Madagascar: IMF staff underline prudent fiscal stance in Madagascar

Antananarivo, Madagascar (PANA) - Successful implementation of the International Monetary Fund (IMF) staff-monitored programme (SMP) with Madagascar will strengthen the Indian Ocean island nation's economic stability and sustainability, according to Malagasy authorities and the Fund's staff who have completed a 10-day working visit here.

In addition, the two sides concurred that the programme will provide a framework that boosts confidence and assists in catalyzing external assistance, and help lay the groundwork for a future request for an Extended Credit Facility (ECF) arrangement with the IMF.

IMF team leader Marshall Mills remarked at the end of the visit late Friday that Madagascar's economic and financial conditions were improving.

"Growth is expected to accelerate from last year to more than 4 percent this year. Economic activity will be driven by a recovery in tourism, which was affected by Air Madagascar’s operational problems in 2015," he said.

Besides, he noted the strengthened construction activity led by public investment; and restored AGOA (African Growth and Opportunity Act) eligibility benefiting manufacturing as other factors likely to induce growth.

"With better rainfall for most of the country so far this year, agricultural production is also expected to recover slowly in 2016 after contracting in 2015.

“Implementation of the SMP was broadly satisfactory at end-December 2015, with generally good performance on indicative targets and structural reforms moving ahead," Mills said, acknowledging that the Malagasy authorities have demonstrated commitment to the program so far and were taking important steps to advance their macroeconomic and structural reforms.

"Revenue mobilization was above target, reflecting a gradual upward trend in tax and customs collections. The quality of expenditure has improved, with the elimination of fuel subsidies, introduction of an automatic pricing mechanism for fuel, agreement on plans to repay some arrears, and an ongoing clean up of government payrolls," he added.

Though inflation remains contained below 8 percent, the IMF team cautioned that the external environment is challenging, in light of low commodity prices and slow growth in some export markets.

Risks to the country's economic outlook stem mainly from fiscal challenges, weak global commodity prices, adverse weather conditions, and policy implementation in a difficult political environment.

In the view of the IMF team, additional reforms, such as strengthening the financial system, will be critical to strengthen the economy and fortify growth.

They said that continuing with a prudent fiscal stance, including through better management of JIRAMA (state-owned electric utility and water services company), avoidance of arrears, and ensuring manageable public debt remain important. Losses in JIRAMA remain a major concern and pose significant risks to the budget.

"Crucially, sustained progress will also depend on improvements in governance, including the fight against corruption, to ensure that reforms are implemented and bear fruits," Mills pointed out in his statement, suggesting that further advancement of the ongoing reforms should lift the economic outlook.

The IMF team met with President Hery Rajaonarimampianina, Prime Minister Jean Ravelonarivo, Minister of Finance and Budget Gervais Rakotoarimanana, Minister of Economy and Planning Herilanto Raveloharison, Central Bank of Madagascar Governor Alain Rasolofondraibe, the Economic Advisor to the President Léon Rajaobelina, and other senior government officials.
-0- PANA AR 12Mar2016

12 march 2016 07:41:52

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