Madagascar consists of 6 provinces and 22 regions and is a presidential representative democratic republic. Formerly a French colony, the country declared its independency on June 26th 1960, but has remained close to French interests. After years of political and economic instability, magnified by the military coup in 2009, Madagascar is slowly recovering. With free and credible presidential and legislative elections at the end of 2013, Madagascar put an end to a long period of political crisis that had devastating effects on the economy, poverty and social outcomes. The return to constitutional order, realized by the inauguration of President M. Hery Rajaonarimampianina in January 2014, and the formation of a government, led since April 2016 by Prime Minister M. Olivier Mahafaly Solonandrasana, have allowed the country to reintegrate into the international community and benefit from the resumption of donor assistance.
Despite a rich endowment of metals and minerals – including one of the world’s largest nickel mines and the largest sapphire reserves – Madagascar remains one of the poorest countries in the world. According to the 2015 United Nations Human Development Report, Madagascar’s HDI value for 2014 was 0.510, placing the country at a ranking of 154 out of 188 countries. Around 80% of the population experienced extreme poverty, with per capita consumption daily consumption below USD 1.9 purchasing power parity (PPP, 2011), between 2001 and 2012. Over the same timeframe, absolute poverty (USD 3.1 PPP per capita per day) rose from an estimated 84.1 percent in 2001 to 89.9 percent of the population in 2005, reaching 93 percent in 2012.
The economy is largely driven by the secondary sector (export processing zones, agro-industry, fisheries, and metal and wood industries) and the service sector (banking, tourism, transport, insurance and construction). Agricultural products (vanilla, coffee, cacao, tobacco) contribute to more than 70% to the country’s exports but the sector is vulnerable to adverse climate change effects, such as floods in the north and droughts in the south of the country. In general, Madagascar is highly vulnerable to natural disasters, including cyclones, droughts, and flooding. It is estimated that one quarter of the population currently live in zones at high risk of natural disasters.
A National Development Plan (NDP) and its implementation strategy were elaborated to focus on improving governance, promoting economic recovery, and expanding access to basic social services. A process of national reconciliation has been initiated and democratic institutions have been strengthened with municipal and senatorial elections having taken place in 2015. The Ministry of Finance has launched reforms of its public finances, starting with the customs and tax administrations, and respective Ministries have elaborated strategies for social protection, education, and universal health coverage. In order to stimulate economic growth in Madagascar at a level equal to least 5%, the International Monetary Fund (IMF) decided in July 2016 to grant an Extended Credit Facility of USD$305 million, backed by a three-year reform program (2016 – 2019) of which energy is a priority.
Given a low level of public resources, public reforms requiring large, new expenditures are feasible in the near future. The Government allocates a large share of the discretionary spending to unaffordable and poorly-targeted fuel subsidies as well as transfers to two troubled state-owned companies: JIRAMA, the public water and electricity utility, and Air Madagascar, the national airline company. While the government is attempting support improved performance for both companies, progress is complicated by vested interests.10