest INSTAT survey on poverty: Millennium Development Goals National Monitoring Survey (ENSOMD) in 2012. - Poverty is primarily rural: average deviation between rural and urban poverty is 28 points. - 2012 INSTAT estimates: - Roughly 71.5 percent of the population was poor in 2012. - Rural poverty: 77.3 percent. - Urban poverty: 48.5 percent. - Poverty threshold based on average annual income of MGA 1,388,000 (equivalent of US$1.00 per day, MGA 3802.0). - Extreme poverty: impacts 56.5 percent of the population; average annual income of MGA 328,160 (less than MGA 1000 per day). - Average annual per capita consumption: MGA 404,000; lower in rural areas, notably Androy Region where it is below MGA 200,000. - Regional poverty concentrations (2012): - Androy: 96.7 percent. - Atsimo Antsiranana: 93.1 percent. - Diana: 42.2 percent. - Analamanga: 47.0 percent. - Poverty trends by province (1993–2010): increased in Fianarantsoa, Mahajanga, and Antsiranana; nearly flat for Toamasina and Toliary; declining for Antananarivo. - Historical poverty spikes: 80.7 percent in 2002 and 76.5 percent in 2010 during the period of political crisis. - For 1993–2012, exceptionally high poverty: Fianarantsoa and Toliary at 91.0 percent and 81.2 percent in 2002; 84.7 percent and 82.1 percent in 2012. ### Health incidence and household characteristics - Most widespread illnesses (in order): fever; diarrheal pathologies; respiratory infections; vascular events caused by inflammatory conditions; trauma; coughs persisting more than three weeks. - Disease incidence by area and consumption quintile: - Urban areas: 7.3, 9.3, 11.0, 12.1, 12.1 (Poorest, Poor, Average, Wealthy, Wealthiest). - Rural areas: 8.6, 9.9, 10.9, 12.7, 14.2 (Poorest, Poor, Average, Wealthy, Wealthiest). - Ensemble: 8.6, 9.9, 10.9, 12.5, 13.3 (Poorest, Poor, Average, Wealthy, Wealthiest). - Household characteristics linked to poverty: - Household size: poorest households average 6.4 members; wealthiest average 3.2 members. - Number of dependents: poorest households average four dependents; wealthiest average 1.7 dependents. - Number of working-age members (age 15 to 65) is nearly the same across household statuses. - Head of household literacy rate: 42.5 percent for the poorest households; 83.0 percent for the wealthiest. - Educational attainment (of 16,914 households surveyed): 29.9 percent had no education; 41.4 percent had completed primary education or were barely literate; 28.7 percent had completed secondary education or higher. ### Implementation foundations and preparatory inputs - The preparation of the DDE draws on ministries’ sector policies; sector studies by development partners (including the World Bank Systematic Country Diagnostic and the UNDP Common Country Assessment); INSTAT surveys on MDG; the ECF matrix; and the Ministry of Economy and Planning strategic report and economic and financial report. *Source: cr17225 - EXECUTIVE SUMMARY* ### 16.5 percent are moderately poor; 22.2 percent are wealthy, and 28.5 percent are the wealthiest. These ### cr17225 - 16.5 percent are moderately poor; 22.2 percent are wealthy, and 28.5 percent are the wealthiest. These ### Household characteristics and poverty distribution - Consumption quintile breakdown labels: Poorest, Poor, Average, Wealthy, Wealthiest, Overall. - Average household size (number of persons): - Poorest: 6.4 - Poor: 5.4 - Average: 4.8 - Wealthy: 4.1 - Wealthiest: 3.2 - Overall: 4.5 - Number of dependents (< age 15 or > age 65): - Poorest: 4.0 - Poor: 3.1 - Average: 2.6 - Wealthy: 2.2 - Wealthiest: 1.7 - Overall: 2.7 - Average working age members (age 15 to 65): - Poorest: 2.3 - Poor: 2.3 - Average: 2.2 - Wealthy: 2.2 - Wealthiest: 2.0 - Overall: 2.2 - Head of household literacy rate (%): - Poorest: 42.5 - Poor: 60.8 - Average: 65.0 - Wealthy: 74.5 - Wealthiest: 83.0 - Overall: 68.4 - Total households sampled by quintile: - Poorest: 2,359 - Poor: 2,798 - Average: 3,190 - Wealthy: 3,749 - Wealthiest: 4,818 - Overall: 16,914 - Source for table: INSTAT ### International ranking and per capita income (selected) - In 2015, Madagascar ranked fifth among the 25 poorest countries by per capita income in current dollars, after Burundi, the Central African Republic, Malawi, and Gambia. - Per capita income (current dollars) for selected countries: - Burundi: 315.2 (2015), 287.3 (2016) - Central African Republic (CAR): 338.7 (2015), 372.2 (2016) - Malawi: 352.7 (2015), 287.0 (2016) - Gambia: 384.2 (2015), 435.5 (2016) - Madagascar: 405.0 (2015), 402.0 (2016) - Source for table: IMF 2015 ### Poverty manifestations and access to services - Poverty shifts food consumption toward less expensive, lower-nutritional-value products (tubers, legumes, dry goods) away from meat, eggs, and milk. - Lack of running water and cooking gas in homes is prevalent