Madagascar - Enhanced Heavily Indebted Poor Countries (HIPC) Debt Initiative

40318 INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL MONETARY FUND MADAGASCAR Completion Point Document for the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Prepared by the Staffs o f the International Development Association and the International Monetary Fund Approved by Callisto Madavo and Gobind Nankani (IDA) and Thomas Krueger and Mark Plant (IMF) October 4. 2004 Table of Contents . I Introduction ................................................................................................................... 4 I1. Assessment of Requirements for Reaching the Completion Point............. 4 A . Poverty ReductionStrategy Paper (PRSP) ................................................................. 5 B. Macroeconomic Performance in 2001-04 ................................................................... 5 C . Use o f HIPC Interim Relief and Tracking o f Poverty Reducing Spending ................ 7 D. Governance and InstitutionalReforms ..................................................................... 11 E. Improved Service Delivery....................................................................................... 15 . I11 Debt Sustainability Over the Medium Term ......................................................... 18 A . Data Reconciliation and Revision o f Assistance ..................................................... 18 B. Status of Creditor Participation................................................................................ 19 C. Updated Debt Sustainability Analysis ...................................................................... 21 D. Sensitivity Analysis .................................................................................................. 25 . I V Conclusions ............................................................................................................... 29 V . Issues for Discussion .................................................................................................. 30  -2- Boxes 1. Status of Triggers for the Floating Completion Point under the Enhanced HIPC Initiative........................................................................................................... 13 2 . Madagascar: Breakdown o f the Increase o f the NPV o f Debt-to-Exports Ratio as o f end-003 ............................................................................................................. 22 3 . Assumptions Used in the Debt Sustainability Analysis ............................................ 24 Figures 1. External Debt and Debt-Service Indicators for Medium and Long-Term Public Sector Debt. 2003-23................................................................................................. 26 2 . Sensitivity Analysis ................................................................................................... 27 Text Tables 1. U s e of HIPC Funds Against the Criteria Set at the Decision Point .......................... 8 2 . Social Expenditure Before and After Interim Assistance......................................... 10 3 . Distribution o f Primary Teachers across Zones ........................................................ 15 4 . Monitoring Indicators............................................................................................... 31 Tables 5 . Selected Economic and Financial Indicators. 2001-23 ............................................. 32 6. Balance o f Payments. 2001-23 ................................................................................. 33 7. Nominal and N e t Present Value o f External Debt Outstanding as o f End-December 1999................................................................................................. 34 8 . Estimated Assistance at Decision Point (Amended)................................................ 35 9. Comparison of Discount and Exchange Rate Assumptions at End-1999 and End-2003............................................................................................................ 36 10. External Public and Publicly Guaranteed Debt at End-December 2003 ..................37 11. Comparison o f N e t Present Value o f External Public Debt Between Decision Point and Completion Point ...................................................................................... 38 12. Net Present Value o f External Debt, 2003-23.......................................................... 39 13. External Debt Service After Full Implementation o f Debt-ReliefMechanisms, 2003-24..................................................................................................................... 40 14. External Debt Indicators, 2003-23 ............................................................................ 41 15. Sensitivity Analysis, 2003-22 ................................................................................... 42 16. Status of Creditor Participation under Enhanced HIPC Initiative............................ 43 17. Delivery o f IDA Assistance under the Enhanced HIPC Initiative, 2000-2020........44 18. Delivery o f IMF Assistance under the HIPC Initiative............................................ 45 19. HIPC Initiative: Status o f Country Cases Considered under the Initiative, end-Sept 2004........................................................................................................... 46 20. Paris Club Creditors’ Delivery o f Debt R e l i e f Under Bilateral Initiatives Beyond the HIPC Initiative..................................................................................... 47 Appendix I. Debt Management..................................................................................................... 48  -3 - Summary and Conclusions 0 The staff of the IMF and IDA consider that Madagascar has met the conditions for reaching the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative as specified in the decision point document. Madagascar’s macroeconomic program i s on track, as evidenced by broadly satisfactory performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. The Government has made significant progress in implementing the structural and social programs despite delays due to the political crisis in 2002. The Joint Staff Assessment (JSA) o f the first annual Poverty Reduction Strategy Paper (PRSP) progress report, which was prepared in broad consultation with civil society and the donor community, considers that important progress has been made in the implementation o f the PRSP. Efforts undertaken during the first year o f the PRSP implementation provide evidence o f the Government’s continued commitment to poverty reduction. 0 The interim relief provided under the enhanced HIPC Initiative has allowed the Government to increase social spending in the recent past. Budgetary savings from interim debt service relief have been used in accordance with the criteria set forth by the authorities at the decision point with social sectors, governance, and infrastructure featuring prominently. Despite slow progress in implementing the poverty-reducing expenditure tracking mechanisms, further improvement i s expected to take place by the end o f 2004 with the reforms supported under the Poverty Reduction Support Credit (PRSC). 0 Financing assurances on the provision of assistance under the enhanced HIPC Initiative have been obtained from creditors representing about 90 percent of total debt relief in net present value terms (NPV). The authorities have contacted non-Paris Club and commercial creditors for obtaining HIPC debt relief. Some non-Paris Club creditors have provided partial relief. 0 Debt Sustainability Analysis (DSA). Based on the debt reconciliation exercise for the completion point, the end-1999 stock o f debt in NPV terms has been revisedupward by US$22 million. The full delivery o f HIPC assistance together with additional bilateral assistance w i l l reduce the N P V o f debt-to-exports ratio at completion point significantly below the HIPC threshold to 137 percent. As such, Madagascar does not qualify for topping-up. The D S A suggests that with sound macroeconomic policies, supporting structural reforms and in the absence o f exogenous shocks, this ratio will trend down during the complete period o f analysis. Sound policies are critical as the sensitivity analysis suggests that Madagascar i s particularly vulnerable to exogenous shocks such as a decline in the terms o f trade and other shocks which could lower GDP growth. 0 The staffs of the IMF and IDA recommend that their respective Executive Directors determine that Madagascar has reached the completion point under the enhanced HIPC Initiative.  -4- I.INTRODUCTION 1. This paper discusses Madagascar’s progress under the HIPC Initiative and seeks Board approvals of its completion point. In December 2000, the Executive Boards o f the Intemational Monetary Fund (IMF) and the Intemational Development Association (IDA) agreed that Madagascar had met the requirements to reach i t s decision point under the HIPC Initiative and defined a set o f conditions for Madagascar to reach the completion point.’ 