Washington, DC — The World Bank Board of Executive Directors today approved the First Poverty Reduction Support Credit* and Grant for a total value of US$125 million, and an additional US$50 million credit to supplement the Community Development Fund project in Madagascar.

The Poverty Reduction Support Credit (PRSC), comprising an International Development Association (IDA) grant of US$88 million and a credit of US$37 million, will support the implementation of the PRSP, and particularly of the reforms to improve governance and human development.

On governance, the PRSC supports reforms in public expenditure management, anticorruption and judiciary, for example, supporting the public finance framework law. It supports reform of the treasury, the procurement code, and an improved alignment of the 2004 budget to the priorities of poverty reduction.

The PRSC also supports the implementation of the Government's Education for All Agenda (EFA) and its policy and institutional reform for service delivery in the nutrition sector. Key policy measures aimed at increasing access to, and quality of, primary education, include the development of the EFA plan, elimination of school fees, provision of learning materials to all primary students, teacher recruitment, reform of the curricula, and reinforcement of management capacity at central and decentralized levels. PRSC1 also supports policy and institutional reform in the nutrition sector, including the development of a National Nutrition Policy.

Implementation of the PRSP is progressing well, and the Government of Madagascar has just presented the First Annual Report on its progress. As reflected in the report, the strategy has some results to show. The economy rebounded from the 2002 crisis, and grew by almost 10 percent in 2003. There are encouraging signs that governance is improving and Madagascar has achieved real results on the ground. In education, primary enrolment rates have increased from around 70 percent in 2001 to over 80 percent now. The roads program has been very successful and rehabilitated over 1,800 kilometers of roads, a three-fold increase over 2001.

However, Madagascar remains vulnerable to exogenous shocks which undermine growth and poverty reduction. In early 2004, Madagascar was hit by two cyclones barely a month apart. Over a third of a million people became homeless, over 300,000 hectares (or ten percent) of total agricultural lands and over 4,600 schools and health centers were damaged or destroyed. Exports of vanilla and shrimp have been affected, and rice production has been severely set back.

The Bank is supporting Madagascar's recovery from the cyclone by supplementing the Community Development Project credit, with additional funds of US$50 million.

The projects were approved by the Board while the President of Madagascar Marc Ravalomanana was visiting Washington, D.C. and planning to meet with World Bank President Jim Wolfensohn.

* The credits are on standard International Development Association (IDA) terms, with a commitment fee of 0.5 percent and a service charge of 0.75 percent. The period of maturity is 40 years, including a 10-year period of grace.

For more information on the World Bank's work in Madagascar visit: http//worldbank.org/afr/mg.