among the poor. - Increased reliance on coal and fuelwood for cooking creates a vicious circle with rapid environmental degradation and insufficient rainfall. - Access to electricity in rural areas is limited to 5.0 percent to 6.0 percent. - Situation worsened due to suspension of grid connections from problems at the national water and electricity utility (JIRAMA). ### Determinants of poverty (findings) - Weak economic performance: - Growth fluctuated between 1.2 percent and 4.1 percent during 1985–1990. - Growth fell to 6.3 percent [sic] in 1991 following civil disobedience; effects persisted until 1995. - Moderate growth of 1.7 percent to 6.0 percent from 1995 to 2001. - Post-election crisis in 2002 led to a growth rate fall by close to 13.0 percent. - Growth between 5.3 percent and 7.1 percent during 2004–2008. - Post-2009 crisis: moderate performance of 3.0 percent to 4.0 percent during 2014–2016. - Weak gains or decline in per capita income observed in these periods. - Economic disjunction and dualism: - Coexistence of an isolated traditional sector and a modern, externally-focused sector. - Agriculture poorly integrated with industry; exposed to commodity price instability. - Agri-food processing industries shares of agri-food value added: beverage 34.0 percent, sugar/flour/starch 28.0 percent, fishery 17.0 percent. - Share of agri-food in industrial value added declined from an average of 23.0 percent (1985–1999) to 18.0 percent (2006–2013). - Import component of inputs for businesses covered by free-trade provisions: 75.0 percent of their total raw materials imports (compared with 51.0 percent for businesses not covered and 53.0 percent for all exporters combined). - SMEs lack capital and face bank financing constraints (guarantees, high interest rates, dossier assembly), turning to microfinance. - Near-stagnant structural transformation: - Agricultural productivity flat or decreasing. - Rehabilitation of hydro-agricultural infrastructure slowed by insufficient resources. - Rural exodus inflates urban informal sector amid limited urban job opportunities. - Rural poor highly vulnerable to climate change. - Fiscal financing practices: - Government budget often balanced after the fact using central bank advances or issuance of government securities, leading to underfunding or crowding out private operators. - Political instability: - Repeated political crises have caused suspension of activities, destruction of infrastructure, and deterioration of social protection systems; poverty rate increased during crisis periods. - Empirical analysis indicates it took more than three years on average to overcome adverse effects of a political crisis. - Institutional weakness: - Weak institutions enable corrupt practices, increased violence, illegal trafficking, and unsound practices contrary to public interest. ### Poverty reduction and social inclusion strategy (2017–2019) — objectives and pillars - Strategy basis: macroeconomic, sectoral, and structural approaches to ensure inclusive growth, good governance, macroeconomic stability, a sound financial system for development financing, and reduction of inflation. - National priority sectors identified: governance, control of corruption, integration, infrastructure, energy, water and sanitation, health, education, social protection, resilience to climate change. - Chief objective: restore growth and reduce poverty. - Public policies: converge on cyclical policy to adjust economy when deviating from desired trend. - Preservation of macroeconomic stability as prerequisite for strong growth and poverty reduction. - Government committed to raising tax revenue and rationalizing spending for a sustainable fiscal deficit. - Central Bank of Madagascar (Banky Foiben’i Madagasikara, BFM) to regulate domestic liquidity to reduce the rate of price increases. ### Fiscal measures and public investment priorities - Fiscal policy to support National Development Plan and priority projects targeting social inclusion and poverty reduction. - Reforms to increase revenue and manage public spending planned or underway. - Government actions: - Expand tax base by formalizing and taxing the informal sector. - Eliminate exemptions via a definitive list, except those serving the public interest. - Secure royalties from extractive and fishery exploitation for increased budget revenue. - Strengthen tax audits with a focus on risk management and communication strategy. - Severely sanction sales without issuing invoice/receipt; systematic tax adjustments based on audits. - Continue collection of tax arrears based on an inventory of arrears; publish reports of irregular tax credits claimed by large businesses. - Customs administration reforms: - Automate customs procedures. - Enhance physical inspections (on-site and desk reviews) to