|In 2000, Madagascar embarked on the preparation of a Poverty Reduction
Strategy Paper (PRSP) under the Heavily Indebted Poor countries (HIPC)
Initiative. The boards of the IMF and of the World Bank concurred in
December 2000 that the country is eligible under the HIPC Initiative, and
Madagascar has reached the decision point for debt relief. On March 1,
2001, the IMF Board granted the country $103 million for 2001-03 under the
Poverty Reduction and Growth Facility (PRGR). Resources freed up from HIPC
will be directed toward improving access to health, education, rural
roads, water, and direct support to communities. In addition, on March 7,
2001, the Paris Club approved a debt cancellation of $161 million. On
February 28, 2001, the African Development Bank (ADB) approved under the
HIPC a debt cancellation of $71.46 million and granted in June 2001 an
additional credit of $20 million to fight against AIDS and poverty.
Partly as a result of these credits but also as a result of previous reforms, average GDP growth exceeded the population growth rate of 2.8% in 1997 (3.5%), 1998 (3.9%), 1999 (4.7%) and 2000 (4.8%). Madagascarís appeal to investors stems from its competitive, trainable work force. More than 200 investors, particularly garment manufacturers, have organized under the countryís Export Processing Zone (EPZ) system since it was established in 1989. The absence of quota limits on textile imports to the European market under the Lome Convention has helped stimulate this growth. In addition, there is evidence that Madagascarís recent eligibility for AGOA is significantly increasing Malagasy exports and foreign investment.
In the short and medium terms, considerable economic growth can arise from greater efficiency in the allocation and use of resources. Since the mid-1980s, Madagascar has run sizeable balance-of-payment deficits. The current account deficit as a percentage of GDP averaged in excess of 6% during the last 6 years and registered nearly 4% in 1999. Madagascarís debt ratio, which had reached 46% in 1996, is estimated at 15.4% in 2000. Within an overall framework of poverty reduction, the HIPC Initiative would enable the country to reduce its debt service ratio to 5.5% in 2003, and remain at around 5% throughout the projection period 2000-19.
An optimistic high-growth scenario is predicated on recovery of private investor interest and a continuing drop in inflation. From more than 60 % in 1994, the inflation rate dropped to 6.4% in 1998, before rising again to 14.4% in 1999 and 8.7% in 2000. The government hopes to bring this down to 5.8% by the end of 2001. In 2000, real GDP growth reached 4.8% and was forecast to accelerate to 6% in 2001. Tax revenues increased to more than 11% of GDP in 2000 and in 2001, the government forecasts a rate approaching 12%.
GDP: purchasing power parity -
$12.3 billion (2000 est.)
SOURCES: The World Factbook, U.S. Department of State
Mother Earth Travel > Country Index > Madagascar > Map Economy History