Economy of Madagascar

Mother Earth Travel > Country Index > Madagascar > Map Economy History

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.)
GDP - real growth rate: 4.8% (2000 est.)
GDP - per capita: purchasing power parity - $800 (2000 est.)
GDP - composition by sector:
agriculture:  30%
industry:  14%
services:  56% (1999 est.)
Household income or consumption by percentage share:
lowest 10%: 1.9%
highest 10%: 36.7% (1993)
Inflation rate (consumer prices): 8.7% (2000 est.)
Labor force: 7 million (1999)
Budget:
revenues: $553 million
expenditures: $735 million (1998 est.)
Industries: meat processing, soap, breweries, tanneries, sugar, textiles, glassware, cement, automobile assembly plant, paper, petroleum, tourism
Industrial production growth rate: 3% (2000 est.)
Electricity - production: 810 million kWh (1999)
Electricity - production by source:
fossil fuel:  37.04%
hydro:  62.96%
nuclear:  0%
other:  0% (1999)
Electricity - consumption: 753.3 million kWh (1999)
Agriculture - products: coffee, vanilla, sugarcane, cloves, cocoa, rice, cassava (tapioca), beans, bananas, peanuts; livestock products
Exports: $600 million (f.o.b., 1998 est.)
Exports - commodities: coffee, vanilla, shellfish, sugar; cotton cloth, chromite, petroleum products
Exports - partners: France 41%, US 19%, Germany 13%, UK 8%, Japan 6% (1999)
Imports: $881 million (c.i.f., 1998 est.)
Imports - commodities: intermediate manufactures, capital goods, petroleum, consumer goods, food
Imports - partners: France 34%, Hong Kong 6%, China 6%, Japan 5%, Singapore 4% (1999)
Debt - external: $4.4 billion (1999)
Economic aid - recipient: $838 million (1997)
Currency: Malagasy franc (MGF)

SOURCES: The World Factbook, U.S. Department of State

Mother Earth Travel > Country Index > Madagascar > Map Economy History