Madagascar - Public expenditure, adjustment and growth

Repott No. 7803-MAG Madagascar' Public Expenditure, Adjustment and Growth DeceWbe20, 1 98 Sout Cetrwal Africa & Indian Ocean Deparmet FOR OFFICIAL USE ONLY 0 0~~~~~~~~~~~~~~~~~0 4i l d 0 59or Dinka  Currency units Malagasy Franc (1KG) Averaae Exchnane rates (FNGIUS$): 1975t 214 1978: 226 1981: 272 1984: 577 1988: 1,407 1989: 1,596 Fiscal year: January 1 - December 31 Metric system ACROMNMS AND ABBREVIATIONS ADB/ADF African Development Bank/African Development Fund BCRDM Central Bank of the Democratic Republic of Madagascar DGP General Planning Directorate EDF European Development Fund EIB European Investment Bank EMSAP Economic Management and Social Action Project EPI Expanded Program on Immunization ESAF Enhanced Structural Adjustment Facility FNDE National Economic Dgvelopmert Fund PFUP State Stabilization Fund ICOR Incremental Capital Output Ratio IDA International development Association IFC International Finance Corporation In International Monetary Fund JIRAMA National Electricity Company MINESEB Ministry of Basic and Secondary Education MINESUP Ministry of Higher Educ.tion MOH Ministry of Health MPAEF Ministry of Livestock, Wator and Forestry MPARA Ministry of Agricultuz"i Production and Agrarian Reform MPFE Ministry at the Presidency for Finance and Economy MTMT Ministry of Transport, Meteorology and Tourism MTP Ministry of Public Works NGO Non-Governmental Organization NTP National Transport Plan OGL Open General License PEP Public Expenditure Program PER Public Expenditure Review PFP Policy Framework Paper PHC Primary Health Care PIP Public Investment Program PPI Small Irrigation Perimeters Project PSAC Public Sector Adjustment Credit RNCPN Madagascar Railway SAP Structural Adjustment Facility SEPT Port of Tamatave SOLIMA National Petroleum Company UNDP United Nations Development Program WHO World Health Organization  FOR OMPCIAL USE ONLY Prefaca This report is based on the findings of two missions to Eadagaacex in October-November 1988 and February 1989, and of follow-up discussions in October 1989. In consultation with Government, the Bank team held informal exchanges of views with representatives of other major donor countries and organisations. The Bank team comprised Salvatcre Schiavo-Campo (mission chief and principal author), Bengt Bostrom (transport), Edmond de Galffier (health), Pierre Demangel (budgetary issues)* Philippe Le Houerou (PIP), Christine glmes (PIP), Saeed Ordoubadi (econometrics), Dieudanne Randrtsmanampisoa (PIP), Jean-Bernard Rasera (education), and Christopher Ward (agriculture). Mohammed Gharbi of the Afri*an Development Bank participated in several of the mission discussions and made substantive contributions. Ginette Fran*ois processed the various drafts. The substance and recomendtions of the report were discussed with the Government at various stages of the process, and the draft report was reviewed by the Government in November 1989. This report represents the first