IMF Staff Completes Mission to Madagascar for 2017 Article IV and First ECF Review

IMF News, March 23, 2017

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Canonical URL: IMF Staff Completes Mission to Madagascar for 2017 Article IV and First ECF Review

Press Release No. 17/96, March 23, 2017.
IMF team led by Marshall Mills, Mission Chief for Madagascar, visited Antananarivo from March 9–22, 2017 to conduct the 2017 Article IV Consultation and discuss the first review of Madagascar’s program under the three-year Extended Credit Facility (ECF).
Following conclusion of ongoing discussions, the IMF Executive Board could consider the first ECF review and the 2017 Article IV Consultation in June 2017.

Madagascar’s GDP growth reached 4.2 percent in 2016.
Growth is currently projected to reach 4.3 percent in 2017.
Inflation is expected to remain contained at 7.7 percent.
Positive external developments prior to the cyclone enabled the central bank to boost reserves to USD 1.12 billion at end-February 2017.
The outlook is diminished by a drought in the central plateau and a cyclone that hit the northeast; the full impact is not yet clear and assessments of damage and financing needs are ongoing.

The authorities have achieved significant progress under the ECF-supported program, although challenges remain.
All quantitative performance criteria for end-December 2016 were met, supported by prudent monetary policy and improving revenue collection that surpassed targets.
The government implemented the measures envisioned in most of the program’s structural benchmarks, although some were delayed.

Difficulties at state-owned enterprises, especially JIRAMA and Air Madagascar, continue to weigh on the budget and the economy.
JIRAMA’s difficulties, aggravated by drought, will require additional transfers of around 0.5 percent of GDP.
New management at JIRAMA is developing a business plan to restructure operations to reduce costs, improve revenue, and contain transfer needs.
Air Madagascar is negotiating a strategic partnership, which is expected to involve a substantial, one-off transfer from the government to offset past losses.
Staff and authorities continue discussions on recapitalizing Air Madagascar, including obtaining financial assurances, and on restructuring JIRAMA.

In the medium-term, authorities aim to break Madagascar’s pattern of low growth by scaling up priority spending and accelerating structural reform.
Authorities intend to boost investment and social spending steadily from 2017 to 2019, drawing on substantial pledges of grants and concessional loans from the donor conference of December 2016.
Management actions are intended to maintain a moderate risk of debt distress while scaling up spending.
To minimize risks, authorities are enhancing investment management and monitoring capacity.
Revised frameworks to encourage private investment are under consideration for mining, petroleum, and special economic zones.
Staff stressed the need to incentivize private investment efficiently, without undermining the government’s key objectives of enhancing revenue and containing fiscal risks.

The authorities continue to make progress in strengthening the legal and institutional framework for enhancing governance and fighting corruption.
The government is committed to submitting draft laws on asset recovery, international cooperation, and combating anti-money laundering to the next parliamentary session.
Staff emphasized the importance of following through with implementation.

The central bank maintained stable inflation while pursuing reforms to improve monetary policy effectiveness and financial stability.
Enhancing the effectiveness of policy instruments requires an efficient interbank and repo market and is a priority.
Reforms under way aim to deepen financial intermediation and inclusion, including a new law on electronic money.
Revisions under preparation to banking and microfinance laws will reinforce stability, and an audit of two government-owned non-bank financial institutions is ongoing.

The mission met with President Hery Rajaonarimampianina; Speaker of the National Assembly Jean Max Rakotomamonjy; Prime Minister Olivier Solonandrasana; Minister of Finance and Budget Gervais Rakotoarimanana; Minister of Economy and Planning and interim Minister of Energy and Hydrocarbons Herilanto Raveloharison; Central Bank Governor Alain Rasolofondraibe; Commissioner General Léon Rajaobelina; other members of parliament; senior officials; private sector representatives; civil society; and development partners.
Mission statement: “The mission takes this opportunity to thank the Malagasy authorities for their strong cooperation and the constructive discussions that took place.”

IMF Staff Completes Mission to Madagascar for 2017 Article IV and First ECF Review — Press Release No. 17/96, March 23, 2017.