The International Monetary Fund (IMF) Executive Board has completed the first review under the Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF) arrangements with Madagascar. The Board also concluded the 2024 Article IV consultation with the country. These reviews allow for immediate disbursement of SDR 36.7 million under the ECF and SDR 40.7 million under the RSF.
Madagascar's economic growth stabilized in 2024, but inflation remains a concern. The fiscal balance improved due to tax arrears settlements, although high transfers to JIRAMA continued. Export declines widened the current account deficit.
Medium-term growth prospects are positive, supported by reforms aimed at improving agricultural productivity, electricity access, and road infrastructure. However, risks remain due to domestic and global uncertainties and climate vulnerability.
Discussions focused on fiscal sustainability through increased domestic revenue, governance improvements, monetary stability consolidation, inclusive growth fostering, and climate change resilience enhancement.
Nigel Clarke, Deputy Managing Director and Acting Chair of the IMF Executive Board stated: "Madagascar continues to face important development needs amid its high poverty rate and vulnerability to climate shocks."
Clarke emphasized a need for faster reform implementation to boost growth potential: "Program performance at end-June 2024 was broadly assessed as mixed."
He highlighted fiscal risk containment through an automatic fuel pricing mechanism: "The continued implementation of the automatic fuel pricing mechanism will help contain fiscal risks."
Further efforts in domestic revenue mobilization were stressed: "Further efforts are needed to continue improving domestic revenue mobilization."
Clarke called for public financial management improvements: "Reinforcing public financial and investment management processes is critical."
Monetary policy adjustments were suggested if necessary: "The central bank (BFM) should stand ready to raise its policy rates."
Climate adaptation remains a priority: "Further building adaptation and resilience to climate shocks as well as mobilizing climate finance should continue to be a key priority."
Executive Directors acknowledged Madagascar's resilient growth but noted ongoing challenges such as development needs and climate vulnerabilities. They urged strong ownership of reforms for macroeconomic stability promotion.
Directors recommended creating fiscal space for investment by advancing revenue mobilization efforts. They also emphasized governance strengthening in state-owned enterprises like JIRAMA.
Policy rate readiness was advised for inflation control: "Directors emphasized the need to stand ready to raise policy rates."
Directors encouraged structural reform continuation alongside anti-corruption strategy adoption.
The next Article IV consultation with Madagascar is expected according to established cycles for members with Fund arrangements.