reduce fraud. - Accelerate collection of customs duty and import tax arrears. - Step up monitoring of customs warehousing; set quantitative and qualitative targets. - Establish audit teams for ex post verifications; accelerate auctions of undeclared containers. - Institute use of tablet computers in physical inspections. - Audit unusually low values and pursue legal action for false declarations. - Administrative and information measures: - Implement a unique taxpayer identifier for customs and tax administrations; expand use across MFB departments and CNAPS. - Establish a tax policy unit at the MFB to conduct impact studies, analyze tax expenditure, and improve coordination and information sharing among customs and tax units. - Enhance cooperation between tax and customs administrations for information cross-checking and sharing. - Budget expenditure priorities: - Prioritize social and poverty-related spending: health, education, infrastructure, social protection. - Continue integrating teachers formerly paid by FRAM into the civil service and distribute school kits. - Focus on selection, coordination, and monitoring of capital projects to improve implementation and absorption. - Continue the medium-term expenditure framework (MTEF) process. - Investment and Investment Funding Coordination and Monitoring Unit (OCSIF) established within the Presidency by Order 2017-094 to coordinate and monitor implementation of priority programs and projects identified during the December 2016 donor and investor conference (CBI). - Public sector infrastructure projects to be prioritized. - Measures to correct inefficient expenditure and budget pressure: - Policy of truth in pricing, including elimination of fuel subsidies. - Limit transfers to government-held corporations. - Pension and wage bill measures: - Address underfunding of CRCM and CPR; continue controls like retiree ID card renewals. - Begin validation of personnel and payroll file for the civil service and senior government officials. - Objective: reduce the wage bill to the equivalent of 4.8 percent of GDP in 2019 and reduce retirement and pension fund deficits. - Programming and transparency: - Opt for effective implementation of program budget with multiyear planning. - MTEF requirements for ministries: estimate three-year costs, define objectives and priority actions, conduct internal assessment. - MTEF teams established in each ministry with strategy and operational units. - Strengthen transparency by submitting financial statements of major government-held corporations for 2015 and 2012–2014 to the Court of Audit and submitting the audit report on execution of the 2015 budget to the legislature. - Include information on public enterprises, public-private partnerships, and national public institutions (EPNs) in budget documentation. - Plan review of legal and regulatory framework for EPNs for greater transparency and accountability. ### Monetary policy and central bank governance - BFM monetary policy aims to maintain inflation below 10.0 percent by adjusting currency in circulation to real needs. - Use of indirect monetary policy instruments (liquidity injection and absorption auctions) emphasized. - Strengthen analytical framework by improving forecasting model and enhancing communications. - Tasks related to new BFM charter: - (i) Implement organizational mechanisms (board of directors, audit committee, executive committee) and reorganize directorates and divisional units per new charter. - (ii) Revise and update governance framework (internal regulations, employee code). - (iii) Preserve financial autonomy by limiting statutory advances to the equivalent of 5.0 percent of ordinary revenue starting in 2019. - (iv) Effectively increase capital. - (v) Improve financial reporting and transparency and establish a business continuity plan based on good international practices. - Exchange rate and market transparency: - International value of the ariary determined by market; free float in continuous trading from 9:00 a.m. to 3:00 p.m. will continue. - Occasional interventions at market conditions to eliminate wide exchange rate fluctuations. - Improve transparency by providing market participants access to information on exchange positions, transactions, and detailed commercial bank reports. ### Financial system: structure, access, and constraints - Financial system dominated by banking sector representing close to 95.0 percent of system assets; followed by nonbank financial institutions and microfinance institutions. - Four large banks dominate with: - 88.4 percent of deposits - 86.2 percent of receivables - 86.1 percent of total banking assets - Bank products insufficiently diversified and directed mainly to large businesses. - Financial access and depth: - Total outstanding loans average 8.0 percent of GDP (compared to 7.2 percent in sub-Saharan Africa and 60.0 percent in Mauritius). - Only 7.8 percent of the population over age 15 hold bank loans. - Interest rates average 14.9 percent for a three-year loan. - Banks’ funding structure is generally short term (text truncated in provided content). *Source: Madagascar Economic Development Paper (content as provided).