Statement by an IMF Staff Mission to the Republic of Madagascar

Press Release No. 08/223
September 25, 2008

An International Monetary Fund (IMF) mission, led by George Tsibouris, visited Antananarivo during September 11-24, 2008, to hold discussions for the fifth review under the IMF's Poverty Reduction and Growth Facility (PRGF), the IMF's concessional lending facility for low-income countries. The mission met with His Excellency President Marc Ravalomanana, Minister of Finance and Budget Haja Nirina Razafinjatovo, Minister of Economy, Trade and Industry Ivohasina Razafimahefa, Central Bank of Madagascar Governor Frédéric Rasamoely, other senior officials of the Government of the Republic of Madagascar, as well as representatives from the private sector, non-governmental organizations, labor unions, and the donor community.

The mission issued the following statement in Antananarivo today:

"Madagascar's economic growth continues to be sustained by prudent macroeconomic policies and ongoing construction of large mining projects. Real GDP growth is estimated at 7.1 percent in 2008. Due to the sizable increases in world food and petroleum prices earlier in the year, inflationary pressures have risen somewhat, with the consumer price index (CPI) 11.2 percent higher by end-August than 12 months earlier. Monetary policy has remained appropriately tight and the large inflows of foreign direct investment led to a further increase in foreign exchange reserves and some appreciation of the ariary. Fiscal performance was characterized by a continued improvement in revenue collection and relatively slow execution of the budget, resulting in lower than expected domestic financing.

"The outlook for 2009 remains positive. Economic growth is projected to accelerate to 7.4 percent, driven by buoyant agricultural production and mining activity. With the ebbing in international petroleum and food prices, inflationary pressures are expected to abate.

"Performance under the government's PRGF-supported program has been generally good. The mission reached preliminary understandings on a set of policies that could underpin the economic program for the remainder of 2008 and 2009. These policies include: (i) a draft 2009 Finance Law which aims to increase revenues by another 0.5 percent of GDP and to align spending with the priorities of the Madagascar Action Plan (MAP); (ii) continued reforms of the tax and customs policy and administrations; (iii) strengthened public financial management; (iv) a program to start tackling the deficit in the state pension system; (v) an appropriately tight monetary and exchange policy to entrench single digit inflation; and (vi) measures to foster private sector growth. Successful conclusion of the discussions during the upcoming IMF Annual Meetings in Washington would allow consideration of the fifth review under the PRGF arrangement by the IMF Executive Board before end-2008.

"The mission would like to thank the authorities for their excellent cooperation and the frank and constructive discussions."



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