Madagascar - Public Sector Adjustment Credit

Docummt of The World Bank FOR OMCIL USE ONLY Rbywt No. 14050 PROJECT COMPLETION REPORT MADAGASCAR PUBLIC SECTOR ADJUSThENT CREDIT IDA CREDITS 1941-MAG, AND 1941-1, 1941-2, 1941-3, 1941-4, 1941-5) MARCH 14, 1995 Country Operations and Industry & Finance Division Country Department III Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit: Malagasy franc (FMG) 1985 US$1 = FMG 662 1986 US$1 = FMG 676 1987 US$1 = FMG 1069 1988 US$1 = FMG 1407 1989 US$1 = FMG 1603 1990 US$1 = FMG 1494 1991 US$1 = FMG 1835 1992 US$1 = FMG 1868 1993 US$1 = FMG 1928 ABBREVIATIONS ASAC Agricultural Sector Adjustment Credit BFV Commercial Bank (Banky Fampandrosoana ny Varotra) BMOI Commercial Bank (Banque Malgache de l'Ocean Indien) BNI Industrial Development Bank (Bankin'ny Indostria) BTM National Rural Development Bank (Bankin'ny Tantsaha Mpamokatra) DGGP Privatization office DSP Core public investment program EMSAP Economic Management and Social Action Project EPZ Export Processing Zone FMG Malagasy Franc (franc malgache) GDP Gross Domestic Product IDA International Development Association IMF International Monetary Fund ISAC Industrial Sector Adjustment Credit ITPAC Industry and Trade Policy Adjustment Credit OGL Open General License PE Public Enterprise PEP Public Expenditure Program PCR Project Completion Report PIP Public Investment Program PSAC Public Sector Adjustment Credit SDR Special Drawing Right  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation March 14, 1995 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Madagascar - Public Sector Adjustment Credit (Cr. 1941-MAG) Attached is the Project Completion Report on Madagascar - Public Sector Adjustment Credit (Credits 1941-MAG and 1941-1, 1941-2, 1941-3, 1941-4, 1941-5) prepared by the Africa Regional Office. The Borrower declined to complete Part II, the authorities noting that project implementation was the responsibility of the previous regime. The main objective of the credit was to build on the liberalization and trade reforms supported by previous credits by raising the efficiency of public resources. The credit aimed to: (a) strengthen the public investment and budgetary formulation process; (b) reform the civil service; (c) rationalize the public enterprise sector; and (d) liberalize and reform the state-owned banking system. In the external sector, the project supported the removal of remaining administrative restrictions, agricultural export monopolies, and price controls. Implementation proceeded rapidly in some areas (continued liberalization of exports, banking sector reform), but delays in budgetary and civil service reform and public enterprise restructuring/divestiturepostponed the release of the second tranche by nearly two years. Subsequently, prolonged political upheaval, accompanied by reversals of some of the policies adopted earlier, disrupted the adjustment process. Parastatal reform was halted, civil service reform never got off the ground, and public sector deficits remain a major obstacle to recovery. The closing date of the credit was extended twice, and eventually the third tranche was canceled. Although the adjustment program as a whole has contributed to the creation of a more open, market-oriented economy, the supply response has been disappointing. Per capita GDP grew only marginally during the first three years of the project, and living standards deteriorated, contributing to the political turmoil; subsequently GDP fell. The project outcome is rated as unsatisfactory, its sustainability as uncertain and the institutional development is rated as negligible. The PCR is of good quality. An audit is planned, together with an audit of the Industry and Trade Policy Adjustment Credit (Cr. 1834). The audit will examine the role of government commitment and political uncertainty in the failure of the project to achieve all of its objectives; the results of the public enterprise reform program; and the extent to which the adjustment process so far has laid the groundwork for future growth. Attachment Tlis document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT MADAGASCAR PUBLIC SECTOR ADJUSTMENT CREDIT (CREDITS 1941-MAG. AND 1941-1. 1941-2. 1941-3. 19414. 1941-5) TABLE OF CONTENTS Page No. PREFACE i EVALUATION SUMMARY iii PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity 1 Background 1 Country Background and Performance I Adjustment Context 2 Objectives and Content or the Program 3 Credit Genesis 3 Credit Objectives and Description 4 Implementation and Performance 5 Program Implementation 5 Economic Performance 7 Implementation of Individual Components 8 Impact of Adjustment 13 Conclusions 14 PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 16 PART III. STATISTICAL ANNEX 17 Table 1: Related Bank Loans/Credits Table 2: Credit Data Table 3: Credit Timetable: Original and Actual Dates Table 4: Cumulative Credit Disbursements Table 5: Use of Bank Resources This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   i PROJECT COMPLETION REPORT MADAGASCAR PUBLIC SECTOR ADJUSTMENT CREDIT (CREDITS 1941-MAG AND 1941-1, 1941-2, 1941-2, 1941-3, 19414, 1941-5) PREFACE This is the Project Completion Report (PCR) for the Public Sector Adjustment Credit (PSAC) to Madagascar. The Credit was approved by the Board on June 29, 1988 and comprised of IDA credit 1941-MAG for SDR 90.5 million, and five IDA reflows: 1941-1- MAG for SDR 1.1 million, 1941-2-MAG for SDR 0.9 million, 1941-3-MAG for SDR 1.2 million, 1941-4-MAG for SDR 1.0 million, and 1941-5-MAG for SDR 0.99 million. The following cofinancing has been provided: a credit of 30 million units of account (UA) (US$40 million equivalent) from the African Development Fund; a grant of SwF 10 million (US$7.5 million equivalent) from Switzerland; and a grant of NKr 20 million (US$2.9 million equivalent) from Norway. The PSAC was closed on September 30, 1993 and a balance of SDR 33.0 million was cancelled. This PCR was prepared by the Country Operations Division, AF3 (Preface, Evaluation Summary, Parts I and III). In March 1994 the Borrower was requested to review Parts I and III and to prepare Part II. The new Government, however, which was put in place in August 1993 following a two-year political transition, declined to complete Part II. The authorities said that the implementation of the PSAC was the responsibility of the previous regime and as such they did not feel competent to comment on it. Preparation of this PCR is based, inter alia, on a project completion mission, the Initiating Memorandum, the President's Report, the Credit Agreements, supervision reports, and internal Bank memoranda.  I  iii PROJECT COMPLETION REPORT MADAGASCAR PUBLIC SECTOR ADJUSTMENT CREDIT (IDA Credits 1941-MAG and 1941-1, 1941-2, 1941-3 1941-4, 1941-5) EVALUATION SUMMARY Background 1. Since independence in 1960, Madagascar's economic record is one of modest growth to 1970 followed by stagnation from 1970 to 1980. The disappointing growth performance of the 1970s stemmed largely from inappropriate economic policies emphasizing a much increased public sector role. Between 1978 and 1980, the Government embarked on an "all-out' public investment policy which included large and economically non-viable projects and resulted in a large debt accumulation. These policies, combined with deteriorating terms of trade, led to an 11 percent decline in real GDP from 1980 to 1982. During the 1983-1985 period, the Government carried out a generally successful stabilization program with IMF support which succeeded in halting the economic decline, and GDP grew by 1.4 percent p.a. on average between 1983 and 1987. 2. In 1985, when the fiscal deficit and the inflation rate had been reduced to manageable levels, the Government turned its attention to structural adjustment efforts with the support of the Bank and other donors. The main thrust of the adjustment program was to correct the large currency overvaluation, reduce price controls, streamline and reform the inefficient parastatal sector and state-owned banking system, liberalize domestic and external trade, and generally trim sharply Government interference in private economic activity. The Bank provided assistance to the program through four IDA credits: (i) the Industrial Assistance Credit (1985--US$60 million), which supported some initial price liberalization; (ii) the Agriculture Sector Adjustment Credit (1986--US$100 million including cofinancing), which mainly supported liberalization of the rice marketing; (iii) the Industry and Trade Policy Adjustment Credit (1987--US$100 million including cofinancing), which mainly supported reform in the tariff and exchange regime; and (iv) the Public Sector Adjustment Credit (PSAC, June 1988--US$180 million including cofinancing). Objectives 3. Building on the liberalization, tariff and exchange reforms introduced under the previous credits, the objective of PSAC was to raise the efficiency of public resources. A comprehensive program was launched for the strengthening of the public investment and budgetary formulation process; the reform of the civil service; the rationalization of the public enterprise sector; and the liberalization and reform of the state-owned banking system. The PSAC also supported the elimination of administrative export restrictions and state agricultural export monopolies, and the lifting of remaining price controls. In addition, concerted attention began to be given to population problems, and to the social aspects of development. The program, which was designed in close consultation with the IMF staff, was supported also by an ESAF approved in May 1989.  iv Implementation Experience 4. Since credit effectiveness in December 1988 until mid-1991, when political turmoil swept the country, implementation of the program proceeded rapidly in certain areas (liberalization of exports, banking sector reform) but more slowly in others (public enterprise reform, revision of budgetary procedures). Release of the second tranche, originally expected in May 1989, took place in March 1991 only. Mobilizing the specialized technical assistance needed for implementation of the complex reform measures proved more difficult than anticipated. Also, presidential elections in 1989 and the consensus approach to decision- making contributed to delays in program implementation. In 1990, lax credit management led to increased inflation and to the depletion of external reserves. 