* ### 55.0 percent of the total stock of credits, compared to 45.0 percent for medium-term and long-term ### 55.0 percent of the total stock of credits, compared to 45.0 percent for medium-term and long-term credits. ### Banking sector performance and challenges - The banking sector’s performance reflects its aversion to risk. - Challenges to be faced in line with development imperatives: - competition within the sector; - diversification of financial products and expanded access to bank financing for economic agents, particularly SMEs; - customer protection; - sector resilience. ### Strategy for stability, development, and resilience of the financial system - The strategy is based on: (i) an improved supervisory framework, including: - reform of legal and regulatory provisions to ensure the supervisor’s independence and define the scope of its powers to impose corrective measures and sanctions and resolve financially troubled institutions; - enhanced on-site inspections and off-site reviews and definition of stability indicators for the system based on enhanced prudential rules; - increased staffing for the supervisory body, strengthening of personal capacities and the provision of adequate resources; and - strengthened cooperation and information exchange with supervisory authorities of the banks’ countries of origin; (ii) the need to develop the financial market (including the interbank, foreign exchange, and government securities market) to improve the system’s functioning and the transmission of monetary policy; and restore confidence thereafter through improved central bank communication with market participants and the public; (iii) more flexible access to financing, through: - the conduct of a more appropriate monetary policy, based on the relationship between the BFM policy rate and formation of the banks’ base lending rates; - the development of competition through the creation of branch offices and institutions, above all in rural areas, to reduce liquidity costs; and - completion of the proposed law on electronic money and the preparation of implementing regulatory texts; (iv) the development of mobile networks and mobile phone transactions to promote competition among financial services; this could lead to less costly and more accessible services for customers, especially individuals and SMEs, while furthering the process of financial inclusion; (v) the improvement of financial infrastructures through the provision of detailed information on customers as a factor in reducing risks and expanding access to financing, especially for households and SMEs with limited means; support for the existing initiative (an operational credit reporting bureau); strengthening of existing credit rating agency capacities to evaluate the quality of credits and the risks they represent for the economy or, alternatively, a study on the potential costs and benefits of establishing other agencies; and the planned implementation of a credit bureau to compile and centrally manage individuals’ credit histories and make the information available to financial institutions for use in optimizing lending and minimizing risks; (vi) the identification and development of financial products and services better suited to the circumstances of households and SMEs: incentives for financial service providers through expanded coverage of guarantee funds; capacity building for SMEs, with the aim of producing simplified but valid financial statements, or generating reports for use in monitoring their activities; and (vii) the establishment of a framework enabling corporations to issue debt securities. ### Debt management - The country's debt strategy is to maximize the use of concessional borrowing in accordance with the Medium Term Debt Strategy. - Madagascar borrows only under highly concessional or semi-concessional terms so as to preserve external debt sustainability in accordance with pre-established criteria and avoid the accumulation of additional payment arrears. - External debt contracted must have a grant element of *Madagascar Economic Development Paper 11* ### 35.0 percent or more (highly concessional) or between a minimum of 20.0 percent and 35.0 percent ### cr17225 - 35.0 percent or more (highly concessional) or between a minimum of 20.0 percent and 35.0 percent ### Public financing, debt, and fiscal framework - Non-concessional borrowing will be limited to the debt ceilings agreed