Washington, DC:
The Executive Board of the International Monetary Fund (IMF) completed
today the second review of Madagascar’s economic program under the Extended
Credit Facility (ECF). The completion of this review enables the immediate
disbursement of SDR 24.44 million (about US$31.9 million) to cover external
and fiscal financing needs, bringing total disbursements under the
arrangement to SDR 122.2 (about
US$159.7 million).
Madagascar’s recovery from the pandemic has been hindered by a severe
cyclone season and the spillovers from Russia’s war in Ukraine. While 2021
growth was revised up to 4.3 percent, 2022 growth is projected to stall at
4.2 percent. Annual average inflation is projected to accelerate to 9.8
percent fueled by the surge in international oil and food prices. Lower
growth and higher commodity prices will weigh on the budget, widening the
fiscal deficit.
The outlook remains subject to significant uncertainty and risks. New COVID
outbreaks in a context of slow vaccination uptake, a further slowdown in
global growth and higher oil prices would adversely affect the near-term
outlook. On the upside, implementation of the reform agenda envisaged in
the Plan Emergence Madagascar along with an increase in investment
could boost productivity and growth.
Following the Executive Board discussion, Ms. Antoinette Sayeh, Deputy
Managing Director and Acting Chair, made the following statement:
"Madagascar’s performance under the Fund-supported program has been broadly
satisfactory despite delays in structural reforms and a challenging
external environment. Continuation of prudent policies and a more proactive
stance to support structural performance are needed to maintain
macroeconomic stability, boost investment, and help achieve more
sustainable and inclusive growth.
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 will be 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.
Improving budget execution is crucial to increase the effectiveness of
fiscal policy and achieve program objectives. In the current 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.
The recent increase in retail fuel prices is a step toward the
implementation of an automatic fuel pricing mechanism which will remove
costly and regressive subsidies. Improving the financial situation of
public utility companies is also essential to reduce the need for fiscal
transfers.
The authorities are encouraged to continue their 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 will also produce a follow-up report on the implementation of its
recommendations in its audit reports on the response to the COVID-19
pandemic.
The central bank continues to enhance its monetary policy framework and
should stand ready to further raise interest rates to contain inflationary
pressures."
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Table 1. Selected Economic Indicator, 2019-24
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2019
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2020
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2021
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2022
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2023
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2024
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Est.
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Proj.
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(Percent change; unless otherwise
indicated)
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National account and prices
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GDP at constant prices
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4.4
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-7.1
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4.3
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4.2
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5.2
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5.2
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GDP deflator
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6.5
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4.4
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6.1
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9.1
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8.3
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6.8
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Consumer prices (end of period)
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4.0
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4.6
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6.2
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12.0
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9.7
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8.7
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Money and credit
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Broad money (M3)
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7.3
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12.1
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12.2
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32.5
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12.9
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13.2
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(Growth in percent of
beginning-of-period money stock (M3))
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Net foreign assets
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-2.6
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2.1
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1.0
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4.4
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0.4
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3.0
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Net domestic assets
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9.9
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10.0
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11.2
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28.1
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12.5
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10.2
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of which:
Credit to the private sector
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10.3
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5.6
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11.1
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9.0
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7.6
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7.9
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(Percent of GDP)
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Public finance
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Total revenue (excluding grants)
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10.8
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9.9
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10.7
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11.6
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12.2
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12.8
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of which:
Tax revenue
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10.6
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9.5
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10.4
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11.3
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11.9
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12.6
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Grants
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3.1
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2.5
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0.6
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2.5
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2.0
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2.0
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of which:
budget grants
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0.7
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0.9
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0.0
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0.0
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0.1
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0.3
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Total expenditures
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15.4
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16.3
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14.1
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20.5
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19.0
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19.5
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Current expenditure
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9.5
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9.6
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8.9
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11.2
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10.0
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10.0
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Capital expenditure
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5.8
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6.8
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5.2
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9.3
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9.0
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9.5
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Overall balance (commitment basis)
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-1.4
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-4.0
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-2.9
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-6.5
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-4.8
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-4.7
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Domestic primary balance1
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0.3
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-1.9
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-0.3
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-1.4
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0.0
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0.3
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Total financing
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1.3
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3.5
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3.1
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6.5
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5.1
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5.0
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Foreign borrowing (net)
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1.3
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1.8
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2.2
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3.7
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3.4
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3.9
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Domestic financing
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0.0
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1.7
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0.9
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2.8
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1.7
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1.0
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Financing gap2
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0.0
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0.0
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0.0
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0.0
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0.0
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0.0
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Savings and investment
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Investment
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18.3
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15.0
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14.9
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19.4
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20.4
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22.2
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Gross national savings
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17.5
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8.2
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9.9
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14.0
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15.3
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17.1
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External sector
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Exports of goods, f.o.b.
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18.5
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15.0
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19.0
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21.3
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21.5
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20.9
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Imports of goods, c.i.f.
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26.9
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24.3
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29.2
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30.2
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28.5
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28.6
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Current account balance (exc. grants)
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-5.4
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-7.9
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-5.5
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-7.9
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-7.1
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-7.0
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Current account balance (inc. grants)
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-2.3
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-5.4
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-4.9
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-5.4
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-5.1
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-5.1
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Public debt
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40.6
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50.8
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53.1
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53.8
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53.1
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53.6
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External Public Debt (inc. BFM
liabilities)
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27.0
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36.7
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39.2
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41.5
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42.3
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43.4
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Domestic Public Debt
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13.6
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14.1
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13.9
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12.3
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10.8
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10.2
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(Units as indicated)
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Gross official reserves (millions of
SDRs)
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1196
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1338
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1630
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1677
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1641
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1696
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Months of imports of goods and services
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4.2
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6.0
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5.8
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5.1
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4.8
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4.7
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GDP per capita (U.S. dollars)
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532
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478
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507
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522
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540
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562
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Sources: Malagasy authorities; and IMF
staff estimates and projections.
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1
Primary balance excl. foreign-financed
investment and grants. Commitment
basis.
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2
A negative value indicates a financing
gap to be filled by budget support or
other financing still to be committed
or identified.
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