## 1. History of Electricity Sector and JIRAMA’s Reforms

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### Background
- Around 36 percent of the population has access to electricity.
- Energy provision composition:
  - 83 percent from wood and charcoal.
  - 17 percent from other sources; around 11 percent coming from hydrocarbons.
- Installed electricity capacity totaled 718MW in 2023, composition:
  - Fossil fuels: 53 percent of installed capacity.
  - Hydroelectricity: 33 percent.
  - Solar energy: 14 percent.
- Economically feasible potential hydroelectric power: 7,800MW, with only 3 percent currently used.
- Solar potential: 2,800 hours of sun estimated annually.
- Wind potential estimated at 2,000MW.
- JIRAMA:
  - Created in 1975; main operator in urban areas.
  - Responsible for transmission and distribution in urban areas and for both electricity and water activities (note focuses on electricity).
  - Operates three interconnected networks covering Antananarivo, Toamasina, and Fianarantsoa, representing 80 percent of overall power demand, plus around 100 stand-alone urban networks and remaining rural areas served by ADER.

### Assessment of JIRAMA Issues
- Recurrent outages:
  - Average of 6 hours of outage per day in Antananarivo in October 2024.
- Three main operational issues:
  1. Insufficient and inefficient production.
  2. Losses during transmission, distribution, and commercialization.
  3. Tariffs below costs.

- Production and efficiency
  - Electricity production mix (based on 2021 production numbers): heavy fuel and diesel 54 percent, hydroelectricity 45 percent, other renewables 1 percent.
  - Thermal power plants availability factor: around 45 percent (benchmark acceptable range 80 to 90 percent).
  - Hydroelectric availability factor: around 75 percent.
  - Fuel consumption: around 250 grams per kWh (reference values for similar plants between 200 and 215 grams per kWh).
  - JIRAMA’s electricity production reached 1,953 GWh in 2023.
  - New hydroelectric projects under preparation: Ranomafana, Sahofika and Volobe (faced with delays).
  - Solar projects under construction (e.g., FINEXPO) and another thermal power plant project underway.

- Losses in the system
  - Transmission losses: 8.2 percent of JIRAMA’s production (benchmark 5 to 7 percent).
  - Distribution losses: 22.6 percent (benchmark 9 to 10 percent). JIRAMA set a medium-term objective of 12 percent distribution losses in 2016.
  - Non-collection losses: 11 percent (benchmark 5 percent). More recent JIRAMA data suggest non-collection losses increased to around 20 percent.
  - Causes: lack of maintenance, reinforcement and extension delays, illicit connections, exemptions, meter-reading refusals.

- Tariffs and costs
  - Average price for electricity: 599 ariary per kWh in 2023 (around US$13 cents per kWh).
  - Total cost per kWh is twice as high based on JIRAMA’s estimations.
  - Cost composition in 2023: fuel expenses around 56 percent of total costs; electricity purchases from other suppliers 30 percent.
  - Tariff adjustment: increase in electricity tariffs for businesses adopted by the Council of Ministers on October 23rd, 2024, to be staggered over three years: 20 percent in the first year and 16 percent in the two subsequent years.

- Financial and governance risks
  - 2019–21 SOE health check (Fund analysis): very elevated risks on profitability and solvency.
  - Net profit margin: -40 percent in 2021.
  - Debt to asset ratio: 160 percent in 2021.
  - Liquidity ratio (current assets over current liabilities): 85 percent in 2021.
  - Commercial revenue covers only half of exploitation costs.
  - Governance issues: reports of widespread corruption, misappropriation, and theft; May 2024 convictions of former CEO and interim CEO to ten years of forced labor for abuse of office, misappropriation of public funds and money laundering (bonuses of MGA 40 to 180 million awarded to managers in 2021 despite financial difficulties).

