Press release No. 24/232

Press release No. 24/232
Press release No. 24/232

IMF Executive Board Approves Financing of $337 Million Under the Extended Credit Facility and $321 Million Under the Resilience and Sustainability Facility for the Republic of Madagascar

June 21, 2024

  • The IMF Executive Board today approved an arrangement under the Extended Credit Facility (ECF) amounting to US$337 million for Madagascar, in addition to an arrangement under the Facility for Resilience and Sustainability (FRD) in the amount of 321 US dollars.
  • The programs supported by the FEC and the FRD are aligned with the authorities’ objectives put forward in the new General State Policy (PGE) adopted in early 2024 and aim to increase Madagascar’s economic resilience and promote inclusive growth in long term.
  • The FRD agreement will support reforms to strengthen climate change adaptation and resilience to natural disasters, support climate change mitigation efforts, improve ecosystem protection and create conditions for investments private sector greens.

Washington, D.C.: The Executive Board of the International Monetary Fund (IMF) today approved a 36-month arrangement under the Extended Credit Facility (ECF) in the amount of SDR 256.62 million (approximately $337 million). ) with Madagascar. The Executive Board also approved an arrangement under the Resilience and Sustainability Facility (RSF) in the amount of SDR 244.4 million (approximately $321 million). Additionally, the Board took note of Madagascar’s cancellation of the 40-month ECF arrangement that was approved on March 29, 2021. The ECF-supported program will provide essential assistance to increase Madagascar’s economic resilience by anchoring fiscal sustainability, strengthening governance, consolidating monetary and financial stability and advancing reforms to support industrialization and human capital development. The FRD agreement aims to address climate vulnerabilities through the implementation of appropriate climate policies.

This decision allows for an immediate disbursement equivalent to 36.66 million SDR (approximately $48 million) under the ECF.

Madagascar’s growth fell to 3.8 percent in 2023, while inflationary pressures eased. Low revenue mobilization and JIRAMA losses continued to weigh on the budget balance. The current account deficit narrowed, mainly due to a decline in imports and a slowdown in economic activity.

The authorities have committed to stabilizing debt below 60 percent of GDP and reducing the primary deficit to around 3 percent of GDP over the life of the program. They intend to take revenue measures and reduce transfers to the energy sector, in particular by gradually eliminating fuel subsidies. These efforts should help create fiscal space to invest in human and physical capital. The authorities are also determined to strengthen governance, transparency and the fight against corruption, to continue the implementation of the operational monetary policy framework targeting the interest rate and to strengthen resilience, in particular through safety nets more solid social.

Medium-term growth prospects appear favorable, bolstered by reforms supported by the FRD and ECF, including government programs to boost agricultural productivity, increase access to electricity, and improve road infrastructure. The risks weighing on the outlook are tilted to the downside, in an uncertain global context. Madagascar also remains vulnerable to climatic shocks.

At the end of the Board of Directors’ discussion, Ms. Antoinette Sayeh, Deputy Director General and Acting President made the following statement:

Madagascar continues to face challenges, with economic growth slowing against a backdrop of weak fiscal performance and gradual progress on reforms. In the future, climate change presents significant risks for the Malagasy economy. The new arrangements under the Extended Credit Facility (ECF) and the Resilience and Sustainability Facility (RSF) will support the authorities’ agenda focused on strengthening human capital, accelerating economic development and improving of governance.

The authorities are implementing measures to create fiscal space for much-needed social spending and investments. These include medium-term revenue mobilization efforts through tax policy and revenue administration measures. The establishment of an automatic fuel price adjustment mechanism and the development of a JIRAMA recovery plan should make it possible to gradually reduce government transfers to the energy sector. These efforts should help stabilize public debt below 60 percent of GDP in the medium term.

The authorities are preparing a new anti-corruption strategy which, combined with an IMF Governance Diagnostic, will support new efforts to fight corruption, promote transparency and improve governance. They are also working to implement a new operational framework for monetary policy, focused on strengthening the central bank’s liquidity management and communication.

Addressing the challenges of climate change will be essential for Madagascar’s medium-term macroeconomic resilience. Reforms supported by the FRD are expected to strengthen climate governance and integrate climate into public finance and investment management processes, strengthen adaptation to climate change and resilience to natural disasters, curb the growth of carbon emissions. greenhouse gases, strengthen the protection of forests and biodiversity and mobilize climate finance The authorities should take full advantage of the support provided by the Fund and the World Bank through the Enhanced Cooperation Framework for Climate Action, as well as as well as other development partners to catalyze private climate finance.

Main economic indicators, 2021–25

2021

2022

2023

2024

2025

East.

Project.

(Growth rate in percentage)

Gross domestic product and prices

GDP at constant prices

5.7

4.0

3.8

4.5

4.6

GDP deflator

6.6

6.9

8.7

6.9

7.6

Consumer Price Index (end of period)

6.2

10.8

7.5

7.8

7.5

Money and credit

Money supply (M3)

12.2

13.8

8.6

12.3

12.1

(Percentage growth of M3 at the beginning of the period)

Net foreign assets

1.0

0.8

18.2

5.7

2.5

Net domestic assets

11.2

13.0

-9.7

6.7

9.6

of which: Credit to the private sector

11.1

9.8

0.7

6.3

6.3

(As a percentage of GDP)

Public finances

Budget revenue (excluding donations)

10.3

9.6

11.4

11.2

11.2

of which: Tax revenues

9.9

9.4

11.1

10.8

10.9

Donations

0.7

1.3

2.3

1.8

0.6

Total expenses

13.7

16.5

17.9

16.7

15.7

Current expenses

8.4

11.0

10.9

10.3

9.7

Capital expenditures

5.3

5.5

7.0

6.4

6.0

Overall balance (commitment basis)

-2.8

-5.5

-4.3

-3.8

-3.8

Domestic primary balance1

-0.1

-1.8

-0.4

0.2

0.7

…Primary balance

-2.2

-5.0

-3.6

-2.9

-2.9

Total funding

3.2

4.7

4.2

4.1

4.1

External financing (net)

2.3

2.5

3.0

3.2

3.4

Domestic financing

0.8

2.3

1.2

1.0

0.7

Funding gap

0.0

0.0

-0.1

0.0

0.0

Savings and investment

Gross fixed capital formation

23.2

20.8

21.6

22.3

21.3

Domestic national savings

10.2

15.4

17.1

17.7

16.5

External sector

Exports of goods, FOB

18.6

23.3

19.6

16.3

18.8

Imports of goods, CIF

28.7

34.2

28.2

25.3

28.2

Current account balance (excluding donations)

-5.5

-6.7

-6.8

-6.4

-5.4

Current account balance (donations included)

-4.9

-5.4

-4.5

-4.6

-4.8

Public debt

51.9

53.9

55.6

53.4

52.9

External public debt

34.3

36.5

35.7

34.8

36.5

Domestic public debt

17.7

17.4

19.9

18.6

16.4

(Units as shown)

Gross official reserves (in millions of SDRs)

1,630

1,601

1,972

2,130

2,250

In months of imports of goods and services

5.8

4.2

5.7

6.3

5.8

GDP per capita (US dollars)

517

523

530

563

577

Sources: Malagasy authorities and IMF staff estimates and forecasts.

1 Primary balance except investments with external financing and donations.

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Tatiana Mossot

PHONE:+1 202 623-7100EMAIL: [email protected]

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