Madagascar - Domestic policy

Ravalomanana inherited a gloomy economy dating back to nationalization in the mid-1970s. The agricultural sector, which employed more than 75% of the labor force, was neglected in favor of industrialization through import substitution. This policy, along with unfavorable terms of trade, resulted in heavy external borrowing and deterioration of the balance of payments. High inflation further eroded the purchasing power of the Malagasy franc. Ex-president Ratsiraka undertook a series of market-oriented adjustment policies with the International Monetary Fund (IMF) and the World Bank, including the removal of price controls and trade restrictions with some success. Increases in fuel prices, depreciation of the franc, and the floods of 2000, however, crushed economic growth. Madagascar's political crisis crushed tourism and manufacturing, leading to a contraction of the economy by 10%. An estimated 150,000 workers lost their jobs due to the crisis.

Ravalomanana has maintained cooperation with the IMF and the World Bank. At a donor meeting in Paris in July 2002, his prime minister, Jacques Sylla presented his government's core strategy consisting of jobs creation, poverty relief, better governance, and private sector promotion. Donors pledged US $2.3 billion in financing over four years. At the donor meeting, the government promised to complete its Poverty Reduction Strategy Paper (PRSP), which will be the country's development blueprint after March 2003. The PRSP as elsewhere in developing countries, which benefit from the Heavily Indebted Poor Countries (HIPC) initiative, must be highly consultative with broad-based citizen input. Ravalomanana's government will be keen to re-establish a sense of domestic stability and rule of law to attract foreign investment.

The question of what to do with Ratsiraka remains. Ravalomanana has established a commission to arrest him for embezzlement and inciting violence, but he remains exiled in France. His personal property including his house have not been abused. Ravalomanana also is concerned with reactionaries still loyal to Ratsiraka. In February 2003, the administration arrested General Bruno Rajohnson on charges of attempting a coup. Finally, an Amnesty International Report in December 2002 found evidence of widespread human rights abuses that bear investigation and attention from President Ravalomanana's administration.