IMF Completes First Credit Review with Madagascar, Disbursing…

The IMF has completed the First Reviews of the ECF and RSF arrangements for Madagascar, resulting in a US$101 million disbursement. Performance was deemed adequate but uneven, necessitating reforms in fiscal management and JIRAMA. Deputy Managing Director Mr. Nigel Clarke emphasized the importance of swift reforms to address poverty and climate vulnerability, while also highlighting the significance of a new decree on environmental assessments for sustainable investment.

The Executive Board of the International Monetary Fund (IMF) announced the completion of the First Reviews under the Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF) arrangements for Madagascar. This allows for a disbursement of US$101 million to support the nation’s economic initiatives. The ECF and RSF were approved in June 2024, reflecting the Board’s assessment of the country’s performance.

Madagascar’s program performance has been characterized as adequate but inconsistent. Implementing an automatic fuel price adjustment is expected to generate fiscal space, which is essential for increasing social spending and investments. Priority remains on reforming JIRAMA to enhance efficiency and service delivery.

Mr. Nigel Clarke, IMF Deputy Managing Director and Acting Chair, emphasized the critical development needs Madagascar faces, particularly regarding its poverty levels and vulnerability to climate-related shocks. He noted that a quicker reform pace is fundamental to stimulate economic growth, which currently lags behind its potential. Political commitment will be necessary to maintain the momentum of program implementation.

Further development of the automatic fuel pricing mechanism is vital for mitigating fiscal risks while facilitating public investment and social development. Strengthening domestic revenue mobilization efforts and ensuring the financial recovery of JIRAMA are also crucial. Enhanced public financial management is critical for effective budget execution and to prevent arrears accumulation.

The central bank of Madagascar, also known as BFM, may need to consider raising policy rates to control inflation. Improvements in liquidity management and clearer communication about monetary policy will reinforce BFM’s credibility. Additionally, bolstering climate resilience and securing climate finance should remain priorities amid ongoing environmental challenges.

The introduction of a new decree regarding environmental and social impact assessments establishes a framework to evaluate investment projects effectively. This approach should be applied to new initiatives, including infrastructure developments, to ensure sustainable growth and responsiveness to climate impacts.

In conclusion, the IMF’s recent reviews endorse Madagascar’s economic strategies while highlighting critical areas for reform. Immediate financial assistance via the ECF and RSF arrangements aims to support the country in addressing poverty and promoting sustainable development. Continued political commitment and effective policy implementation will be essential for overcoming challenges and achieving economic growth.

Original Source: www.miragenews.com