International Monetary Fund (IMF) Executive Board Completes the Second Reviews Under the Extended Credit Facility and the Resilience and Sustainability Facility Arrangements with the Republic of Madagascar

• The IMF Executive Board completed the Second Reviews under the Extended Credit Facility (ECF) arrangement and the Resilience and Sustainability Facility (RSF) arrangement for the Republic of Madagascar, allowing for an immediate disbursement of SDR 77.392 million (about US$107 million).
• Madagascar’s performance under the ECF and RSF has been satisfactory. The recent adoption of a recovery plan for the public utilities company (JIRAMA) and the continued implementation of the automatic fuel price adjustment mechanism will release space for critical development needs while helping improve energy supply.
• Recent weather-related events, reduction in official development assistance (ODA) and the U.S tariff hike risk setting Madagascar back; they constitute a wakeup call.

The Executive Board of the International Monetary Fund (IMF) completed today the Second Reviews under the 36-month Extended Credit Facility (ECF) arrangement and under the 36-month Resilience and Sustainability Facility (RSF) arrangement. The ECF and RSF arrangements were approved by the IMF Executive Board in June 2024 (see PR24/232). The authorities have consented to the publication of the Staff Report prepared for this review.[1]

The completion of the reviews allows for the immediate disbursement of SDR 36.66 million (about US$50 million) under the ECF arrangement and of SDR 40.732 million (about US$56 million) under the RSF arrangement.

Madagascar has been hit by a myriad of shocks this year, including weather-related events and the dual external shock of ODA reduction (by about 1 percent of GDP) and U.S. tariff hike (47 percent initially). These developments would take a toll on growth, considering the country’s high dependence on external financial support and the exposure of its vanilla sector and textile industry to the U.S. market. Growth in 2025 would be lower-than-previously expected at 4 percent.

The current account deficit widened to 5.4 percent of GDP in 2024, due to continued weak performance in some mining subsectors; it is expected to widen further (to 6.1 percent of GDP) this year, amidst challenging prospects in the textile industry and the vanilla sector.

Program performance has been satisfactory, with all end-December 2024 quantitative performance criteria and three out of four indicative targets having been met. M3 growth was within the bands of the Monetary Policy Consultation Clause. All but one structural benchmark for the review period were also met. On the RSF front, a new forest carbon framework that promotes private sector participation in the reforestation was adopted and the National Contingency Fund for disaster risk management was operationalized.

At the conclusion of the Executive Board discussion, Mr. Nigel Clarke, Deputy Managing Director, and Acting Chair, made the following statement:

“Performance improved gradually over the first half year of the program, following delays related to mayoral elections; all but one of the end-December 2024 quantitative targets were met, and notable progress was achieved in the structural reform agenda. Recent weather-related and external shocks call for spending reprioritization, deliberate contingency planning in budget execution, and letting the exchange rate act as a shock absorber.

“The recent adoption of a recovery plan for the public utilities company (JIRAMA) is a step in the right direction. Its swift implementation will help address pervasive disruptions in the provision of electricity to households and businesses, while limiting calls on the State budget. The continued implementation of the automatic fuel pricing mechanism will also help contain fiscal risks with targeted measures to support the most vulnerable.

“Pressing ahead with domestic revenue mobilization efforts and enhancing public financial management and the public investment process remain key to fiscal sustainability. Early preparations for the 2026 budget will allow for stronger buy-in from domestic stakeholders; the budget should be anchored in a well-articulated medium-term fiscal strategy that accounts for the implementation of JIRAMA’s recovery plan and creates space for critical development spending.

“While inflation has receded slightly from its January peak, the central bank (BFM) should not loosen monetary policy until inflation is on a firm downward path. Further improvements in liquidity management, forecasting and communication will strengthen the implementation of the BFM’s interest-based monetary policy framework. Maintaining a flexible exchange rate will help absorb external shocks.

“A swift implementation of the authorities’ anti-corruption strategy (2025-2030), together with a homegrown action plan for implementing key recommendations from the IMF Governance Diagnostic Assessment (GDA), will improve transparency and the rule of law, support the authorities fight against corruption and protect the public purse.

“The authorities’ continued commitment to their reform agenda under the Resilience and Sustainability Facility (RSF) will support climate adaptation in Madagascar and complement the Extended Credit Facility (ECF) in fostering overall socio-economic resilience.”

Sources: Malagasy authorities; and IMF staff estimates and projections.

1. Primary balance excl. foreign-financed investment and grants.

2. A negative value indicates a financing gap to be filled by budget support or other financing still to be committed or identified.

Distributed by APO Group on behalf of International Monetary Fund (IMF).