5. The political crisis which erupted in mid-1991 disrupted economic activity and, together with the policy backtrack of 1990, derailed the adjustment effort. The growing shortage of foreign exchange during the second half of 1991 led to the suspension of the Open General License (OGL) import system (introduced in July 1988) and its replacement by a rationing mechanism of foreign exchange allocation. The already slow implementation pace of the parastatal reforms came to a halt. Results 6. Overall, the adjustment program contributed to establishing a more open and market- oriented economy. Achievements under the PSAC included: (i) a significant improvement in the programming and composition of public expenditure and in the reform of the budgetary system; (ii) the promulgation of a new Investment Code and free-trade zone legislation in December 1989; (iii) the enactment of a Banking Law in May 1988 allowing, for the first time, the participation of private capital in existing banks and the creation of new private financial institutions; and (iv) the formulation of a comprehensive health strategy establishing policy and strategy in the health sector and defining priority activities to be financed by public expenditure. A comprehensive reform of the civil service was prepared but not implemented. Sustainability and Conclusions 7. The adjustment program had a major impact on reversing the economic decline and laying the foundation for the recovery of the Malagasy economy. It provoked an important shift in mind sets, which endures to this day. The success of the Free Trade Zone regime, although modest, demonstrated that the potential for export-led, private-sector-based growth exists. Overall, however, the performance was disappointing. A per capita growth of 0.5 percent p.a. on average during the period 1988-90 was far from sufficient to reverse the long term decline in the living conditions of the population. The reforms were not deeply internalized and were only partially implemented. There was strong resistance from many quarters, including politicians, civil servants, trade-unions, and traditional business. 8. Three major lessons can be drawn from the experience. First, the piecemeal approach followed in the past, which may have been the only way to introduce policy changes in Madagascar at the time, failed to generate a strong enough supply response. Second, the preoccupation with detailed processes obscured the strategic vision which was needed to create and maintain the momentum for reform. Third, the failure to address poverty issues in the design of the adjustment process led to a massive rejection of government policies and to the eventual political turmoil.  1 PROJECT COMPLETION REPORT MADAGASCAR PUBLIC SECTOR ADJUSTMENT CREDIT (IDA Credits 1941-MAG, and 1941-1, 1941-2, 1941-3, 1941-4, 1941-5) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity Project Name: Public Sector Adjustment Credit (PSAC) IDA Credit Number: 1941-MAG, and 1941-1, 1941-2, 1941-3, 1941-4 and 1941-5. Region: Africa Country: Madagascar Sector: Sectoral Adjustment Credit Background Country Background and Performance 1. Madagascar, a large island off the southeastern coast of Africa in the Indian Ocean, has a vast range of natural resources and a wide assortment of ecological and climatic variations. With an area of 587,000 square kilometers, it is sparsely populated by about 12 million inhabitants; however, population is growing at about 2.8% p.a.. With a per capita income estimated at US$220 in 1992, Madagascar is among the poorest countries in the world. The agricultural sector accounts for about 33 percent of GDP, and employs approximately 80 percent of the work force. The industrial sector accounts for 14 percent of GDP. 2. Modest growth from independence to 1972 was followed by a declining GDP per capita until 1987. The disappointing growth of the 1970s stemmed largely from inappropriate economic policies. These emphasized a much increased public sector role, with import substitution in industry as the central objective and agriculture in a support role, and pervasive controls on private economic activity. Between 1978 and 1980, the Government embarked on an "all-out" public investment policy which included large and economically non-viable projects. These policies, combined with deteriorating terms of trade, led to an 11 percent decline in real GDP from 1980 to 1982 and a large external debt burden, which still severely constrains economic growth. 3. During the 1980s, the focus of economic management moved from the urgent need of financial stabilization with IMF assistance in the first part of the decade to supply-oriented measures supported by the Bank and the Fund in the second part. Between 1983 and 1987, the economic decline of the preceding three years was arrested, and the economy grew at a modest average rate of 1.4 percent per annum. The improved policy environment contributed to an acceleration of economic growth starting in 1988, when GDP grew faster than population at 3.4  2 percent. The economy continued to grow by another 4.1 percent in 1989 and by 3.1 percent in 1990. In 1990, however, lax credit policies led to increased inflation and to the depletion of external reserves. 4. In mid-1991, political turmoil swept the country, accelerating the pace of transition towards a more open society, but disrupting economic activity and, together with the policy backtrack of 1990, derailing the adjustment process. A transitional power-sharing arrangement was negotiated out of the political stalemate and a new coalition government was put in place in January 1992. Presidential elections took place in February 1993 and the opposition candidate was elected. Legislative elections were held in June 1993, and in August the National Assembly chose its leadership and the prime minister, who announced most of his cabinet at the end of August. The political transition was peaceful but adversely affected the economy and economic reform effort. GDP declined by about 7% in 1991 and grew by only 1% in 1992. External arrears continued to grow. Tax revenues were low, and combined with lax management of expenditure, led to a budget deficit of 10% of GDP in 1992. Adjustment Context 5. The Public Sector Adjustment Credit (PSAC), was the fourth in a series of adjustment operations. Its aim was to consolidate the policies adopted under the first three operations (increased efficiency in resource allocation through liberalization of product and factor markets), and capitalize on them by additional measures in the public enterprise, financial sector, public expenditure, external sector, and social policy areas. 6. Four IDA adjustment credits have been extended to Madagascar since 1985. Initially, the Government was not ready to implement a broad-based structural adjustment effort. Instead, it adopted a more cautious reform strategy to address the structural distortions sector by sector. This approach was supported by two IDA sector credits--the Industrial Sector Adjustment Credit (ISAC) in 1985 and the Agricultural Sector Adjustment Credit (ASAC) in 1986. Building on these two operations, the adjustment process gained momentum and, the Government, recognizing that sectoral policy improvements by themselves were unlikely to lead to significant and rapid supply response, moved decisively to a broader agenda of far-reaching reforms supported successively by the Industrial and Trade Policy Adjustment Credit (ITPAC) in 1987 and the Public Sector Adjustment Credit (PSAC) in 1988. 7. In industry, the Government eliminated in 1985 most ex-factory price controls and reduced controls on profit margins. Also, it improved the quality of public investment in manufacturing; eliminated export taxes on manufactured products and promulgated a more private sector-oriented investment code. This effort was supported by the ISAC (US$60 million), which became effective in July 1985. The PCR for this project (February 5, 1992) concludes that this operation, although perhaps modest in its specific conditionality, played a key role in setting the political economy stage for a comprehensive reform program. 8. In agriculture, a number of institutional improvements had been achieved by 1985, with support from IDA through project lending. Also, in the context of IMF-supported stabilization programs, consumer subsidies on rice (Madagascar's main staple) had been eliminated. Building on these improvements, the Government moved beyond adjustments in administered producer prices to a thorough refashioning of the rice pricing and marketing regime, which included its liberalization and the removal of the monopsony of state agencies. These reforms  3 were supported by the ASAC (US$100 million, including cofinancing), which became effective in September 1986. The PCR for this project (July 2, 1993) concludes that implementation has been generally satisfactory, even though the second tranche was released with a two-year delay in April 1989; however, its direct and immediate impact on agricultural production, other than rice, was marginal. 9. The sectoral policy improvements in industry and agriculture were unlikely to lead to a lasting supply response as long as the external trade and exchange regime continued to be dominated by quantitative restrictions and an overvalued exchange rate. The Government thus moved in 1987 to establish a market-determined trade and foreign exchange-allocation regime. These efforts were supported by the ITPAC (US$100 million, including cofinancing), which became effective in September 1987, and included: (a) large devaluations totaling 46 percent in foreign currency terms; (b) the replacement, in January 1988, of quantitative import restrictions for protective purposes with a simplified tariff structure; and (c) the first steps toward replacing the discretionary foreign exchange allocation system with the introduction of a full-fledged Open General License System (OGL). The PCR (April 15, 1992) concludes that the core objective of ITPAC--to implement trade policy reforms increasing competition and efficiency of the industrial sector and enhancing its contribution to the economy--was substantially realized. Implementation, however, experienced major delays caused by difficulties in the privatization and/or liquidation of the ten targeted public enterprises. 