IMF Executive Board Completes Second Review Under the Extended Credit Facility Arrangement for Madagascar and Approves US$44.5 Million Disbursement

IMF News, December 6, 2017

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Canonical URL: IMF Executive Board Completes Second Review Under the Extended Credit Facility Arrangement for Madagascar and Approves US$44.5 Million Disbursement

On December 6, 2017, the Executive Board of the International Monetary Fund (IMF) completed the second review of Madagascar’s program supported by the Extended Credit Facility (ECF).
Decision taken without a Board meeting under lapse-of-time procedure.
Approved disbursement: SDR 31.428 million (about US$44.5 million).
Total disbursements under the ECF arrangement approved on July 27, 2016: SDR 124.834 million (approximately US$174.1 million).

Madagascar’s implementation of its economic program supported by the ECF has remained strong.
All quantitative performance criteria and indicative targets were met at end-June 2017.
Structural agenda is advancing.
Economic recovery has continued with solid growth and continued macroeconomic stability despite the drought and cyclone in early 2017.
Fiscal performance in 2017: roughly as planned, with strong revenue performance offsetting some unexpected spending pressures.
Monetary and exchange rate policy: successfully managed external challenges; inflation was stable despite weather-related shocks.
External sector:
- Current account weakened in 2017 relative to 2016, driven by the trade deficit.
- Overall external account remained strong as transfers and financial inflows largely offset the current account deficit.
- Malagasy Ariary has appreciated slightly in real effective terms.
- Central Bank of Madagascar has boosted international reserves significantly, well beyond program targets.

The 2018 budget supports the program’s core objective of strong and inclusive growth.
Financing pressures arose from a higher than expected wage bill and the strong Ariary.
Authorities’ response measures:
- Contain lower priority spending.
- Boost revenue, including increases in fuel taxes.
Investment spending: both domestically and externally-financed investment spending is expected to grow significantly, although less than targeted earlier due to capacity constraints.

Steadily raise revenue mobilization.
Gradually reduce transfers to the public utility company JIRAMA.
Scale up public investment while containing risks to macroeconomic stability and debt sustainability.
Caution that planned tax incentives should be cost-effective and should not jeopardize program goals for revenue and public investment.

Continued efforts to enhance governance and the fight against corruption are vitally important.
Priorities:
- Completion of the new legal framework (in line with international standards).
- Strengthening of enforcement.
- Continued improvement in public financial management.

Work underway to develop the financial sector is important and well-prioritized.
Authorities’ strategy aims to enhance the sector’s contribution to economic development, especially financial inclusion.
Mobile money services are growing rapidly and will be further supported by a new, modernized legal and regulatory framework.
To keep financial risks under control, initiatives are underway to strengthen supervision as well as the broader legal framework for the financial sector.

Source: IMF Press Release No. 17/467, December 6, 2017.