IMF Staff Completes Program Review Mission to Madagascar

IMF News, June 11, 2019

Source details

Press Release No. 19/207; dated June 11, 2019.
A team from the IMF led by Charalambos Tsangarides, Mission Chief for Madagascar, visited Antananarivo on May 29-June 11, 2019.
The mission discussed the fifth review of Madagascar’s economic reform program supported by the IMF’s Extended Credit Facility (ECF).
Madagascar’s ECF-supported program was approved by the IMF Executive Board in July 2016.

2018 growth reached 5.2 percent, driven by a rebound in agricultural production and investment.
Inflation decelerated to 6.1 percent at end-2018.
The current account recorded a surplus in 2018 despite higher oil prices, helped by strong vanilla and mining exports.
Economic growth is expected to exceed 5 percent again in 2019, reflecting higher public investment spending and intensified private sector activity.
For 2019, growth prospects remain positive, with growth expected to stabilize above 5 percent supported by investment, exports, improvement in the energy sector, and construction.
The central bank successfully accumulated record levels of foreign exchange reserves.

The implementation of the ECF-supported program has remained satisfactory through 2018 and is expected to remain on track in 2019.
The authorities met all the end-2018 performance criteria, despite a shortfall in domestic revenue collection.
The indicative target on domestically financed priority social spending was missed.
Authorities made good progress on the structural reform agenda, albeit at a slower pace than envisaged.

Delays in adjusting fuel pump prices in a context of high world oil prices led to increased liabilities to distributors which could weigh negatively on the budget.
Budget execution has been low so far in 2019.
The revised finance law recently adopted improves the quality of spending with more budgetary space allocated to infrastructure, health, and education expenditures, with an associated limited deterioration of the overall fiscal balance.
Maintaining debt sustainability will require strict prioritization of investment projects and monitoring of debt sustainability.

Improve domestic revenue collection, including by revising tax expenditures and exemption regimes.
Contain lower priority public spending, especially subsidies in the fuel and electricity sectors.
Continue discussions between the authorities and operators to implement the plan on fuel pricing; setting a new fuel price structure is an essential step before settling existing liabilities with distributors.
Adopt a pricing mechanism that aligns pump prices with costs, reflecting world price developments, along with targeted social measures to protect the most vulnerable from the impact of potential future price adjustments.
Improve the financial situation of the public utility JIRAMA by raising revenues, improving governance, and intensifying the fight against fraud.
Support cost-cutting measures, including through renegotiation of contracts with electricity and fuel suppliers.
Continue improving governance and the business climate, including stepping up the fight against corruption; adopt the draft law on illicit asset recovery as an urgent priority to complete the legal framework to fight corruption.
Maintain structural reforms at the central bank to strengthen the monetary policy framework and boost financial sector development.
Strengthen fiscal risk management and public procurement procedures at the Ministry of Economy and Finance.

The mission met with Prime Minister Christian Ntsay, Minister of Economy and Finance Richard Randriamandrato, Minister of Energy, Water, and Hydrocarbons Vonjy Andriamanga, Central Bank of Madagascar Governor Alain Rasolofondraibe, senior officials, and development partners.
The mission thanked the Malagasy authorities for their strong cooperation and the constructive discussions.

IMF Communications Department — End-of-Mission press release (June 11, 2019).