under the ECF arrangement to avoid short-term liquidity problems and medium-term or long-term solvency problems while ensuring development financing. - Domestic financing emphasis: - Secure mainly through auctioned Treasury Bills. - Reduce the use of statutory advances. - For 2017, limit on withdrawal of statutory advances is set at the equivalent of 5 percent of the government's ordinary revenue in 2016. - Strategy foresees no recourse to statutory advances in 2018. - Planned increase in public investment: - 7.9 percent of GDP in 2017 - 9.8 percent in [2018] - 10.5 percent in 2019 - Planned annual average investment equivalent to 9.5 percent of GDP during 2017–2019 to sustain growth. ### Inclusive growth, private sector, and SEZs - Growth drivers and resource endowments: - Natural capital representing 25.0 percent to 30.0 percent of total wealth. - Human capital representing close to 48.0 percent of total wealth yet underqualified. - Arable land representing 40.0 percent of natural capital. - Priority sectors for inclusive growth: renewable energies, transportation infrastructures, health, education, social protection expansion. - Special Economic Zones (SEZs): - Draft SEZ law aims to promote investment and job creation across industrial, agro-industrial, science and technology, tourism, finance, transport, and logistics activities. - SEZs exempt from all charges and operated under concession for a renewable term of three years. - Proposed SEZ law provisions: - (i) Tax and customs benefits, protections from nationalism/expropriation/arbitrary requisition; eligibility for customs warehousing for a term of 36 months, renewable once; exemption from customs duties and import taxes for materials and equipment used in construction or operation of SEZs; VAT exemption for imports. - (ii) Hiring: no restrictions on middle and senior management hires; only 5 percent of non-management positions may be reserved for expatriates. - (iii) Principles for foreign currency transactions (exemption from taxes, fees, and administrative charges) and dispute resolution mechanisms between private actors and the government and/or SEZ businesses. ### Macroeconomic performance and outlook - 2016 economic expansion: 4.2 percent, driven by agriculture, free-trade, tourism, and construction and public works. - 2017 outlook: - Growth expected at 4.3 percent (adjusted from initial forecast of 4.5 percent) due to drought and cyclone impacts. - Average growth projected at slightly above 5.0 percent during 2017–2019. - Per capita income: - US$402 in 2015 - US$405 in 2016 - US$416 in 2017 (expected) ### Business climate and institutional reforms - World Bank Doing Business rankings: - Slipped from 157th in 2014 to 164th in 2015. - Ranked 169th in 2016 and improved to 167th in 2017. - Key constraints identified: - Electricity supply ranked last. - Access to financing ranked 180th. - Construction permits ranked 177th; recording title to property ranked 153rd; contract execution ranked 146th. - Political uncertainty and bribery considered major constraints. - Ongoing and planned reforms: - Completion of PPP law; corporations law; decree establishing the national authority in charge of corrective commercial measures (ANCC); anti-corruption law; new mining code not yet passed. - PPP terms must be published on the MFB site within one month after signature. - Proposed law on asset recovery drafted but not yet approved; decree creating the asset recovery authority dependent on law approval. - New real property code being drafted; automation of customs procedures, online VAT payments, and JIRAMA reforms underway; law on production and dissemination of statistics planned. - EDBM measures: online business creation, electronic/mobile payment of registration fees, adoption of unique identification number. - Institutional dialogue mechanisms established: public private dialogue (DPP), Strategic Dialogue Group (GDS), Commission on Business Law Reform, Partnership Framework for Budget Support (CPAB), Coordinating Committee on Business Climate Reforms, Reform Program Technical Monitoring Committee (CTSPR). ### Governance, anti-corruption, and asset recovery - Law 2016-020 on the fight against corruption approved, replacing the 2004 law. - Objectives: ensure integrity in public/elective office, reform private sector practices. - Provisions include dynamic, harmonized asset disclosure management; concept of disqualification for senior government officials; sector policy to prevent and control corruption. - Introduces/updates corruption offenses: misappropriation of public assets, conflicts of interest, corruption by private-sector entities, corporate criminal liability, misappropriation of private assets; protections for witnesses, whistleblowers, and enforcement agents; strengthens BIANCO