10. The PSAC (US$180 million, including cofinancing) became effective in December 1988. This operation was geared to support additional actions aimed at reducing the heavy direct involvement of the state in the economy and improving public sector management. The policy package supported by this operation focused on: (a) restructuring and privatization of public enterprises; (b) introducing a new public sector budgeting system; (c) extending the annual public investment program into a rolling three-year Public Investment Program (PIP) process and preparation of annual public expenditure programs; (d) restructuring the banking system; (e) eliminating administrative export restrictions and the state stabilization funds' monopoly on pepper, cloves and coffee; and (f) initiating a comprehensive civil service reform. Analysis of experience with the implementation of this Credit and of its impact on the economy is the subject of this report. Objectives and Content of the Program Credit Genesis 11. As of the beginning of 1988, the Government had made good progress toward addressing many of its economic problems. It had substantially redressed the fiscal, monetary, and external imbalances; eliminated most price controls; largely corrected the exchange rate overvaluation; and replaced quantitative import restrictions with a simplified tariff system. The Government's overall objective was to preserve the progress made in financial stabilization, while achieving an early transition to sustained per capita growth with increased social equity. 12. Within this framework, the central task not yet addressed by previous adjustment policies was an increase in the efficiency of allocation and use of public sector resources. Because of the pressing stabilization needs, public expenditure had in the past been cut with insufficient attention to efficiency or the social aspects of adjustment. As a result, although  4 expenditure monitoring and control had improved since 1983, the pattern of public expenditure did not fully correspond to the country development priorities and was in some respects inconsistent with the new incentive framework. The overall size and allocation of the civil service needed to be reviewed, as well. The fundamental objective was not only to raise the efficiency of public services but also to reorient them toward activities that supported the private sector efforts made possible by the liberalized environment. 13. With the support of PSAC, the Government's strategy for the next phase of adjustment centered on the following four policy areas: (i) public expenditure; (ii) export promotion and trade liberalization; (iii) the public enterprise and financial sectors; and (iv) social policies. Credit Objectives and Description 14. Credit Objectives. The policy package contained in the PSAC had as its objective to promote an early transition to per capita growth with increased social equity, through measures to accelerate the supply response to the new market-oriented incentive structure. 15. Credit Components. PSAC included five major components: * Public Expenditure Reform to raise the efficiency of public services and to reorient them toward activities supporting the private sector efforts which were made possible by the liberalized environment. The four major aspects of the reform were: (i) definition of detailed priorities for current and development public expenditure; (ii) formulation of strategies for the major economic and social sectors; (iii) strengthening the institutional basis of public expenditure programming; and (iv) formulation of a consolidated budget including all sources and uses of funds. * Public Enterprise Reform, with the objective to: (i) reduce in the short-term the sector's adverse financial impact on the economy; (ii) rationalize the sector by a program of liquidation of unviable enterprises or divestitures of PEs (except for those with a clear natural monopoly or strategic role); and (iii) improve the efficiency of the enterprises remaining in the public sector, and adapt the regulatory framework accordingly. * Financial Sector Reform to liberalize and improve the efficiency of the banking system through effective competition and appropriate disposition of doubtful and non- performing loans. . Export Promotion and Trade Liberalization with the objectives to: (i) expand traditional exports to the full extent permitted by the world market structure and demand constraints; (ii) diversify to non-traditional export activities by building on the country's resource base; and (iii) foster the liberalization of imports. * Social Policies. In conjunction with the Economic Management and Social Action Program Credit (EMSAP, approved in December 1988), the PSAC aimed to: (i) address the consequences of the prolonged economic decline; (ii) cushion the repercussions of certain adjustment measures on specific groups; and (iii) help meet more effectively the general social objectives of development.  5 Implementation and Performance Program Implementation 16. Effectiveness. The PSAC became effective on December 16, 1988, about four months behind original schedule. The three policy-related conditions of effectiveness included: (i) promulgation of the implementing decree for the new Banking Law; (ii) promulgation of legislation concerning trade liberalization; and (iii) satisfactory preparation of procedures for the formulation of restructuring plans for six public enterprises. The cross-effectiveness clause concerning the African Development Fund credit was waived. 17. Second Tranche Release. The release of the second tranche, originally expected in May 1989, took place in March 1991 only. At the time of second tranche release, six of the seven conditions for second tranche release were met, albeit with considerable delays. The conditions satisfied were: * Preparation of a 3-year public investment program (1989-91) and an overall public expenditure program for 1989, both acceptable to IDA. Acceptable 1990-92 and 1991- 93 public investment programs had also been prepared by the time of second tranche release. * Preparation of a comprehensive health sector strategy. * Completion of a comprehensive census of central government permanent employees. * Establishment of a unit responsible for performance review, rehabilitation and restructuring of public enterprises. * Satisfactory progress in the implementation of the action plan for public enterprises. * Preparation of action plans for the two national banks (BFV and BTM) and the restructuring plan for the third bank (BNI), acceptable to the Association. The seventh condition--completion of a proposal for a new budgeting system--was waived by the Board in February 1991 and became a condition for third tranche release. In addition, the second tranche amount was increased by about US$10 million equivalent in response to foreign exchange needs as a result of higher petroleum prices ensuing from the Gulf crisis. 18. Third Tranche Release. By August 1993, of the seven conditions for third tranche release, four conditions were met: * Regulatory measures for implementation of a new budgeting system * Implementation of the action plans for the two national banks and the restructuring plan for the third national bank. * Agreement on an action plan to restructure agricultural export marketing. * Satisfactory progress in the implementation of the four-year program of tariff reform.  6 The three remaining conditions were not met: * Preparation of a three-year PIP/PEP acceptable to IDA. The 1993-95 PIP/PEP was not satisfactory with expenditures 21% over the amount recommended. * Preparation of a program, acceptable to IDA, to improve management of central government permanent employees. In April 1992, Government approved an action plan as agreed with the Bank, and appointed a commission to oversee its implementation. Following issues raised by the commission on the approach used to define the action plan, Government reversed its position and adopted new regulations for civil service reform, found unacceptable by the Bank. * Further progress in the implementation of the action plan for Public Enterprises. No progress was made by Government to disengage from an agreed upon list of eleven enterprises. The closing date of the credit had already been extended twice and given the fact that no immediate action to meet the outstanding conditions was foreseen, the credit was closed on September 30, 1993 and the third tranche of SDR 33 million was cancelled. 19. Disbursements. The proceeds of the IDA credit of SDR 95.7 million (about US$132 million, equivalent including five IDA reflows) were to be disbursed in three tranches: the first of SDR 28.5 million was released upon credit effectiveness; the second of SDR 34.2 million was released in March 1991; and the third of SDR 33 million was cancelled. 20. The PSAC financed 100% of foreign exchange cost of eligible imports under a negative list. The first tranche was disbursed over a period of 18 months and the second tranche over a period of three years. The 1990 audit report identified a major irregularity in the use of funds during the December 1989 to September 1990 period: about US$9 million were drawn directly from the Central Bank from the special accounts on order from the Treasury in favor of one single local importer, by-passing the normal OGL procedures, to finance commercial imports. Only $50,000 equivalent were reimbursed in local currency. Following Bank insistence that irregularities be corrected, the Government, in mid-1993, arrested several individuals who are awaiting trial.  7 Economic Performance Table 1: MADAGASCAR- Economic Indicators, 1988-1990 (average per annum) Poecte [ V Actuals- Projected 1988- 1988- 1990 1990 GDP (rnarket price) growth rate 4.0 3.5 -0.4 GDY growth rate 4.1 2.0 -2.2 GDY/ capita growth rate 0.8 -1.2 -2.0 Consumption per capita 2.3 -1.6 -3.9 Gross Investment/GDP 16.5 13.8 -2.7 Domestic Savings/GDP 5.6 8.1 2.5 National Savings/GDP -1.9 4.9 6.8 Public Investment/GDP 8.5 8.2 -0.3 Public Savings/GDP 0.6 -1.5 -2.1 Private Investment/GDP 8.0 5.7 -2.4 Private Savings/GDP -2.5 6.4 8.8 Ratio Public Investment/Private Invest. 1.1 1.6 0.5 Tax Revenues/GDP 16.6 11.0 -5.6 Government Expenditure/GDP 24.1 23.6 -0.5 Deficit (-)/GDP (excluding capital grants) -2.4 -10.2 -7.8 Exports FOB growth rate 10.2 6.4 -3.7 Imports FOB growth rate 11.4 14.6 3.3 Terms of Trade % Change 0.8 -9.3 -10.1 Current Account (in fm. USS) -348.7 -297.4 51.3 21. During the first three years of the program (1988-90) the main economic target -- an increase in per capita GDP -- was reached, although at a lower rate than forecast (see table 1). For the first time since many years, per capita GDP increased, although modestly (0.5 percent per year on average). In spite of negative public savings, national savings reached 5 percent of GDP, due to stronger than anticipated private savings (6.4 percent of GDP). Living conditions deteriorated with a decline in per capita income (-1.2 percent), and a decrease in per capita consumption (-1.6 percent), which exacerbated the poverty situation and social tensions, and contributed to the 1991 political turmoil. 