### History of Reforms and Programs (Box 1)
- 1974 law 74-002 gave the State exclusive right to intervene in the sector; JIRAMA created by law 75-024 in October 1975.
- 1998 electricity reform law (law 98-032) unbundled the industry and allowed competition via concessions; rural electrification agency set up in 2002 (decree 2002-1550).
- 2017 law (law 2017-020) intended to separate production, transmission, distribution/commercialization and attract private capital; in practice transmission and distribution still managed by JIRAMA and JIRAMA’s legal status remains unclear.
- JIRAMA’s financial decline began in the 1980s after costly hydroelectric installations (Andekaleka and Namorona) and worsened with tariff reductions in 2009.
- Notable programs:
  - PAGOSE (2016): Project to improve governance and operations in the electricity sector (objectives: planning and financial sustainability, operational performance and governance, reliability, coordination).
  - LEAD project (2019–24): increase electricity access for households, businesses, and health centers.
  - DECIM project (2023–2028): financing hybridization of JIRAMA thermal plants with solar PV and battery storage; deployment of smart-grid and smart-metering technologies; strengthening, densifying and extending climate-resilient distribution grids and connecting additional customers; feasibility, affordability and other relevant studies.

### Impact on Economic Development
- Constraints on firms and growth:
  - JIRAMA’s deficiencies constrain firms’ productivity, economic growth and development, making finalization and implementation of JIRAMA’s recovery plan increasingly urgent and requiring strong executive support.

- Fiscal impact
  - JIRAMA incurs an annual deficit financed partly by government transfers.
  - JIRAMA net cash flow in 2023: MGA 1,268 billion or 1.8 percent of GDP.
  - Government transfers to JIRAMA and selected suppliers in 2023: MGA 895 billion or 1.3 percent of GDP.
  - JIRAMA did not pay employees’ wage income taxes amounting to MGA 13 billion between January and August 2024.
  - JIRAMA’s debt to the private sector (including arrears to suppliers) at end-2023: MGA 1,880 billion or 2.7 percent of GDP (estimation based on 2023 non-audited financial accounts).
  - Taking into account debt to the State, JIRAMA’s debt increases to MGA 5,316 billion or around 7.6 percent of GDP at end-2023.
  - Government issued special T-bills in 2022 to pay for JIRAMA’s fuel requisitions, treated as loans from the government to JIRAMA.

- Impact on business competitiveness
  - Electricity is reported as an impediment by 17 percent of firms surveyed in the World Bank Enterprise Survey for Madagascar (2022), making it the second biggest constraint to competitiveness (survey covered 386 businesses).
  - For firms reporting outages (around 52 percent of firms surveyed), there are 6.3 electrical outages in a typical month, which last an average of 3.1 hours.
  - Cross-country comparisons show electricity ranked above other constraints such as corruption or informality for Malagasy businesses.

### Key Statistics and Benchmarks (selected)
- Electricity access: 36 percent of population.
- Energy provision: 83 percent wood and charcoal; 17 percent other sources; 11 percent hydrocarbons.
- Installed capacity (2023): 718MW.
- Hydropower potential: 7,800MW (3 percent used).
- Solar potential: 2,800 hours annually.
- Wind potential: 2,000MW.
- JIRAMA production (2023): 1,953 GWh.
- Thermal availability factor: around 45 percent (benchmark 80–90 percent).
- Hydro availability factor: around 75 percent.
- Fuel consumption: around 250 grams per kWh (reference 200–215 grams per kWh).
- Transmission losses: 8.2 percent (benchmark 5–7 percent).
- Distribution losses: 22.6 percent (benchmark 9–10 percent); 2016 medium-term objective: 12 percent.
- Non-collection losses: 11 percent (benchmark 5 percent); JIRAMA recent data: around 20 percent.
- Average price for electricity (2023): 599 ariary per kWh (around US$13 cents per kWh).
- Net profit margin (2021): -40 percent.
- Debt to asset ratio (2021): 160 percent.
- Liquidity ratio (2021): 85 percent.
- JIRAMA net cash flow (2023): MGA 1,268 billion or 1.8 percent of GDP.
- Government transfers to JIRAMA and selected suppliers (2023): MGA 895 billion or 1.3 percent of GDP.
- JIRAMA debt to private sector (end-2023): MGA 1,880 billion or 2.7 percent of GDP.
- JIRAMA total debt including State (end-2023): MGA 5,316 billion or around 7.6 percent of GDP.
- Unpaid employees’ wage income taxes (Jan–Aug 2024): MGA 13 billion.
- Tariff increases for businesses adopted October 23rd, 2024: 20 percent in the first year and 16 percent in the two subsequent years.

