IMF Executive Board Completes Second Review Under the Extended Credit Facility Arrangement for the Republic of Madagascar
IMF News, September 12, 2022
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- IMF Executive Board Completes Second Review Under the Extended Credit Facility Arrangement for the Republic of Madagascar
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- Published: September 12, 2022
Program decision and financing
- The Executive Board completed the second review of Madagascar’s economic program under the Extended Credit Facility (ECF).
- The completion enables immediate disbursement of SDR 24.44 million (about US$31.9 million) to cover external and fiscal financing needs.
- Total disbursements under the arrangement to date amount to SDR 122.2 (about US$159.7 million).
Macroeconomic outlook and risks
- Recovery has been hindered by a severe cyclone season and spillovers from Russia’s war in Ukraine.
- Real GDP: 2021 growth revised up to 4.3 percent; 2022 growth projected to stall at 4.2 percent.
- Inflation: Annual average inflation projected to accelerate to 9.8 percent due to international oil and food price surges.
- Near-term outlook subject to significant uncertainty and risks:
- Downside risks: New COVID outbreaks with slow vaccination uptake; further slowdown in global growth; higher oil prices.
- Upside potential: Implementation of the Plan Emergence Madagascar reform agenda and an increase in investment could boost productivity and growth.
Policy assessment and recommendations (from Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair)
- Overall assessment: Performance under the Fund-supported program has been broadly satisfactory despite delays in structural reforms and a challenging external environment.
- Fiscal policy and revenue mobilization:
- The 2022 revised budget envisages a larger domestic primary deficit than previously contemplated.
- Higher international oil prices imply an increase in budget transfers to oil distributors and public utility companies.
- Strengthening the fight against tax fraud and improving tax arrears collection are key to offset any drop in domestic revenue collection.
- Further efforts will be needed in the 2023 budget to increase domestic revenue mobilization, reach fiscal balance, and create additional fiscal space for social spending and priority public investment.
- Budget execution and social protection:
- Improving budget execution is crucial to increase the effectiveness of fiscal policy and achieve program objectives.
- In the context of rising food and fuel prices, it is especially important to raise the execution of social spending and build stronger safety nets to protect the most vulnerable.
- Fuel pricing and public utilities:
- The recent increase in retail fuel prices is a step toward implementing an automatic fuel pricing mechanism to remove costly and regressive subsidies.
- Improving the financial situation of public utility companies is essential to reduce the need for fiscal transfers.
- Governance, transparency, and accountability:
- Authorities are encouraged to continue efforts to improve budget transparency and strengthen accountability, including through more effective enforcement of the anti-corruption legal framework.
- To enhance ex-post controls of public finances, the Cour des Comptes is being given full access as controller to the Ministry of Finance’s information systems.
- The Cour des Comptes will produce a follow-up report on the implementation of its recommendations in its audit reports on the response to the COVID-19 pandemic.
- Monetary policy:
- The central bank continues to enhance its monetary policy framework and should stand ready to further raise interest rates to contain inflationary pressures.
Selected economic indicators and key statistics (2019–24)
- GDP at constant prices (percent change):
- 2019: 4.4
- 2020: -7.1
- 2021: 4.3
- 2022 (Proj.): 4.2
- 2023 (Proj.): 5.2
- 2024 (Proj.): (value not provided)
- GDP deflator (percent change):
- 2019: 6.5
- 2020: 6.1
- 2021: 9.1
- 2022 (Proj.): 8.3
- 2023 (Proj.): 6.8
- Consumer prices (end of period):
- 2019: 4.0
- 2020: 4.6
- 2021: 6.2
- 2022 (Proj.): 12.0
- 2023 (Proj.): 9.7
- 2024 (Proj.): 8.7
- Broad money (M3) growth (percent of beginning-of-period money stock):
- 2019: 7.3
- 2020: 12.1
- 2021: 12.2
- 2022 (Proj.): 32.5
- 2023 (Proj.): 12.9
- 2024 (Proj.): 13.2
- Net foreign assets (growth percent):
- 2019: -2.6
- 2020: 2.1
- 2021: 1.0
- 2022 (Proj.): 0.4
- 2023 (Proj.): 3.0
- Net domestic assets (growth percent):
- 2019: 9.9
- 2020: 10.0
- 2021: 11.2
- 2022 (Proj.): 28.1
- 2023 (Proj.): 12.5
- 2024 (Proj.): 10.2
- Credit to the private sector (growth percent):
- 2019: 10.3
- 2020: 5.6
- 2021: 11.1
- 2022 (Proj.): 9.0
- 2023 (Proj.): 7.6
- 2024 (Proj.): 7.9
- Public finance (percent of GDP):
- Total revenue (excluding grants):
- 2019: 10.8
- 2020: 10.7
- 2021: 11.6
- 2022 (Proj.): 12.8
- Tax revenue:
- 2019: 10.6
- 2020: 9.5
- 2021: 10.4
- 2022 (Proj.): 11.3
- 2023 (Proj.): 11.9
- 2024 (Proj.): 12.6
- Grants:
- 2019: 3.1
- 2020: 2.5
- 2021: 0.6
- 2022 (Proj.): 2.0
- Budget grants:
- 2019: 0.7
- 2020: 0.9
- 2021: 0.0
- 2022 (Proj.): 0.1
- 2023 (Proj.): 0.3
- Total expenditures:
- 2019: 15.4
- 2020: 16.3
- 2021: 14.1
- 2022 (Proj.): 20.5
- 2023 (Proj.): 19.0
- 2024 (Proj.): 19.5
- Current expenditure:
- 2019: 9.6
- 2020: 8.9
- 2021: (value not provided)
- Capital expenditure:
- 2019: 5.8
- 2020: 9.3
- Overall balance (commitment basis):
- 2019: -1.4
- 2020: -4.0
- 2021: -2.9
- 2022 (Proj.): -6.5
- 2023 (Proj.): -4.8
- 2024 (Proj.): -4.7
- Domestic primary balance1:
- 2019: -1.9
- 2020: -0.3
- Total financing:
- 2019: 1.3
- 2020: 3.5
- 2021: 5.1
- 2022 (Proj.): 5.0
- Foreign borrowing (net):
- 2019: 1.8
- 2020: 2.2
- 2021: 3.7
- 2022 (Proj.): 3.4
- 2023 (Proj.): 3.9
- Domestic financing:
- 2019: 1.7
- 2020: 2.8
- Investment (percent of GDP):
- 2019: 18.3
- 2020: 15.0
- 2021: 14.9
- 2022 (Proj.): 19.4
- 2023 (Proj.): 20.4
- 2024 (Proj.): 22.2
- Gross national savings (percent of GDP):
- 2019: 17.5
- 2020: 8.2
- 2021: 14.0
- 2022 (Proj.): 15.3
- 2023 (Proj.): 17.1
- Exports of goods, f.o.b. (percent of GDP):
- 2019: 18.5
- 2020: 21.3
- 2021: 21.5
- 2022 (Proj.): 20.9
- Imports of goods, c.i.f. (percent of GDP):
- 2019: 26.9
- 2020: 24.3
- 2021: 29.2
- 2022 (Proj.): 30.2
- 2023 (Proj.): 28.5
- 2024 (Proj.): 28.6
- Current account balance (excl. grants):
- 2019: -5.4
- 2020: -7.9
- 2021: -5.5
- 2022 (Proj.): -7.0
- Current account balance (inc. grants):
- 2019: -2.3
- 2020: -4.9
- 2021: -5.1
- Public debt (percent of GDP):
- 2019: 40.6
- 2020: 50.8
- 2021: 53.1
- 2022 (Proj.): 53.8
- 2023 (Proj.): 53.6
- 2024 (Proj.): 53.4
- External Public Debt (inc. BFM liabilities) (percent of GDP):
- 2019: 27.0
- 2020: 36.7
- 2021: 39.2
- 2022 (Proj.): 41.5
- 2023 (Proj.): 42.3
- 2024 (Proj.): 43.4
- Domestic Public Debt (percent of GDP):
- 2019: 13.6
- 2020: 13.9
- 2021: 12.3
- Gross official reserves (millions of SDRs):
- 2019: 1196
- 2020: 1338
- 2021: 1630
- 2022 (Proj.): 1677
- 2023 (Proj.): 1641
- 2024 (Proj.): 1696
- Months of imports of goods and services:
- 2019: 6.0
- 2020: 4.8
- 2021: 4.7
- GDP per capita (U.S. dollars):
- 2019: 532
- 2020: 478
- 2021: 507
- 2022 (Proj.): 522
- 2023 (Proj.): 540
- 2024 (Proj.): 562
IMF Press Release No. 22/303, September 12, 2022.