22. The fiscal targets were not met. Revenue mobilization was lower than expected, with tax revenue at a mere 11 percent of GDP, compared to a forecast of 16.6 percent. The result was a higher fiscal deficit (about 10 percent of GDP, capital grants excluded). This structural  8 imbalance has not been corrected since and remains one of the major obstacles to economic and financial recovery. On the external account, the performance did not meet expectations: although exports picked-up in 1989 and 1990, the overall export growth was only 6 percent per annum, compared to 10 percent projected. Following lax credit policies, imports soared by 52 percent in 1990, leading to a current account deficit of 13 percent of GDP and the depletion of external reserves. Overall, imports rose by 15 percent p.a. over the period, compared to 11 percent projected. 23. Altogether, the economic performance during 1988-90 demonstrated that adjustment can work in Madagascar. However, it also showed that reforms had not been strong enough to eliminate structural imbalances in the fiscal and external accounts. Also the policy backtrack of the early 1990s showed that the improvement was fragile, and that the structural adjustment stance was not deeply internalized. Implementation of Individual Components 24. Public Expenditure Reform. During the fiscal stabilization period of the early 1980s, public spending was cut from 28 percent of GDP in 1980 to 16 percent of GDP in 1983. T-hese results were impressive in terms of their stated objective of fiscal stabilization but the realignments were "forced" by the urgency of the stabilization task and not carefully Hplanned". The Government had neither the breathing space nor the institutional structures needed to manage the required compression of expenditure with sufficient attention to the efficiency of key public services or to the social aspects of development. As a result, toward the end of 1987 the overall level of public expenditure (23 percent of GDP) had become sustainable in a financial sense but not in a developmental sense, because its composition and programming modes corresponded neither to Madagascar's stated development priorities nor to the new market- oriented incentive framework that the Government was putting in place. This situation led to the conclusion that a strengthening of public expenditure programming and reform of the budgetary process were to be essential parts of the next generation of adjustment. 25. In the public investment area, the first rolling triennial public investment program (PIP) was formulated for 1989-91, and was consistent with the move toward a reduced but more efficient role for Government and with the major economic and social priorities. The PIPs for 1990-92 and for 1991-93 followed, and incorporated steady improvements in programming. The bulk of expenditure was concentrated on economic and social infrastructure. Agriculture, education, health and transport accounted for half of the total public expenditure programmed for each year in 1989, 1990 and 1991. However, in the 1991 PIP, the share of resources allocated to agriculture decreased slightly with a commensurate increase in the share of infrastructure and education. PIP implementation for 1989, 1990, 1991, and 1992 was on average about 70% of the amount budgeted. The principal reason for the underimplementation was an inefficient budgetary and administrative system, combined with insufficient coordination with donors, thus resulting in poor disbursements of loans and counterpart funds. The political turmoil which took place in the latter half of 1991 interrupted the cycle, which has now resumed with the preparation of the 1993-95 PIP. 26. In support of the Government's investment policy which is focused on: (i) infrastructure rehabilitation to support private sector activities; (ii) improvement in primary education; (iii) restructuring of the health system; and (iv) implementation of poverty alleviation programs, the  9 1993-95 PIP was reformulated with World Bank assistance around a prioritizing mechanism, the "Domaine de Suivi Prioritaire" (DSP). Introduction of the DSP was aimed to alleviate the difficulties encountered in PIP execution and monitoring. The DSP includes key projects in infrastructure (transport, electricity, and telecommunications), as well as in the social sectors (health, public education, and poverty alleviation). 27. To increase the efficiency of public resources, the strengthening of budgetary institutions and procedures was required. With PSAC support, initial steps were taken in 1988 and 1989. In addition to the establishment of the process of formulating the rolling triennial PIP, two new entities were created to guide the budgetary reform: the Internal Reform Committee within the Ministry of Finance and Budget, and a new PIP monitoring office within the Ministry of Economy and Planning. An agreed action plan included a test consolidated budget for 1990 and a fully consolidated budget for 1991. Several concrete institutional improvements were effected by the Government, including the revision of budget procedures, the tightening of the schedule for budget preparation, the integration of the PIP formulation process within that calendar, formal Assembly approval of the PIP at the time of budget approval, and the adoption of a new accounting system. The full proposal for a new budgeting system was delayed, however, due to difficulties in mobilizing the specialized technical assistance, and full completion of this second tranche condition was waived. The revised timetable entailed completion of the budgeting system proposal by September 1991, and its implementation, a condition of third tranche, was envisaged before end-1991. 28. After considerable delays in the resumption of normal budgetary processes, due to the mid-1991 turmoil, a new budgetary system was adopted in June 1992. The 1993 budget was formulated under the new budgeting system allowing for the functional analysis of expenditures and the consolidation of all expenditures and revenues. Improved implementation procedures were established in January 1993, including: streamlining the verification of payment orders; rationalization and simplification of the appropriations allotment system; further decentralization of payment orders; and improvement in the control of commitments. The basic principles of the budgetary reform implemented in January 1993 fully correspond to PSAC objectives. However, additional work remains to be done in the rationalization, simplification and finalization of the budgetary reform process including: (i) finalization of a standard format for both capital and current expenditures; (ii) simplification of budgetary estimates and control to avoid continuous revisions during implementation; (iii) clarification of procedures for the preparation and monitoring of PIP budgetary commitments; (iv) re-examination of the semestrial commitment procedure; and, (v) improved monitoring of payment orders, Treasury transfers, and withdrawal applications sent to donors. 29. The deficiencies in the civil service were a key factor in the poor composition of public expenditures. Incentives were weak, owing to the severe erosion in real wages during the 1980s. The allocation of personnel among ministries was inconsistent with the private-oriented incentive framework the Government had put into place, and the management and control systems were ineffective. As a first step, the Government proceeded to a systematic assessment of the entire civil service employment situation, including a full verification of the payroll and a comprehensive census of the civil service. The census methodology was formulated in the course of 1989, the census took place in February 1990, and the statistical results were completed in June 1990. Virtually 100% of the civil service payroll was censed, and irregularities (fraud or errors) were identified in about 20% of payroll files. After considerable  10 delays, the results of the civil service census were finally validated in August 1992 and a decision was taken to adjust the payroll files. 30. In April 1992 a commission on civil service reform was established with the mandate of implementing the Government's action plan (based on a joint Bank/Government fact-finding report) on civil service reform. The action plan, approved in April 1992, stipulated a two- pronged approach to civil service reform: (i) in the short-term, and within the context of the adjustment program, actions would include maintaining the wage-bill at its current level, while ensuring that immediate recruitment needs were met; and, (ii) in the long-term, the reform strategy would address the institutional issues within the framework of a fundamental reform of the civil service. The new civil service statute, adopted in 1993, redefines the responsibilities and rights of civil servants within the new democratic framework, which in itself should improve the functioning of the civil service. However, beyond these general principles, the statute includes counterproductive measures, such as career growth based on seniority (without the required technical background), and a systematic reclassification leading to rigidity of the civil service and to a fiscally unsustainable increase in the wage bill. 31. Public Enterprise Reform. A centerpiece of economic policy in the 1970s was the nationalization of foreign-owned enterprises, accompanied by the creation of a large number of new public enterprises (PEs). As a result, a large parastatal sector emerged with some 170 PEs in existence as of the end of 1987. The majority of these received subsidies from the Government and suffered from managerial, technical and financial problems. The 1983 stabilization program sharply reduced these subsidies. On the other hand, despite a ceiling on credit to PEs established in 1985, the Government-owned banking sector continued to keep these enterprises alive and as of 1987 the PE sector absorbed over 50 percent of total bank credit. 