round of a continuing dialogue on public expenditure programming and monitoring In Madagascar. The future stages of the dialogue will build on the substantial progress made by the Governme*t in 1988 and 1989. The second round of public expenditure review Is now on-going; it focusses on the 1990-92 public investment program, the 1990 budget, and the phased impllmentation of the agenda for action recommeoded In the present report. Consequently, the text of this report is current as of end-1989 and several of its recommendations are already being acted upon. 'bis document has a rtictd distbutn and my be ed by recipions ody in the pfomane of their offcl dutis Its conten may not odwrwbe be dlscd wthout Wodd Bank auodErton.  WWAI_M - EOIC lISA1S Volum lrt Vale at Oamt Prim (millions USS E. IurcWlse B ts IUO 1984 16 18 87 1986 190 t111 11 0 198 1S67 1t6 Coffe 100.0 74.0 64.3 71 74.5 64.1 21 1 10 148 09 78 Cllwv0s 1100.0 143.1 284.4 217.7 182.1 293.8 51 48 x J8 10 18 Vanilla 100.0 210.7 153.7 17.6 292.0 15.1 19 71 44 10 10 44 ::O" i 9 58123 i48 StoWt FC 100.0 113.2 105.4 111.5 117.0 111.6 437 35 282 2 311 282 F. MWrdwisel lat Food 100.0 103.0 120.2 113.0 104.4 40.9 89 50 50 52 48 21 FUIl and ewne 100.0 188.9 195.2 155.5 128.0 176.2 70 185 85 59 55 69 Otherwosu ergoods 100.0 43.8 53.0 50.5 40.5 43.3 85 47 52 58 a9 58 Otier lIterad goods 100.0 33.2 31.3 30.8 31.7 25.7 228 150 lOS 119 114 97 Capital goode 100.0 79.8 58.6 54.8 45.8 58.5 176 133 98 109 105 137 Total laports CIF 100.0 42.8 4.4 41.6 B 0.9 38.0 560 545 395 395 382 392 G. TerM of Trafd 1980 1984 185 1986 1987 198 Merch. Exports Price lo x 100.0 90.4 61.2 67.5 62.2 57.4 March. I"orts Price Inbt 100.0 212.4 155.8 158.8 175.4 174.8 Ner". TerM of Trado 100.0 42.8 39.3 42.5 35.5 32.9 US$ hiIllow (at arrat prls): H. Balance of Payents 1980 1984 1985 1986 1967 Im EBo"ortsf *od & NFS 515 407 341 405 400 399 Merdwidlse (FCB) 437 353 252 320 311 282 tn-Factr Servioes 79 54 53 78 97 117 lp Oftsofb ods&NFS 1085 5089 5M 537 544 550 Mordwndise (FM) 784 353 334 331 315 315 n-Factor Services 32D 156 187 206 229 244 hsaorce bhlanco -569 -103 -1E0 -132 -130 -100 het Factor Incoe -45 -148 -129 -155 -159 -172 (Interest per MORS 27 32 53 O0 83 81 Net current trtnafors -21 2 32 42 53 0 (We"rs remittano0e) .. 8 5 4 OCr A/C bia before Off. Transf -115 -247 -257 -245 -242 -272 Net OffIcial Transfers 07 82 87 118 107 135 Curr A/C hi after Off. Trtnf -886 -183 -198 -135 -135 -137 LuWTeruCapltal Infic 375 171 150 224 211 2W8 Direct IrNeeb" ~~~~0 0 Not LT Lomns(OS dbta) 8i6 101 1ii 148 185 149 OUwr LT Infle (Net) 14 70 32 78 40 50 Total Otr Item (net) 276 15 24 41 -7 15 Net Stwrt TeO Capital 291 22 2 -25 4 -19 CapItal FloI N.E.L. a 0 0 0 0 0 Errors and bielsi -15 -7 22 -6 - 34 OIB In Net Rsewe -83 -22 16 -0 -9 -8 Net Credit fromthe IW 42 18 -4 4 9 -29 01w ReserNW Owfs -125 -0 19 -70 -78 -57 AsS ae of GP: ouce Blace -17.4 -4.3 -8.8 4.9 -6.5 -8.1 Interest Payents 0.8 1.3 2.2 2.2 4.0 4.7 Dmrernt Aow,t Balanco -19.4 -10.4 -11.0 -0.1 -11.6 -13.7 Umrands Item: Rsr eocl. Gold '(lL USS) 9 59 48 115 185 224 sws Ircl. Gold ull. US$) 9 59 48 115 185 224 Off ilal X-at (LOIM) 211.30 576.60 862.48 676.34 10i8.21 1407.10 Irbx Real Eff. X-R Baso 1980 100.00 98.49 91.62 86.52 59.13 51.30 MP (mlI lons of arrent US$) 3285 2374 2345 2W 2081 1988  Mid-1088 Pi,ultlatn (aII$.) 