---

### 13. Madagascar’s electricity sector performance is worse than in other similar countries in

### Cross-country comparison of electricity and firms
- 17 percent of firms report electricity as their biggest obstacle to doing business (comparator group average: 12 percent).
- 52 percent of businesses report experiencing electrical outages (comparator group average: 73 percent).
- For firms experiencing outages, average losses due to outages represent 26 percent of their annual sales (well above all countries in the comparator group).
- The number of days to obtain an electrical connection upon application is 73 days on average (higher than in all comparator countries).
- 17 percent of businesses own or share a generator (comparator group average: 54 percent).
- Data source: World Bank Enterprise Surveys.

### Firm-level impacts and productivity
- Madagascar’s average revenue-based total factor productivity (TFPR) is lower than that of peer countries (source: World Bank Enterprise Surveys and IMF staff estimates).
- Descriptive evidence suggests a negative relationship between TFPR and frequency of power outages at the firm level.
- Supporting external evidence cited:
  - Allcott et al. (2016): electricity shortages lowered productivity by 1.5 percent for the average manufacturing plant in India.
  - Fisher-Vanden et al. (2015): electricity shortages raised production costs by 8 percent on average for Chinese firms.
- TFPR estimates constructed following Francis et al. (2020) using a translog production function with capital and labor inputs.

### Impact on economic growth
- Electricity availability directly impacts economic growth and has indirect benefits via commercial activity at night, reduced indoor air pollution, and reduced time spent collecting firewood.
- Best and Burke (2018) panel regression (2006-16) finds a 10 percentage point increase in electricity capacity per capita could increase GDP per capita growth by between 0.6 and 1.1 percentage points over a ten-year period.
- Back-of-the-envelope implication from Best and Burke (2018): if Madagascar’s electricity capacity were 10 percentage points higher, annual GDP per capita could have been 9 percent greater after a ten-year period.
- IMF staff regression (Box 1) estimates: a one percentage point increase in the share of population with electricity access raises average annual per capita GDP growth between 0.04 and 0.09 percentage points.
- IMF staff estimates (Box 1 and paragraph 16): a ten-percentage point rise in electricity access raises annual per capita GDP growth by between 0.4 and 0.9 percentage points.
- Scenario: increasing electricity access from the current 35 percent to the objective of 70 percent by 2030 (PGE target) implies GDP per capita could be anywhere between 13 and 28 percent higher relative to the baseline after 10 years.

### Impact on Human Development Index (HDI) and regional disparities
- Madagascar’s HDI has stagnated between 0.49 and 0.50 for the last ten years (UNDP classification: “low human development”).
- Machine-learning district estimates (Sherman et al., 2023): wealthier districts (e.g., Toamasina I) had HDI just under 0.66 in 2019; poorer districts (e.g., Benenintra) around 0.37.
- The gap in HDI between the most and least developed districts in Madagascar has stagnated at around 0.34 since 2013.
- Instrumental-variable estimation (following Dinkelman (2011)) finds:
  - A 10-percentage point increase in the share of households with reliable electricity access raises national HDI by 1.3 percentage points.
- Counterfactual scenario if household electricity access rises to 70 percent by 2030:
  - National HDI would rise by 16 percent.
  - The HDI gap between the most and least developed district would narrow by 29 percent.
  - Least developed southern districts could see district-level HDI rise by close to 25 percent.
  - National HDI would rise to 0.58 (placing Madagascar on par with countries such as Cameroon).
  - Note: as of 2023, Madagascar’s HDI stood at 0.49, ranking 177th out of 192 countries; a HDI of 0.58 would move the country up by around 25 places.

### Comparison with other African utilities and reform correlates
- In SSA, one third of electricity utilities encounter financial difficulties (UPBEAT/ESMAP analysis, 2012-2018).
- Only one in three utilities in SSA recover operating and debt-servicing costs (one in four if subsidies are excluded).
- Fewer than half the utilities surveyed published audited financial statements; fewer than one in three had unqualified audit opinions.
- Improvements in cost recovery have been achieved via:
  - Reductions in non-technical losses (example: Côte d’Ivoire).
  - Sharp increases in capacity and network rehabilitation (example: Rwanda: generating capacity increased from 76 MW in 2009 to 225 MW in 2020; electricity access increased from 6 percent in 2009 to 54 percent in March 2020).
- Successful electricity sector reforms are correlated with:
  - Presence of an electricity law, a sector regulator, vertical unbundling, and private participation.
  - Côte d’Ivoire highlighted for early IPPs (1994) and successful privatization via concession of Compagnie Ivoirienne d’Electricité.

