The International Monetary Fund (IMF) on Wednesday approved the disbursement of $43.2 million to Madagascar, part of $347 million loan secured in 2016 and 2017 under the extended credit facility.
An extended credit facility (ECF) allows the borrowing country to take out money over an extended period of time rather than reapplying for a loan each time it needs money.
Madagascar’s 40 month-ECF arrangement to support the country’s efforts to reinforce macroeconomic stability and boost sustained and inclusive growth was approved on July 27, 2016 for about US$305 million, or 90 percent of Madagascar’s quota.
Additional access of 12.5 percent of Madagascar’s quota was approved by the Executive Board in June 28, 2017, bringing access to about US$347 million at that time.
On November 4, 2019, the Executive Board also approved Madagascar’s request for a three-month Extension of the ECF arrangement to February 26, 2020, to allow time to conclude the discussions to complete the sixth and last review.
Following the approval of more funds to Madagascar, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair at the IMF, said “Madagascar’s performance under its economic program supported by the ECF arrangement has been broadly satisfactory with solid growth”.
Furusawa described Madagascar’s inflation as moderate and in single-digit inflation. The country also has a robust external position.
“Going forward, a commitment to strong policies and an ambitious agenda to complete outstanding structural reforms remains crucial to mitigate internal and external risks, strengthen macroeconomic stability, and achieve higher, sustainable, and inclusive growth,” he said.
Furusawa added: “The authorities’ economic reform agenda summarized in the Plan Emergence Madagascar aims to raise economic growth through increased public and private investment, strengthening human capital, and improving governance. Creating additional fiscal space by further improving revenue mobilization through a medium-term tax revenue strategy, containing lower-priority spending, and enhancing investment implementation capacity is essential for scaling-up priority investment and social spending in education, health, and housing.
“Resolute actions are needed to contain risks to macroeconomic stability and debt sustainability, including reducing fiscal risks from the financial situation of the public utility JIRAMA and containing liabilities to fuel distributors. On the latter, the implementation of an automatic fuel pricing mechanism to avoid budget costs must be accompanied by mitigating measures to limit impact on the poorest, including by the on-going scaling up of social safety net programs.
“Effective and impartial enforcement of the new anti-corruption legal framework, now closer to international standards, is needed to improve the business climate and attract private investment. Continued progress to further strengthen public financial management is necessary to improve the governance of public resources. Measures to increase resilience to natural disasters also need to be prioritized.
“The authorities’ ongoing reform agenda should continue to benefit from continued IMF engagement, including technical assistance.”