## IMF Executive Board Approves US$304.7 million Extended Credit Facility Arrangement for Madagascar

_IMF News, July 28, 2016_

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## Bibliographic details
- Published: July 28, 2016

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### Overview
- Executive Board approved the equivalent of SDR 220 million (about US$304.7 million, or 180 percent of current quota) under a 40-month Extended Credit Facility (ECF) arrangement for Madagascar.
- SDR 31.428 million (about US$43.5 million) is available for immediate disbursement; the remaining amount will be available in phases over the duration of the program, subject to semi-annual reviews.
- The Executive Board was informed of the Managing Director’s approval of the first and final review under the six-month Staff-Monitored Program (SMP) covering September 2015–end-March 2016; the country built a satisfactory track record of sustained reforms, with progress in most areas.

### Key messages from Mitsuhiro Furusawa (Deputy Managing Director and Acting Chair)
- Primary aim: reinforce macroeconomic stability and promote sustainable and inclusive growth.
- Identified challenges:
  - Weak revenue collections.
  - Substantial low-priority spending.
  - Need for strengthened economic governance.
- Essential actions and priorities:
  - Rigorous and sustained reform implementation.
  - Increase tax revenue and contain then reduce lower-priority spending, including transfers to state-owned enterprises such as the utility company JIRAMA.
  - Rely as much as possible on external grants and concessional financing while allowing appropriate external borrowing, to preserve debt sustainability.
  - Strengthen governance: public financial management and procurement practices, increase budget transparency, carefully manage fiscal implications of Public Private Partnerships, reinforce institutions and legal framework for combatting corruption.
  - Financial sector: more frequent and deeper supervision of banks and nonbanks, establish legal and operational framework for institutions in difficulty, promote modern payment methods.
  - Central bank: maintain price stability, continue improving operational framework for monetary policy implementation, including establishing a well-functioning money market.
  - Capacity building and technical assistance to support reform implementation.

### Recent Economic Developments
- Context: recovery from extended political crisis and international isolation from 2009 to 2013; key social and developmental indicators deteriorated during that period.
- Recovery since 2014 hampered by falling key commodity prices, weather-related shocks, and deep-rooted structural weaknesses.
- GDP growth: estimated at 3.1 percent in 2015 (slightly lower than in 2014 and barely higher than population growth).
- Inflation: fell to 6.3 percent at end-May 2016 from 7.6 percent at end-December 2015, led by lower food and fuel prices.
- Fiscal: budget execution challenging in 2015; fiscal deficit increased to 3.3 percent of GDP due to underperforming revenue collections, financing difficulties, and unexpected transfers to state-owned enterprises and pensions.
- Outlook: economic conditions expected to improve in 2016 supported by country-specific factors.

### Performance Under the Staff-Monitored Program (SMP)
- SMP period: September 2015–end-March 2016.
- Macroeconomic targets: broadly satisfactory and met through end-March 2016, except ceilings on net credit to government and new external payment arrears (due to technical difficulties in making payments).
- Fiscal and external: tax revenue began to improve gradually; priority social spending targets were met; robust accumulation of foreign exchange reserves boosted external buffers.
- Structural progress:
  - Strengthened audits and controls for revenue collections.
  - Automatic fuel pricing mechanism to avoid fuel subsidies.
  - Submission to Cabinet of a revised Central Bank Act.
  - Cabinet approval of a National Social Protection Policy.
  - Better transparency and functioning of the foreign exchange market.
  - New database to enhance debt management capacity and transparency.

### Program Summary (ECF-supported program objectives)
- Boost prospects for inclusive growth through:
  - Improved access to education, health care, and social protection.
  - Enhanced infrastructure and private sector development.
- Create fiscal space through improved revenue generation and spending prioritization.
- Reinforce economic governance by strengthening public financial management and intensifying anti-corruption measures.
- Strengthen macroeconomic stability by bolstering central bank operations and financial supervision.
- Reform implementation to be supported by targeted capacity building and technical assistance.

