Washington, DC: Today, the Executive Board of the International Monetary Fund (IMF) completed the first review of Madagascar’s economic program under the Extended Credit Facility (ECF) arrangement. The completion of this review enables the immediate disbursement of SDR 48.88 million (about US$ 67.5 million) to cover external and fiscal financing needs, bringing total disbursements under the arrangement to SDR 97.96 (about US$ 135 million).
The 40-month ECF arrangement wasapproved by the IMF Executive Board on March 29, 2021, with a total access of SDR 219.96 million (about US$312.4 at the time, or 90 percent of quota). The arrangement aims to support Madagascar’s recovery from the pandemic and revive the authorities’ reform momentum to raise and sustain growth and reduce poverty (see Press Release 21/91).
Since the onset of the COVID-19 pandemic, Madagascar benefitted from two IMF Rapid Credit Facility (RCF) disbursements of SDR 122.2 million (about US$ 165.99 million or 50 percent of quota) in April 2020 and SDR 122.2 million (about US$ 171.9 million or 50 percent of quota) in July 2020, and received an SDR allocation of SDR 234.2 million (about US$ 322 million) in August 2021.
Madagascar continues to be affected by the COVID-19 pandemic and is going through a severe cyclone season. After a contraction of GDP estimated at 7.1 percent in 2020, the recovery has been sluggish with growth estimated at 3.5 percent in 2021, in part reflecting a delayed reopening of the economy. Growth is projected to rebound more vigorously to 5.4 percent in 2022. Downside risks are high, as COVID-19 vaccination rates remain low, and Madagascar remains vulnerable to severe natural disasters.
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 for the first half of 2021 was broadly satisfactory despite the ongoing COVID-19 pandemic and recent cyclones, which took a severe human and economic toll on the country. The continuation of prudent policies and implementation of the reform agenda under the Extended Credit Facility arrangement will support the economic recovery and should help achieve more sustainable and inclusive growth .
“The authorities are implementing a gradual fiscal consolidation while boosting much-needed social and investment spending. The 2022 Budget includes measures to increase domestic revenue mobilization and create the fiscal space for growth-enhancing spending. Progress in the execution of social spending is a key program objective and requires better planning and a streamlined authorization process. Given Madagascar’s moderate risk of debt distress, it is recommended that the authorities follow a prudent debt management strategy that relies on grants and concessional financing for scaling-up investment.
“Stronger efforts are needed to improve budget transparency and reporting. The authorities recently published four audit reports by the Cour des Comptes on the response to the COVID-19 pandemic. It will be essential to address the findings of those reports in order to strengthen governance and transparency. The prompt publication of an independent third-party audit of COVID-19-related public procurement contracts is also important. The authorities are working on further strengthening public financial management. The effective enforcement of the anti-corruption legal framework is also necessary.
“Reforms to mitigate fiscal risks include the preparation of a timetable for the transition toward an automatic fuel pricing mechanism along with the development of adequate social safety nets to protect the most vulnerable groups. Improving the financial situation of the public utility JIRAMA is also essential. The authorities are also strengthening the disaster risk management system to address climate-related risks with technical assistance from the Fund.
“The authorities are committed to continue enhancing the monetary policy framework, protecting central bank autonomy, and fostering financial sector development and financial inclusion.”
