IMF Staff Reviews Progress of Madagascar’s Economic Program

IMF News, September 26, 2018

Source details

Press Release No. 18/359; mission dates: September 12-26, 2018.
Mission led by Marshall Mills, Mission Chief for Madagascar.
Review covered the fourth review of Madagascar’s economic reform program supported by the IMF’s three-year Extended Credit Facility (ECF).
Statement emphasizes that views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Economic growth is expected to exceed 5 percent this year, the highest in 10 years.
Growth drivers: rebound in agricultural production (especially rice) and growing public investment.
Inflation: after peaking in late 2017, inflation has been falling steadily toward 7 percent by year-end.

Despite rising international oil prices, external developments have remained favorable.
Strong export performance underpinned by high prices and production for vanilla and mining.
The Central Bank continued building up foreign exchange reserve buffers, which reached an all-time high.

Implementation of the ECF-supported program remains broadly satisfactory.
All program targets for the first half of the year were met, except for a temporary shortfall in social spending.
Budget execution was largely as planned.
Continuing the shift from less productive public spending to investment and social spending remains a core program objective.
Delays in adjusting fuel pump price, amid rising world oil prices, social difficulties, and ongoing discussions on price structure, are creating a significant, unfunded liability to distributors.
- Staff urged authorities to:
- Minimize the impact on the budget and priority spending by progressively aligning pump prices with cost recovery.
- Eliminate the liabilities as expeditiously as conditions permit.
- Authorities are considering measures to alleviate the impact of price adjustments on the most vulnerable.
Public utility JIRAMA has made progress in reducing its needs for government transfers.
- Staff stressed the importance of intensifying efforts to limit transfers for next year, in line with the authorities’ plans.

Mission and authorities discussed reforms underway in monetary policy, the financial sector, and public financial management with IMF technical assistance.
The Central Bank is strengthening its operational frameworks to better manage bank liquidity, limit volatility in the foreign exchange market, and build reserves.

Progress on structural reforms includes the opening of the first anti-corruption center.
Authorities and staff agreed on the continuing priority of strengthening governance and the fight against corruption.
Staff stressed the vital importance of adopting before the end of the year the two laws submitted to parliament on illicit asset recovery and anti-money laundering.
- Failure to adopt these laws would expose Madagascar to potentially far-reaching economic consequences, particularly on the cost of cross-border transactions.

The mission met with Acting President Rivo Rakotovao, Prime Minister Christian Ntsay, Minister of Finance and Budget Vonintsalama Andriambololona, Central Bank Governor Alain Rasolofondraibe, other senior officials, private sector representatives, civil society, and development partners.
“The mission would like to thank the Malagasy authorities for their strong cooperation and the constructive discussions.”

IMF Communications Department — Press Release No. 18/359, September 26, 2018.