Madagascar has unlocked a $101 million loan from the IMF after concluding an Article IV consultation. The funds will be disbursed through the Extended Credit Facility and the Resilience and Sustainability Facility, aimed at enhancing growth and addressing fiscal challenges. The IMF emphasizes the need for ongoing reforms, improved governance, and resilience to climate shocks to ensure sustainable economic development.
Madagascar has secured a loan of $101 million from the International Monetary Fund (IMF) following the conclusion of the Article IV consultation. The IMF announced that its Executive Board also completed the First Reviews of two arrangements: the 36-month Extended Credit Facility (ECF) and the Resilience and Sustainability Facility (RSF), both approved in June 2024.
The completion of these reviews facilitates the immediate disbursement of about $48 million from the ECF and approximately $53 million from the RSF. The IMF report indicates that Madagascar’s economic growth has stabilized in 2024, although inflationary pressures remain a concern. Improvements in the fiscal balance have occurred thanks to settling tax arrears owed by fuel distributors, despite ongoing high transfers to the energy utility, JIRAMA.
However, the current account deficit has increased mainly due to declining exports. Despite this, Madagascar’s medium-term growth outlook remains positive, supported by reforms under the RSF and ECF, which target enhanced agricultural productivity, electricity access, and road infrastructure improvements. The IMF emphasizes that the country’s risks, such as vulnerability to climate shocks, weigh on these growth prospects.
Discussions related to the 2024 Article IV consultation highlight the need for fiscal sustainability through improved domestic revenue, reduced fiscal risks, and buffer building for shock resilience. Strengthening fiscal institutions, public financial management, governance, and anti-corruption efforts are focal points of this review.
Nigel Clarke, the IMF’s Deputy Managing Director and Acting Chair, stated, “Madagascar continues to face important development needs amid its high poverty rate and vulnerability to climate shocks.” He asserted that reform acceleration is necessary to achieve growth aligned with medium-term potential. Clarke noted mixed results in program performance as of June 2024, indicating further political commitment is essential.
Regarding fiscal stability, Clarke emphasized that maintaining an automatic fuel pricing mechanism is crucial for managing fiscal risks while facilitating public investment and social spending. Additionally, improving domestic revenue, securing JIRAMA’s financial recovery, and enhancing public investment management processes were highlighted.
He pointed out that continual governance improvements, based on the Governance Diagnostic Assessment, along with the implementation of the Anti-Corruption Strategy for 2025-30, are essential for combating corruption and promoting transparency. Coordination with the central bank (BFM) was advised to manage inflation, as well as improving its liquidity management and communication on monetary policy.
In conclusion, Madagascar’s acquisition of $101 million from the IMF solidifies its fiscal strategies while addressing significant economic challenges. The prospects for growth are cautiously optimistic, contingent on ongoing reforms and improvements in governance and financial management. The IMF underscores the urgency for Madagascar to enhance resilience to climate impacts and solidify economic recovery through strategic fiscal reforms.
Original Source: dmarketforces.com
