The International Monetary Fund (IMF) Executive Board has completed the second reviews under both the Extended Credit Facility (ECF) and the Resilience and Sustainability Facility (RSF) arrangements with Madagascar. These arrangements, initially approved in June 2024, aim to support Madagascar's economic stability and resilience.
The completion of these reviews allows for immediate disbursements totaling approximately US$106 million. This includes SDR 36.66 million under the ECF arrangement and SDR 40.732 million under the RSF arrangement.
Madagascar faces significant challenges this year due to weather-related events and external shocks such as a reduction in Official Development Assistance (ODA) and increased U.S. tariffs affecting its vanilla sector and textile industry. These factors are expected to reduce growth prospects, with GDP growth forecasted at 4 percent for 2025.
In 2024, Madagascar's current account deficit widened to 5.4 percent of GDP due to weak performance in some mining subsectors. It is anticipated to increase further this year amid difficulties in key industries.
Despite these challenges, program performance has been satisfactory, meeting most quantitative performance criteria and indicative targets set for December 2024. A new forest carbon framework was adopted under the RSF, promoting private sector involvement in reforestation efforts.
Nigel Clarke, Deputy Managing Director and Acting Chair of the IMF Executive Board, stated: “Performance improved gradually over the first half year of the program... Recent weather-related and external shocks call for spending reprioritization.”
Clarke also highlighted steps taken by Madagascar to address utility disruptions through a recovery plan for JIRAMA, the public utilities company, emphasizing its importance for fiscal sustainability alongside continued implementation of an automatic fuel pricing mechanism.
Efforts towards domestic revenue mobilization and enhanced public financial management remain crucial for fiscal health. Preparations for the 2026 budget should align with a medium-term fiscal strategy that accommodates critical development spending.
While inflation has slightly decreased from its peak earlier this year, Clarke advised against loosening monetary policy until a consistent downward trend is observed. He also emphasized maintaining a flexible exchange rate to absorb external shocks.
Finally, Clarke stressed that implementing an anti-corruption strategy would enhance transparency and rule of law while supporting socio-economic resilience through climate adaptation initiatives under the RSF.