### Policy recommendations and recovery objectives
- Overarching objective: JIRAMA should reach financial sustainability and no longer depend on government transfers; also increase electricity access and shift production mix toward renewables.
- Recommended actions:
  - Increase production capacity and efficiency and expand access:
    - Electricity production should be at least doubled by 2030 (estimate).
    - Improve production efficiency by reducing fuel needed to produce electricity, including better monitoring of fuel stocks (geo-filling).
  - Shift the production mix toward renewables:
    - Target production mix: 85 percent renewables (75 percent hydroelectricity, 5 percent wind energy, 5 percent solar energy).
    - Reduce thermal (fossil fuel) production to 15 percent.
    - Estimated potential resources: hydroelectric power potential 7,800MW; solar potential with 2,800 hours of sun annually; wind potential 2,000MW.
    - Note: many hydroelectric plants have little storage capacity and cannot fully substitute thermal during peak hours; solar tends to supply outside peak hours and is more expensive than hydroelectricity.
  - Reduce losses:
    - Aim to reduce losses to around 20-25 percent of production (transmission, distribution, commercialization phases).
    - Implement broad use of smart and prepaid meters; fully extend prepaid meters in all administrations.
    - Invest in maintenance to improve network quality.
  - Review tariff structure:
    - Tariffs should be in line with recovery costs (operational, distribution, commercialization, investment).
    - First-best: one single household tariff with targeted transfers to compensate most vulnerable households.
    - Second-best (when targeted transfers are difficult): tariff structure by consumption brackets.
    - Implement an automatic indexation mechanism to keep prices in line with costs.

*Source: IMF staff paper “The Electricity Sector and JIRAMA” (SIPEA2025026).*

### 1. History of Electricity Sector and JIRAMA’s Reforms ..................................................................

### 1. History of Electricity Sector and JIRAMA’s Reforms

### Background
- Around 36 percent of the population has access to electricity.
- Most of Madagascar’s energy provision comes from traditional sources: 83 percent from wood and charcoal; the remainder 17 percent from other sources, with around 11 percent coming from hydrocarbons.
- Installed electricity capacity totaled 718MW in 2023, with the following composition:
  - Fossil fuels: 53 percent of installed capacity.
  - Hydroelectricity: 33 percent.
  - Solar energy: 14 percent.
- Economically feasible potential hydroelectric power is estimated at 7,800MW, with only 3 percent currently used.
- Solar potential: 2,800 hours of sun estimated annually.
- Wind potential estimated at 2,000MW.
- JIRAMA, created in 1975, is the main operator in urban areas; responsible for transmission and distribution in urban areas and for both electricity and water activities (this note focuses on electricity).
- JIRAMA operates three interconnected networks covering Antananarivo, Toamasina, and Fianarantsoa, representing 80 percent of overall power demand, plus around 100 stand-alone urban networks and remaining rural areas served by ADER.

### Assessment of JIRAMA Issues
- Recurrent outages: average of 6 hours of outage per day in Antananarivo in October 2024.
- Three main operational issues:
  1. Insufficient and inefficient production.
  2. Losses during transmission, distribution, and commercialization.
  3. Tariffs below costs.

- Production and efficiency
  - Electricity production mix (based on 2021 production numbers): heavy fuel and diesel 54 percent, hydroelectricity 45 percent, other renewables 1 percent.
  - Thermal power plants availability factor: around 45 percent (benchmark acceptable range 80 to 90 percent).
  - Hydroelectric availability factor: around 75 percent.
  - Fuel consumption: around 250 grams per kWh (reference values for similar plants between 200 and 215 grams per kWh).
  - JIRAMA’s electricity production reached 1,953 GWh in 2023.
  - New hydroelectric projects under preparation: Ranomafana, Sahofika and Volobe (faced with delays).
  - Solar projects under construction (e.g., FINEXPO) and another thermal power plant project underway.