2. Total assistance to be provided to Madagascar under the HIPC Initiative amounts to US$836 million in NPV terms, U S 2 2 million higher than the decision point estimate (US%814million). This represents a reduction o f 40.2 percent o f the revised N P V o f debt at end-1999 after assuming full use o f traditional debt relief mechanisms. Based on the new common reduction factor, IDA and the IMF will have to provide debt relief in N P V terms, in the amount o f US$256 million and US$19 million, respectively. Both institutions have been providing interim debt relief since the decision point. Madagascar also benefited from interim assistance provided by the African Development Bank (AfDB), the European Union (EU), the OPEC Fund (OPEC) as well as from Paris Club creditors. The total amount o f interim assistance extended to Madagascar by these creditors through December 2003 amounted to approximately US$256 million, o f which US$47 million and US$7 million were provided by IDA and the IMF, respectively. 3. This paper i s organized as follows. Section I1assesses Madagascar’s performance in meeting the requirements for reaching the completion point, as set out in the decision point document. Section I11reviews the status o f creditor participation and the delivery o f debt r e l i e f to Madagascar under the enhanced HIPC Initiative, and presents the results o f the updated DSA. Sections I V and V present the conclusions and issues for discussion respectively. FOR REACHING OF REQUIREMENTS 11. ASSESSMENT THE COMPLETION POINT 4. I n the view o f the staffs of IDA and the IMF, Madagascar satisfied almost all completion point conditions set out at the decision point in Box 8 of the decision point document. At that time, the Boards agreed that Madagascar would reach the floating completion point on the basis o f (i) the preparation o f a full PRSP and its satisfactory implementation for at least one year; (ii) maintenance o f macroeconomic stability through satisfactory implementation o f the IMF-supported program; (iii) use o f budgetary savings from HIPC interim r e l i e f in accordance with the criteria laid out at the decision point; and (iv) satisfactory implementation o f policy reforms for improving governance and service delivery to the poor. See “Madagascar-Enhanced Heavily Indebted Countries Initiative - Decision Point Document”. December 5,2000 EBS/00/25 1, (1 2/4/00), and IDAR2000-229, (12/5/00).  -5- A. Poverty Reduction Strategy Paper (PRSP) 5. Madagascar prepared a fully participatory PRSP in July 2003. I t s preparation took longer than originally expected due to the political crisis in the country which paralyzed political and economic life during most o f 2002. The PRSP and the JSA o f the strategy were presented to the Boards o f IDA and the IMF in November 2003. 6. The Government has released the First Annual Progress Report on the implementationof the PRSP covering the period July 2003-June 2004. The Progress Report, which reflects the progress made on poverty reduction and on the policy front, was prepared by the Govemment through a participatory process. The Progress Report and i t s accompanying JSA will be considered by the Boards o f IDA and the IMF along with the present document. The JSA considers that important progress has been made in the implementation o f the PRSP. B. Macroeconomic Performance in 2001-04 7. The 2002 political crisis and repeated fiscal slippages made for uneven progress under the PRGF arrangement, but overall performance has been broadly satisfactory.2The Board o f the IMF i s expected to complete the fifth review under the current PRGF arrangement concurrently with this document. In concluding the second review under the PRGF on December 23,2002 (EBS/02/209, 12/6/02), the Board also extended the PRGF arrangement, which was originally scheduled to expire at end- February 2004, to end-November 2004 in order to accommodate a new test date in place o f that missed in 2002 because o f the political crisis. The Board further extended the PRGF arrangement to March 1,2005, in concluding the fourth review on March 17,2004, owing to fiscal slippages that emerged in the second half o f 2003. As a consequence o f these developments, the completion point under the enhanced HIPC Initiative was delayed. 8. Macroeconomic performance over the period 2001-03 was significantly affected by the political strife in 2002. Real GDP growth was 6 percent in 2001, but declined by about 13 percent in 2002, due to a major political crisis that brought economic activity to a near standstill for the first six months o f the year. Rebounding from the 2002 economic downtum, real GDP grew by 9.8 percent in 2003. Inflation rose to 13.9 percent in 2002 (on a year-on-year basis), before receding to -0.8 percent in 2003. The external current account deficit (including official grants), declined from 5.6 percent Madagascar's recent, albeit mixed, progress in macroeconomic performance and structural reforms, follows a long period o f weak performance in the early nineties, characterized by weak GDP growth, very high inflation rates and deteriorating fiscal deficits. While Madagascar's economy had begun to show improvements towards the end o f the nineties due to the implementation o f a reform program accompanied by liberalization and structural measures, debt levels had started to build up. At the time o f the decision point in 2000 the NPV o f debt to exports and to GDP (after traditional relief) were close to 250 percent and 55 percent, respectively. See EBS/00/25 1, (12/4/00), and IDA/R2000-229, (12/5/00) mentioned above.  -6- of GDP in 2000 to 1.3 percent in 2001, reflecting a strong export performance, notably in the export processing zones (EPZ) and the vanilla sector. Subsequently the current account deficit increased to 6 percent o f GDP, due to a sharp decline in EPZ activities and current transfers, following the 2002 political crisis. 9. Recent economic developments were marked by a sharp depreciation of the Malagasy franc and two cyclones that hit the country in early 2004. The exchange rate depreciated by about 50 percent against the Euro in the first half o f 2004, owing to (i)strong imports due to higher petroleum prices, increased government capital expenditures, and an acceleration o f private imports in response to tax and tariff exemptions granted for imports o f capital goods and selected other items in September 2003; and (ii) weak exports, as a result o f two cyclones that damaged the vanilla and shellfish industries. The exchange rate stabilized during the third quarter o f 2004, as import demand weakened and the Government implemented important adjustment measures. 10. Performance on the fiscal front was mixed during the period 2001-03. In 2001, tax revenue fell substantially short o f the program target, due to weaknesses in customs administration and some exceptional exemptions granted in the run-up to the December 200 1 presidential elections. Despite this revenue performance, the overall deficit, on a commitment basis and excluding grants, was contained at 8.1 percent o f GDP against a revised program target o f 9.9 percent, as government expenditures were lower than programmed. As a result o f the decline in domestic activities, tax revenue f e l l further to 7.7 percent o f GDP, but due to lower expenditures, the overall deficit was contained at 7.7 percent o f GDP, compared with 9.7 percent envisaged under the original program. Fiscal slippages occurred in the second half o f 2003, owing mainly to the impact o f tax and tariff exemptions mentioned above. The deficit on a commitment basis, excluding grants, amounted to 9.3 percent o f GDP in 2003, compared with 7.6 percent expected under the program. This was mainly due to higher expenditures, including on priority sectors. 11. I n 2004, the Malagasy authorities have started to address outstanding weaknesses of the tax system, including through measures aimed at lowering tariff barriers, broadening the revenue base, and simplifying the tax system. Moreover, the tax exemptions granted in 2003 for non-capital goods were removed in July 2004. The authorities have also taken measures aimed at strengthening tax administration, including (i)introduction o f anticorruption measures in the tax and customs departments; (ii)tightening o f conditions for importers that benefit from a customs duties advance scheme; (iii) acceleration o f customs clearance procedures; (iv) rotation o f 25 percent o f customs agents; (v) establishment o f performance contracts for customs agents; and (vi) installation o f the most recent ASYCUDA software by UNCTAD. In addition, the tax department has reinforced its tax recovery efforts, mainly through the acceleration o f the recovery o f tax arrears and more systematic information sharing with the public procurement office. The implementation o f these measures should help ensure that the tax revenue-to-GDP ratio for 2004, set at 11.2 percent, can be met.  -7- 12. Madagascar made progress, albeit slowly, in implementing the envisaged structural reforms in the areas of budgetary management, tax administration, and privatization during 2001 to 2004. In particular: (i) improvements have been made in public financial management towards better controls and transparency; and (ii)the private sector environment has been made more business friendly through reforms o f the investment code and the regulatory framework, although privatizations proceeded more slowly than expected. Furthermore, Madagascar has liberalized and simplified i t s external trade regime. 