### Selected Economic and Financial Indicators, 2013–19 (Actuals, Prel., Est., Projections — percent change unless otherwise indicated)
- National account and prices:
  - GDP at constant prices: 2013: 2.3; 2014: 3.3; 2015: 3.1; 2016: 4.1; 2017: 4.5; 2018: 4.8; 2019: 5.0
  - GDP deflator: 2013: 5.1; 2014: 6.6; 2015: 7.6; 2016: 6.7; 2017: 6.9; 2018: 6.4; 2019: 6.1
  - Consumer prices (end of period): 2013: 6.3; 2014: 6.0; 2015: 7.1; 2016: 5.9
- Money and credit:
  - Reserve money: 2013: -6.1; 2014: 14.1; 2015: 9.6; 2016: 16.0; 2017: 12.7; 2018: 11.9
  - Broad money (M3): 2013: 5.3; 2014: 11.1; 2015: 14.6; 2016: 17.9; 2017: 12.5; 2018: 12.3
  - Net foreign assets: 2013: -13.5; 2014: 5.4; 2015: 7.5; 2016: 2.6; 2017: 2.5
  - Net domestic assets: 2013: 18.7; 2014: 5.7; 2015: 7.7; 2016: 10.4; 2017: 9.4; 2018: 9.9; 2019: 9.8
  - Credit to the private sector (of which): 2013: 8.6; 2014: 8.2; 2015: 4.6; 2016: 7.8
- Public finance (percent of GDP):
  - Total revenue (excluding grants): 2013: 10.1; 2014: 11.0; 2015: 11.2; 2016: 11.7; 2017: 12.2
  - Tax revenue: 2013: 9.3; 2014: 10.8; 2015: 11.5; 2016: 12.0
  - Grants: 2013: 1.3; 2014: 1.5; 2015: 2.0; 2016: 2.7
  - Total expenditures: 2013: 14.9; 2014: 14.7; 2015: 15.1; 2016: 16.2; 2017: 18.3; 2018: 17.6; 2019: 18.0
  - Current expenditure: 2013: 11.8; 2014: 10.3; 2015: 10.0; 2016: (not listed in source)
  - Capital expenditure: 2013: 3.9; 2014: 3.5; 2015: 8.0; 2016: 8.1
  - Overall balance (commitment basis): 2013: -4.0; 2014: -2.3; 2015: -3.3; 2016: -3.2; 2017: -4.4
  - Float (variation of accounts payable, + = increase): 2013: -0.2; 2014: 0.6; 2015: 0.1; 2016: 0.0
  - Variation of domestic arrears ( + = increase): 2013: 2.2; 2014: -0.7; 2015: -0.5; 2016: -1.2; 2017: -0.3
  - Overall balance (cash basis): 2013: -2.0; 2014: -2.4; 2015: -3.7; 2016: -4.5; 2017: -5.1; 2018: -5.0; 2019: -4.7
  - Primary balance excl. foreign-financed investment²: 2014: -1.3; 2015: -0.6; 2016: 0.2; 2017: 0.3
- Savings and investment:
  - Investment: 2013: 15.9; 2014: 15.6; 2015: 13.1; 2016: 15.3; 2017: 18.2; 2018: 18.6
  - Gross national savings: 2013: 13.0; 2014: 14.5; 2015: 14.0; 2016: 14.4
- External sector:
  - Exports of goods, f.o.b.: 2013: 18.1; 2014: 20.6; 2015: 21.0; 2016: 21.5; 2017: 20.8; 2018: 20.7; 2019: 20.9
  - Imports of goods, c.i.f.: 2013: 30.7; 2014: 30.2; 2015: 28.7; 2016: 31.2; 2017: 31.5; 2018: 31.6
  - Current account balance (exc. grants): 2013: -6.5; 2014: -1.5; 2015: -3.4; 2016: -4.3; 2017: -6.4; 2018: -5.6; 2019: -5.5
  - Current account balance (inc. grants): 2013: -5.9; 2014: -1.9; 2015: -4.2
- Public debt (percent of GDP):
  - Total public debt: 2013: 33.9; 2014: 35.8; 2015: 41.0; 2016: 41.7; 2017: 42.8; 2018: 43.6; 2019: 44.5
  - External: 2013: 22.8; 2014: 24.4; 2015: 28.4; 2016: 30.4; 2017: 32.6; 2018: 34.5
  - Domestic: 2013: 11.4; 2014: 12.6; 2015: 11.3; 2016: 10.2; 2017: 9.1
- Other indicators:
  - Gross official reserves (millions of SDRs): 2013: 502; 2014: 535; 2015: 600; 2016: 701; 2017: 782; 2018: 859; 2019: 945
  - Months of imports of goods and services: 2013: 2.9; 2014: 3.4; 2015: 3.6
  - Terms of trade (percent change, deterioration -): 2013: 0.8; 2014: -4.6; 2015: -2.1
  - GDP per capita (U.S. dollars): 2013: 462; 2014: 453; 2015: 402; 2016: 391; 2017: 405; 2018: 419; 2019: 437
  - Nominal GDP at market prices (billions of ariary): 2013: 23,397; 2014: 25,775; 2015: 28,585; 2016: 31,773; 2017: 35,507; 2018: 39,609; 2019: 44,103

*Press Release No. 16/370, July 28, 2016 — IMF Communications Department.*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [Republic of Madagascar and the IMF](http://www.imf.org/external/country/MDG/index.htm)
- [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [www.imf.org/Madagascar](http://www.imf.org/Madagascar)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2016/07/28/19/38/pr16370-madagascar-imf-executive-board-approves-us-304-7-million_