- Losses in the system
  - Transmission losses: 8.2 percent of JIRAMA’s production (benchmark 5 to 7 percent).
  - Distribution losses: 22.6 percent (benchmark 9 to 10 percent). JIRAMA set a medium-term objective of 12 percent distribution losses in 2016.
  - Non-collection losses: 11 percent (benchmark 5 percent). More recent JIRAMA data suggest non-collection losses increased to around 20 percent.
  - Causes: lack of maintenance, reinforcement and extension delays, illicit connections, exemptions, meter-reading refusals.

- Tariffs and costs
  - Average price for electricity: 599 ariary per kWh in 2023 (around US$13 cents per kWh).
  - Total cost per kWh is twice as high based on JIRAMA’s estimations.
  - Cost composition in 2023: fuel expenses around 56 percent of total costs; electricity purchases from other suppliers 30 percent.
  - Tariff adjustment: increase in electricity tariffs for businesses adopted by the Council of Ministers on October 23rd, 2024, to be staggered over three years: 20 percent in the first year and 16 percent in the two subsequent years.

- Financial and governance risks
  - 2019–21 SOE health check (Fund analysis): very elevated risks on profitability and solvency.
  - Net profit margin: -40 percent in 2021.
  - Debt to asset ratio: 160 percent in 2021.
  - Liquidity ratio (current assets over current liabilities): 85 percent in 2021.
  - Commercial revenue covers only half of exploitation costs.
  - Governance issues: reports of widespread corruption, misappropriation, and theft; May 2024 convictions of former CEO and interim CEO to ten years of forced labor for abuse of office, misappropriation of public funds and money laundering (bonuses of MGA 40 to 180 million awarded to managers in 2021 despite financial difficulties).

### History of Reforms and Programs (Box 1)
- 1974 law 74-002 gave the State exclusive right to intervene in the sector; JIRAMA created by law 75-024 in October 1975.
- 1998 electricity reform law (law 98-032) unbundled the industry and allowed competition via concessions; rural electrification agency set up in 2002 (decree 2002-1550).
- 2017 law (law 2017-020) intended to separate production, transmission, distribution/commercialization and attract private capital; in practice transmission and distribution still managed by JIRAMA and JIRAMA’s legal status remains unclear.
- JIRAMA’s financial decline began in the 1980s after costly hydroelectric installations (Andekaleka and Namorona) and worsened with tariff reductions in 2009.
- Notable programs:
  - PAGOSE (2016): Project to improve governance and operations in the electricity sector (objectives: planning and financial sustainability, operational performance and governance, reliability, coordination).
  - LEAD project (2019–24): increase electricity access for households, businesses, and health centers.
  - DECIM project (2023–2028): financing hybridization of JIRAMA thermal plants with solar PV and battery storage; deployment of smart-grid and smart-metering technologies; strengthening, densifying and extending climate-resilient distribution grids and connecting additional customers; feasibility, affordability and other relevant studies.

### Impact on Economic Development
- JIRAMA’s deficiencies constrain firms’ productivity, economic growth and development, making finalization and implementation of JIRAMA’s recovery plan increasingly urgent and requiring strong executive support.

- Fiscal impact
  - JIRAMA incurs an annual deficit financed partly by government transfers.
  - JIRAMA net cash flow in 2023: MGA 1,268 billion or 1.8 percent of GDP.
  - Government transfers to JIRAMA and selected suppliers in 2023: MGA 895 billion or 1.3 percent of GDP.
  - JIRAMA did not pay employees’ wage income taxes amounting to MGA 13 billion between January and August 2024.
  - JIRAMA’s debt to the private sector (including arrears to suppliers) at end-2023: MGA 1,880 billion or 2.7 percent of GDP (estimation based on 2023 non-audited financial accounts).
  - Taking into account debt to the State, JIRAMA’s debt increases to MGA 5,316 billion or around 7.6 percent of GDP at end-2023.
  - Government issued special T-bills in 2022 to pay for JIRAMA’s fuel requisitions, treated as loans from the government to JIRAMA.

- Impact on business competitiveness
  - Electricity is reported as an impediment by 17 percent of firms surveyed in the World Bank Enterprise Survey for Madagascar (2022), making it the second biggest constraint to competitiveness (survey covered 386 businesses).
  - For firms reporting outages (around 52 percent of firms surveyed), there are 6.3 electrical outages in a typical month, which last an average of 3.1 hours.
  - Cross-country comparisons show electricity ranked above other constraints such as corruption or informality for Malagasy businesses.

