## IMF Staff Completes 2019 Article IV and Program Review Mission to Madagascar _IMF News, November 25, 2019_ ## Source details **Canonical URL:** [IMF Staff Completes 2019 Article IV and Program Review Mission to Madagascar](https://www.imf.org/en/news/articles/2019/11/25/pr19430-madagascar-imf-staff-completes-2019-article-iv-and-program-review-mission) ## Other formats - [Markdown version](/en/news/articles/2019/11/25/pr19430-madagascar-imf-staff-completes-2019-article-iv-and-program-review-mission/index.md) - [Structured JSON version](/en/news/articles/2019/11/25/pr19430-madagascar-imf-staff-completes-2019-article-iv-and-program-review-mission/index.json) - [Bundle manifest](/en/news/articles/2019/11/25/pr19430-madagascar-imf-staff-completes-2019-article-iv-and-program-review-mission/bundle-manifest.json) ## Bibliographic details - Published: November 25, 2019 --- ### Mission overview - Press Release No. 19/430; mission visited Antananarivo from November 11 to 25. - Mission led by Charalambos Tsangarides, mission chief for Madagascar. - Purpose: conduct discussions for the 2019 Article IV consultation and the sixth and final review of Madagascar’s economic reform program supported by the Extended Credit Facility (ECF) arrangement. - Staff-level agreement reached for the sixth program review, subject to approval by IMF management and the Executive Board. - Consideration by the IMF’s Executive Board is expected in January 2020. - The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. ### Macroeconomic outlook and recent performance - Economic growth expectations: - Quote: “Economic growth is expected to remain close to 5 percent this year, reflecting catching- up of private sector activity and public spending.” - For 2019, growth is expected to improve to 4.8 percent. - For 2020, real growth is expected to reach 5.2 percent. - Inflation and external sector: - Inflation is expected to be contained to 6 percent by end-year. - Current account is expected to record a small deficit in 2019 in a context of decreasing vanilla prices. - Growth drivers cited: dynamic credit conditions, positive developments in mining, transportation, and services; for 2020, increased public spending on infrastructure, health and education, and increasing private sector activity especially in tourism, other services, and light manufacturing. ### Program implementation and performance under the ECF - The implementation of the authorities’ program supported by the ECF arrangement has remained satisfactory. - Timeline: the ECF-supported program expires in early 2020. - Performance targets: - Authorities met all the June 2019 performance criteria. - Authorities met the indicative target on tax revenue collection. - The indicative target on domestically financed priority social spending was missed by a significant margin; the year-end objective will not be met despite recent improvements in execution. - Central bank actions: continued reduction of exchange rate volatility, support for gradual accumulation of reserves, and liquidity management through timely interventions contributing to macroeconomic stability. - Structural reforms: progress made but at a slower pace than envisaged. - Fuel pricing and liabilities: despite renegotiation of distribution margins on fuel prices, a remaining gap between reference and pump prices led to continued accumulation of small liabilities to distributors. ### Key policy recommendations and staff advice - Public investment and social spending: - Authorities’ plan to increase public investment and social spending requires continued efforts to raise revenue and contain transfers to the fuel and electricity sectors. - Supporting economic activity will require the strict prioritization and timely implementation of growth-enhancing investment projects. - Reducing poverty will necessitate strong public spending execution in the health and education sectors, as well as containing lower priority public spending such as subsidies to fuel and electricity operators. - Revenue mobilization and tax policy: - Meeting ambitious tax revenue targets will critically depend on stepping up collection efforts, cross-checking information between customs and domestic tax administrations, and revising tax expenditures and exemption regimes. - Fuel and electricity sector reforms: - Staff underscored the need to adopt a pricing mechanism that aligns pump prices with world price developments and to settle existing liabilities with distributors to avoid budget costs. - Such a mechanism should be implemented along with targeted social measures to protect the poor from the impact of potential future price adjustments. - JIRAMA (public utility) reforms: - To improve the operational and financial situation of JIRAMA and ensure it does not weigh on the budget, an encompassing strategy to raise revenues and improve governance is needed. - Staff support ongoing cost-cutting measures, including the renegotiation of contracts with electricity and fuel suppliers, and the audit of the company’s arrears. - Governance and anti-corruption: - Staff encouraged continued improvements in governance, including stepping up the fight against corruption to strengthen the business climate and attract private investment. - Staff commended the authorities for adopting an ordinance on illicit asset recovery and urged its operationalization through the speedy adoption of the implementation decree. - Financial sector legislation: - To consolidate and deepen significant structural reforms undertaken at the central bank, staff welcomed the authorities’ plans to submit the new banking law and the financial stability law to Parliament. ### Meetings and acknowledgements - The mission met with: President Andry Rajoelina; Prime Minister Christian Ntsay; Minister of Economy and Finance Richard Randriamandrato; Interim Minister of Energy, Water, and Hydrocarbons Christian Ramarolahy; outgoing Central Bank of Madagascar Governor Alain Rasolofondraibe and new Governor Henri Rabarijohn; senior officials, development partners, and representatives of the private sector and civil society. - The mission thanked the Malagasy authorities for their strong cooperation and constructive discussions. *IMF staff press release, November 25, 2019.* --- ## References - [Republic of Madagascar and the IMF](http://www.imf.org/external/country/MDG/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2019/11/25/pr19430-madagascar-imf-staff-completes-2019-article-iv-and-program-review-mission_