Tanzania: Madagascar faces challenges to reverse worsening development indicators

Dar es Salaam, Tanzania (PANA) - Affirming that Madagascar's economic environment remains challenging, an International Monetary Fund (IMF) team concluded Tuesday that over the medium term, the key challenge to the Indian Ocean republic remains to secure strong, sustainable, pro-poor growth to help reverse the deterioration in development indicators.

"This requires scaling up essential infrastructure, reforms to improve governance and the business climate, and enhanced social development policies, as reflected in the National Development Programme, the National Social Protection Strategy, and the National Anti-Corruption Strategy," remarked Marshall Mills who headed the IMF team on a two-week visit to the island's capital, Antananarivo.

During its visit, the IMF mission reached a staff-level agreement with the authorities in Madagascar on financial assistance under the Rapid Credit Facility (RCF),  coupled with a 6-month Staff-Monitored Programme.

In order to maintain macroeconomic stability, enhance fiscal and external sustainability, and strengthen the capacity of the government, the IMF team and the Malagasy authorities have reached an agreement on a set of economic and structural policies to reinforce the progress made since the previous RCF, which was approved by the IMF Executive Board in June 2014.

In a statement, Mills noted that the island's economic recovery that began in 2014 has failed to gain further momentum due to a series of shocks and deep-rooted structural weaknesses; growth is expected to reach 3.2 percent in 2015, with end-year inflation remaining contained at 7.9 percent.

"Sharply falling commodity prices are holding back mining revenues, while private investment remains weak in the context of the poor business climate. Tourism has been hampered by difficulties at Air Madagascar, while recurring power cuts at JIRAMA, the public utility, continue to constrain economic activity," he said.

Subject to IMF management approval, the staff-level agreement on the RCF disbursement is expected to be submitted to the IMF Executive Board for consideration in November 2015.

Under the RCF arrangement, Madagascar would be able to access up to SDR 30.55 million (about US$47.4 million).

“To support a medium-term development programme, two key objectives of the authorities’ programme are to increase domestic revenue collection and enhance spending quality," said Mills. "These objectives are reflected in the broad outlines of the 2016 budget discussed with the authorities."

According to the IMF official, Madagascar's new measures to improve tax administration focus on increasing compliance, deterring fraud, eliminating some exemptions, and tackling the large informal sector.

Mills also noted that the Central Bank of Madagascar has recently taken measures to ensure the smooth and transparent functioning of the foreign exchange market.

He said: "In particular, it has discontinued buy-back operations, eliminating the wedge between the official interbank market exchange rate and the private sector market rate used for most transactions (which was 8 percent at the beginning of September).

"The private sector market rate has remained roughly stable. The forthcoming new draft Central Bank law will enhance the governance and independence of the central bank."

In Antananarivo, 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 as well as private sector representatives and development partners.
-0- PANA AR 22Sept2015

22 september 2015 19:50:04

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