powers. - Prohibits use of influence or abuse of power to influence votes or public/union/association elections. - Anti-corruption institutional framework: - Identified implementing institutions: High Counsel on Integrity (CSI), BIANCO, National Financial Intelligence Unit (SAMIFIN), local anti-corruption centers (PACs), and the agency in charge of asset recovery. - PACs (created by Law 2016-021) to be gradually established in the six provincial capitals; Antananarivo PAC expected in 2017, others in 2018. - PACs’ jurisdiction extends to all offenses relating to corruption and money laundering. - Asset recovery law drafted; intended to create attachment and confiscation mechanisms for proceeds of unlawful activity; proposed law complete and to be submitted to the legislature in May (year in source); decree establishing the agency dependent on legislative adoption. - Implementation needs: - Shorten time to process anti-corruption cases. - Implement a corruption statistics system based on BIANCO and SAMIFIN surveys; publish periodic statistical information to monitor PAC performance. - Coordination, capacity-building actions, and substantial budget appropriations are indispensable. ### Rural development and agriculture - Sector importance and indicators: - Employs 75.0 percent of the total population and 60.0 percent of youths. - Accounts for 86.0 percent of the total number of jobs. - Agricultural value added estimated at 27.0 percent of GDP. - Growth rate of the sector about 1.5 percent, below demographic growth. - Area potentially available to large-scale production estimated at over 35 million hectares. - Average household size: rural 4.9 persons; urban 4.5 persons; national average 4.8 persons. - Key crops and production: - Rice: occupies 1.2 million hectares; employs 2.0 million rural households; production of 4.0 million tons per year consumed. - Cassava: represents 30.0 percent of cultivated land; production of 3.0 million tons per year. - Maize: represents 12.0 percent of cultivated areas; 75.0 percent consumed and 25.0 percent used for animal feed. - Principal challenges: low productivity, small operations, obsolete means of production, access to fertilizer/improved seeds, climate risks, insecure land tenure, underinvestment. - Strategic objectives and measures: - (i) Increase productivity: quality inputs, research funding, irrigation investment, land tenure strengthening, small equipment, farmer training, diversified financing including microfinance. - (ii) Expand production areas: secure land tenure; promotion of investment zones. - Preliminary PSAEP study: an 86.0 percent increase in farming could generate a 40.0 percent increase in farm incomes and ensure food security for close to 20.0 percent of the rural population, requiring increasing cultivated land by 2 million hectares. - (iii) Food and nutritional security: strengthen storage infrastructures, post-harvest procedures, research, producer groupings, small processing units, early warning systems. - (iv) Access to local markets and export repositioning: develop agro-industry and industrial fisheries, ranching development. - (v) Improved sector governance: organization and professionalization, reform agricultural education and training, retrain actors, platforms for dialogue, support center for production and marketing, standardize AEP statistical system. - (vi) Improve collection and distribution system: develop competition in controlled collection areas; rehabilitate infrastructures. - (vii) Coordinate agriculture with industry: develop agro-industry; rehabilitate and expand rural roads. - (viii) Expand social protection for vulnerable farmers to improve resilience to climate-related natural disasters. ### Resilience, risk, and disaster management - Vulnerabilities and historical impacts: - Six periods of drought between 1990 and 2013: 200 deaths and 3,515,290 affected. - Three major floods during 1990–2013: 45 dead, 82,987 persons affected, economic losses estimated at US$150 million. - FAO 2015 impact: cyclones/heavy rains flooded 25,000 hectares of rice, reduced rice production by 6.0 percent; cassava and maize declined by an average of 10.0 percent; FAO estimated 1.9 million persons affected by food insecurity in 2015 (1.4 million moderate, nearly 450,000 severe). - Enawo cyclone provisional assessment (early March 2017): 80 deaths; over 160,000 injuries including over 32,000 in Antananarivo; 100 percent of vanilla plantations and 80.0 percent of rice crops in the northern part destroyed. - 2017 impacts: drought and cyclone in first half led to downward adjustment of 2017 growth target from 4.5 percent to 4.3 percent; agricultural production outlook expected to decline in 2017. - Strategy components: - (i) Strengthen national capacities and BNRGC regional offices; rely on