[Madagascar] World Bank Granted $45m to enhance public finance sustainability and the investment climate

The World Bank has approved a $45 million grant for the second Public Finance Sustainability and Investment Development Policy Financing (DPF) operation. Building on the reforms pursued since 2014, this operation supports the continuation of a series of reforms that the Government of Madagascar is undertaking to accelerate socioeconomic recovery.

This second operation will help strengthen and deepen reforms in fiscal management.  Specifically, it will support Government’s efforts to increase tax revenues, reduce selected subsidies that do not benefit the poor, and strengthen public investment management: fuel subsidies have been eliminated, the transfers to the Pension Fund have been rationalized, and revenue collection has been steadily increasing. Reforms supported under this two-year program are expected to increase tax revenues by 0.6 percent of gross domestic product (GDP) and reduce expenditures that do not benefit the poor by 0.8 percent of GDP.

“This program will support the Government’s commitment to increase fiscal space for spending on the social sectors and public investment, while further stimulating private sector led growth,” said Coralie Gevers, World Bank Country Manager for Madagascar.

This operation also supports a set of reforms to improve the investment climate. Private investment will receive a much-needed boost through programs targeted at improving JIRAMA’s procurement practices, reducing the number of days needed to resolve commercial cases, and improving the stability of the microfinance banking sector.

DPF operations provide un-earmarked financial support directly to the government’s treasury upon completion of a package of policy and institutional reforms that are designed and undertaken by the government. Policy reforms are expected to promote specific development outcomes that contribute to a sustainable reduction in poverty through promoting growth and enhancing the well-being of poor people. A complementary DPF series is also under preparation aimed at promoting Inclusive and Resilient Growth.

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