The funds, according to an IMF statement, will be provided to enable Madagascar’s authorities to urgently meet their balance of payment needs.
“The board’s approval enables the immediate disbursement of the full amount, which is equivalent to 25 percent of Madagascar’s quota in the IMF,” the IMF explained.
“The IMF financial assistance is in support of a set of economic and structural policies and measures the authorities plan to implement in order to restore macroeconomic stability, provide a favourable environment in support of inclusive growth and poverty reduction, and to strengthen the capacity of the Malagasy government.”
The provision of emergency funds comes a time when relatively strong growth in Madagascar began to contract in 2009, and weakness continued thereafter in the following years. The IMF added that Madagascar’s political and economic uncertainty then sparked negative investor perception.
“Over this period, Madagascar also experienced dwindling financial support from development partners and enduring fiscal deficits that became progressively more difficult to finance,” the IMF added.
“Supported by large mining projects that are reaching commercial production, recovering rice production, and a less uncertain political environment, growth is projected to increase to 3 percent in 2014.”
The Rapid Credit Facility (RCF) provides immediate financial assistance with limited conditionality to low-income countries win need of an urgent balance of payments.
RCF financing has zero interest until the end 2014, has a grace period of five and a half years, and a final maturity of 10 years.
The level of interest for all concessional facilities is thereafter reviewed every two years.
Min Zhu, deputy managing director and acting chair of the IMF, explained that Madagascar’s engagement with the IMF’s funding is one step towards implementing policies and structural reforms to correct macroeconomic imbalances.
“Madagascar’s re-engagement with the fund marks the end of a difficult period of economic disruption in which economic activity slowed, investment stagnated and social and governance indicators weakened,” said Zhu.
“Last year’s elections, and subsequent widespread recognition of the new government by the international community, are helping to set the stage for a revival of the economy, but large balance of payments and fiscal gaps need to be filled in order not to jeopardise the economic recovery and to begin to address social needs.”