The Executive Board of the IMF has approved an amount of $312.4 million equivalent to SDR219.96 million under the Extended Credit Facility for Madagascar.

The Extended Credit Facility which now has the approval of the Board constitutes a 40-month arrangement. The Board’s decision allows an immediate disbursement of SDR48.88 million, equivalent to $69.4 million.

This is the second disbursement of SDRs under the ECF arrangement. The new ECF arrangement follows the Fund’s emergency support rendered to Madagascar in April 2020 for SDR122.2 million (about $165.99 million or 50 percent of quota).

Furthermore, in July 2020 another tranche of support for SDR 122.2 million (about $171.9 million or 50 percent quota) was disbursed under the Fund’s emergency support. Expectations are that the new arrangement will add to other bilateral and multilateral financial support.

According to the IMF, the program design considers Madagascar’s fragilities, including its high exposure to climate-related shocks.

Thus, the Fund’s support will focus on mitigating the economic impact of the pandemic, maintaining macroeconomic stability, and reviving the reform momentum to raise and sustain growth and reduce poverty.

Moreover, the aim of the fund is to rebuild and further strengthen fiscal space. This is to allow for the needed investment and social spending through revenue mobilization.

Other areas of consideration include improving quality of spending; resuming and advancing the structural reform and anti-corruption efforts and governance agenda; strengthening the monetary policy framework and supporting financial stability.

Considering the foregoing, these will be in focus alongside maintaining price stability with exchange rate flexibility. The Fund indicates that it will also help strengthen capacity development since it is crucial for success of the program.

ECF to support economic recovery and implementation of structural reforms

The Deputy Managing Director and Acting Chair of the Board, Ms. Antoinette Sayeh noted that: “The authorities’ program, which will be supported by a new arrangement under Extended Credit Facility, will focus on supporting the economic recovery and implementing structural reforms to increase sustainable and inclusive growth that reduces poverty.”

Ms. Antoinette Sayeh acknowledged that the country’s authorities are implementing strategies to create fiscal space. This will make up for the deficit in social spending and investment. The country has outlined that it will do these through medium-term revenue mobilization efforts and improving quality of spending, she averred.

Taking cognizance of the country’s moderate debt distress level, its authorities have also outlined plans to follow a prudent debt management strategy that focuses on concessional financing for scaling-up investment and improving investment management.

Another major consideration by the Board is the authorities’ commitment to develop contingency plans as well as mitigate fiscal risks. These include addressing potential fuel pricing-related liabilities and implementing the public utility JIRAMA’s recovery plan with World Bank support.

According to the Board, they have also developed a disaster risk management strategy to assess and manage climate-related risks. Throughout the pandemic, the authorities of Madagascar have remained transparent by providing information on Covid-spending. Currently, work is ongoing to further strengthen budget transparency and improve transparency commitments.

The authorities have shown commitments to improve the business environment and attract private investment. Thus, work is in progress towards implementing the anti-corruption legal framework, the Board affirmed.

Furthermore, the IMF Executive Board is satisfied with the authorities’ plan to continue improving monetary policy framework, developing, and strengthening the financial sector, and boosting financial inclusion.