13. Performance under the PRGF arrangement through end-June 2004 has been broadly satisfactory, taking into account the impact of adverse exogenous shocks and corrective measures taken by the authorities. While several performance criteria for end-March and indicative targets for end-June 2004 have been missed, deviations were generally small and mainly related to the impact o f two major cyclones. For the rest o f 2004, Madagascar i s expected to maintain prudent financial management, as well as to focus on capacity building o f institutions that are needed to sustain a growing market economy and ensure an equitable distribution o f the opportunities and resources brought about by economic expansion. C. Use of HIPC Interim Relief and Tracking of Poverty Reducing Spending 14. Budgetary savings from interim debt service relief have been used broadly in line with the criteria set forth at & he decision point (Table l).3HIPC savings were used mainly to support improved service delivery in primary education, health and rural infrastructure (roads and water). The shares allocated to education and health were higher than expected, increasing from 41 percent in 2001 to 63.5 percent in 2004.4 The justice sector received less than originally intended, though this was compensated for by increases in the government allocation for key actions in the sector, especially the Ecole Nationale de la Magistrature (ENMG). The cumulative allocation to rural roads, infrastructure for drinking water and safety nets to support communities over the interim period represented 28.4 percent o f the savings from debt relief over the same period. The allocation to safety nets fluctuated depending on need, being high during 2002 (economic and political crisis) and 2004 (cyclones), but lower otherwise. The use o f interim debt r e l i e f has been reported in documents produced by the National Statistical Institute (INSTAT) and discussed with civil society during regional workshops. The outcomes o f the reports were also discussed twice a year during supervision missions with the donors. Table 5 in the decision point document presents the detailed plan for the use o f the funds freed by the enhanced HIPC Initiative. This reflects, in particular, the priority given to the Education for All program.  -8- Table 1: Use o f HIPC Funds Against the Criteria Set at the Decision Point Ref* 2001 2002 2003 2004 Average % % % % % % TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Of which: Current expenditures 60.0 57.0 51.9 68.4 70.1 61.9 Education 25.0 21.0 23.6 41.4 32.0 29.8 Recruitment o f new teachers 9.0 0.8 6.8 12.1 7.0 6.8 Pedagogical material 3 .O 2.7 2.5 1.7 0.0 1.8 Technical material 3.0 3.8 0.0 2.1 0.0 1.6 School feeding 3.0 0.0 0.0 0.0 0.0 0.0 Incentive system for rural teacher 3.0 6.1 7.0 13.2 19.9 11.3 Literacy campaigns 2.0 0.0 0.0 0.0 0.0 0.0 Fund for cultural development centers (libraries etc.) 2.0 7.6 1.4 12.3 5.1 8.3 Health 20.0 20.3 21.9 23.9 31.6 24.1 Recruitment o f medical personnel 4.0 2.9 8.1 1.2 12.1 7.4 Supply o f drugs 4.0 0.2 6.6 9.8 3.0 5.1 Incentive system for rural medical staff in CSB 3 .O 0.0 0.0 0.0 0.0 0.0 Small equipment in CSBs and CHDs 3.0 12.0 4.7 5.1 14.0 8.7 Anti HIViAIDS campaign 3.0 2.5 1.3 0.0 0.0 0.9 Immunizationprogram 3.0 2.1 1.2 1.8 2.5 2.0 Institutional reinforcement 5.0 7.4 6.3 2.0 2.9 4.6 Justice system 2.0 2.1 0.6 0.0 0.0 0.7 Public control organizations 2.0 2.5 2.8 1.7 2.9 2.4 Implementation o f decentralization strategy 1.o 2.8 2.8 0.3 0.0 1.5 Others ( including environment, gender programs) 10.0 8.3 0.0 1.1 3.6 3.2 Investment expenditures 40.0 43.0 48.1 31.6 29.9 38.1 Roads maintenancefund (FER), rural roads 20.0 23.0 21.2 19.4 0.0 16.5 Infrastructure for drinking water 3.0 3.0 1.6 1.4 5.3 2.7 Safety net support to communities 10.0 4.4 10.9 4.9 18.2 9.2 Other (including electrification) 3 .O 9.3 10.9 3.6 5.3 7.2 Monitoring system (including full household survey) 4.0 3.2 3.5 2.3 1.1 2.6 * As in Table 5 o f the Decision Point Document, EBS/00/25 1, (12/4/00), and IDMR2000-229, (1215100). Source: STA 2004, updates Table 5 o f the Decision Point Document, EBS/00/25 1, (12/4/00), and IDAR2000-229, (1 2/5/00). 15. T h e overall resource envelope for the social sectors has increased over the interim period, mainly due to the increase in the allocation for p r i m a r y education (Table 2). Social spending increased from 3.5 percent o f GDP in 1999 to 5.3 percent o f GDP in 2004, albeit below the projected levels at the time o f the decision point.5 In 2001 The incremental resources from the savings freed by the HIPC interim r e l i e f for the social sectors represented 0.4 percent o f GDP in 2001, 0.5 percent o f GDP in 2002, 0.7 percent o f GDP in 2003 and 0.4 percent o f GDP in 2004.  -9- and 2002, the ratio o f social spending to GDP was in line with the projection at decision point. However, it declined in 2003 for both education and health sectors. The decline i s largely accounted f o r b the need to re-launch the economy and restore the infrastructure K after the crisis in 2002. The increase in social spending over the interim period, i s mainly due to the increase in the allocation for primary and secondary education, whose share increased from 2.1 percent o f GDP in 1999 to 3.4 percent o f GDP in 2004 (see Table 2). Although it did not translate into an increase in the share o f GDP allocated to the sector, health spending, in real terms, increased from FMG 345.5 billion in 1999 to FMG 354 billion in 2004. As reported in Table 4 and in section 1I.E. on Improved Service Delivery, most o f the targets in education and health showed improvements in 2003 after the crisis, and were met despite the lower than projected share o f social spending in GDP , 16. Since the decision point, the Government, with the support of the donor community, focused on improving its ability to use public resources effectively. Accordingly, a number o f actions were undertaken by the Government to improve poverty reducing expenditure tracking mechanisms. First, the activities and programs financed with debt r e l i e f savings were identified in the budget by a special code to facilitate tracking o f these expenditures. Second, three HIPC expenditure tracking assessments were undertaken in 2001,2003 and 2004. These assessments show that the system o f public financial management has improved, albeit slowly. Four out o f 16 benchmarks7 were met, and three others showed improvements. With the implementation o f the reforms supported under the PRSCs, the number o f benchmarks met i s expected to increase from 4 in 2004 to 6 in 2005, and to at least 10 in 2006. The Government’s reconstruction program was supported by the Emergency Economic Recovery Credit (EERC) and comprised, among others: (i) reimbursement o f V A T to enterprises (US$91.5 million); (ii) support to strategic public enterprises and rehabilitation o f destroyed infrastructure (US$88.5 million ); assistance to the national airline; assistance to the Northern railway; rehabilitation o f destroyed bridges and road infrastructure due to the cyclone Kesiny in 2002. Source: EERC - Madagascar. The 2003 HIPC Assessment and Action Plans (AAP) showed that 4 out o f 16 bench- marks were met. The benchmarks met included (i) government budget not funded through extra-budgetary resources to a significant degree; (ii) budget classification system allows for administrative, economic, functional basis; (iii) poverty related expenditure i s clearly identified in the budget; and (iv) tracking surveys are used to supplement internal controls. In 2004 (in draft still), 3 out o f the original 16 benchmarks were met, but the benchmark on clear identification o f poverty expenditures was downgraded, because only HIPC expenditures are separately identified. An additional benchmark was met for integrating multi-year projections into the budget cycle. In addition, two indicators for budget reporting improved, as did the indicator on the accumulation o f arrears.  - 10- Table 2: Social Expenditure Before and fter Interim Assistance (in billions of FMG, unless otherwise indicated) Social spending before H I P C assistance 711.3 1037.6 1258.5 1358.0 1598.8 1344.0 1907m7 Health 199 345.5 464.2 479.1 537.0 419.7 441.1 Education 512.3 692.1 794.3 879.2 1061.8 924.4 1466.6 Of which: primary and secondary education 413.8 496.3 600 713.7 870.1 751.6 1253.4 Social spending before H I P C assistance (in percent o f GDP) 3.5 4.5 4.8 4.5 5.3 3.9 4.8 Health 1.o 1.5 1.8 1.6 1.8 1.2 1.1 Education 2.5 3.0 3.0 2.9 3.5 2.7 3.7 Of which: primary and secondary education 2.0 2.1 2.3 2.4 2.9 2.2 3.2 Total H I P C d n a n c e d spending 325.0 318.1 363.1 285.1 Health 66.0 70 87 90.1 Education 68.2 75 150 91.4 Of which: primary and secondary education 68.2 73.4 150 91.4 Institutional development and PRSP monitoring 48.7 65.7 33.9 59.6 Rural roads 74.9 67 71 0.0 Water supply, environment and other 67.2 39.7 22 44.0 Total HIPC-financed spending (in percent o f GDP) 1.1 1.0 1.1 0.7 Health 0.2 0.2 0.3 0.2 Education 0.2 0.3 0.4 0.2 Of which: primary and secondary education 0.2 0.2 0.4 0.2 Institutional development and PRSP monitoring 0.2 0.2 0.1 0.2 Rural roads 0.3 0.2 0.2 0.0 Water supply, environment and other 0.2 0.1 0.1 0.1 Social spending including HIPC-financed expenditures 1492.5 1743.9 1581.2 2089.2 Health 545.1 606.9 506.4 531.2 Education 947.4 1137.0 1074.8 1558.0 Of which: primary and secondary education 781.9 943.5 902.0 1344.8 Social spending including HIPC-financed expenditures (in percent o f GDP) 5.0 5.8 4.7 5.3 Health 1.8 2.0 1.5 1.3 Education 3.2 3.8 3.2 4.0 Of which: primary and secondary education 2.6 3.1 2.7 3.4 Nominal GDP 20,343 23,379 26,242 29,843 30,042 33,893 39,446 Source: STA 2004; This table shows the budget allocations and updates Table 6 o f the decision point document.  - 11 - 17. Similarly, the monitoring system has been strengthened. The Government has established a Poverty Monitoring System to follow progress in implementing the PRSP. An indicator system with the corresponding sources (Tableau de Bord Social) has been produced regularly from 200 1. A multi-topic household survey (Enqugte Prioritaire auprks des Mknages, EPM) was conducted in 2001. A follow-up 2004 E P M survey w i l l commence shortly and enable the Government to update i t s trends in poverty and monitor progress in implementing the PRSP. Finally, a poverty map, based on 1993 data, was constructed in 2002. But many challenges remain and technical assistance i s being provided by the donors to strengthen the monitoring and evaluation system o f the PRSP, and to improve budget monitoring systems. 18. The updated indicators* show that most of the targets were achieved (see Table 4). The share o f the budget o f the Ministry o f Education allocated to the primary schools, and that o f the Ministry o f Health budget allocated to district health centers and hospitals exceeded the targets. In education, the enrolment rates increased; however, while showing some improvements, repetition rates and primary school completion rates remained below the targets. In health, immunization rates improved. Other health indicators (such as the percentage o f births attended by professionals or the medical consultation rates) were below target until 2002, but in 2003, they met or exceeded their targets, and the drug procurement agency’s revenues showed a steady increase. The Road Maintenance Fund (FER) allocated an increasing share to rural roads over the period, increasing to over 10 percent in 2002 and beyond. D. Governance and Institutional Reforms 19. As elaborated in the HIPC Decision Point Document, the key challenge in this area i s the reform o f the public finance system to improve budget formulation, execution, control, monitoring, and auditing to increase transparency and efficiency in spending. 20. The reforms supported under the HIPC Initiative are now part of an overall program aiming to improve the public financial management system. These reforms were based on several diagnostic studies, including the Country Financial Accountability Assessment (CFAA) and the Country Procurement Assessment Report (CPAR) conducted by IDA, the European Union, and the IMF. To further operationalize the reforms, a Priority Action Plan for 2004 was developed and approved by the Government in 2003, in collaboration with the relevant development partners. The PRSC process also supports the Government’s reform program and reflects the need to improve budget execution, reporting, and overall monitoring o f results. 21. The Government has implementedthe conditions for improving governance (see Box 1). The Government has updated the existing legal, procedural, and institutional framework. Accordingly, the regulations governing the control mechanisms have been adjusted through the adoption o f a range o f legislative texts to reflect the institutional changes and the recommendations to improve operational efficiency. As outlined in Table 4 o f the Decision Point Document.  - 12- In accordance with the recommendations o f the CFAA, a new internal control cadre in the Ministry o f Finance, the General Inspectorate for Finances (IGF), had also been introduced in 2003 and became operational in June 2004. These reforms were complemented by significant investments in human resources. Staffing for the National Audit Court (Chambre des Comptes), the Directorate for Expenditure Commitment Control (CDE) and the State Inspectorate General (IGE) has been improved, and adequate staff has been selected for the newly created IGF. In addition, the different offices have been modernized to enhance the operational . efficiency. A monitoring system to track budgetary execution in six ministries (health, basic education, public works, rural development, justice, and forestry and water) has been put in place. Periodic reports monitoring the execution rates at each stage o f the budgetary cycle were produced for the six ministries.For education and health, to better monitor progress on social spending at the central and decentralized levels, the reports on budgetary cycle for the 2001-03 period have been complemented by an assessment o f the corresponding physical outcomes (see B o x 1). The monitoring results are discussed with the development partners . on a regular basis. The treasury accounting system was modernized and strengthened. The main objective i s to ensure that government accounts are produced in a timely manner in accordance with statutory requirements. A new unit (Consolidation and Audit Unit) has been established in the Ministry o f Finance to address the shortcomings in producing final accounts. As a result o f the work o f this unit, the 1999 and 2000 budgetary execution laws were prepared and submitted to the National Audit Court (Chambre des Comptes), but later than envisaged in the decision point document due to the 2002 crisis. The final accounts for 2001 and 2002 were submitted in December 2003 and June 2004, respectively. The final accounts for 2003 will be submitted by the end o f 2004. This paves the way for the National Audit Court to submit audited accounts to Parliament and initiate parliamentary approval on the basis o f the annual budgetary execution law (Zoi de rigzement). Finally, a public and transparent information system on granting o f licenses (beneficiary list, geographical zone, and the amount o f fees) in the mining, forestry, andfishing sectors has been implemented. The completion o f this reform took longer than expected. Prior to 2004, the information system was partial, including only the l i s t o f beneficiaries and the geographical zone without mentioning the fees paid by the operators. A comprehensive information system, according to the terms spelled out in the decision point document has now been e~tablished.~The Government provided an action plan with the calendar o f publication to sustain this reform. Information on license adjudication, specifying beneficiaries, geographic locations, and amounts o f fees was published in the newspapers for the fishing sector (December 2003), the forestry sector (February 2004), and the mining sector (April 2004).  - 13 - Box 1: Status o f Triggers for the Floating Completion Point Under the Enhanced HIPC Initiative Triggers Status Comments GOVERNANCE AND INSTITUTIONAL REFORMS A l . Improve financial monitoring and control (a) Control systems have been Completed Reforms cover the National Audit Court and the strengthenedthrough: Procurement Commission. The related action plan centers on reforming the statutes governing these agencies, including assigning external auditing functions to the Procurement Commission and internal auditing functions to the State Inspectorate General (IGE). (i) adoption of an appropriate legal and Revised legislative texts were approved by the Completed constitutional ji-amework; Parliament and the Senate between December 2003 and July 2004. (ii) adoption ofprocedures and internal Completed Detailedprocedural manuals, increased control systems that conform to interna- reporting obligations of public institutions are tional technical standards; and fully completed. (iii) an increase in staffing and resources Completed Additional staff were recruited for the agencies. o j t h e State Inspectorate General (IGE) Additional resources have been allocated to the and the Commitment Control Office agencies. (CD.0 (b) A monitoring system for the Completed The budget monitoring system i s operational for budgetary cycle has been designed and the Ministries o f Health, Basic Education, Public implemented in at least six ministries, Works, Rural Development, Forestry and Water, including the Ministries o f Basic and Justice. Education and Health. (c) Starting in 2001, the centralization Comuleted In 2001, all the 22 principal treasury offices procedures and consolidation o f a l l were computerized and a new unit balances of the principal treasury offices (Consolidation and Audit Unit) has been by the Central Treasury Accounting established in the Ministry o f Finance. The Office (ACCT) has been improved, balances for 1999 to 2003 were established. through the formation of a consolidation and audit unit, constitutinga step toward the establishment o f general balance sheet statements and o f reliable opening and closing accounting balances. (d) The 1999 budgetary execution law has Comuleted, The 1999 and 2000 budgetary execution laws been prepared during 2001 and that o f but not in were prepared and submitted to the National 2000 by end-June 2002. - time Audit Court but with delays due to the 2002 crisis. The 1999 and 2000 laws were submitted in December 2002 and JulyEeptember 2003, respectively. The 2001 and 2002 laws were submitted in December 2003 and June 2004, respectively. The 2003 law will be submitted by end-2004.  - 14- Box 1: Status o f Triggers for the Floating Completion Point Under the Enhanced HIPC Initiative (concluded) Triggers Status Comments A2. Biannual reports on education and health sector activities at the central and decentralized Completed level, have been prepared including: (i) budgetary allocation and expenditure Completed Quarterly reports on budgetary allocation execution; and and expenditure execution are being regularly compiled. (ii) physical achievements. Completed The first physical outcome reports were completed and discussed with the donor community. A3. A public and transparent information Completed The process was completed in the first system on granting licenses (beneficiary list, semester o f 2004, with the required geographical zone, and amount) in the mining, informationpublished in the newspapers forestry, and fishing sectors has been for fishing in December 2003, for forestry implemented, and beneficiary l i s t i s published in February 2004, and for mining in April biannually. 2004. The information system i s now in place. B. IMPROVED SERVICE DELIVERY B1. Teacher availability in rural areas has been expanded by: (i) formalizing and implementingnew financial Completed The system of financial incentives for incentives for teachers to serve in rural public teachers to serve in rural areas has been primary schools; and formalized and implemented. (ii) recruiting at least 3,500 new teachers from Numerical 3427 teachers were recruited. 89 percent of 2000 for public primary schools and deploying target not them were deployed to remote areas. In at least 60 percent o f them to schools with either met, but addition, the salaries of 8000 teachers FRAM-paid teachers or with a ratio of pupils to satisfactor); hired by parent-school associations were publicly paid teachers in excess of 50. progress partially paid for. achieved B2. The generic essential drug supply system Completed The central purchasing pharmacy of district pharmacies has been rendered (SALAMA) i s fully operational and i t s operational, including the start-up of generic annual gross revenues have been drug supply for hospital outpatients, as increasing, reaching FMG 49,l billion in measured by the increase in annual gross 2003. In parallel, the generic essential drug revenues o f the existing central purchasing supply system of district pharmacies has pharmacy. been rendered operational. B3. Current road maintenance needs are Completed A l l current road maintenance needs are covered 100 percent through the Road covered by the Road Maintenance Fund, Maintenance Fund, of which at least 10 percent and 10 percent in 2002 and 10.9 percent in are used for rural roads. 2003 were allocated to rural roads.  - 15 - E. Improved Service Delivery 22. Improving human capital i s the third pillar of the PRSP. In education, as set out in the HIPC decision point document, Madagascar's main challenge lies with increasing enrolments and improving the efficiency o f the education system and public expenditures, as outlined in the previous National Education Program (PNAE 1 1) and the recent Education Sector Strategic Plan, by providing universal access to grade 1 with the Education For All program, raising survival rates to the end o f the cycle, and reducing grade repetition in all grades. 23. As noted in Box 1, the Government has broadly met the trigger for better teacher availability in rural areas by implementing new financial incentives for teachers to serve in rural public primary schools (through an increase in the hardship allowances for teachers in remote areas)." In addition, 3,427 teachers were recruited since 2001 for public primary schools. The majority o f the newly recruited teachers, that i s 89 percent, were deployed in rural areas (zones 2 and 3)," where either teachers were paid by parent-school associations (FRAM) or the ratio o f pupils to publicly-paid teachers was in excess o f 50. Less than 3,500 teachers were formaIly recruited, but it i s worth noting that the Government has also compensated communities for the salaries o f 8,000 teachers paid for by parents-school associations (FRAM). Although the ratio o f pupils to teachers showed a slight downward trend, it s t i l l remains high in remote areas due to the net increase in enrollments as explained below. Table 3: Distribution of Primary Teachers across Zones 2002-03 2003-04 Parent- Parent- school school Publicly association Ratio o f Publicly association Ratio o f ZONE* Number o f paid paid pupils to Number o f paid paid pupils to students teachers teachers teachers students teachers teachers teachers 0 140,760 3,360 164 42.0 128,909 2,612 137 49.0 1 628,737 11,013 1,838 57.0 588,455 11,291 2,519 52.0 2 228,287 9,570 2,015 66.0 707,569 125,000 3,338 57.0 3 876,559 14,567 3,090 60.0 1,143,778 19,476 6,191 59.0 Total 2,274,443 38,509 7,107 59.0 2,568,711 45,879 12,185 56.0 * For the zone 0 that corresponds to urban area, no hardship allowances are established. Source : Ministry o f Education and Research. loIn addition, for the first year (2004) o f the EFA plan implementation, a contract to construct 110 houses for teachers in remote areas i s underway. ''The classification i s based on the accessibility and remoteness o f the areas.  - 16- 24. The savings from HIPC relief also supported the implementation of the Education For All Plan, in particular the following: (a) Provision o f grants to all primary schools following the Government’s declaration for free and compulsory primary education in 2002.’’ (b) Contribution to the salary o f parent-school associations (FRAM) paid teachers in order to alleviate education costs for the poorest families. About 8,000 teachers were paid every year through the HIPC released budget funds.13 (c) Provision o f furniture for disadvantaged public primary schools in 2003 in remote rural areas. (d) School stationary for students from the poorest families (509,000 students in 2002 and 1,227,000 in 2003). (e) Refurbishing o f 26 teacher training institutions to train about 2,000-3,000 new teachers per year according to the EFA Plan. 25. The outcomes achieved in service delivery in the education sector were the result of the combined HIPC program and the action plan spelled out in the PRSP. In addition to the scheduled actions in the HIPC program, the key measures to improve primary education over the period o f 2002-04 include (i) elimination o f school fees for public primary schools; (ii) strengthening o f local district and community schools links; (iii)provision o f more textbooks (in order to reach a ratio o f one textbook per student), student kits and kits for teachers; (iv) implementation o f cash payments to the parent- school associations (FRAM) for pedagogical improvements in the schools and assisting children from the poorest families with additional school costs; (v) restructuring o f management in the districts (CISCOs); and (vi) improving data collection and monitoring mechanisms at the districts, sub-districts (ZAPS), and school levels. 26. The reforms implemented in the education sector have shown positive results. The net enrollment rate in primary education increased from 67 percent in 2000/01 to 84 percent in 2003/04; the survival rate between grades 1 and 5, although s t i l l low, increased from 21 percent to 30 percent, but high repetition rates remain a concern. In 2003, a system o f automatic promotion between grades 1 and 2 and between grades 3 and 4 to bring the high repetition rate under control, and regulations related to school management to increase student learning time and to improve student learning outcomes were passed. In 2004, the government has also prepared and issued clear guidelines for the districts and schools aiming to reduce repetition and drop out rates at the primary and secondary levels. ’’ Local school committees (comprised o f parents, school head, and community representatives) were created to manage school grants. To ensure transparency in the use of school grants, reports on expenditures were publicly posted at school level. While in 2002, only 75 percent o f primary schools received the assigned budget, by 2003, almost all primary schools received the corresponding budget at the beginning o f the school year. l3 However, the success o f this action i s dampened since the number o f parent-school association (FRAM) paid teachers increased significantly (to about 12,000 in 2003) due to massive student enrollment.  - 17- 27. Consolidating the achievements during the interim period remains a challenge. A human resource rationalization plan, policies on teacher recruitment (including the recruitment o f FRAM teachers), incentive arrangements for remote postings, (pre- and in-service) teacher training and teacher deployment, as well as the criteria for the construction o f new classrooms need to be reviewed. 28. I n health, as set out in the HIPC document at the decision point, the main challenge i s to improve access to basic health facilities for the majority of the rural population, and thereby help improve health outcomes. Policy actions to achieve these objectives include the redeployment o f medical staff, construction o f new health facilities, and increasing the availability o f generic drugs. The Government had also planned to prevent the spread o f communicable diseases and, in particular, to stabilize the HIV/AIDS prevalence rate, by developing a multi-sectoral national strategy. 