Madagascar - Economic development



The 1982–1984 development plan, more modest than the previous one owing to limited resources, called for a shift from social investments (especially education and health) to agriculture, industry, and infrastructure. The following 1984–87 plan called for spending centered mainly on transport improvements and agricultural development. The 1986–90 plan, which superseded the 1984–87 plan, had 30% of the budget coming from private sources and 40% from foreign sources. The plan called for investments of 47% in agriculture in the ongoing effort to achieve food self-sufficiency and crop diversification.

Antigovernment strikes, corruption, and a lack of commitment have limited progress on the reforms since the early 1990s. In March 1997, a World Bank structural adjustment credit of $70 million was approved; in July 1999, a $100 million credit, and $40 million from the International Monetary Fund (IMF). The GDP growth rate has increased steadily since these credits were allocated to Madagascar. However, external debt remained at $4 billion throughout the decade. One good sign, was that the inflation rate was cut from 45% in 1993 to 6.2% in 1998.

In 2000, Madagascar was approved for $1.5 billion in debt service relief under the IMF/World Bank Heavily Indebted Poor Countries (HIPC) initiative. In 2001, it negotiated a $111.3 million three-year Poverty Reduction and Growth Facility (PRGF) Arrangement with the IMF. The PRGF was due to expire in November 2004. Also in 2001, the Paris Club approved a debt cancellation of $161 million, and the African Development Bank (AfDB) approved a debt cancellation of $71.46 million and granted an additional credit of $20 million to fight HIV/AIDS and poverty. Foreign direct investment in Madagascar's export processing zone strengthened the country's balance of payments position from 1997–2001, real GDP growth rate averaged4.75%, and inflation was limited. The government embarked on an agenda of regulatory reform and public enterprise in 2002. Poverty, however, remains a constraint on growth and development.

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