Madagascar - Enhanced HIPC Debt Initiative: President's Memorandum and Recommendation and Completion Point Document

REPUBLIC OF MADAGASCAR CHAIRMAN'S SUMMINGUP Completion PointDocument for the EnhancedHIPC Initiative Meeting of Boardof Executive Directorsof IDA October21,2004 TheExecutiveDirectorsconsidered onOctober21,2004thePresident'sMemorandumand Recommendation and Completion `PointDocument for the enhanced Heavily Indebted Poor Countries Initiative (HIPC) for Madagascar. Directors agreed that Madagascarhad metthe conditions for reaching the completion point under the enhanced HIPC Initiative and endorsed the recommendations in paragraph8 of the Memorandum of the President, approving the upward revisionIDA's assistance to the country. of DirectorsnotedthatMadagascar is exitingfromtheenhancedHIPCInitiativetoattaindebt sustainability,andsufficientassuranceshavebeengiven ,by thecountry'sothercreditorstocommit enhancedHIPCInitiativeassistancetoMadagascaronanirrevocablebasis.Inthisregard,Directors stressed that Madagascar should continue to seek fromits non-Paris Club creditors the entire debt relief within the framework of the enhanced HIPC Initiative. Some Directors however, expressed concern that the baseline scenarios relating to the projections for the country's long-term debt sustainability appear overoptimistic, and do not adequately incorporate the country's vulnerability to exogenousaswellas endogenous shocks. They would have preferred more alternative scenarios in this regard. DirectorscommendedMadagascarformakinggoodprogressinimplementing its PRSP,and noted that the country continued to move forward on its reform agenda, despite difficult circumstances arising from cyclones and rising rice and oil prices in particular. They welcomed the authorities' efforts to track HIPC-related expenditures. Directors were pleased with the progress made in implementing the country's macroeconomic management reform program supported by the IMF. They emphasized that sound macroeconomic policy and the implementation of structural reforms as well as prudent borrowing policy will allow Madagascar to build on the benefits of debt relief obtained at the completionpoint. Directorsnoted`theneed for theGovernment to strengthenthecountry'sdebt- managementcapacity and ensure fiscalsustainability. They highlightedtheimportance of diversifying Madagascar's economic and export base. In this connection, Directors encouraged the Government to step up its efforts to improve the business climate and promote private sector investment. Finally, Directors commended the efforts by the authorities to make progress in implementing reforms to improve service delivery in rural infrastructure, education and health. They encouraged the Government to further improve governance and enhance transparency and accountability in the use of public resources.