32. The Government's reform program of the PE sector aimed at: (i) reducing in the short- term the sector's distortionary impact on the economy; (ii) rationalizing the sector through liquidation of unviable PEs, or divestiture; and, (iii) improving the efficiency of the remaining enterprises and adapting the regulatory framework accordingly. Concerning the first objective, an indefinite moratorium on the creation of new PEs was established in 1988, new credit to "high risk" PEs was prohibited, and the Government froze the budgetary transfers to all these PEs at the 1987 level. With regard to the rationalization of the sector, an action plan was to be implemented over a three-year period. Considering the large number of PEs and the comprehensive nature of the proposed reform, the specific measures to be decided upon were to be implemented in phases with due regard for their social impact and in parallel with the necessary build-up in the institutional capacity to manage the reform program. 33. Under ITPAC, ten enterprises were identified for liquidation/privatization, and it was agreed that completion of the divestiture or liquidation phase was to occur by December 1988. In December 1990, six companies had been liquidated, three were sold to private investors and the remaining company was given an extension for its sale or liquidation until May 1991. The PE reform program was expanded and continued under the PSAC, consisting of a multi-year program of liquidation, divestiture, or restructuring for 51 enterprises. The enterprises selected under both ITPAC and PSAC accounted for about two-thirds of total capital of the PE sector and absorbed an estimated 50 percent of total credit to PEs and 70 percent of the credit to "high risk" PEs.  I1 34. Progress in PE reform slowed in 1989, partly due to the heavy electoral calendar of that year (presidential and parliamentary elections), and partly to the absence of an effective institution in charge of the reform process. To resolve the problem, in December 1990, the Government created a special unit reporting to the Prime Minister's Office, with the responsibility to manage in its entirety the parastatal reform program. In 1990, a new series of divestiture, dissolution and restructuring actions took place, as agreed under the program. 35. Following the mid-1991 turmoil and the establishment of a transitional government, the responsibility to oversee the PE program was assigned to a task force (Delegation Generale du Gouvernement a la Privatisation [DGGP]) reporting to a decision-making body, the "Conseil de Surveillance" headed by the Prime Minister. The Bank's recommendations about publicity and transparency were followed, and procedures were simplified and expedited with assets or firms being awarded to the best offer. Also, one of the main obstacles to privatization--lack of access by foreigners to land ownership--was partially alleviated by allowing full property rights to foreigners, but under a set of specific conditions and subject to a case-by-case approval. However, overall results remained meager. 36. The April 1992 supervision mission targeted a group of 60 enterprises for divestiture, for which liquidation or privatization was foreseen in the first two phases of PSAC. However, as the divestiture of all the 60 targeted enterprises would have taken an inordinate amount of time, it was agreed that the divestiture process should concentrate on the 11 largest enterprises. The PE reform program was suspended by the transitional Government during the first half of 1993 as a cautionary measure, until after an elected government was put in place. Eventually the last PSAC supervision mission (August 1993), determined that effective Government disengagement during the entire program to-date, was limited to 58 enterprises of which 15 were privatized and 43 liquidated. In addition, four PEs were contracted out to private management and three have been restructured awaiting eventual privatization. 37. Financial Sector Reform. The financial sector was highly inefficient and unable to meet the challenges of a liberalized economy. The plight of the public enterprises spilled over into the banking system, saddling the banks' portfolio with a heavy burden of non-performing loans, crowding out credit to the private sector and pushing up interest rates to compensate for the losses from lending to PEs . The Government reform program included measures to restore the financial health of the banks, while liberalizing the banking system and changing the ownership and management structure of the sector. The restoration of sound portfolios and improvements in credit decision formulation were included as conditions under ITPAC. As a consequence of the portfolio audits initiated in 1986, loans in the high risk category were immediately written down to the maximum allowable under accumulated provisions. Additional provisions for the rehabilitation of the portfolios were undertaken in April 1988 and again in February 1989. The Central Bank ensured that the prescribed provisioning and write-offs were fully implemented. 38. The Banking Law of May 1988, enacted in the context of PSAC negotiations, further established supervisory guidelines for the Central Bank and also allowed, for the first time, the participation of private capital in existing banks and provided for the creation of new private financial institutions. A new private bank called Banque Malgache de l'Ocean Indien (BMOI), with 75% foreign and 25% local ownership started operations in mid-1989. In February 1991, Credit Lyonnais, a leading French Bank, acquired majority (51%) share in BNI and assumed management of the institution. Also, in March 1991, an Italian Bank - l'Instituto Bancario San  12 Paolo di Torino - acquired a minority (22%) participation in BFV. With these developments only one of the four existing banks - BTM - remains under the full ownership and control of the Government. 39. PSAC conditionality in the reform of the banking sector involved: enactment of a new banking law, and preparation and implementation of restructuring action plans for the three national banks. These conditions were met. However, despite the portfolio clean-up and the privatization moves mentioned above, the Government was unable to satisfactorily control the growth of credit in 1990 and 1991. This was due to institutional weaknesses in the wholly state-controlled BTM, which suffered a severe deterioration of its loan portfolio over the 1990/91 period -- a major factor in the discontinuation of the OGL import system in September 1991. Remedial action was taken in February 1992 with the replacement of BTM top management, the reduction of BTM loan portfolio and the setting up of a credit ceiling in August 1992. Problems at BTM spilled over to the other remaining majority state-owned bank, BFV, which has since late 1991 consistently failed to respect credit ceilings. While the two private banks have been in positions of excess liquidity and BTM reduced its refinancing requirement, showing excess liquidity in August 1992, BFV still has a net refinancing requirement with the Central Bank. Privatization of the remaining two state-owned banks - BTM and BFV - will be undertaken with support from the Financial Institutions Development Technical Assistance Project, which was approved by the Board in May 1993. 40. Export Promotion and Trade Liberalization. Prior to the initiation of the adjustment program, Madagascar had an extensive system of export controls, including prior authorization to export, export price controls, minimum value requirements and trial periods for exporters. Until end-1987, coffee, vanilla, cloves and pepper, which together accounted for about two- thirds of total merchandise export earnings, were subject to the export monopoly of the State Stabilization Fund. In January 1988, the State Stabilization Fund's monopoly of exports of pepper and cloves was abolished, and in May 1988 coffee producers were also allowed to negotiate and execute export contracts freely. With the exception of the foreign exchange repatriation obligation that still remains in force and the case of vanilla (until most recently still under control of the State Stabilization Fund), virtually all other export controls have been eliminated. Export taxes on coffee and vanilla have been eliminated in the 1992 budget. 41. A program of tariff rationalization was introduced under ITPAC in January 1988, when specific tariffs were substituted by ad valorem rates; tariff categories were reduced from 69 to 21, with a minimum rate of 5% scaling up to a maximum of 110%. The maximum tariff rate has been gradually reduced and reached 60% in the 1991 Budget Law, leaving only 12 categories. The surcharge introduced for the previously prohibited products was phased out a year earlier than originally envisaged, in January 1990. In February 1988 the Government also eliminated "end-use" taxation applicable to approximately 500 products. PSAC conditionality included the completion of the four-year program of tariff reform introduced under ITPAC. By 1992, the tariff reform program was practically completed with the reduction of tariff rates to 5, ranging from 10% to 50% (luxury products). The program was completed in 1993 with the elimination of the remaining distortions within the tariff structure. 42. Social Policies. To address social problems, which originated primarily from the persistent decline in per capita income, the Government's program focused on the following priority areas: primary health care, nutrition, protection of homeless children, and employment generation. Family planning activities and population policies were also to be strengthened to  13 improve the longer-term social and economic prospects. PSAC conditionality was limited to the preparation of a comprehensive health strategy. In close collaboration with the Bank in August 1989 the Government formulated a strategy for the health sector including priority activities to be financed by public expenditure. Noteworthy aspects of the strategy are: integrating the delivery of family planning services into the basic activities of the public health system; the refocussing of on-going programs onto the major threats represented by malaria, tuberculosis and leprosy; the redeployment of resources to primary health care activities; and a thorough reform and rehabilitation of the in-service training and supervision programs. This document constituted the basis for the Health Sector Improvement Project approved by the Board in May 1991. 