local communities. - (ii) Increase resilience of vulnerable populations via disaster early warning systems, comprehensive information systems, education/outreach on climate change, mobilize humanitarian and development assistance. - (iii) Institutionalize inclusion of risk/disaster considerations across development actors. - (iv) Establish financial mechanisms for real-time emergency and mitigation responses. ### Infrastructure, transport, and market access - Market integration challenges and impacts on producers and consumers. - Road network condition and access: - Percentage of communes accessible by road throughout the year roughly 40 percent for the last three years. - Percentage of the national highway network paved and in good condition: 45.0 percent. - Percentage of unpaved national roads in good condition: 14.0 percent in 2015. - Percentage of rural roads in good condition: 12.0 percent. - Strategy priorities: - Restore financial capacity of the FPR by increasing its budget by 10 percent to 25 percent. - Ensure access to areas with strong production potential and palpable economic and social impacts. ### Energy development - JIRAMA reform priorities: implement audit recommendations, lease thermal plants and generators, competitively recruit management, transition from thermal to hybrids or lower-cost fuel, income protection, prevent illegal connections/theft, reduce technical/non-technical losses, transparency and governance in contracts, gradual tariff adjustment. - Renewable energy rationale: less pollution, accessibility, lower-cost development, sustainable solution. - Financing constraint: high investment cost; few private initiatives to date (Barefoot College project partnership, Elec Antin micro plant, biomass thermoelectric plant in 2012, wind farm in 2007, Solar Scaling project with IFC support). - Energy strategy pillars: - (i) Production from renewable sources: hydraulic, solar, wind. - (ii) Hydroelectric development. - (iii) Development of electricity lines. - Prepared financing plan for four priority projects: hydro-solar-wind project in the Grand Sud; Tana-Tamatave transmission line interconnection (250 kilometers); Fianarantsoa Mankara-Mananjary transmission line interconnection. - Strategy objectives: improved legal framework; development/preservation of natural capital; access to sustainable energy for all; rural/semi-urban/urban electrification; energy security and independence; improved regulatory/institutional framework; sustainable financing. ### Education, health, and social protection - Health access and quality: - Roughly 77.0 percent of EPM respondents state they have access to healthcare facilities. - Office visits free but medicine rarely available; patients often pay part or all of medicine costs. - Education and literacy: - Illiteracy rate declined; school enrollment increased following measures reducing parental expenses. - Quality of instruction remains principal challenge in primary education. - Strategy pillars: - Improve quality of services, access to education, educational and healthcare infrastructures, institutional strengthening, create fiscal margins for social sectors. - Reinstating the preparation of MTEFs, application and monitoring of MTEFs, budget planning and programming reforms, scale up performance-based financing. - Expand social protection, define responsibilities for program support, pilot mutual insurance in certain regions. - Critical actions: implement National Universal Health Coverage Strategy; implement national health insurance and National Health Solidarity Fund (CNSS); revitalize mutual health organizations. - Create fiscal headroom by redirecting current spending to priority social sectors; institute a year of preschool in public primary schools (EPP); construct/equip new classrooms; hire additional teachers; provide school kits. - Improve services via good governance: train non-civil service teachers; community-based supervision of elementary teachers; introduce school meal programs in disadvantaged areas; expand conditional cash transfer (TMC) program; integrate community teachers into civil service by merit. - Social protection system characteristics: - Includes contributory and non-contributory systems, retirement fund, pension and insurance plans, programs for basic social services and vulnerable groups. - WFP school meals program supports 292,000 students in 1,208 public and private elementary schools in the south. ### Water, sanitation, and hygiene (WASH) - Sector performance and access: - National rate of access to water and sanitation: 41 percent (below international trends at 51 percent). - 2012 INSTAT survey: 27.7 percent of total population had access to drinking water (77.4 percent urban, 17.7 percent rural). - Regions with highest drinking water coverage: Itasy 