IMF looking for Madagascar for program review mission

International Monetary Fund (IMF) Staff has Completed 2019 Article IV and Pro­gram Review Mission to Madagascar, so disclosed by International Monterey Fund.

As to the press release, IMF staff and the authorities reached staff-level agreement for the sixth program review that subject to approval by IMF management and the Ex­ecutive Board. The implementation of the authorities’ program supported by the Ex­tended Credit Facility (ECF) arrangement has remained satisfactory. And the authori­ties’ plan to increase public investment and social spending requires continued efforts to raise revenue and contain transfers to the fuel and electricity sectors.

An International Monetary Fund (IMF) mission led by Charalambos Tsangarides, mission chief for Madagascar, visited Anta­nanarivo from November 11 to 25 to con­duct discussions for the 2019 Article IV consultation and the sixth and final review of Madagascar’s economic reform program supported by the ECF arrange­ment.

At the end of the mission, Tsan­garides issued as “The discus­sions have allowed the authori­ties and the IMF staff to reach staff-level agreement for the sixth program review, subject to approval by IMF management and the Executive Board. Con­sideration by the IMF’s Execu­tive Board is expected in January 2020.”

“Despite a temporary slowdown in the first half of the year, main­ly due to slow budget execution, the macroeconomic outlook has remained favorable. For 2019, growth is expected to improve to 4.8 percent, supported by dy­namic credit conditions, and positive de­velopments in mining, transportation, and services. In a context of decreasing vanilla prices, the current account is expected to record a small deficit. After peaking in late 2017, inflation has continued to steadily de­celerate and is expected to be contained to 6 percent by end-year.

For 2020, economic prospects remain positive, with real growth expected to reach 5.2 percent, supported by increased public spending on infrastructure, health and education, and increasing private sector activity especially in tourism, other services, and light manufacturing.” He add­ed He further noted that the implementation of the ECF-supported program that expires in early 2020 has remained satisfactory. The authorities met all the June 2019 perfor­mance criteria, as well as the indicative tar­get on tax revenue collection. However, the indicative target on domestically financed priority social spending was missed by a significant margin; despite recent improve

ments in execution, the year-end objective will not be met. The central bank has con­tinued to successfully reduce exchange rate volatility and support gradual accumulation of reserves, and manage liquidity through timely interventions, thus contributing to macroeconomic stability. The authorities made some progress on the structural reform agenda, albeit at a slower pace than envis­aged. Despite the successful renegotiation of distribution margins on fuel prices, a re­maining gap between reference and pump prices led to continued accumulation of small liabilities to distributors.

“Staff welcomed the authorities’ commit­ment to strengthen growth, enhance rev­enue collection, and foster social inclusion. Supporting economic activity will require the strict prioritization and timely imple­mentation of growth-enhancing investment projects.

Meeting the authorities’ ambitious tax revenue targets will critically depend on stepping up collection efforts, cross-check­ing information between customs and do­mestic tax administrations, and revising tax expenditures and exemption regimes. Re­ducing poverty will necessitate strong pub­lic spending execution in the health and edu­cation sectors, as well as containing lower priority public spending such as subsidies to fuel and electricity operators.” He remarked.

“Staff underscored the need to adopt a pric­ing mechanism that aligns pump prices with world price developments and to settle ex­isting liabilities with distributors to avoid budget costs. Staff emphasized that such a mechanism would need to be implemented along with targeted social measures to pro­tect the poor from the impact of potential future price adjustments.

To improve the op­erational and financial situation of the public utility JIRAMA and ensure it does not weigh on the budget, an encompassing strategy to raise revenues and improve governance is needed. Staff also support ongoing cost-cut­ting measures, including through the renego­tiation of contracts with electricity and fuel suppliers, and the audit of the company’s arrears.

Added he pointed out that staff encouraged the authorities to continue improving gov­ernance, including by stepping up the fight against corruption, a key element to strength­en the business climate and attract private investment. In this respect, staff commended the authorities for adopting an ordinance on illicit asset recovery and urged its operation­alization through the speedy adoption of the implementation decree. To consolidate and deepen significant structural reforms under­taken at the central bank to strengthen the monetary policy framework and boost finan­cial inclusion, staff welcomed the authori­ties’ plans to submit the new banking law and the financial stability law to Parliament.

“The mission met with President Andry Rajoelina, Prime Minister Christian Ntsay, Minister of Economy and Finance Richard Randriamandrato, Interim Minister of Ener­gy, Water, and Hydrocarbons Christian Ra­marolahy, outgoing Central Bank of Mada­gascar Governor Alain Rasolofondraibe and new Governor Henri Rabarijohn, senior of­ficials, development partners, as well as rep­resentatives of the private sector and civil society.The mission would like to thank the Malagasy authorities for their strong coop­eration and the constructive discussions.” He stated.

 The Ethiopian Herald Sunday Edition 1 December 2019

 BY MEHARI BEYENE