11 1888 Pua COIU ltA I n usS: 210 A. Shem of GM"rasOmstlo Prowc .uhaa( BA ,= Per,wit. (fa am Iedt)(from canton prIce datari 1865 197 191 1988 i 1987 188 1985-73 197340 180-8 198 198 8a/ Gross OmtIo a Pr .S p. 1101.0 190.0 198.0 1198100 100.0 100.0 8.0 1.0 0.4 1.2 3.9 Not Irdiroct Tamn 11.8 134I ... . AgrlcltIre .. 32.3 38.1 48.7 42.2 41.1 .. -.4 2.3 -1.1 5.1 iniatry .. ~~~~~~20.2 18.0 15.7 18.1 18.3 .. 1.8 -2.0 8.4 8.1 servIcs 47.4 45.9 40.86 41.8 42.8 .. 1. 4.5 1.0 3.8 Resmuc Bhlane 48.4 -4.0 -17.1 -4.9 48.5 -8.5.. . B~P"t Of WIS 15.7 18.9 15.9 15.1 18.8 21.2 -1.4 1.9 -5.3 -18.3 -12".0 Iuwt of WIS 22.1 20.9 32.9 20.0 28.1 29.7 0.8 2.7 -0.2 -12.1 0.5 Total EBq2udItIrs 108.4 104.0 117.1 104.9 108.5 108.5 2.9 1.3 -1.0 1.2 3.7 Total CciuAwtiEn 98.2 89.7 93.5 91.2 91.8 12.2 2.2 0.9 -0.3 -0.5 5.7 Private Cogpttln 73.8 72.4 70.4 78.2 71.8 80.3 2.0 0.2 -0.2 -0.5 8.9 Gener al rwnit 22.8 17. 17.1 13.1 13.8 11.8 3.3 4.3 -1.0 -0.7 -4.2 Grass Owomtlo lmwsuetor 10.2 14.3 23.5 13.7 14.8 18.3 4.2 3.2 -4.9 11.8 3.0 Fixed I,west.nt .. 13.5 22.8 . . . . . Mu" Isn Stode .. 0.8 0.7 . . ... .. . Gras Doesetic SaviUi 3.8 10.3 8.5 8.8 8.4 7.8 7.2 -9.6 11.5 20.1 -89.8 Net Fator Incus -4.1 -2.2 -1.4 46.8 -7.8 48.8 . . Not Orrmnt Tratufers. -1.7 -0.8 1.3 2.5 3.2 . . Gros Ndatina Savlrq . 8.5 4.4 3.5 3.3 2.4 7.4 -9.3 13.2 45.2 In billIonsm of LW ~ 1985 197 19110 1988 198 1988 (at comstant 1980 primu) Gross DstIc PRoiW 52 82 85 7 9 3.0 1.0 0.4 1.2 3.9 Cavaity to lqmart 138 158 109 84 73 OS 1.4 -4.7 -2.9 -12.8 -7.0 Terom Traib Ajustmnt 40 88 0 9 12 7 . Gross Domestic In As 595 ON4 890 675 6 708 2.8 -0.2 0:6 . 2.9 Gross National Prodat 49 812 680 020 83 M8 3.4 1.2 -0.5 0.0 3.1 Gross Nationl Inu 584 87 88 3 103 64 8.2 -0.1 -0.2 0.5 2.1 (1980 I Ir)inflatilon Rates( p.a.)- C. Prices Indices 1980 1984 198 198 1I8 198 198-73 19738 19808 1987 1988 Comme Prices (IFS 64) 100.0 2i.5 249.3 285.5 328.3 415.8 3.4 9.0 17.4 15.0 29.6 Nuiesale Prices (IFS .. . . ... lapI lclt GOP' Deflator 100:0 214. 238. 273.j 31.4 =395 4.8 10.2 17:4 21'.0 20.9 lipi lcit Expeditres Def I. 100.0 2)9.6 238.2 271.5 33.7 410.8 4.5 11.7 17.5 22.9 23.1 0. Othe IndIcatwor: 195573 1973480 19808 Grafth RatWs( p.a.): Pouaion 2.3 2.7 3.3 Gros Nat I. Incasi p.c. 0.9 -2. -34 af Provislaul Ostliates. Private CcnjinptIa p.c. -0.3 -2.4 -3.4 lapart Elasticity: IN"rt (GNS) I GUP(P) 0.2 2.7 -25.1 MargIal SAVIip Rates: G-rass NatIonal Savirg . 150.5 22.5 Grass DomestIc Sanif 32.4 198.6 144.3 IIO) (Period average): Ohrs of Total 1985 197 1980 198 Ld aba oc In:- - - - AgriculUn ~85.1 82.9 80.9 liAgrlws 4.3 5.2 6.0 ServIce 10.5 11.9 13.2 Total 100.0 100.0 100.0  WaAR - 0NWIC IQICATM aShr of GOP() Grawth Rates 1. Budtet 1980 1984 1988 198B8 lP 1988 1988 1988 18 1988 urrent Rece1pts 12.4 18.9 15.7 14.6 18.1 17.9 13.9 8.7 51.5 12.7 Ourrnt EXdiUtres 18.5 14.2 13.0 12.9 14.4 12.8 12.3 11.2 38.8 15.0 urrent Budet Balance -4.1 2.7 2.2 1.7 3.7 5.1 .. 