Madagascar has secured a $101 million loan from the IMF following the completion of the Article IV consultation. This loan is part of the 36-month ECF and RSF arrangements aimed at enhancing fiscal sustainability, governance, and climate resilience. Despite ongoing inflation pressures and a widening current account deficit, the IMF indicates that the country’s growth outlook remains positive with necessary reforms and political will.
Madagascar has successfully accessed a loan amounting to $101 million from the International Monetary Fund (IMF), following the completion of the Article IV consultation yesterday. The IMF’s Executive Board has also finalized the First Reviews concerning the 36-month Extended Credit Facility (ECF) and the Resilience and Sustainability Facility (RSF). The ECF and RSF arrangements were approved in June 2024, facilitating immediate fund disbursement.
Following this completion, Madagascar is set to receive an allocation of SDR 36.7 million, approximately $48 million, under the ECF, and SDR 40.7 million, roughly $53 million, under the RSF. The IMF indicated that Madagascar’s economic growth has stabilized in 2024, although inflationary pressures continue to affect the economy. Positive fiscal developments ensued from settling tax arrears owed by fuel distributors, fostering improvements despite ongoing substantial transfers to JIRAMA, the state-owned utility.
However, the current account deficit has widened mainly due to declining export levels. In terms of outlook, Madagascar’s medium-term growth prospects remain favorable, driven by RSF and ECF-supported reforms targeting enhanced agricultural productivity, better electricity access, and improved road infrastructure. Nevertheless, the IMF cautioned that external and domestic uncertainties present downside risks, particularly the country’s vulnerability to climate shocks.
Discussions during the 2024 Article IV consultation emphasized the necessity of ensuring fiscal sustainability through increased domestic revenue and reduced fiscal risks. The review aims to reinforce fiscal institutions, enhance public financial management, improve governance, combat corruption, stabilize the economy, and encourage inclusive growth while building resilience to climate change.
Mr. Nigel Clarke, IMF Deputy Managing Director and Acting Chair, remarked, “Madagascar continues to face important development needs amid its high poverty rate and vulnerability to climate shocks. A faster pace of reform is needed to spur growth, which remains well below its medium-term potential.” He further stressed the importance of effective political support to implement these measures.
Mr. Clarke reiterated that maintaining the automatic fuel pricing mechanism will mitigate fiscal risks and enable increased public investment and social expenditure. He also highlighted the importance of enhancing revenue mobilization and ensuring JIRAMA’s financial recovery. Improving public financial management and implementation of a robust anti-corruption strategy remain essential for boosting transparency and fighting corruption.
Moreover, he noted that the central bank (BFM) must be prepared to raise policy rates to maintain a downward inflation trajectory. Improvements in liquidity management, alongside clearer communication regarding monetary policy, would strengthen BFM’s credibility. Adapting to climate shocks and securing climate financing should be prioritized along with the implementation of environmental assessments for new projects.
Madagascar’s recent acquisition of a $101 million loan from the IMF marks a significant step toward enhancing its economic stability. The funds will support initiatives aimed at fiscal sustainability, improved governance, and climate resilience. However, continued reforms and robust political commitment are essential to address underlying vulnerabilities and stimulate long-term growth. The IMF’s support highlights the importance of structural reforms in facilitating Madagascar’s recovery and growth, especially in combating poverty and adapting to environmental challenges.
Original Source: dmarketforces.com
