The postponement of IMF budgetary aid disbursements has placed Madagascar in a delicate negotiation phase. Facing public concerns, the State, through the voice of the Minister of Economy and Finance, seeks to reassure citizens.
Negotiations are ongoing. During a Central Bank event yesterday at Carlton, Anosy, Dr. Herinjatovo Aimé Ramiarison, Minister of Economy and Finance, expressed reassurance regarding Madagascar's situation with the International Monetary Fund (IMF). "This is not a withdrawal, but there are still points we need to discuss together on this matter," the State's chief financial officer assured the press. According to him, Madagascar will explain to the Bretton Woods institution the reasons that led it to suspend implementation of automatic fuel price adjustments. He acknowledged that this point prompted the IMF to suspend the disbursement of 183 million dollars under the Extended Credit Facility (ECF) and the Resilience and Sustainability Trust (RST).
"It is on this sole point that the State and IMF have not yet reached agreement," declared Minister Ramiarison, affirming that Madagascar meets practically all structural benchmarks required for the ECF and RST. "When we concluded this agreement, the implementation of the automatic fuel price adjustment mechanism was set as a prerequisite," he added.
The IMF Board of Directors was scheduled to examine on July 17 the report of the 3rd and 4th reviews of these two programs. This item was ultimately removed from the agenda and its examination "postponed." The reason: suspension of automatic price adjustments. A decision implemented under an energy emergency declaration aimed at preventing global oil price increases, resulting from Middle East conflict, from driving up pump prices.
A new energy emergency period was declared on July 17. Already, in their mission conclusion communiqué following the ECF and RST program reviews in April, IMF representatives had expressed reservations about the energy emergency declared on April 7.
"The mission emphasized the importance of maintaining automatic fuel price adjustment mechanisms following the current pause, to limit the impact of sharp global oil price increases on the budget and generate resources to address Madagascar's vast development needs," the IMF mission statement reported.
This mechanism has consistently been the main sticking point in discussions between the State and Bretton Woods institutions. In December 2024, the IMF and World Bank already postponed their financial aid disbursements due to differing views with the State on this issue.
Compensatory Measures
This disagreement, which appears temporary, highlights a divergence in approach between national authorities and the IMF. On one side, the financial institution advocates strict fiscal discipline. On the other, the State favors cyclical management aimed at containing inflationary effects. An inflationary situation confirmed by the Central Bank yesterday.
The State's chief financial officer also defends the fuel price freeze as necessary to preserve social peace and political stability. "Madagascar cannot afford high inflation, which could trigger a social or political crisis. Moreover, we are already experiencing economic recovery momentum," he argued. According to him, during ongoing discussions with the Bretton Woods institution, Madagascar will work to explain and defend the appropriateness of its fuel price freeze policy.
He stated that the IMF wants guarantees regarding the country's fiscal sustainability. He conceded that suspending automatic price adjustments may require subsidies to cover potential gaps. "This is precisely what the IMF wants to know: how we plan to proceed," he indicated. As compensatory measures, Minister Ramiarison highlighted strengthened tax revenues and progress in combating fiscal corruption.
Better control of public spending and prudent debt policy, presented as exemplary on the African scale, are also cited as compensatory measures. However, according to the government member, a delegation already traveled to Washington in mid-July to convince the IMF of the merits of the State's decision to freeze fuel prices. Initially, the approach has not...