92.0 percent; Analamanga 79.0 percent. - Rate of use of toilets estimated at 51.5 percent. - Regions with highest prevalence of open defecation: Atsimo Atsinanana, Androy, Sofia. - Sector constraints: inadequate investment, lack of maintenance, demographic growth in urban areas, lack of organized household waste collection, and financing shortages. - Strategy actions: - Clarify responsibilities between ministry and communes. - Improve sanitation service performance (material and financial resources). - Adopt funding modes that ensure efficiency and cost recovery within ability to pay. - Reduce investment costs via appropriate technologies and maintenance approaches. - Manage environmental impacts of wastewater and sewage. - Step up outreach actions and resource mobilization. ### Statistics, INSTAT reform, and M&E - Rationale: Reliable, timely statistical information required for policy, strategy, monitoring, and evaluation. - INSTAT reform priorities: - (i) Reorganization and capacity strengthening. - (ii) Enhance legal provisions: amend texts governing production and dissemination of statistics; national statistical development strategy covering 2016-2019. - (iii) Production and dissemination: publish concepts/methodologies; prepare national accounts on a new basis and quarterly accounts; conduct general census of population and housing; develop index of industrial production on a new basis; improve foreign trade statistics. - (iv) Coordinate statistics activities: conclude memoranda of understanding between the MFB, the BFM, and the Ministry of the Interior. ### Conclusion: conditions for success and risks - Conditions for success: - Domestic political stability as a precondition to increased private investment. - Widespread support from the Malagasy population and development actors; national and regional communication and outreach campaigns required. - Principal risks: - Institutional weakness: inadequate human, financial, and technical resources reducing operational capacity and jeopardizing strategy implementation and poverty reduction objectives. - Unforeseeable changes in the international context affecting investment decisions. - Unavailability of reliable information to evaluate strategy performance. - Proliferation of equivalent planning documents raising doubts about consistency and potentially discouraging individual initiatives. *Source: cr17225 - 35.0 percent or more (highly concessional) or between a minimum of 20.0 percent and 35.0 percent.* ### Conclusion ### Conclusion ### Environmental protection, biodiversity, and climate - The progress achieved in terms of protection of the environment, biodiversity, and climate should be further supported to ensure that the development of Madagascar’s natural resources is truly the basis for lasting, sustainable development and an effective means to fight poverty. - Considerable effort and attention should be given to examining Madagascar’s particular requirements and characteristics through the identification of targets and prioritization of actions; the alignment of sector strategies and implementation plans and prioritization of objectives are essential and urgent in the agriculture and environment sectors to lay the foundation for sustainable development of natural resources. ### Inclusiveness, political will, and security - The continued efforts to ensure acceptance and inclusiveness for the PND coupled the SDGs, and the manifestation of true political will to reduce inequalities will necessarily strengthen peace and security in the country. ### Human capital, health, and education - Performance in regard to human capital was “relative.” The MDGs served to “reconcile” objectives. This situation calls for renewed differentiation of support in favor of the health and education sectors. ### Institutional capacity and coordination - A strong, capable institution is needed to channel development efforts around the SDGs and turn sector framework documents into coherent actions that produce impacts for the most vulnerable. ### Role of international community and private sector - The continued mobilization and effort of the international community and the private sector is likewise needed to help Madagascar overcome present and future challenges and make tangible progress toward achieving the sustainable development objectives. ### Next steps - to organize regional workshops not only for information and communication but also to continue discussion on the prioritization of targets and choice of indicators. The RGPH will supplement the statistical bases for the exercise; and - to include SDG issues in the domestic resource mobilization strategy and the National Human Development Report. *Source: Conclusion (cr17225 - Conclusion).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17225.pdf_