43. An Economic Management and Social Action Support Project (EMSAP) was approved by the Board in December 1988. Its objectives were: to help Government prepare social policies and programs and to facilitate the implementation of the adjustment program by reinforcing institutional capabilities in economic management. It also included a program of concrete actions in favor of the most vulnerable groups. Subsequently, a Food Security and Nutrition Project was approved by the Board in March 1993. Impact of Adjustment 44. Overall, despite slower than expected progress in "process-oriented' policy areas (i.e., budgetary and public enterprise reforms), the cumulative implementation of the package of sectoral and macroeconomic reforms enacted since 1985 has succeeded in bringing an unprecedented degree of freedom to the markets and in restoring economic growth after a prolonged period of uninterrupted decline. In the rice sector, the response to the liberalization measures taken in late 1986 was practically immediate, with the 1987 season showing a substantial production increase. As a result, and despite bad weather in 1988 and 1990, Madagascar has now significantly reduced its heavy food import dependency. For the economy as a whole, it was not realistic to expect a supply response much before 1989 because most of the crucial structural adjustment reforms (price decontrol, exchange regime, external trade, restructuring of the banking sector, public enterprise and improved allocation of public expenditures) took place only beginning in 1987. 45. With regards to foreign exchange and trade liberalization, by 1989, the real effective exchange rate had fallen to about 40% of its 1982 level. The twelve months between the large devaluation of June 1987 and the introduction of the OGL import system on July 1, 1988 was a key transition period to the beginning of recovery. The impact of the devaluation, both on prices and on domestic demand, was absorbed relatively quickly. In April 1988, inflation began to decelerate rapidly and economic activity began to recover. Real GDP grew by 3.4% in 1988 and by 4. 1% in 1989. Growth in 1990 continued, yielding the third consecutive year of per capita GDP increase. 46. In the area of public enterprise reform, although measurable progress was achieved, the divestiture process proved more difficult than anticipated initially, in large part because of weak government commitment. In public finance, significant improvement in the programming and composition of public expenditure was achieved; however, progress in the reform of the budgetary system was slower than anticipated. To encourage private investment and export diversification, a new Investment Code and free-trade zone legislation were promulgated in December 1989. The response of private investors has been most encouraging. It is estimated  14 that at end 1993 about 10,000 jobs have been created in the free-trade zone, generating about 30 million in additional exports. Finally, social and environmental concerns were integrated more explicitly in the Government's financial and economic program, and a targeted poverty alleviation program was launched, supported by the IDA-financed EMSAP. 47. The political crisis which erupted in mid-1991, however, derailed the adjustment effort. Output fell by an estimated 6.3%, and inflationary pressures increased. Madagascar's external position also weakened in 1991. Notwithstanding important disbursements of balance of payments support during the first half of the year and a 20% reduction in imports, the country's poor export performance led to an overall balance of payments deficit which was financed by an accumulation of external payments arrears and the depletion of reserves. The growing shortage of foreign exchange during the second half of the year led to the suspension of the OGL system in October 1991 and its replacement by a rationing mechanism of foreign exchange allocation. Despite the above economic environment, the private sector - especially export oriented industries - were better able to weather the political crisis of 1991-92 than other sectors. 48. The economy remained stagnant in 1992, and fiscal and external accounts did not improve. GDP rose by only 1%, with agriculture growing by almost 2% and industry declining by the same amount. Since the last devaluation of the FMG by 11.7% in early 1991, the real effective exchange rate has appreciated and in December 1992 the parallel market exchange rate was 20-25% higher than the official rate. Per capita consumption declined by more than 5%. The trade balance deteriorated further as the dollar value of imports increased by over 7% compared to a 3% increase in exports, which contributed to a current account deficit of 8.8% of GDP. On the positive side, the transition government (January 1992 through August 1993), maintained progress on some reforms (e.g., trade liberalization, elimination of export taxes on coffee and cloves, establishment of a new pricing and tax mechanism for petroleum products). Conclusions 49. Notwithstanding the encouraging results of 1988-1990, the supply response to the structural reform program has not reached its potential. Traditional export crops and import substituting industries continued to stagnate. The emergence of new activities in manufacturing following creation of the EPZ in 1989, non-traditional agricultural exports and tourism-related services was promising and in many instances impressive; however, since these activities started from a very low base, they attained a relatively limited level and had, therefore, a limited impact on the overall economy. The supply response has been constrained in particular by important physical (infrastructure) bottlenecks, poorly functioning commodity and factor markets, a heavy debt burden, and adverse terms of trade. The growth in new exports is rapid and promising, but is not yet large enough to compensate for the sharp decline in the prices of the country's traditional exports. 50. Under PSAC, Madagascar consolidated the reforms under previous operations to firmly put the country on the path to becoming an open market oriented economy. However, a per capita growth of 0.5% during the period 1988-90 was far from sufficient to reverse the long term decline in the living conditions of the population. The reforms were not internalized and were only partially implemented. The legacy of the 1970s' experiment in socialism and dirigisme still lingers and has affected the pace of reform, especially the withdrawal of the state from commercial and productive activities.  15 51. Three major lessons can be drawn from the adjustment experience. First, the piecemeal approach followed in the past, characterized by incomplete reform measures which were not implemented effectively enough, failed to generate a strong supply response. It is important to reach a consensus on an ambitious growth vision and then to act in a way that is consistent with that vision. Second, it is essential to push aggressively on a select number of key economic levels to truly spring the economy forward. The preoccupation with detailed processes and the existence of too many non-essential conditions obscured the strategic vision which was needed to create and maintain the momentum for reform. 7hird, the authorities did not explain the benefits of adjustment to the population; they only underlined its costs. While projects aimed at reducing proverty were designed to accompany the adjustment program, there was no attempt made by the authorities to explain how it was addressing poverty issues. In order to encourage popular participation and acceptance, the government's economic program needs to be broadly disseminated, explained, and discussed.  16 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE (In March 1994 the Borrower was requested to review Parts I and III and to prepare Part II. The new Government, however, which was put in place in August 1993 following a two-year political transition, declined to complete Part II. The authorities said that the implementation of the PSAC was the responsibility of the previous r6gime and as such they did not feel competent to comment on it.)  17 PROJECT COMPLETION REPORT MADAGASCAR PUBLIC SECTOR ADJUSTMENT CREDIT (IDA Credits 1941-MAG, and 1941-1, 1941-2, 1941-3, 1941-4. 1941-5) PART III: STATISTICAL INFORMATION Table 1: Related Bank Loans/Credits Loan/Credit Title Purpose f Month/Year of Status I_Approval Industry and Trade Policy To support policy reforms designed to increase June 1987 Closed Adjustment Credit competition through liberalization of the inter- March 31, 1991 (Cr. 1834-MAG) national and domestic trade, thus fostering a market-based resource allocation system. Economic Management and To support Government's efforts to improve December 1988 Ongoing Social Action Project public sector management, to address the plight of (Cr. 1967-MAG) the more disadvantaged groups and to strengthen Government's capacity to monitor and address social issues, policies and programs systematically within its overall economic public expend.prograrn.  