Under the Extended Credit Facility, a fourth program review is scheduled for May. A working meeting to this effect was held in Washington yesterday, as part of the spring meetings of the Bretton Woods institutions.
May 3-12. This is the timetable for the 4th round of the review of the Extended Credit Facility (ECF) program of the International Monetary Fund (IMF) for Madagascar. Information communicated by the Ministry of Economy and Finance yesterday. According to this ministerial communication, a working meeting to prepare for this fourth mission of IMF evaluators was held yesterday in Washington. A working session as part of the spring meetings of the Bretton Woods institutions, namely the IMF and the World Bank. Opposite the Malagasy delegation led by Rindra Hasimbelo Rabarininarison, Minister of Economy and Finance, there was the IMF team led by Frédéric Lamber, its head of mission in Madagascar.
The information shared by the Ministry of Economy and Finance on its Facebook page is relatively laconic. It is likely, however, that yesterday’s working meeting was intended for both parties to get in tune. On the Malagasy side, it would have been an opportunity to take stock of progress in relation to the planned disbursement “conditionalities”. For its part, the IMF team would have recalled the points to be improved precisely.
The ECF is a program of financial assistance from the IMF to support the economic programs of the recipient countries which therefore aim to restore stability and macroeconomic viability, and to have dynamic and sustainable growth. Madagascar has been a beneficiary once more since February 12, 2021, for a total amount of $312 million. Disbursements are planned in seven tranches, over a period of forty months, i.e. until May 2024.
Madagascar is currently in the third tranche, with the disbursement of 32.6 million dollars, last March. This brings the amount acquired so far to $195.5 million. There is thus still a good part of the FEC which remains to be acquired. As the program deadline approaches, the pace of disbursements will need to be accelerated. The 4th review of the ECF should lead to the disbursement of a 4th tranche. However, as indicated above, disbursements are subject to “conditionalities”. The reviews, which in simple words are evaluation missions, serve precisely to assess compliance with these conditionalities.
spoilsport
According to a March 2 IMF press release reporting the findings of the 3rd review, Antoinette Sayeh, Deputy Managing Director and Acting President, noted that “in an unfavorable global environment and following a series of shocks climate change, Madagascar’s performance under the IMF-supported program has been mixed”. The Big Island can and must do better. “The implementation of structural reforms is accelerating but must continue,” she added.
Among the points for improvement reported by the letter from the Bretton Woods institution is the identification of appropriate tax policy measures, such as the rationalization of tax exemptions. “The authorities must continue their efforts to strengthen budget credibility and transparency. (…) Measures aimed at strengthening the legal framework for public procurement would be welcome,” the statement added.
In this sense, there is also the improvement of the autonomy of the Court of Auditors, for the external control of public finances. The application of the anti-corruption framework is not left out. According to the information, the IMF would also expect more guarantees on the state’s commitment to “gradually implement an automatic fuel pricing mechanism”. In other words, price truth, scheduled to be effective in 2024.
There is also the increase in expenditure for the social ministries. Added to this are building climate resilience and social safety nets for vulnerable households. With a view to this 4th IMF review, the State has already taken the lead by adopting a few measures. The reform of the mining code, whose related bill was adopted by the Council of Ministers on Wednesday, is one of these initiatives to comply with the conditionalities of the FEC.
Reform of the regulatory framework of the telecommunications sector and new communication technologies. The requisition of fuel for the benefit of Jirama, which cannot be made without a corresponding financial commitment document. Two decisions taken by the Council of Ministers last week would also be part of these measures for the next IMF review.
The initiatives of law or regulatory text in order to meet the conditionalities of the FEC are easy on paper. Their adoption and implementation, however, involve convincing parliamentarians and stakeholders in the sectors concerned. Some wonder, however, whether this election year is the right time to carry out reforms in sensitive sectors. The outcome of the vanilla saga, lately, indicates that in the face of socio-economic issues, political issues are playing spoilsport.
