- According to the latest review of the Malagasy economy, poverty has deepened during the last year due to the political crisis. Despite economic setback, Madagascar was given a US$ 15.9 million disbursement by the IMF.
Anne Krueger, IMF Deputy Managing Director, said that the Malagasy government nonetheless had implemented its poverty reduction strategy in a "satisfactory" way, given the difficult situation. "However, as a result of the political crisis, the authorities' macroeconomic objectives for 2002 were not fully achieved and poverty deepened," she noted.
The IMF emphasised that the challenge for the Malagasy authorities in the period ahead was to "stabilise the economy, strengthen the business climate to encourage private investment, and diversify the export base to strengthen exports and economic growth."
Madagascar's budget for 2003 was seeking to boost revenue to permit a recovery of expenditure while containing the fiscal deficit, the island's authorities had informed the Fund.
To this end, the Malagasy government was "addressing problems of inefficiency and corruption in public administration, especially in the customs and tax departments." Authorities had already established a committee to oversee the reform of customs and tax administration.
The authorities also intended to curb the growth of the civil service wage bill and link salary increases to job performance. Further reforms were however "needed to remove weaknesses in budget preparation, expenditure control, and treasury operations, in order to strengthen the budgetary process and prevent the accumulation of arrears," said Ms Krueger.
- It will be important to maintain export competitiveness in order to reduce external vulnerability and boost exports, she added. Madagascar should further aim at "maintaining low production costs, improving the efficiency of the cotton sector, and diversifying exports."
The Malagasy authorities were noted for being committed to the privatisation and rehabilitation of public enterprises "in order to increase economic efficiency, private investment, and economic growth." According to Ms Krueger, these reforms "could play an important role in raising income and reducing poverty in rural areas."
The IMF review of Madagascar's economy resulted in the Fund's board approval of a disbursement amounting to US$ 15.9 million of an earlier approved loan to reduce poverty. Madagascar has so far drawn US$ 47.7 million under this poverty reduction arrangement with the IMF.
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