Table 1. Selected Economic Indicators, 2019-24 | |||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | ||||
Est. | Proj. | ||||||||
(Percent change; unless otherwise indicated) | |||||||||
National account and prices | |||||||||
GDP at constant prices | 4.4 | -7.1 | 3.5 | 5.4 | 5.1 | 5.0 | |||
GDP deflator | 6.5 | 4.4 | 6.1 | 6.1 | 6.9 | 5.6 | |||
Consumer prices (end of period) | 4.0 | 4.6 | 6.2 | 6.3 | 6.1 | 5.9 | |||
Money and credit | |||||||||
Broad money (M3) | 7.3 | 12.1 | 19.0 | 16.5 | 10.7 | 13.3 | |||
(Growth in percent of beginning-of-period money stock (M3)) | |||||||||
Net foreign assets | -2.6 | 2.1 | 1.4 | 7.9 | -1.0 | 3.8 | |||
Net domestic assets | 9.9 | 10.0 | 17.6 | 8.6 | 11.7 | 9.4 | |||
of which: Credit to the private sector | 10.3 | 5.6 | 8.6 | 8.3 | 8.1 | 7.2 | |||
(Percent of GDP) | |||||||||
Public finance | |||||||||
Total revenue (excluding grants) | 10.8 | 9.9 | 10.8 | 11.9 | 12.5 | 12.9 | |||
of which: Tax revenue | 10.6 | 9.5 | 10.4 | 11.6 | 12.2 | 12.6 | |||
Grants | 3.1 | 2.5 | 1.7 | 2.1 | 2.0 | 1.2 | |||
of which: budget grants | 0.7 | 0.9 | 0.0 | 0.0 | 0.3 | 0.3 | |||
Total expenditures | 15.4 | 16.3 | 18.7 | 19.7 | 18.2 | 17.9 | |||
Current expenditure | 9.5 | 9.6 | 11.4 | 10.5 | 10.1 | 10.0 | |||
Capital expenditure | 5.8 | 6.8 | 7.4 | 9.2 | 8.2 | 7.9 | |||
Overall balance (commitment basis) | -1.4 | -4.0 | -6.3 | -5.8 | -3.8 | -3.8 | |||
Domestic primary balance1 | 0.3 | -1.9 | -2.5 | -0.9 | 0.0 | 0.4 | |||
Total financing | 1.3 | 3.5 | 6.4 | 5.8 | 4.1 | 4.0 | |||
Foreign borrowing (net) | 1.3 | 1.8 | 3.6 | 3.3 | 2.6 | 3.0 | |||
Domestic financing | 0.0 | 1.7 | 2.9 | 2.5 | 1.5 | 1.0 | |||
Financing gap | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
Savings and investment | |||||||||
Investment | 18.3 | 15.0 | 16.6 | 19.3 | 19.1 | 19.4 | |||
Gross national savings | 17.5 | 8.2 | 11.2 | 14.3 | 14.5 | 15.3 | |||
External sector | |||||||||
Exports of goods, f.o.b. | 18.5 | 15.0 | 18.9 | 18.3 | 17.9 | 18.0 | |||
Imports of goods, c.i.f. | 26.9 | 24.3 | 29.2 | 27.3 | 27.6 | 27.6 | |||
Current account balance (exc. grants) | -5.4 | -7.9 | -7.1 | -7.1 | -6.6 | -5.3 | |||
Current account balance (inc. grants) | -2.3 | -5.4 | -5.5 | -5.0 | -4.6 | -4.1 | |||
Public debt | 38.5 | 49.0 | 53.1 | 52.9 | 52.0 | 51.9 | |||
External Public Debt | 27.0 | 36.7 | 41.4 | 41.9 | 41.2 | 41.3 | |||
Domestic Public Debt | 11.5 | 12.3 | 11.7 | 11.0 | 10.7 | 10.6 | |||
(Units as indicated) | |||||||||
Gross official reserves (millions of SDRs) | 1196 | 1338 | 1633 | 1723 | 1665 | 1754 | |||
Months of imports of goods and services | 4.2 | 6.0 | 6.0 | 5.7 | 5.0 | 5.0 | |||
GDP per capita (U.S. dollars) | 512 | 457 | 502 | 525 | 565 | 592 | |||
Sources: Malagasy authorities; and IMF staff estimates and projections. | |||||||||
1Primary balance excl. foreign-financed investment and grants. Commitment basis. | |||||||||