29. The government has complied with the condition calling for the setting up of a generic essential drug supply system of district pharmacies. The drug distributor, S A L A M A , i s operational (including the startup o f generic drug availability for hospital outpatients), and annual gross revenues have increased steadily over the last three years (see Table 4). A number o f actions to expand rural health facilities have also been implemented. Between 2000 and 2003, accessibility to basic health services (57 percent for less than 5km) improved slightly with the construction o f 109 new health facilitie~,'~ the increase in non-salary budget allocation to the districts (from 27.7 percent in 2000 to 37.8 percent in 2003)15 and the expansion o f the private non-profit sector activities in rural areas in social marketing o f basic health products.16 30. Based on the annual statistical report of the Ministry of Health, many public health indicators, including MDGs, have improved over the interim period (Table 4).17 The proportion o f deliveries attended by skilled medical s t a f f increased modestly from 20.2 percent in 2000 to 24.2 percent in 2003.18 The immunization rate increased from 70.9 percent in 1999 to 85.1 percent in 2003. The curative medical consultation rate at public and private primary health care centers improved significantly from 42 percent in 1999 to 60 percent in 2003 due to the redeployment o f medical staff in rural areas-887 doctors and 395 nurses and midwives since 1999-and the distribution l4 However, since many inadequate health facilities were no longer staffed, effective coverage was lower. l5Since the budget execution varied from 81 percent in 2000 to 93 percent in 2003 the net increase was 15,2 percent (SOCS). l6 These include water purification, impregnated bed nets, chloroquine for home treatment, oral and injectable contraceptives, etc. Starting in 2003, the Ministry o f Health relied much more on public-private partnership (PPP) for i t s own needs by subcontracting the management o f nutritional intensive rehabilitation centers in 36 referral hospitals and hiring 2 international NGOs to provide technical assistance in management and planning '' in the 111 districts. l7 Although the trends are the same, the staffs have noted a difference between data rovided by D H S and the Ministry o f Health. Actual data as measured by D H S 2003 i s 54 percent.  -18- of free drugs in 2003. Many programs against transmissible disease^,'^ which already started previously were consolidated over the interim period, including the HIV/AIDS multi-sector program (Projet Multi-Sectoriel de Prevention du Sidu) which i s now in its third year o f implementation.20 3 1. T o consolidate and strengthen the recent progress in the health sector, the Ministry o f Health i s focusing on improving the performance o f existing hospitals prior to further expansion o f the hospital network, and improving access to health services in rural areas. Ensuring adequate supplies o f generic drugs in pharmacies in districts will require adequate funding from the Government. A reformulation o f the national health strategy i s under way to provide a clearer vision about the actions to be undertaken to achieve these objectives. 32. Rural roads. Infrastructure improvement, especially in rural areas, i s among the Government's key priorities in i t s poverty reduction strategy. The Government has complied with the condition calling for 100 percent o f current road maintenance needs being covered through the Road Maintenance Fund (FER), and has allocated at least 10 percent for rural roads after 2002 (in comparison to 2.3 percent and 3.2 percent in 2000 and 2001, respectively). The achievements during the interim period are part o f a broader implementation o f the new rural transport policy, which emphasizes the maintenance o f rural roads through the FER and i t s sustainable financing. The HIPC resources were mainly used for current road maintenance (6,000 km and 7,200 temporary jobs created), rehabilitation o f rural roads (1,670 km and 5,500 jobs), and periodic maintenancehehabilitation o f paved roads (180 km and 540 jobs). 111. DEBT SUSTAINABILITY OVER THE MEDIUMTERM A. Data Reconciliation and Revision of Assistance 33. Staffs of IDA and the IMF, together with the Malagasy authorities, have reviewed the stock of debt as of end-1999 presented in the decision point document. As a result o f this exercise, the N P V o f the debt owed to some creditors as presented in the Decision Point Document was revised. These revisions arise from discrepancies with the decision point data discovered during consultations with creditors after the decision point document was published. The main revisions are as follows: The fight against malaria included the implementation o f annual indoor insecticide spraying campaigns in eligible highland zones, social marketing o f impregnated bed nets, and availability o f malaria home treatment for children. Interventions to control tuberculosis, control o f morbidity due to schistosomiasis, and plague control have also been important elements. 20Thefirst national survey conducted in fall 2003 showed that the HIV prevalence in pregnant women was at 1.1 percent, i.e., already at a generalized phase, and the syphilis rate was at 8 percent (active syphilis). An Information-Education-Communication (IEC) program covering the most sensitive sectors, training for doctors and paramedics and the supply o f treatment kits covering the main causes o f STIs has been set up.  - 19- e Multilateral Creditors. The N P V o f debt to the EU was revised upward from U S 2 4 to US$30 million due to new information provided by the creditor; whereas a revision o f projected interest payments warranted a downward revision o f the N P V o f debt owed to the IMF from U S 5 5 million to U S 4 8 million. The decision point estimate o f the N P V o f debt with respect to the IMF included SDR charges which are normally not considered as a debt liability. 0 Bilateral Creditors. The N P V o f the debt owed to Russia was revised upward from US$l20 million to U S 1 2 8 million to reflect the implementation o f the 1997 Paris Club rescheduling as discussions with this creditor were ongoing at the time o f the decision point.21Also, based on creditor statements and official confirmation o f numbers received in 2001, the N P V o f Madagascar’s debt with Iraq was revised upward from US$59 million to US$72 million. 34. After full implementationof traditional relief mechanisms, the revised end- 1999 NPV of debt amounts to US%2,OSOmillion, compared to US%2,058million estimated at the decision point (Table 7). The associated HIPC assistance would increase by U S 2 2 million in N P V terms, from the decision point estimate o f US$814 million to US$836 million.22 The new common reduction factor with respect to the revised end-1999 debt stock would be 40.2 percent instead o f 39.5 percent as estimated in the decision point document (Table 8). B. Status of Creditor Parti~ipation~~ 35. Madagascar has received assurances of participationin the enhanced HIPC Initiative from creditors accounting for about 90 percent of the NPV of HIPC assistance (as approved at the decision point). Most multilateral creditors, as well as the Paris Club, have been providing interim assistance. The authorities are working toward signing agreements with all remaining creditors. Multilateral Creditors 36. Debt relief from multilateral creditors under the enhanced HIPC Initiative amounts to U S 3 5 7 million in NPV terms (or 44 percent of total HIPC relief to Madagascar) (Table 8).24 IDA, IMF, AfDB, the EU, and the OPEC Fund have granted interim assistance. The International Fund for Agricultural Development (IFAD) and the Arab Bank for African Economic Development (BADEA) have committed to provide the assistance requiredunder the enhanced HIPC Initiative as soon as Madagascar reaches the completion point. 21 EBS/00/25 1, IDAR2000-229 footnote 7. 22 Table 16 presents the amount o f assistance to be provided by each creditor consistent with the revised HIPC assistance. 23 The amounts o f debt relief in this section refer to HIPC assistance as estimated in the decision point document. 24 Using revised end-1999 data, debt relief from multilateral creditors would rise by U S 4 . 9 million.  - 20 - 37. Assistance from IDA. Debt relief from IDA under the enhanced HIPC Initiative approved at the decision point amounts to US$252 million in N P V terms. This assistance i s being delivered through a reduction o f 50 percent o f the debt service falling due to IDA, on disbursed and outstanding credits to IDA as o f end-December 1999. This mechanism, applied over January 200 l-February 2020, would provide a cumulative nominal assistance o f US$437 million.25 O f this amount, US$47 million has already been delivered as interim assistance during January 200 l-December 2003. 38. Assistance from the IMF. Enhanced HIPC assistance from the IMF amounts to US$22 million in N P V terms (SDR 16.6 million) and due to downward adjustments to the end-1999 debt stock, would be revised to US$19 million. IMF assistance (SDR 14.73 million) i s being delivered through grants from the PRGF/HIPC Trust to Madagascar’s Umbrella Account. These resources would cover approximately 26 percent o f Madagascar’s principal repayment falling due to the IMF during 2001-08. A total o f SDR 5.6 million was provided as interim assistance through September 2004. 39. Assistance from the AfDB Group. Enhanced HIPC assistance from the AfDB Group amounts to US$59 million in NPV terms. Total assistance provided to Madagascar during the interim period amounted to US$32 million in nominal terms. AfDB’s assistance would be provided through a reduction o f 80 percent in the debt service payments to the AfDB Group over the period January 2001 to September 201 1. Bilateral and commercial creditors 40. Paris Club creditors have agreed in principle to provide their share of assistance under the enhanced HIPC Initiative (US$383 million in NPV terms). Interim assistance i s provided through a flow rescheduling under Cologne terms. Bilateral agreements have been signed with all Paris Club creditors except Japan. This has not yet been signed due to technical delays. Most creditors have also have indicated that they would provide assistance beyond HIPC relief, estimated to represent about US$612 million in end-2003 N P V terms. 