### Key Statistics and Benchmarks (selected)
- Electricity access: 36 percent of population.
- Energy provision: 83 percent wood and charcoal; 17 percent other sources; 11 percent hydrocarbons.
- Installed capacity (2023): 718MW.
- Hydropower potential: 7,800MW (3 percent used).
- Solar potential: 2,800 hours annually.
- Wind potential: 2,000MW.
- JIRAMA production (2023): 1,953 GWh.
- Thermal availability factor: around 45 percent (benchmark 80–90 percent).
- Hydro availability factor: around 75 percent.
- Fuel consumption: around 250 grams per kWh (reference 200–215 grams per kWh).
- Transmission losses: 8.2 percent (benchmark 5–7 percent).
- Distribution losses: 22.6 percent (benchmark 9–10 percent); 2016 medium-term objective: 12 percent.
- Non-collection losses: 11 percent (benchmark 5 percent); JIRAMA recent data: around 20 percent.
- Average price for electricity (2023): 599 ariary per kWh (around US$13 cents per kWh).
- Net profit margin (2021): -40 percent.
- Debt to asset ratio (2021): 160 percent.
- Liquidity ratio (2021): 85 percent.
- JIRAMA net cash flow (2023): MGA 1,268 billion or 1.8 percent of GDP.
- Government transfers to JIRAMA and selected suppliers (2023): MGA 895 billion or 1.3 percent of GDP.
- JIRAMA debt to private sector (end-2023): MGA 1,880 billion or 2.7 percent of GDP.
- JIRAMA total debt including State (end-2023): MGA 5,316 billion or around 7.6 percent of GDP.
- Unpaid employees’ wage income taxes (Jan–Aug 2024): MGA 13 billion.
- Tariff increases for businesses adopted October 23rd, 2024: 20 percent in the first year and 16 percent in the two subsequent years.

*Source: IMF staff paper “The Electricity Sector and JIRAMA” (SIPEA2025026).*

### 13. Madagascar’s electricity sector performance is worse than in other similar countries in

### 13. Madagascar’s electricity sector performance is worse than in other similar countries in

### Cross-country comparison of electricity and firms
- 17 percent of firms report electricity as their biggest obstacle to doing business (comparator group average: 12 percent).
- 52 percent of businesses report experiencing electrical outages (comparator group average: 73 percent).
- For firms experiencing outages, average losses due to outages represent 26 percent of their annual sales (well above all countries in the comparator group).
- The number of days to obtain an electrical connection upon application is 73 days on average (higher than in all comparator countries).
- 17 percent of businesses own or share a generator (comparator group average: 54 percent).
- Data source: World Bank Enterprise Surveys.

### Firm-level impacts and productivity
- Madagascar’s average revenue-based total factor productivity (TFPR) is lower than that of peer countries (source: World Bank Enterprise Surveys and IMF staff estimates).
- Descriptive evidence suggests a negative relationship between TFPR and frequency of power outages at the firm level.
- Supporting external evidence cited:
  - Allcott et al. (2016): electricity shortages lowered productivity by 1.5 percent for the average manufacturing plant in India.
  - Fisher-Vanden et al. (2015): electricity shortages raised production costs by 8 percent on average for Chinese firms.
- TFPR estimates constructed following Francis et al. (2020) using a translog production function with capital and labor inputs.

### Impact on economic growth
- Electricity availability directly impacts economic growth and has indirect benefits via commercial activity at night, reduced indoor air pollution, and reduced time spent collecting firewood.
- Best and Burke (2018) panel regression (2006-16) finds a 10 percentage point increase in electricity capacity per capita could increase GDP per capita growth by between 0.6 and 1.1 percentage points over a ten-year period.
- Back-of-the-envelope implication from Best and Burke (2018): if Madagascar’s electricity capacity were 10 percentage points higher, annual GDP per capita could have been 9 percent greater after a ten-year period.
- IMF staff regression (Box 1) estimates: a one percentage point increase in the share of population with electricity access raises average annual per capita GDP growth between 0.04 and 0.09 percentage points.
- IMF staff estimates (Box 1 and paragraph 16): a ten-percentage point rise in electricity access raises annual per capita GDP growth by between 0.4 and 0.9 percentage points.
- Scenario: increasing electricity access from the current 35 percent to the objective of 70 percent by 2030 (PGE target) implies GDP per capita could be anywhere between 13 and 28 percent higher relative to the baseline after 10 years.

