IMF board clears Madagascar loan reviews, unlocks SDR 114 million disbursement

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IMF clears Madagascar loan review

Highlights

IMF Executive Board completed third and fourth reviews of Madagascar’s ECF and RSF programs, enabling immediate disbursement of SDR 73.32 million and SDR 40.732 million, respectively.
Real GDP growth in Madagascar is estimated at 3.1% for 2025 and projected at 3.8% for 2026, supported by reconstruction and government recovery efforts amid cyclone impact.
The current account deficit is forecast to widen from 6.0% of GDP in 2025 to 8.3% in 2026 due to higher oil prices, increased imports, and mining disruption.

Program approval and reform conditions

As reported by the International Monetary Fund, its Executive Board has completed the combined third and fourth reviews under Madagascar's 36-month Extended Credit Facility and 36-month Resilience and Sustainability Facility arrangements, allowing the immediate disbursement of SDR 73.32 million under the ECF and SDR 40.732 million under the RSF.

The IMF says the two arrangements were originally approved in June 2024, and that the latest review comes with Madagascar's consent to publish the staff report prepared for the assessment. Program performance under the ECF is described as broadly satisfactory, although tax collection remains well below expectations.

The board also completed the financing assurances review and granted a waiver for nonobservance of the end-June 2025 performance criterion on the primary balance floor, citing the temporary nature of the breach and subsequent corrective action. On the RSF side, Madagascar has adopted its first green budget and a National Climate Finance Strategy, though some reform measures are delayed partly because of exogenous factors.

Economic pressures and policy implications

Madagascar is undergoing a political transition after protests linked to persistent electricity outages and water shortages, while earlier tropical cyclones and spillovers from the war in the Middle East add to the country's vulnerabilities. Against that backdrop, real GDP growth is estimated at 3.1% in 2025 and projected at 3.8% in 2026, supported by post-cyclone reconstruction and the government's recovery plan.

The current account deficit is projected to widen to 8.3% of GDP in 2026 from 6.0% in 2025, reflecting higher oil prices, cyclone-related imports and damage to mining activity. The IMF says stronger domestic revenue mobilization and public financial management are needed to protect fiscal sustainability and create room for social and growth-supporting spending.

It also says a full application of the automatic fuel pricing mechanism by January 2027, alongside targeted support for vulnerable groups, would help redirect limited public resources toward education, health and social protection. Swift implementation of the recovery plan for JIRAMA is expected to improve the reliability of electricity and water supply while reducing pressure on the state budget, while the central bank is urged to remain ready to tighten monetary policy further if inflationary pressures persist.

Our earlier coverage of Italy’s push to revise EU fiscal rules focused on Rome’s request for more flexibility in deficit calculations to reflect the impact of energy-driven inflation. We also noted Italy’s plan to allocate €14 billion over two years to ease companies’ energy costs, highlighting how external price shocks can strain public finances and intensify debates over fiscal policy frameworks.

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