Madagascar's payments balance is chronically negative. Since private investment has been limited, the deficits have been covered by foreign aid grants, official loans, and the use of central bank reserves from good years. In 1981 Madagascar was refused credit by its suppliers because of worsening deficits. The IMF provided a standby loan in 1982, conditional on devaluation of the currency, increased agricultural sector investments, producer price increases for rice and cotton, and the imposition of a ceiling on the minimum wage. These measures had a positive effect, although export production continued to decline. Consequently, further standby credits were negotiated and, in the late 1980s, Madagascar's debt was periodically rescheduled conditional on further trade liberalization, tighter government spending controls, privatization of the state's banks, improvement of credit access, and the opening up of financial markets to foreigners. France and Germany canceled significant portions of Madagascar's debt at that time.
In 1997, the Paris Club approved a 67% debt reduction, but since the majority of the country's debt did not lie with the Paris Club, it retained an external debt of over $4.5 billion. In 2000, Madagascar qualified for $1.5 billion in debt service relief from the IMF/World Bank Heavily Indebted Poor Countries (HIPC) initiative. In 2001, the IMF approved a three-year $103 million loan to Madagascar.
The US Central Intelligence Agency (CIA) reports that in 2000 the purchasing power parity of Madagascar's exports was $680 million while imports totaled $919 million resulting in a trade deficit of $239 million. The International Monetary Fund (IMF) reports that in 2001 Madagascar had exports of goods totaling $111 million and imports totaling $114 million. The services credit totaled $42 million and debit $61 million. The following table summarizes Madagascar's balance of payments as reported by the IMF for 2001 in millions of US dollars.
|Balance on goods||-3|
|Balance on services||-19|
|Balance on income||-10|
|Direct investment abroad||…|
|Direct investment in Madagascar||11|
|Portfolio investment assets||…|
|Portfolio investment liabilities||…|
|Other investment assets||-15|
|Other investment liabilities||-12|
|Net Errors and Omissions||-31|
|Reserves and Related Items||54|