### Impact on Human Development Index (HDI) and regional disparities
- Madagascar’s HDI has stagnated between 0.49 and 0.50 for the last ten years (UNDP classification: “low human development”).
- Machine-learning district estimates (Sherman et al., 2023): wealthier districts (e.g., Toamasina I) had HDI just under 0.66 in 2019; poorer districts (e.g., Benenintra) around 0.37.
- The gap in HDI between the most and least developed districts in Madagascar has stagnated at around 0.34 since 2013.
- Instrumental-variable estimation (following Dinkelman (2011)) finds:
  - A 10-percentage point increase in the share of households with reliable electricity access raises national HDI by 1.3 percentage points.
- Counterfactual scenario if household electricity access rises to 70 percent by 2030:
  - National HDI would rise by 16 percent.
  - The HDI gap between the most and least developed district would narrow by 29 percent.
  - Least developed southern districts could see district-level HDI rise by close to 25 percent.
  - National HDI would rise to 0.58 (placing Madagascar on par with countries such as Cameroon).
  - Note: as of 2023, Madagascar’s HDI stood at 0.49, ranking 177th out of 192 countries; a HDI of 0.58 would move the country up by around 25 places.

### Comparison with other African utilities and reform correlates
- In SSA, one third of electricity utilities encounter financial difficulties (UPBEAT/ESMAP analysis, 2012-2018).
- Only one in three utilities in SSA recover operating and debt-servicing costs (one in four if subsidies are excluded).
- Fewer than half the utilities surveyed published audited financial statements; fewer than one in three had unqualified audit opinions.
- Improvements in cost recovery have been achieved via:
  - Reductions in non-technical losses (example: Côte d’Ivoire).
  - Sharp increases in capacity and network rehabilitation (example: Rwanda: generating capacity increased from 76 MW in 2009 to 225 MW in 2020; electricity access increased from 6 percent in 2009 to 54 percent in March 2020).
- Successful electricity sector reforms are correlated with:
  - Presence of an electricity law, a sector regulator, vertical unbundling, and private participation.
  - Côte d’Ivoire highlighted for early IPPs (1994) and successful privatization via concession of Compagnie Ivoirienne d’Electricité.

### Policy recommendations and recovery objectives
- Overarching objective: JIRAMA should reach financial sustainability and no longer depend on government transfers; also increase electricity access and shift production mix toward renewables.
- Recommended actions:
  - Increase production capacity and efficiency and expand access:
    - Electricity production should be at least doubled by 2030 (estimate).
    - Improve production efficiency by reducing fuel needed to produce electricity, including better monitoring of fuel stocks (geo-filling).
  - Shift the production mix toward renewables:
    - Target production mix: 85 percent renewables (75 percent hydroelectricity, 5 percent wind energy, 5 percent solar energy).
    - Reduce thermal (fossil fuel) production to 15 percent.
    - Estimated potential resources: hydroelectric power potential 7,800MW; solar potential with 2,800 hours of sun annually; wind potential 2,000MW.
    - Note: many hydroelectric plants have little storage capacity and cannot fully substitute thermal during peak hours; solar tends to supply outside peak hours and is more expensive than hydroelectricity.
  - Reduce losses:
    - Aim to reduce losses to around 20-25 percent of production (transmission, distribution, commercialization phases).
    - Implement broad use of smart and prepaid meters; fully extend prepaid meters in all administrations.
    - Invest in maintenance to improve network quality.
  - Review tariff structure:
    - Tariffs should be in line with recovery costs (operational, distribution, commercialization, investment).
    - First-best: one single household tariff with targeted transfers to compensate most vulnerable households.
    - Second-best (when targeted transfers are difficult): tariff structure by consumption brackets.
    - Implement an automatic indexation mechanism to keep prices in line with costs.

*Source: IMF staff estimates; World Bank Enterprise Surveys; UPBEAT/ESMAP; selected issues paper (sipea2025026).*

---


_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025026.pdf_