18 Table 2: Credit Data Amounts (million) (as of November 30, 1993) Original Disbursed Cancelled Repaid Outstanding IDA 1941-MAG (SDR) 90.50 57.50 33.00 0.00 57.50 IDA 1941-1-MAG(SDR) 1.10 1.10 0.00 0.00 1.10 IDA 1941-2-MAG (SDR) 0.90 0.90 0.00 0.00 0.90 IDA 1941-3-MAG(SDR) 1.20 1.20 0.00 0.00 1.20 IDA 1941-4-MAG (SDR) 1.00 1.00 0.00 0.00 1.00 IDA 1941-5-MAG (SDR) 0.99 0.99 0.00 0.00 0.99 Sub-total (SDR) 95.69 62.69 33.00 0.00 62.69 Swiss grant (SwF) 10.00 10.00 0.00 0.00 0.00 ADF (UA) 30.00 n.a. na. n.a. n.a. Norwegian grant (NKr) 20.00 n.a. n.a. n.a. n.a. Table 3: Credit Timetable: Original and Actual Dates Original/Planned Credit Dates Revised/Actual Dates Preparation Mission October 20, 1987 Initiating Memorandum January 15, 1988 Appraisal January 31, 1988 January 31, 1988 Negotiations April 1988 May 2, 1988 Letter of Development Policy - May 1988 Board Approval June 1988 June 29, 1988 Signing of Credit Agreement July 18, 1988 Effectiveness August 1988 December 16, 1988 Effectiveness of 1941-1 (lst IDA reflow) - August 25, 1989 Effectiveness of 1941-2 (2nd IDA reflow) - July 23, 1990 Second tranche release May 1989 March 1991 Third tranche release December 1989 Cancelled Effectiveness of 1941-3 (3rd IDA reflow) - May 29, 1991 Effectiveness of 1941-4 (4th IDA reflow) - November 30, 1992 Effectiveness of 1941-5 (5th IDA reflow) - July 15, 1993 Closing Date December 31, 1990 September 30, 1993  19 Table 4: Cumulative Credit Disbursements Amount (million) FY89 FY90 FY91 FY92 FY93 FY94 IDA 194 1-MAG (SDR) Planned 50.60 39.90 Actual 22.40 2.35 31.82 0.17 0.61 0.16 IDA 1941-1-MAG(SDR) Actual - 1.10 - - - - IDA 1941-2-MAG (SDR) Actual - - 0.90 - IDA 1941-3-MAG(SDR) Actual - - - 1.20 - IDA 19414-MAG(SDR) Actual - - - 1.00 - IDA 1941-5-MAG (SDR) Actual - - - - - 0.99 Total (SDR) Actual 22.40 3.45 32.72 1.37 1.61 1.15 Swiss Grant (SwF) Actual 1.94 8.06 ADF (UA) n.a. n.a. n.a. n.a. n.a. n.a. Norwegian grant (NKr) n.a. n.a. n.a. n.a. n.a. n.a.  20 Table 5: Use of Bank Resources A. Bank Staff Inputs FY FY FY FY FY FY FY FY FY 86 87 88 89 90 91 92 93 94 Total Identif./Preparation 3.7 12.8 16.5 Appraisal 103.5 103.5 Negotiations 36.4 36.4 Supervision 59.9 40.1 28.1 28.8 43.9 200.8 Project Completion Report 10.0 10.0 Total 3.7 12.8 - 139.9 59.9 40.1 28.1 28.8 43.9 10.0 367.2 B. Mission Data Project Stage MonthtYear # wks _# persons SWs Report date Rating Preparation October 1987 3 9 18 December 2, 1987 Appraisal January 1988 3 6 15 February 26, 1988 Supervision October 1988 3 8 15 December 14, 1988 February 1989 4 6 16 March 17, 1989 June 1989 3 4 10 July 11, 1989 October 1989 3 7 18 November21, 1989 December 1989 2 2 4 December 22, 1989 March 1990 1 1 1 April 3, 1990 April 1991 1 2 2 May 7, 1991 January 1992 2 2 4 February 4, 1991 March 1992 3 6 8 May 17,1992 June 1992 3 1 2 July 14, 1992 August 1992 2 4 2 September 18, 1992 September 1992 2 6 8 September 18, 1992 December 1992 3 2 4 January 7, 1993 Completion August 1993 3 7 4 August 30, 1993  21 MADACASCAR, XEY INDICATORS 3N3941507 1915 19iC 1917 1911 1919 1990 1991 1992 1993 Real g lM: OGmDmm.cPrudat (GDP) LI 2.0 L2 3.4 4.1 3.1 4I LO 2.1 Qms Da_mte Imr (GDY) 0.3 3.5 -0.3 2.6 3.1 0.2 -.7 0.7 3.6 Real p9f cai pwh raw- Ctor Dmamc Podurt .1.5 -1.1 *1.9 0.2 0.3 -0.1 -9.6 -I. -0.6 TotaL l a 1.7 -7.6 -3.6 -4.4 -1.7 1.3 -4.1 -5.6 1.0 pliva casmapa 1.6 4.0 -4.3 -4.1 -2.1 2.1 -3.6 -5.9 2.1 Dedt and Debt Smim (LT+fMF+S): Total DOD (US inl) 2,472.2 2,925.6 3,945.2 3,9960 3,423.3 3,651.5 3,715.3 3,31L4 3979.5 DOD /GDP 33.0 102.2 177.5 177.5 131.0 116.3 13.3 1307 119.6 Debt _A (USS mil) 1/ 155. 296.0 313.6 330.6 206.1 464.6 10.9 111.0 39 DebO sw.c/Expon 43.4 72.6 71.7 79.7 42.9 3I1 34.7 22.0 17.7 Debt swwA / GDP 5.5 9.1 12.2 13.5 U3 15.1 6.4 3.7 2.6 latl b.vdm (LT+W+fST): InWpaid (USSmil) 73.1 73.6 110.3 76.7 110.4 173.3 49.7 53.3 27.7 etW /Exetw 20.4 19.3 25.3 18.5 23.0 32.9 10.2 10.7 5.6 Ileng/IGDP 2.6 2.4 4.3 3.1 4.4 5.6 1.9 1.3 0.3 G(3mgUIr4mz / GDP *.5 9.0 10.1 13.3 13.4 17.0 L2 11.3 12.3 ICOR(5ya aWirgy- shwn) 11.4 6.1 4.7 4.1 3.9 13.3 14.2 19.4 26.1 Domadc Sa* / GDP 1.3 6.9 5.9 3.4 10.0 6.0 -0.5 2.3 3.6 BOP Ruoum Balance I GDP -7.7 -2.3 -5.2 .4.1 -4.0 -10.7 -7.3 -7.3 4.6 Nadonl SSViQPW/ GDP -1.9 3.5 1.2 3.7 5.3 5.6 40.5 3.7 5.2 BOP Curnt Account Balance / GDP -10.3 -4.3 -10.0 -10.3 4.7 -13.4 -9.9 4.3 4.3 M- al Domc SaWmg Raw -115.6 663.9 94.7 117.4 57.7 991.3 93.3 30.1 25.2 Mumn Nalonl Savip Raw -33.6 633.S 207.3 137.1 53.7 -665 33.5 995.5 45.2 Govatnrnmt ia'.a _ /GDP 6.0 5.4 7.0 6.9 9.7 7.9 5.9 7.6 3.1 Govemen Savinp I GDP 40.4 -0.9 40.2 -1.4 -3.1 - 0.0 -4.2 -4.3 -2.6 Privae lir_Z / GDP 2.6 3.6 3.1 6.4 3.7 6.9 4.6 3.7 4.3 Prvae Saviop / GDP -1.5 4.4 1.4 5.1 1.4 5.6 3.7 3.0 7.3 Govenunew ,anu / GDP 13.3 12.7 15.3 13.3 12.7 13.3 9.3 10.9 10.3 Govnment e _/enditag GDP 20.3 20.0 23.9 24.1 25.5 21.2 20.1 23.5 21.6 O0a Budpt deficit / GDP 2V -7.5 -7.3 4.6 *10.3 -12.6 -7.3 -10.6 .12.4 -11.0 Prmmnry defic I GDP -3.6 -2.9 *2.7 -3.2 -5.1 -2.1 -4.9 *5.6 -6.4 Cotmaw Prisen gpww mb 3/ 9.6 16.2 27.2 24.4 12.3 15.4 14.9 13.2 9.5 GDP Dfao growt rae 10.5 14.2 23.0 21.2 12.0 11.4 14.4 12.6 12.6 Real Exelp Rat Inde (197-100) 1439 141.2 100.0 35.3 34.9 96.1 n7.5 92.3 100.7 Ter. ofTmdu Indi (1937-100) 112.1 U32.6 100.0 95.6 31.2 74.5 73.7 69.2 66.3 ExporsGNFSvolum uow*raw 41 -3.2 0.0 2.9 4.2 16.9 12.0 4.3 2.0 -61 Epr GNFS / GDP 11.6 12.0 16.5 16.3 11.0 15.9 17.3 16.7 15.5 Imporm GNFS, vohes puw raw 41 9.5 -20.9 0.3 -9.6 0.9 33.0 -14.9 0.6 3.0 Import GNFS / GDP 13.9 14.1 20.7 21.2 21.4 269 26.2 25.2 24.2 BOP Cumnt Accopm Balance (USS mal) 51 -310.0 -204.6 *256.6 -264.2 -2163 -411.7 .264.6 -261.3 -293.9 Net mave (USS ml) -135.S 48.7 -53.2 33.4 300 -55.5 -41.6 -133 3.1 Gro ruas(ma o ofioyjt) 0.3 2.1 3.0 3.6 3.9 1.0 .2 1.2 1.3 I/ ArU mvte paid ai aucbsdi 2V Sidig interm medag ap11. 3Y Prvae c oam ddate (adald coimtm. 4N Natial 5/ E=huMg offira grAL  22 MADAGASCAR. NATIONAL ACCOUNTS Part A. Currmt Price Data (in billions of local currency units) PercapitaGNP- USS 210 (1991) Population: 12.032 million (1991) 3/3/94 15:07 -- ~~~~~~~~~~~~~~~~~~~~~~~~~EsL 1925 1986 1987 1988 1989 1990 1991 1992 -199T Gross Domestic Product 1.8932 2,203.S Z743.2 3,436.3 4,005.3 4,601.5 4,906.4 5,579.6 6,416.6 Net Ifdirect Txe 206.7 220.7 349.5 389.0 360.7 403.6 340.9 410.7 430.7 GDP at Factor C4st 1,686.5 1,983.1 2,393.7 3,047.8 3,644.6 4,197.9 4,565.5 5,168.9 5,985.9 Imports (GNFS) 1/ 352.3 310.1 567.7 728.8 S57.6 1,235.6 1,285.4 1,405.1 1,550.8 Expozi (GNFS) 1/ 220.5 263.4 453.0 559.2 720.9 730.2 246.4 929.9 992.5 Resourcc Balance -137.8 -46.7 -114.7 -169.0 -136.7 -505.4 -439.0 '475.2 -558.3 Total Expenditures 2,031.0 2,250.5 2,857.9 3,605.8 4,142.0 5,106.9 5,345.4 6,054.8 6,974.9 Total Consumption: 1,8692 2,051.3 2,580.7 3,148.9 3,605.7 4,325.5 4,943.9 5,423.0 6,182.7 Government 124.8 194.9 250.5 279.6 350.9 367.3 422.0 463.4 481.7 Private 1,624.4 1,856.4 2,3302 2,869.3 3,254.8 3,9582 4,521.9 4,959.6 5,701.0 Gross Domestic Investment 161.8 199.2 2772 456.9 536.3 721.4 401.5 631.8 7922 G.D.Fuxed Invement 161.2 199.2 277.2 456.9 536.3 682.2 518.9 631.2 792.2 Government 2/ 112.9 119.5 191.6 237.3 382.1 365.2 291.6 423.9 518.9 Private 48.9 79.7 85.6 219.6 1482 317.0 227.3 207.9 273.3 Changes in Stocks 0.0 0.0 0.0 0.0 0.0 992 -117.4 0.0 0.0 Memorandum Itcrs: Gross Domestic Savinp 24.0 152.5 162.5 287.9 399.6 276.0 -37.5 156.6 233.9 Net Factor Income -25.3 -104.6 -1S6.6 -251.9 -302.3 -238.4 -248.3 -256.5 -234.S NetCurrentTransfen 25.2 22.6 55.9 90.2 114.9 219.5 263.6 305.1 336.9 National Savinp -36.1 76.6 31.8 126.2 212.2 257.2 -222 205.2 336.0 1/ National AccountL 2/ Including Public Enterprises Investment. Part B: Constant Price Data (in billions of local currency units, 1987'100) EA 1985 1986 1987 19BS 1989 1990 1991 1992 IW3 Gross Domestic Product 2,652A 2,710.4 2,7432 2,835.9 2,951.7 3,044.4 2,237.6 2,266.3 2.91 2 Imports (GNFS) 1/ 715.5 566.0 567.7 513.1 517.6 628.6 526.3 589.9 60 7 6 Exports (GNFS) 1/ 440.6 440.4 453.0 415.7 486.0 544.2 570.1 581.3 5460 Resource Balance -274.9 -125.6 -114.7 -97.4 -31.5 -144.4 -16.2 -8.6 461 6 Total Expenditures 2,951.1 2,833.1 Z857.9 2,917.5 2,972-2 3,176.9 2,906.8 2,907.3 3.025 7 Total Consumption: 2,725.4 2,595.4 2,580.7 2,546.4 2,583.3 2,700.9 2,669.1 2,593.4 2.691 1 Government 2352 233.2 250.5 239.9 253.5 246.6 229.6 230.5 21114 Private 2,490.2 2,361.6 2,3302 2,306.5 2,329.8 2,454.3 2,439.6 2,362.9 2.479 7 Total Investment 225.7 237.7 2772 371.1 388.8 475.9 237.6 313.9 334 5 Government .. .. .. .. 281.4 232.6 156.2 210.6 '39 7 Private 225.7 237.7 2772 371.1 107.4 243.3 80.8 103.3 94 I Terms ofTrade (mT) adjustment -0.2 40.4 0.0 -21.6 -51.0 -1372 -184.0 -190.9 *157 2 Gross Domestic Income 2,658.1 2,750.2 2,7432 2.814.4 2,900.7 2,9072 2,653.6 2,675.9 2.-I 1 Domestic Savings (Tr Adjusted) -67.3 155.3 162.5 262.0 317.4 206.3 -15.5 22.5 '9 9 1/ Goods and nonflactor savices (National Accounts).  23 MADAGASCAR NATIONAL ACCOUNTS Part C: Viii Added by Sector (% of GDP at factor cost) 3/3/94 15:07 ESL 1985 1986 1987 1988 1989 1990 1991 1992 1993 Agriculturw 35.1 36.8 36.2 33.5 32.9 32.3 33.0 33.4 33.1 Indusry 13.3 12.9 13.7 13.2 14.8 14.2 14.0 13.6 14.1 -of which: Mining 0.3 0.3 0.3 0.5 0.4 0.4 0.3 0.3 0.3 Savices 1/ 51.5 50.3 50.1 533 52.3 53.5 52.9 53.0 52.8 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Historical and projectod sharcs ar calculated from current price datia 1/ Officisl Malagasy national accounts include constuction in savices Part D: Log-Term Growth Rates (average annual growth rat fiom costant pice data) EsL 1973-80 1980-92 1993 Gross Domestic Product 1.4 -0.1 2.1 Agricultue 0.7 2.0 3.3 Industry 1.9 -1.5 8.1 -of which: Mining .. .. 0.7 Services 1.6 -0.6 22 Exports of GNFS 2.5 -1.8 -6.1 Imports of GNFS 2.2 -6.5 3.0 Total Expenditures 1.5 -1.5 4.1 Total Consumption 12 -1.5 3.8 Govemment 3.9 -0.4 -8.3 Private 1.0 -1.6 4.9 Gross Domestic Investmcnt 42 -1.5 6.6 Government .. .. 13.8 Pivate .. .. -.2 Capacity to import -5.1 -3.4 -0.4 Gross Domcstic Income -0.5 -0.3 3.6 Gross National Income -0.4 -0.6 4.6 Gross National Product 1.6 -0.4 3.0 Gross Domestic Savings .. -56.6 -13.3 Gross National Savings .. 20.5 -5.2 Population 2.7 3.0 2.8 Labor Force 22 2.1 2.6 GDP per capita -12 -3.0 -0.6  24 MADAGASCAR, NATIONAL ACCOUNTS Pat E: Anual Grow* Rate (avra a--al gowt zi aa km consant price dat) 3/3i94 15:07 -195 19S6 19S7 1981 1989 1990 1991 1992 1993 Grs Domestic Product(1917-100) 1.1 2.0 1.2 3.4 4.1 3.1 -6.1 1.0 2.1 AgUiaulat 1.1 3.2 2.5 2.2 5.2 2.1 0.5 1.7 3.3 Indusy 2.8 3.7 4.3 1.5 1.2 -1.0 -1.0 .2.0 3.1 Sa vices 0.7 0.7 -0.6 4.7 4.0 4.0 -7.1 1.1 2.2 Grs Domestc IDcm 0.3 3.5 -0.3 2.6 3.1 0.2 -S.7 0.3 3.6 Gos Domes&c wneslment 1.3 5.3 16.6 33.9 4.1 22.4 -50.1 32.1 6.6 Total Co,nin l 4.7 -4.1 -0.6 -1.3 1.5 4.6 -1.2 -2.S 3.1 Populato 3.0 3.1 3.2 3.2 3.2 3.2 3.1 2.9 2.1 Per Canita Growth Rzs: Gros Dometic Product -1.3 -1.1 -1.9 0.2 0.3 -0.1 -9.6 .1.S -0.6 Towl Caompticm 1.7 -7.6 -3.6 -4.4 -1.7 1.3 .4.1 .5.6 1.0 Privaa Coaumptioa 1.6 -1.0 -4.3 -4.1 -2.1 2.1 -3.6 -5.9 2.1 Part F: Price Indlces (Nioial Accomub Deflsoa 1937-100) 1935 1916 1987 1913 1999 1990 1991 1992 1993 Gross Domesic Product 71.2 11.3 100.0 121.2 135.7 151.1 172.9 194.6 219.1 Import (GNFS) 50.1 54.1 100.0 142.0 165.7 179.4 219.3 231.2 255 2 Export(GNFS) 50.1 59.1 100.0 134.7 141.3 134.2 143.5 160.0 131.3 Total Expenditurs 63.1 79.4 100.0 123.6 139.4 160.1 113.9 201.3 230 5 Consumption 61.6 79.0 100.0 123.7 139.6 160.1 115.2 209.1 229 7 Invesnment 71.7 83.8 100.0 123.1 137.9 164.2 169.0 201.2 236 3 Agiculbre 72.4 16.4 100.0 115.3 123.9 142.3 157.9 177.1 197 5 Indus*y 74.4 81.5 100.0 120.2 159.4 171.4 193.5 216.4 20' Services 72.5 12.7 100.0 129.5 145.9 165.1 191.4 214.6 242. 3 Part G: Oter Economic Indkators 1980-93 1973 1930 Imnu Elasdcitv hinport (GNFS) .0.4 .. .. -0.6 .1 2 Marmin Savinf Rates (Me Grou Domestic Savings Gross Naional Savin.s ICOR (palod averags) 4.7 .. .. .3.3 17 7 Labor Foce (Y.) Agriculra. Tndusny .. Sevices ToWl 100.0 .. .. 