An International Monetary Fund (IMF) mission, headed by Mr. George Tsibouris, visited Antananarivo, Madagascar, from April 23 to May 6, 2014 and reached agreement with the Malagasy authorities on a program that could be supported by the IMF's Rapid Credit Facility (RCF).
Subject to IMF management approval, the staff-level agreement is expected to be submitted to the IMF Executive Board for its consideration in June 2014. Under the arrangement, Madagascar would be able to access up to SDR 30.55 million (about US$47.4 million).
The mission met with His Excellency President Hery Rajaonarimampianina, Minister of Finance and Budget Jean Razafindravonona, Minister of Economy and Planning Herilanto Raveloharison, and Acting Governor of the Central Bank of Madagascar Vonimanitra Razafimbelo, as well as representatives of the private sector and civil society.
At the end of the mission, Mr. Tsibouris issued the following statement:
"The Malagasy authorities have been able to maintain macroeconomic and financial stability during a difficult period of economic disruption over the past five years. However, low economic growth has interrupted the trend of improving social indicators. As a result of weak tax revenue performance and declining support from Madagascar's development partners, the government has compressed fiscal spending and accumulated domestic arrears.
"In addition, budgetary subsidies for fuel and energy more generally have become very costly and have been crowding out the room for other priority fiscal spending. Cuts in public infrastructure and social spending have been considerable. About 90 percent of the population now lives below US$2 a day (adjusted for purchasing-power parity), making poverty a critical issue for Madagascar.
"The government's immediate objective for 2014 is to create a solid foundation for faster growth and poverty reduction. In this context, it will be crucial to pursue policies that address pressing social and development needs while maintaining macroeconomic and financial stability. The International Monetary Fund stands ready to support the government's goals.
"Madagascar has urgent balance of payments and budgetary needs that, if not addressed, could result in further economic disruption. Accordingly, the Malagasy authorities and the mission agreed on a combination of measures aiming to: (i) improve tax and customs revenue collections; (ii) increase funding of priority public investment programs and social spending; (iii) stop the accumulation of new domestic arrears and clear existing arrears in a phased manner; and (iv) address the issue of fuel price subsidies over time, while identifying efficient mechanisms for supporting vulnerable groups.
"There is also a need for a medium-term strategy to bring the Malagasy economy back on the path of sustainable and inclusive growth. In particular, reforms advancing governance and the rule of law, creating a level playing field for the private sector, and encouraging investment inflows are critical. The strategy should also maintain debt at a sustainable level and give priority to concessional sources of financing. In this context, the Fund stands ready to provide assistance in its core areas of expertise.
"The mission takes this opportunity to thank the Malagasy authorities for their exemplary cooperation and the constructive discussions that took place."