13.1 117.9 29.4 Capital Ripts .. .. .. .. .. .. .. .. .. . Capital Expenwltires 9.8 8.1 7.3 8.7 10.8 8.8 8.1 6.7 K7.2 23.9 Otners .. -0.3 -0.1 -0.2 1.7 -.7. Overall OIf loit -13.8 -5.7 -5.2 -4.8 -5.2 -5.4 -14.1 9.4 32.5 23.4 Offlclal Capital Wrants 0.1 0.9 0.5 0.8 0.8 0.9 .. 108.9 24.8 32.3 External Borrowo (net) 8.9 2.7 3.1 2.8 4.5 5.0 -2.3 8.7 94.9 34.6 DOmestic Non-Darc Vinencira 0.1 -0.2 0.2 0.2 0.2 0.3 .. 2.9 138.7 2.7 Omestic Eank FIrmncing 11.3 2.3 1.3 1.0 -0.5 -0.8 -24.7 -14.8 J. Bdml Capital Fim, Debt Not 0D 1remts (USs mlII lamo) Dbt OM tsta1ing & Dlsbrurd (US$ ml I lons) ard Det Bwdm Ratios 1980 1984 1985 1988 1987 1988 1980 1984 1985 1988 19n 1988 PLbi i&Pl IlcilyOm. LT 381 101 118 148 185 149 958 1875 2182 2873 3387 3318 Offlcial Creditors 282 95 128 163 188 lb 610 1515 1849 2340 2987 3008 itli lateral 85 42 89 122 140 1? 220 411 502 653 843 921 of hid I1IRD 1 -1 -1 -2 -2 30 25 28 31 3B 30 of- ld IDA 25 30 57 93 90 70 122 251 318 422 550 B07 B latsral 187 53 57 42 48 A4 390 1104 1347 1687 2144 2085 Private Ouditcrs 129 6 -7 -18 -23 -12 348 360 333 333 380 312 awliers 12 8 13 -1 -1 1 181 87 88 94 100 81 fInacilal ickts 57 3 -20 4- -22 -13 185 273 247 239 280 231 Private Nen-granted 0 0 0 0 0 0 0 0 0 0 0 0 TotaI LT 381 101 118 148 185 149 958 1875 2182 2873 3387 3318 IMF Credit 49 18 -4 4 -6 -29 55 148 182 184 238 190 Not Short-TW3 Capital 291 22 2 -25 -4 -19 244 150 120 155 '27 95 Total Icl. IW & Net ST 701 140 116 128 155 101 1255 2173 2484 3012 3732 3603 Bank aid IDA Ratios 1980 1984 1985 1988 1987 .d8 Share of Total Lon-TerM OD 1. IM as X of Total 3.1 1.4 1.3 1.2 1.1 0.9 2. IDA as % of Total 12.8 13.4 14.5 15.8 17.7 18.8 3. IBlOIDA as % of Total 15.8 14.7 15.7 17.0 18.8 19.7 Share of LT Debt Servioe 1. I as X of Total 5.0 7.2 3.3 3.1 2.7 2.9 2. IDA as X of Total 1.9 8.7 3.1 4.1 4.0 4.3 3. ID.IDA as X of Total 7.0 13.9 8.3 7.3 8.7 7.2 O0D-to-Exports Ratios 1. Lo A-Te m t/Ew-orts 184.4 468.8 830.5 845.1 808.7 814.9 2. IIF CredIt/ExDors 10.8 38.8 48.7 44.4 57.2 46.7 3. Shrt-Te m Delot/xporte 47.1 37.3 34.7 37.4 30.5 23.3 4. LT+IMF+ST OXWIExports 242.0 540.7 711.9 728.9 898.4 884.9 MOD-to-6P Ratlos 1. oca-Tren OEtd 29.3 79.0 98.1 98.5 181.8 187.1 2. IF CredltVGOP 1.7 8.2 8.9 8.9 11.4 9.8 3. SMort-Term 0 wP 7.5 8.3 5.1 5.8 8.1 4.8 4. LT+IW+ST OODVD 38.4 91.5 15.1 112.1 179.3 181.4 Debt Service JExportB 1. Pi*llc & BrantOdLT 11.1 11.1 29.8 27.0 35.3 37.5 2. Private Nan-g.ranteed LT 0.0 0.0 0.0 0.0 0.0 0.0 3. Total LoW-Term Debt Servico 11.1 11.1 29.3 27.0 35.3 37.5 4. 0W . 01gB. 0.8 8.8 13.8 14.9 10.8 12.8 5. Interest onl oST t 1.1 3.0 3.9 2.8 2.4 1.0 8. Total (L i h 3 FIt.) 12.8 22.9 48.8 44.5 48.3 51.3  1988 SOCIAL INDICATOR DATA SHEET MADAGASCAR Rfrence 4OP Wost Rocnt L* t '115 tug Istimate tLow-inos *coo tatl land area (thou so km) 187.0 187.0 16?.0