Table 1. Selected Economic Indicators, 2019-23 | ||||||||
2019 | 2020 | 2021 | 2022 | 2023 | ||||
Est. | Proj. | |||||||
(Percent change; unless otherwise indicated) | ||||||||
National account and prices | ||||||||
GDP at constant prices | 4.4 | -7.1 | 3.5 | 5.4 | 5.1 | |||
GDP deflator | 6.5 | 4.4 | 6.1 | 6.1 | 6.9 | |||
Consumer prices (end of period) | 4.0 | 4.6 | 6.2 | 6.3 | 6.1 | |||
Money and credit | ||||||||
Broad money (M3) | 7.3 | 12.1 | 19.0 | 16.5 | 10.7 | |||
(Growth in percent of beginning-of-period money stock (M3)) | ||||||||
Net foreign assets | -2.6 | 2.1 | 1.4 | 7.9 | -1.0 | |||
Net domestic assets | 9.9 | 10.0 | 17.6 | 8.6 | 11.7 | |||
of which: Credit to the private sector | 10.3 | 5.6 | 8.6 | 8.3 | 8.1 | |||
(Percent of GDP) | ||||||||
Public finance | ||||||||
Total revenue (excluding grants) | 10.8 | 9.9 | 10.8 | 11.9 | 12.5 | |||
of which: Tax revenue | 10.6 | 9.5 | 10.4 | 11.6 | 12.2 | |||
Grants | 3.1 | 2.5 | 1.7 | 2.1 | 2.0 | |||
of which: budget grants | 0.7 | 0.9 | 0.0 | 0.0 | 0.3 | |||
Total expenditures | 15.4 | 16.3 | 18.7 | 19.7 | 18.2 | |||
Current expenditure | 9.5 | 9.6 | 11.4 | 10.5 | 10.1 | |||
Capital expenditure | 5.8 | 6.8 | 7.4 | 9.2 | 8.2 | |||
Overall balance (commitment basis) | -1.4 | -4.0 | -6.3 | -5.8 | -3.8 | |||
Domestic primary balance1 | 0.3 | -1.9 | -2.5 | -0.9 | 0.0 | |||
Total financing | 1.3 | 3.5 | 6.4 | 5.8 | 4.1 | |||
Foreign borrowing (net) | 1.3 | 1.8 | 3.6 | 3.3 | 2.6 | |||
Domestic financing | 0.0 | 1.7 | 2.9 | 2.5 | 1.5 | |||
Financing gap2 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
Savings and investment | ||||||||
Investment | 18.3 | 15.0 | 16.6 | 19.3 | 19.1 | |||
Gross national savings | 17.5 | 8.2 | 11.2 | 14.3 | 14.5 | |||
External sector | ||||||||
Exports of goods, f.o.b. | 18.5 | 15.0 | 18.9 | 18.3 | 17.9 | |||
Imports of goods, c.i.f. | 26.9 | 24.3 | 29.2 | 27.3 | 27.6 | |||
Current account balance (exc. grants) | -5.4 | -7.9 | -7.1 | -7.1 | -6.6 | |||
Current account balance (inc. grants) | -2.3 | -5.4 | -5.5 | -5.0 | -4.6 | |||
Public debt | 38.5 | 49.0 | 53.1 | 52.9 | 52.0 | |||
External Public Debt | 27.0 | 36.7 | 41.4 | 41.9 | 41.2 | |||
Domestic Public Debt | 11.5 | 12.3 | 11.7 | 11.0 | 10.7 | |||
(Units as indicated) | ||||||||
Gross official reserves (millions of SDRs) | 1196 | 1338 | 1633 | 1723 | 1665 | |||
Months of imports of goods and services | 4.2 | 6.0 | 6.0 | 5.7 | 5.0 | |||
GDP per capita (U.S. dollars) | 512 | 457 | 502 | 525 | 565 | |||
Sources: Malagasy authorities; and IMF staff estimates and projections. | ||||||||
1Primary balance excl. foreign-financed investment and grants. Commitment basis. | ||||||||
2A negative value indicates a financing gap to be filled by budget support or other financing still to be committed or identified. | ||||||||