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Publish Date : 20-Jun-2014

The Executive Board of the International Monetary Fund (IMF) today approved emergency financial assistance under the Rapid Credit Facility (RCF) in the equivalent of SDR 30.55 million (about US$47.1 million) for Madagascar to enable the authorities meet their urgent balance of payment needs.

The IMF financial assistance is in support of a set of economic and structural policies and measures the authorities plan to implement in order to restore macroeconomic stability, provide a favorable environment in support of inclusive growth and poverty reduction, and to strengthen the capacity of the Malagasy government. The Executive Board's approval of the RCF disbursement will also enable the authorities to engage in discussions with development partners' regarding further assistance. The Board's approval enables the immediate disbursement of the full amount, which is equivalent to 25 percent of Madagascar's quota in the IMF.

After several years of reasonably strong economic growth, output contracted in 2009 and remained weak over several years, given a high level of political and economic uncertainty that impacted investment decisions. Over this period, Madagascar also experienced dwindling financial support from development partners and enduring fiscal deficits that became progressively more difficult to finance. Supported by large mining projects that are reaching commercial production, recovering rice production, and a less uncertain political environment, growth is projected to increase to 3 percent in 2014.

The RCF provides immediate financial assistance with limited conditionality to low-income countries with an urgent balance of payments need. In this context, the economic policies of a member receiving RCF financing are expected to address the underlying balance of payments difficulties and support policy objectives including macroeconomic stability and poverty reduction. Financing under the RCF carries zero interest (until end 2014), has a grace period of 5.5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.

Following the Executive Board discussion on Madagascar, Mr. Min Zhu, Deputy Managing Director and Acting Chair, said: Madagascar's re-engagement with the Fund marks the end of a difficult period of economic disruption in which economic activity slowed, investment stagnated and social and governance indicators weakened. Last year's elections, and subsequent widespread recognition of the new government by the international community, are helping to set the stage for a revival of the economy, but large balance of payments and fiscal gaps need to be filled in order not to jeopardize the economic recovery and to begin to address social needs.

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