IMF Staff Concludes Staff Visit to Madagascar

An International Monetary Fund (IMF) team led by Mr. George Tsibouris visited Antananarivo during February 18-March 4, 2015. It held discussions with the government on reforms aimed at addressing the macroeconomic pressures, accelerating growth, and achieving a durable reduction in poverty that could be supported by the IMF’s Extended Credit Facility (ECF)1. The mission met with President Hery Rajaonarimampianina, Prime Minister Jean Ravelonarivo, Minister of Finance and Budget Gervais Rakotoarimanana, Central Bank of Madagascar Governor Alain Rasolofondraibe, the Economic Advisor to the President Léon Rajaobelina, and other senior officials, as well as private sector representatives and development partners.

At the end of the visit, Mr. Tsibouris issued the following statement:

“Over the past two weeks, we continued constructive discussions with the authorities on an economic reform program for which they are seeking support under the IMF’s ECF. Discussions focused on an economic strategy for 2015-18 that draws on the National Development Plan and the Presidential Plan of Urgent Actions. The strategy under discussion emphasizes measures to increase revenue mobilization, improve the composition and quality of fiscal spending, and advance monetary and financial sector reforms.”

“Madagascar’s revenue performance remains below its potential. To improve revenue mobilization, the authorities have committed to strong efforts to improve tax and customs administration. They also plan on a range of broad-based reforms, including improved controls, valuation, audits, and use of risk-based management. Actions to broaden the tax base in 2015 will also be taken.

“We welcome the authorities’ commitment to address the root causes of budgetary pressures. Fuel subsidies, transfers to state-owned enterprises, including the loss-making JIRAMA, and the underfunded civil service pension funds weighed heavily on budget execution in 2014. The intention to eliminate fuel-price subsidies is welcome. Going forward, it is critical to strengthen the performance and oversight of state-owned enterprises and pension funds, and to modernize the public sector in general. It will also be important to proceed with the approved strategy for public financial management reform.

“These measures will create room to increase spending on infrastructure, education, health, and social protection programs. Already, the government is reallocating resources to tackle the recent natural disasters. Human capital development is a key policy objective. Infrastructure investment, including in the energy, transportation, and agricultural sectors, is critically needed; their careful prioritization and prudent financing strategies will ensure that debt remains on a sustainable trajectory. Additional support from Madagascar’s technical and financial partners will be important.

“The mission also discussed monetary and financial sector reforms, including the need to strengthen the independence and capital base of the central bank and enhance its internal governance. Going forward, it will be essential to ensure that the foreign exchange market is sufficiently liquid and reflects market conditions. In that context, the central bank should rebuild its international reserves. An action plan on medium-term financial sector reforms will be finalized following the Financial Sector Assessment Program (FSAP) that is expected to be undertaken in 2015.

“The government is creating a more conducive environment for the private sector. To create a solid foundation for private sector growth, it will be important to strengthen institutions and governance. The government has a key role to play by improving the legal and regulatory environment.

“With good progress being made so far, we are determined to continue our discussions with a view to reaching agreement on an ECF arrangement as soon as possible.”

1 The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years ( The Fund reviews the level of interest rates for all concessional facilities every two years.



International Monetary Fund (IMF)

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