41. Non-Paris Club official creditors account for about 9 percent of the debt relief committed at the decision point. Some non-Paris Club creditors (China, Kuwait, and Saudi Arabia) have provided some debt r e l i e f either through cancellations o f some loans or flow rescheduling.26 One o f the commercial creditors has provided i t s share o f HIPC debt relief through a rescheduling in 2001, A small amount o f commercial debt was paid down by the authorities as some commercial banks confiscated Madagascar’s deposits abroad. 25 As a result o f the upward revision o f HIPC assistance, IDA assistance to Madagascar would increase to US$256 million in N P V terms, equivalent to approximately US$444 million in nominal terms (Table 17). 26 Libya has recently informed the Bank and the Fund that it will be providing debt r e l i e f to HIPC countries on a bilateral and on a case by case basis. This will not affect the 90 percent financing assurances that have been estimated for Madagascar.  -21 - C. Updated Debt Sustainability Analysis External Debt Situation at End-2003 42. The DSA included in the decision point document has been updated jointly by the Malagasy authorities and the staffs of the IDA and the IMF. The stock o f debt disbursed and outstanding was updated on the basis o f end-2003 loan-by-loan information provided by the authorities. This information has been reconciled with creditor statements from all multilateral and Paris Club creditors, as well as with several non-Paris Club creditors. The exchange rates and discount rates used for calculating Madagascar’s nominal and N P V debt as o f end-2003 are presented in Table 9. 43. Based on the reconciled debt data, Madagascar’s nominal stock of disbursed and outstanding external debt reached US$4,843 million at end-2003, compared with US$3,950 million at end-1999 (Table Of this, 54 percent was owed to multilateral creditors, 45 percent to bilateral creditors and 0.3 percent to commercial creditors. Madagascar’s largest official creditor at end-2003 was IDA, accounting for 41 percent o f total debt. 44. The NPV of Madagascar’s debt at end-2003, after full application of traditional debt relief mechanisms, i s estimated at US$3,053 million, equivalent to 284 percent of the exports of goods and non-factor services. After assuming full delivery o f the revisedHIPC debt relief, the N P V o f external debt would be reduced to US$2,079 million, equivalent to 194 percent o f exports. This represents an increase o f 60 percentage points in the N P V o f debt-to-exports ratio compared to the decision point projection. Finally, after taking into account additional bilateral debt relief, the N P V o f external debt would be reduced to US$1,467 million, equivalent to 137 percent o f exports (Table 11). Factors explaining the increase of the ratio between end-1999 and end-2003 45. Box 2 presents a decomposition of the factors underlying the 60 percentage points increase in the NPV of external debt-to-exports ratio at end-2003 relative to the ratio projected at the decision point (133 percent against 194 percent). The net changes in the discount rates and increase i s the result o f several factors, including (i) exchange rates used for the calculation o f the N P V o f external debt; and (ii)a reduction in exports relative to that predicted at the time o f the decision point. Including additional bilateral relief beyond the terms o f the enhanced HIPC Initiative, the ratio o f the NPV o f external debt to exports would fall to 137 percent. The relative importance o f each factor i s shown in the box below: 27 The debt data are based on parameters prevailing at the end o f each year.  - 22 - Box 2. Breakdown of the Increase of NPV o f Debt-to-Export Ratio as o f end-2003 I/ Percentage Percent o f total Points increase 'NPV of debt-to-exports ratio (as projected at Decision Point) 133.1 ~ 1 Changes in the Ratio 60.5 100% ~ 1, Due to changes in the parameters 33.4 55% ~ o/w due to changes in the discount rates 26.3 44% o/w due to changes in the exchange rates 7.1 12% 2. Due to unanticipated new borrowing -1.3 -2% o/w due to higher than expected disbursements -0.4 -1% o/w due to lower concessionality of the loans -0.9 -1% 3. Due to changes in exports 8.4 14% 4. Arrears accumulated during the interim period 6.7 11% 5. Other factors 2/ 13.3 22% NPV of debt-to-exports ratio (actual) 193.6 Reduction in the ratio due to additional bilateral r e l i e f 56.9 NPV of debt-to-exports ratio after bilateral debt relief beyond HIPC 136.7 assistance Sources: Bank-Fund staff estimates. I / NPV o f debt-to-exports ratio after enhanced HIPC assistance. 2/ Due to revisions in the end-99 database and changes in the delivery o f assistance compared to the assumptions in the decision point projections. 46. Between the decision point and the completion point, Madagascar's export performance was somewhat worse than expected. Despite a high level o f exports in 2001 and a rebound in 2003, on average, export performance was weaker than projected at the decision point. This was due to the decline in exports in 2002 when output and exports declined drastically due to the political strife. Decline in exports accounts for 14 percent o f the total increase in the ratio (equivalent to 8.4 percentage points). 47. Consistent with the enhanced HIPC Initiative methodology, the DSA at the completion point used updated parameters for the calculation of the NPV of debt.28 The changes observed in the exchange and discount rates between the decision point and *'The DSA uses end-2003 exchange rates and the six-month average o f the CIRR (July-December 2003) as discount rates.  -23 - the completion point resulted in an increase o f 33 percentage points in the N P V o f debt to exports ratios with discount rates having a large effect.29 48. The remaining changes in the NPV of external debt-to-exports ratio are explained by a number of factors. New external borrowing, which was lower than anticipated in the decision point document, contributes to reducing the debt ratio by 1 percentage point. Approximately 7 percentage points o f the deterioration in the ratio since the decision oint can be attributed to arrears accumulated by Madagascar during the interim period!' Finally, other factors not isolated raised the end-2003 ratio by 13 percentage points. 49. Madagascar does not meet the conditions for topping-up. Relative to projections at the decision point, the N P V o f external debt-to-exports ratio deteriorated to 194 percent on account o f multiple factors as detailed above. However, after including additional bilateral assistance beyond HIPC, the ratio i s reduced to 137 percent below the 150 percent HIPC threshold. External Debt Outlook, 2004-23 50. The macroeconomic framework has been revised in the context of updating the DSA by the staffs o f the IMF and IDA together with the authorities. While maintaining the thrust o f the GDP projections in the baseline presented at the time o f decision point, the current scenario takes into account the recent high levels o f activity in, as well the future prospects for, the construction, mining, and the export processing zones. Over the projection period (2004-23), GDP growth averages 6 percent, slightly lower than the 6.3 percent average growth projected at the decision point. Structural measures to support this growth include public enterprise reforms to improve efficiency, the development o f infrastructure to provide access to markets and increase tourism, and measures to improve the business climate (in particular the establishment o f a one-stop counter for processing investment related formalities). GDP growth will be underpinned by an average growth in the volume o f exports o f slightly over 6 percent. On average the import growth at 5.8 percent i s slightly weaker than GDP growth as food imports and in particular rice imports grow relatively slowly given the expected increase in domestic agricultural output. 51. The fiscal stance would be prudent and expenditures would be contained to about 20 percent of GDP with the overall deficit (excluding grants) declining gradually from an average of about 9 percent in 2000 to 2006 to less than 4 percent by the end of the projection period. The public expenditure reforms, which are key 29 SDR and U.S. dollar discount rates declined from 5.6 percent to 4.2 percent and from 7.0 percent to 4.5 percent, respectively. The euro discount rate also decreased from 5.5 percent to 4.6 percent (Table 9). 30 These arrears have been to non-Paris Club creditors. While Madagascar has contacted all non-Paris Club creditors regarding the provision o f HIPC debt relief, some have not yet responded.  - 24 - among the structural reforms in Madagascar, are assumed to help increase the revenue-to- GDP ratio to about 16 percent by the end o f the projection period. 