Madagascar: Prudent fiscal policy helps Madagascar keep rein on inflation

Antananarivo, Madagascar (PANA) – Prudent monetary policy has enabled Madagascar to contain inflation which ticked up earlier this year due to weather-related shocks, a staff team of the International Monetary Fund (IMF) observed at the end of a mission to the island nation’s capital, Antananarivo.

In a statement issued on Friday, IMF Mission Chief for Madagascar Marshall Mills said that the country’s inflation is expected to fall to around 8 percent by end-year, and to decline gradually in 2018.

The Fund’s staff visited Antananarivo from 7-21 September 2017 to hold discussions on the second review of Madagascar’s economic reform programme supported by the IMF’s three-year Extended Credit Facility (ECF).

“Madagascar’s economic conditions continue to be positive in 2017, with sustained macroeconomic stability despite shocks. Economic growth is projected at 4.1 percent in 2017,” said Mills. “While still among the highest rates in sub-Saharan Africa, this is lower than expected, partly due to the impact of the cyclone and drought on agriculture and hydropower.”

Growth is projected to accelerate to 5.1 percent in 2018, led by rising public investment and a rebound in agriculture.

The IMF team noted that the Central Bank of Madagascar has appropriately managed pressures linked to the positive vanilla price shock, with the accumulation of additional foreign exchange reserves, while the exchange rate appreciated, consistent with its flexible exchange rate regime.

Performance under the ECF-supported programme remains strong. Based on current data, all quantitative performance targets for end-June were met. Revenue collection continues to exceed programme targets, Mills said.

Concerning the remainder of 2017, the authorities are undertaking some additional budget measures to offset unexpected developments. Higher than expected outlays for the wage bill will be offset by over-performance on revenues and containing other spending.

The authorities are also working to speed up the execution of foreign-financed investment projects.

Work on Air Madagascar’s planned strategic partnership is advancing, and a final agreement will require a substantial transfer in the 2017 budget to cover its liabilities accumulated from past losses, as already envisaged under the IMF-supported programme.

Discussions on the 2018 budget focused on the program’s goals of increasing revenue collection and enhancing the quality of public spending. The authorities reiterated their commitment to these goals.

Mills said performance under the ECF-supported programme remains strong. Based on current data, all quantitative performance targets for end-June were met. Revenue collection continues to exceed programme targets.

Concerning the remainder of 2017, the authorities are undertaking some additional budget measures to offset unexpected developments. Higher than expected outlays for the wage bill will be offset by over-performance on revenues and containing other spending.

The authorities are also working to speed up the execution of foreign-financed investment projects. Work on Air Madagascar’s planned strategic partnership is advancing, and a final agreement will require a substantial transfer in the 2017 budget to cover its liabilities accumulated from past losses, as already envisaged under the IMF-supported programme.

According to the IMF mission statement, Madagascar authorities were also elaborating additional tax policy and administration reforms to maintain strong revenue growth in 2018, despite the negative impact of the stronger Ariary (local currency) on customs revenues.

On the spending side, discussions focused on promoting spending to support inclusive growth, as envisioned under the programme.

Mr. Mills noted that progress would require faster execution of public investment, containing wage bill growth, and reducing transfers, especially to the state-owned electric utility JIRAMA, where reforms are advancing to improve management and lower costs.
-0- PANA AR/MA 22Sept2017

22 سبتمبر 2017 07:10:16




xhtml CSS