100.0 100 0  25 MADAGASCAR. EXrERNAL TRADE A. Volumw, Value, an Pri 3/3/94 15:07 ~~~~~~~ - ~~~~~~~~~~~~~~~Esi 1985 1986 1987 1988 1989 1990 1991 1992 1993 MERCHANDISE EXPORTS: (volume index 1987-100) Coffee 94.2 99.3 100.0 90.8 129.9 100.8 85.9 105.0 105.4 Cloves 383.1 338.2 100.0 173.4 546.5 339.5 434.6 353.8 299.0 Vanila 48.5 53.2 100.0 47.8 46.2 63.9 49.5 53.9 242 Other Exports 93.6 82.5 100.0 107.4 123.0 133.2 162.8 147.7 147.7 Merchandise Expor (FOB) 92.5 87.1 100.0 88.8 117.1 111.6 118.8 116.6 107.0 (Value - Curr. mill S) Coffee 102.9 139.3 92.7 73.7 76.8 38.6 28.1 31.6 37.1 Cloves 35.2 27.5 10.0 15.5 32.2 20.0 23.1 9.0 5.0 Vanilla 43.6 47.8 88.8 43.6 42.1 57.1 46.6 51.2 23.0 Other Exports 109.4 108.2 137.6 146.9 170.2 202.9 240.3 235.9 224.2 Merchandise Exports (FOB) 291.2 322.9 329.0 279.7 321.3 318.6 338.0 327.7 289.4 MERCHANDISE IMPORTS: (Vol. Index 1987-100) Food 101.6 133.9 100.0 32.9 80.4 90.5 59.5 92.8 81.4 Other Consumer Goods 128.4 108.6 100.0 99.7 105.8 165.6 111.6 133.8 127 5 POL and Other Energy 101.0 134.9 100.0 148.7 66.2 147.4 110.5 109.8 116 5 Intarmediad Goods 162.8 76.3 100.0 70.4 77.5 122.5 103.6 110.6 127 3 Primaly 139.3 97.3 100.0 84.6 84.9 125.2 77.3 80.8 92 3 Manufaures 2152 29.5 100.0 38.6 61.1 116.5 162.2 177.0 204 0 Caital Goods 126.8 102.8 100.0 121.5 112.1 158.3 135.1 99.4 107 5 Tota Merch. Imports (CIF) 133.3 102.3 100.0 92.7 88.6 136.3 107.8 108.4 115 1 (Value - Curr. mill. S) Food 49.6 52.0 51.8 17.2 38.2 48.8 35.2 58.2 51 5 Other Consumer Goods 51.3 51.2 52.5 55.5 58.5 99.7 69.8 88.7 U. 0 POL and Other Energy 84.7 58.3 55.4 65.7 35.5 113.5 71.2 72.1 '6 1 [ntamediate Goods 182.0 100.5 147.3 109.9 120.0 200.7 176.2 199.5 :_Is1 Primary 107.4 88.5 101.6 91.2 90.7 141.6 90.7 100.5 114 S Manufactures 74.6 12.0 45.6 18.7 293 59.1 85.5 99.0 1 i 3 4 Capital Goods 97.9 93.8 102.0 131.3 119.9 186.4 165.3 128.9 :313 Total Merch. Imports (CIF) 465.4 355.7 409.0 379.7 372.0 649.0 517.7 547.3 5'S 1 COUNTRY INDICES ( 1987-100): Mrchandise Export Price 95.7 112.8 100.0 95.7 83.4 86.8 86.5 85 4 3: Merchandise Import Price 85.4 85.0 100.0 100.1 102.6 116.4 117.4 123.4 .'' 9 Merch. Terms of Trade 112.1 132.6 100.0 95.6 81.2 74.5 73.7 692 06 I  26 IUDACASCALM EXTRNAL TRLAD Mm=. of Tebi ae Cwoutb Rati dTobl~ ~ ~ ~~~~~Mu Id Rd RAf (f cnma Pn) Ea ACO Em 1985 1936 1937 19U 1993 1980-1992 1993 3N94 15:07 Coffee 35.3 43.2 23.2 263 12.S -2.0 0.4 caaqs 12.1 L5 3.0 5.5 L7 15.7 -15.5 Va;n 15.0 14.1 21.0 15.6 7.9 3.5 -SS.1 Odw E Ipa 37.6 33.5 41.3 5.5 77.5 - 0.0 Tol Mach. ExpRm (fob) 100.0 100.0 100.0 100.0 100.0 2.6 4.2 Food 10.6 14.6 12.7 4.5 9.0 3 56.0 OtberCo Goob 11.0 14.4 12.1 14.6 14.5 .3.9 19.9 POL md Oar Enwv 13.2 16.4 13.5 17.3 U.2 2.9 -0.7 batm Goods n.i: 39.1 22.3 36.0 29.0 39.4 4.4 6.1 PtNy Goods 23.1 24.9 243 24.0 19.3 .. 4.5 MnufacumdGaoods 16.0 3.4 11.2 4.9 19.6 _ 9.1 CAI* Goos 21.0 26.4 24.9 34.6 24.0 .64 -26.5 Toaw Mech. Inqmp 100.0 100.0 100.0 100.0 100.0 -69 0.5 C: Tr.d he Nm FJaw Swvia 1985 1936 1917 1912 1939 1990 1991 1992 1993 Vobm Indiam (197-100) Export of Namfctor sams 73.0 31.7 100.0 105.0 120.9 171.7 126.9 132.7 151.5 Impol of NonfN&ttor 97.3 92.3 100.0 90.7 9M1 1063 90.3 903 100.9 USI3 Puc In&= 19t7-31001 Eoa of Nmfiw mmomm 713 95.3 100.0 117.6 114.1 117.2 120.6 134.3 136.5 hap"iw otfNoofacorvw 733 95.1 100.0 117.6 114.1 117.2 120.6 134.3 1365  27 MADAGASCAL' BALANCE 0 PAY1O4T (US S gam jZ) 3/394 1507 Ba 1985 1986 1917 1913 1989 1990 1991 1992 1993 A. Exporm of G(3S 3517 407.5 437.7 414.6 4800 m2.5 489.0 504.8 490.4 A. Expow of GNFS 11 349.7 391.0 425.0 39Z1 453.6 512.6 484.S 499.3 487.7 1. Mad cdia (FOB) 291.2 322.9 329.0 279.7 321.3 313.6 33L0 327.7 2S9.4 2. Noa-fiacnr Saer 5Z6 75.1 95.9 Ill4 132.3 194.0 146.1 171.5 191.4 B. a1 oGNFS 56.0 490.3 559.4 547.4 552W 241.7 609 732.3 775.3 1. Me eCbAm& (FOB) 401.5 294.9 339.6 313.0 306.9 5664 440.1 465.2 47.6 2. Notaetor Swic 167.5 195.4 219.3 234.4 246.0 275.3 240.1 267.6 302.7 C. Rneouma Balance -219.3 -92.3 -134.4 .149.3 -99.4 -329.1 -196.0 -233.5 -227.6 D. Ndt FacltO nco -12L7 -154.6 -174.5 .179.0 -121.6 -159.6 -135.3 -137.3 -121.1 1. Fado Raccip 4.4 5.3 9.3 13.3 123 14.9 4.1 5.5 17 2. Factor PaMm 133.1 159.9 11s1 192.3 206.9 174.5 139.4 142.1 124.5 a) Total IDN 73.0 161.7 140.9 173.7 166.4 173.1 137.5 141.5 121.7 b) Oth Facto Paymn_ 60.1 -1.1 42.9 116 40.5 0.7 L9 1.3 2.1 E. Nt Cugrmt Trmnf 3Z0 42.3 52.2 64.1 71.7 76.9 66.3 109.0 115.5 1. Cwms R ip 32.6 36.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 a) Wodk. zv _m 4.6 4.2 3.4 3.2 1I 0.0 0.0 0.0 0.0 b) Oterw r. n 34.0 32.0 -3.4 -3.2 -4.1 0.0 0.0 0.0 0.0 2. Ctrax Pay_ 14.4 15.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 F. OamI AccoCM Balam 1. BEfo o54al cpWl -310.0 -204.6 -2566 -264.2 -216.3 -411.7 -264.6 .261.1 -293.9 2. OfficiaL pa al 2V 60.3 109.1 101.9 124.9 131.4 160.6 112.6 125.9 139.7 3. AAw offcia capitl gpn -249.7 -94.8 -154.7 -139.4 -4.9 -251.1 -152.0 .135.9 -154.2 G. LoaTuM Caital Iname -3.7 36.4 20.9 -2.1 -19.5 -37.2 -148.9 -71.3 -84.2 1. Ditct IAmwmet .. .. .. .. 12.1 22.4 13.7 21.1 23.1 2. Nde LT Bctmwig 117.7 28.9 134.2 35.7 -7.6 -59.6 -1626 -99 102.0 a) Dibumam 164.3 192.7 295.9 243.3 243.2 151.1 41.1 112.7 131.0 b) Repayw-mn 46.6 163.1 161.7 207.6 250.2 210.7 203.7 205.6 239.0 3. Odw L-T Infl,TI -121.4 7.5 -1133 -32.5 -24.7 0.0 0.0 0.0 0.0 It Toal Other Im 237.0 124.6 202.6 211.5 137.5 151.0 313.0 224.7 262.2 1. Ned S-T Capital. n..j 91.6 149.7 131.6 263.1 195.2 -27.4 252.6 220.1 262.2 A) Intere m 0.0 33.0 30.0 97.0 56.0 0.0 17.1 37.1 94.0 b) Other net S-T cl .. .. .. .. .. -27.4 164.9 133.0 161.2 2. Capital Flob, n.eL 137.9 -35.9 64.0 -51.5 .57.6 171.4 65.4 3.9 0.0 3. Ero A O _m 7.5 10.3 0.0 4;1 0.0 0.0 0.0 0.0 0.0 L Chuagm Net R.um 16.3 -662 -.1 -69.3 -33.2 137.3 -17.1 -17.0 -23.3 1. Net Creai From WF -3.5 4.0 1.5 -29.2 -16.3 .29.7 -16.7 -16.2 -14.1 2. Raear Cm 19.2 -70.1 -77.6 -40.2 -16.9 167.0 -.4 -0.1 -9.7 3. E Esro _ . . .u . .. V/ Good and nofacor auvi99. 2/ 1nchmdNg official cwromWw betw 199.  28 MADA.GA8CARM DALACZr 0?r PAYMbaaS (USI mam a Priam) 3f1/94 15:07 EAL 1985 1936 1937 1933 1939 1990 1991 1992 1991 L As sh of CDP (CW.USS) 1. R_m*. Balme. -7.7 -2.2 -5.2 il -4.0 -10.7 -73 -7.3 4.6 2. 1 1aaP Puins. 2.6 5.0 5.5 7.1 6.7 5.6 5.1 4.7 3.7 3. Ogr. Aec. Balm -10.3 43 -10.0 .10.3 1.7 -13.4 -9.9 4.3 41 4. L-T Ca InMm -0.1 LI 0.3 41 4- -L2 -5.6 -2.4 -2.5 S. Not Crdi ftam w DAF 41 .1 03 -L2 47 -LO 46 45 44 1C Fmup RhmR R_nw L. lawmR (incl& pd) 48.4 114.5 125.2 ml3.7 25.3 U.1 35.2 n7.7 96.9 2. Gaid (dyr, L*-a _- *- 3. Or. Rl. (arM ph) 41.4 114.5 135.2 m.7 2453 31 U5.2 37.7 96.9 4Q.0l RC.m ofkm ) 0.3 2.1 3.0 16 3.9 LO L2 1.2 L3 L Pwinp C (LU / US) l.Nlmd Offic dEmp Rlaf a) mu raou 6L5 676.3 1,069.2 1,407.1 1,603.4 L494.1 1,335.4 U67.9 1,923.0 b) oa.d r 35.3 769.3 1,234.3 1,52I64 1,532.5 L465.6 1,332.7 L910.2 1,925.6 2 kAj(19 87100) a) UUV (WB k) 77.2 91.1 100.0 1073 106.5 112.6 115.1 120.0 120.6 b) la Rl xch Ri 141.9 141.2 100.0 35.3 49 96.1 37.5 92.3 100.7 3. X-Rlw for GNP Cowaiie 662.5 6763 1,069.2 1,407.1 1,603.4 1,494.1 1,35.4 1,367.9 1,9280 hL Mmml D GDP (azr.a USS wM) (aw 2,357.S 3,25S.4 Z565.6 2,442.5 2,497.9 3,079.3 2,673.2 2937.1 3,322.1 GDP(uUSs UOMS) (go) 2,977.7 2,3623 Z=S 2,2515 X613.5 3,139.7 2,677.2 2,921.0 3,327.1  29 MADACASC-CL GOVWRGiDZT BUDczr (a bEn atd wninq ) 3/3#9415:19 I945 I9 1937 1933 1939 1990 1991 1992 199S Dh TAM 33.1 39.1 44.2 5L4 46.4 0.7 64.5 72L 1ikr TMU 2066 220.7 340.6 377.4 36.7 403.6 2966 455.0 435. Nanam R uipz 12.0 20.6 353 44.7 100.6 137.7 94.S 31.2 14L5 TOTAL Carm Rn _ae 251.7 2204 420.7 473.5 507.7 611.0 455.9 6033 6aLs In on Ex 1/ 60.2 59 1527 23L5 27L1 239.9 231.1 2660 220 1nsaz D an Damgc 5.4 La 9.7 11.0 20.2 22.0 43.7 114.5 726 Od CurC Tras 20.0 29.1 37.5 39.S 537 6.7 70. 50.1 60. Subd 0.0 . .. 0.0 0.0 0.0 0.0 CAipda 165.1 174.1 227.5 239.2 2760 227 310.1 414.3 470. TOTAL CO lE xNpIS 259.7 30L1 427.4 5215 63.0 6113 6L5 347.4 324.4 Budeay Savip -L0 -20.7 67 4.0 -1253 .03 -205.6 -239.1 -163.6 CapRami_ 0.0 0.0 0.0 0.0 L9 .2 11.6 10.6 224 CViul Trmu 31.0 353 51.5 CL7 t0.S 53.0 73.5 93.9 9Q1 3uduy liv 103.2 105.1 177.2 237.2 307.2 312.2 251.9 3634 4743 TOTAL Cqpi&dl Ezp& 134.2 140.4 2293 305.9 33.0 365.2 325.4 4623 564 TOTAL Fimm 142.2 161.1 236.0 353.9 5044 359.3 519.4 60.3 705.6 2zkmg CqiuiGina 213 20.9 37.7 66 10.1 35.4 65.6 137 155.2 RoundBalDrnr I/ 110.2 130.2 2062 2313 2136 9.9 3479 153.1 112.6 Mo y Sym C 2/ 5.5 2.5 -11.0 52 133.4 132.4 -144.9 95.S 149.0 Odir Dcmn. Bwsimg 4.6 7.5 3.1 1.7 493 -7.5 250.3 3032 22L3 P-.y De"l -47.6 43.2 .73.6 -111.4 -2061 47.4 -2336 -3103 -412.1 11 Inch dinh vaak ans s roinaft aP-enI. 2/ T-cbag fin chgof dsW =icauwI w han asiumabmAag w'  30 MbADAGAICAR MONE AND C2=rr (a balm a heal eneYmy ') 3d394 15:19 1915 1936 1917 19U 1939 1990 1991 1992 1993 A- Afm Flosn Not ate cal Rgemm 10.l3 -44.7 -73. -97.6 -53.2 205.1 -3L4 -3LI .460 NA D sc CMt 77.4 76.5 65.1 -2.3 30.9 110.1 153.6 1917 147.7 To Go_huma Btdg I/ 19.0 19.7 -12.0 -.3 -30.2 *61.0 37.4 135.3 U0 To Odr Ocak1niu 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 To Pvaa. So" 534 56 77.1 2.o 611 171.1 96.2 63.4 147.7 ToUl AneW & 1 3L2 31.S -L5 -99.9 -223 3152 122.2 166.9 10L7 Money -d QOa qy (M2) 4a5 6.7 79.1 1065 1339 2.4 209.C 201.3 458.0 Net Oteha Lb0irn 47.7 -54.9 47.6 -2064 -211.2 312.3 47.4 -34.5 -35C2 B. End-of-Yow Stock. Not haadovA Rua',m -463 -613 C5.7 5LO 122.6 413 -76.2 -34.9 _ mt DOadc Cred 749.6 3261 91.2 3U.9 919.3 1,029.9 1,1335 1,3O22 0.0 To GovumatBudg 357.3 377.0 365.0 342.7 312.5 253. 30.9 444.2 _ To Odw Ocial Efin .. .. .. - .. _ .. .. - To P,Mva Secat 3923 449.1 526.2 5462 607.3 7734 374. 933O0 1,035.7 Total Ames LiahdWn 6633 757.3 U5.5 939.9 1,042.4 94W6 1,1073 1,347.3 - Moey ad Quabnany (L) 361.6 443.3 2.4 633.9 .3 325.2 1,343 1,23.1 1104.1 Net O0 liahb 301.7 309.5 295.1 306.0 219.6 123.4 72.5 111.2 C Offet t Exnanalo ofMO lnce4m in Momqy4.Qu o % No Formg AmeS 26.7 -51.6 -93.0 -91.6 -23.2 3,547.7 -15.0 -15.3 _ Net Dome CQvQ 191.1 33.2 323 -2.2 16.4 4,537.5 733 93.7 - Cm& to G _owm 46.9 22.7 -15.2 -209 -16.0 -2,54L7 27.4 67.2 Crdt to O0c E .. . .. _ .. _ Crea to PTiba.ea 144.2 65.5 97.5 IL 32.3 7,129.2 45.9 3L.5.. Net Od eUrLids 117.3 -0.4 -110.7 -193.S -11L3 13,035.2 -4L7 -17.1 Net lnL R e (USS iL) Ch &ritg ds y- y 16.3 46.2 .4L -0.3 -33.2 137.3 -17.1 -17.0 -23.S Stock a md-of-yi (a uusam) -135.3 4M.7 -53.2 33.4 30.0 -55.5 -4L6 -13.3 3.1 1/ Credit to Govenma Bu dg dam oe haLa dw pqymma on debt aine de to rawh.&Wne sapuns. Note: MQM denoe mo xd qua ioey.   I I I