WASHINGTON, June 9, 2023 — The World Bank Group Board of Directors approved today a $100 million credit for a Development Policy Operation (DPO) in Madagascar aimed at supporting reforms to unleash drivers of inclusive and resilient growth. The reforms are geared toward improving transparency and macro-fiscal stability; market competition; and corporate governance in the energy, telecommunications, and mining sectors.
Madagascar has been trapped for decades in a low-growth, high-poverty state, essentially caused by persistent weaknesses in governance, low human and physical capital accumulation, and slow progress economic transformation. More frequent and extreme climate events and, more recently, the COVID-19 pandemic, have exacerbated those challenges. High exposure to climate risks such as cyclones, droughts, floods, and rising sea levels make Madagascar one of the countries most severely affected by climate change impacts in the region. The operation, the first in a programmatic series of three DPOs, is anchored in two mutually reinforcing pillars. The first is aimed at strengthening the governance and macro-fiscal frameworks including through climate-smart fiscal and decentralized management, and the second pillar will help enhance the enabling investment environment and deepen structural reforms in critical infrastructure sectors including mining, energy, and digital connectivity.
“In order to improve living standards and reduce poverty, Madagascar must increase its growth potential substantially and attract new investments in sectors susceptible to drive structural transformation. Through this program, the government took the first steps to implement overdue reforms in improving competitiveness and transparency in the mining sector, and in enabling growth sectors such as energy and digital. Sustaining these reforms over time will enable the country to escape the poverty trap,” said Marie-Chantal Uwanyiligira, World Bank Country Manager for Madagascar. “This operation follows the recently approved Country Partnership Program for Madagascar, whose priority interventions include the mobilization of productive investments to accelerate economic transformation.”
Aligned with our Country Partnership Framework, the DPO supports several critical reform actions recently adopted by the government. This includes supporting the authority of the national utility company, JIRAMA, on purchasing power agreements that will help shift energy production toward renewable energy while expanding private participation; lifting the suspension of mining permit movements and gold exports to allow the country to better seize opportunities for growth; and legislation to encourage competitive investments in digital infrastructure to make broadband services more affordable.
“This operation seeks to leverage transparency and macro-fiscal reforms to curb opportunities for state capture and enable inclusive service delivery and resilient growth,” said Jean-Pascal N. Nganou, Senior Economist, and Ibrahim Elghandour, Public Sector Specialist, both for the World Bank in Madagascar. “It also benefits from close collaboration and coordination with other World Bank operations and development partners, especially the International Monetary Fund (IMF). Policy measures and technical assistance provided through the DPO program — particularly in governance, macroeconomic management, and energy — complements the reforms supported by the IMF’s Extended Credit Facility program.”