52. External assistance, which stands at about 13 percent of GDP i s gradually unwound to average about 6 percent of GDP in the projection period.31 I t i s assumed that Madagascar w i l l rely more on domestic savings in the medium and long term. Budget support (loans and grants) which i s currently about 5.0 percent as a share o f GDP i s gradually lowered but maintained at an average o f about 1.5 percent in the latter half o f the projection period as Madagascar will need budget support even in the longer term. All new borrowing i s assumed to be at highly concessional (IDA comparable) terms. The composition o f external assistance i s assumed to shift gradually towards grants, which increases as a share o f total external assistance from 50 percent in 2004 to about 60 percent by the end o f the projection period. Box 3 summarizes the assumptions underlying the projections for the period 2004-2023: Box 3: Assumptions Used in the Debt Sustainability Analysis Real GDP growth i s assumed to average 6 percent (slightly lower than the 6.3 percent at decision point). Export volumes are projected to grow at a l i t t l e over 6 percent (6.2 percent on average) while import volumes grow slightly below GDP growth on average. The terms o f trade decline sharply in 2004, rebound modestly in the first few years and remain stable in the outer years. Foreign direct investment i s assumed to be about 1.5 percent o f GDP. Gross domestic investment increases rapidly in the initial years to a little over 20 percent and decelerates slowly from the middle years to about 9 percent towards the end of the projection. Both public and private investment are high initially, and while public investment decelerates sharply in the later years, private investment remains high at above 10 percent o f GDP. The external current account deficit (excluding grants) declines from over 13 percent in 2004 to a little above 5 percent in the middle years o f the projectionperiod. I t remains slightly below 5 percent in the subsequent years. External financing, which i s high in the current period, i s unwound to average 6 percent o f GDP in the projection period. Budget support i s gradually unwound from the current high levels, but maintained at about 1.5 percent for the later years o f the projectionperiod. New borrowing i s assumed to be at highly concessional (IDA-like) terms and grants are assumed to increase gradually to about 60 percent as a share o f total external assistance from the current level o f about 50 percent. 31 External assistance as a share o f GDP averaged about 6 percent over the last previous years.  -25 - 53. Under the above assumptions and thanks to debt relief, the profile of Madagascar’s NPV of external debt as a ratio of exports, which i s relatively high in the initial years, i s expected to decrease gradually over time (Figure 1). The end-2004 N P V o f debt-to-exports, after the full delivery o f HIPC assistance, i s 214 percent. Although the ratio i s projected to come down rapidly, it would remain above the HIPC threshold o f 150 percent in the initial five years o f the projection period. After additional bilateral assistance, the ratio i s projected to be reduced to 154 percent as at end-2004, close to that o f non-HIPC low income countries (143 ercent) but s t i l l high compared to that o f developing countries as a whole (120 percent).P2 From 2005 onwards, the ratio would steadily decline to reach 63 percent by end-2023, after HIPC assistance and additional bilateral debt relief are taken into account (Table 14). 54. The declining profile of the NPV of external debt-to-exports ratio i s accompanied by lower external debt service ratios. In 2004, after full delivery o f HIPC assistance and additional bilateral debt relief, the debt service ratio would fall sharply to about 5 percent o f exports, compared to 13 percent after full delivery o f traditional debt r e l i e f mechanisms. For the period as a whole, the extemal debt service-to-exports ratio i s projected to be relatively stable at about 5 percent on average. D. Sensitivity Analysis 55. Madagascar will exit from the enhanced HIPC Initiative with improved chances of attaining debt sustainability, particularly taken the delivery of additional bilateral assistance into account. However, vulnerabilities w i l l remain. The three alternate scenarios below (Figure 2) serve to illustrate the implications for Madagascar’s debt burden o f a lower GDP growth, a deterioration in the terms o f trade, and the effect o f a change in the composition o f financing towards more loans rather than grants. Scenario 1. Lower growth 56. Failure to implement structural reforms could result in lower GDP growth in Madagascar. In this scenario, GDP growth i s assumed to be 4 percent in the medium- term on average, a substantial shock relative to the base case assumption o f 6 percent. The volume o f exports and imports would grow at approximately the same rate as GDP, i.e., at 4 percent. Extemal assistance as a ratio o f GDP i s assumed to be the same as in the baseline scenario and borrowing, as in the baseline scenario, i s at highly concessional (IDA comparable) terms. Although the profile o f most measures o f the debt burden would continue to trend downward, the reduction in the debt burden i s more limited. By the end of the projection period, the ratios o f N P V o f debt-to-GDP and to-exports would be higher on average by about 10 and 15 percentage points, respectively, relative to the baseline scenario. The debt service-to-export ratio would start to increase towards the end o f the projection period. The current account would deteriorate sharply and with external 32 Ratios for non-HIPC low-income countries and for developing countries are for 2002 and 2001, respectively. See Heavily Indebted Poor Countries (HIPC) Initiative-Status o f Implementation, SM/04/300 o f 8/23/2004, and IDNSecM2004-0599.  - 26 - Figure 1. External Debt and Debt-Service Indicators for Medium- and Long-Term Public Sector Debt, 2003-23 (In percent) 350 350 ExternalStock of Debt in Net Present Value terms / Exports 300 300 --e After Tradtional debt relief mechanisms --t After Enhanced HIPC 250 250 assistance After bilateral debt r e l ~ e f 200 beyond HIPC assistance 200 150 150 100 100 50 50 0 0 2003 2006 2009 2012 2015 2018 2021 16 1 - 16 Extemal Debt Service / Exports 14 +After Traditional debt relief 14 mechanisms -m-- After Enhanced H I P C assistance 12 12 After bilateral debt relief beyond H I P C assistance 10 - 8 ' - 6 - 4 - 2 - 0 2004 2007 2010 2013 2016 2019 2022  - 27 - 250 - 250 Ekemal StockofDebt i n N e t Present Value Temilwons Line scenario + Allcmalivc scenario I- L o w r GDP 5owh -- 200 200 ... A . . Alternalivc sccnario 11- Terms o f trade shock -XI. - Allernalive 6cenario 111- Lower Granls 150 -- 150 100 -- 100 50 8 50 10 Ekemal Debt ServiceBports -Base Linc scenario -CAilemalive scenario 1- L o w r GDP 5 o N h ... A . . Allemalive scenafio 11- Terms o f trade shack -a - Allemalive scenario 111- L o w r Granls ' 0 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 -Base Line scenario +Allernalive sccnario 1- Lowr GDP 5owh . - . A . . Alternative scenario 11- Termsofm.de shock 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022  -28 - financing assumed not to increase to compensate for shortfalls, central bank reserves would be depleted. 33 Scenario 2. L o w e r prices of commodities 57. Despite the increasing share of EPZs in Madagascar’s exports in recent years, Madagascar remains susceptible to declines in the prices of commodities, particularly that o f vanilla. To illustrate, the price o f vanilla and shellfish (two important items in Madagascar’s traditional exports)34 are assumed to fall sharply in 2005 (by about 50 percent in the case o f vanilla), stay at these levels for about two years and reverse gradually in subsequent years. Financing shortfalls (of about US$85 million a year) are assumed to be met by temporary additional borrowing at concessional terms, such that the international reserves to import ratio i s maintained at a reasonable level. Given the concessional nature o f the new borrowing, the debt service ratio would increase only marginally and the impact i s slightly lower than in the lower GDP growth scenario. As the need for additional new borrowing i s only temporary, the debt service ratio trends downwards but remains slightly higher than in the base case scenario. The impact on the debt to export ratio i s significant such that the ratio remains higher than in the base case and higher than the HIPC thresholds until after 2010, pointing to the need for the development o f appropriate macroeconomic and export policy responses to potential shocks. Scenario 3. Lower grants a n d higher loans 58. This scenario assumes a change in the m i x o f external assistance w i t h lower grants that are replaced b y increased borrowing. As in the baseline scenario, external financing i s assumed to be about 6 per cent o f GDP on average. The share o f grants was reduced by 1 percentage point o f GDP in favor o f loans relative to the baseline scenario.35 Debt service ratios would start to rise towards the end o f the period and, while initially the impact on the N P V o f debt stock would be small, the debt burden build over time such that the N P V o f the stock o f debt-to-exports i s about 20 percentage points higher relative to the baseline towards the end o f the projection period. I f the borrowing i s done on a non-concessional basis, the impact relative to the baseline scenario would be larger by a further 10 percentage points with respect to the NPV o f debt to exports and the debt service-to-export ratio would rise even faster. ~~ 33 Borrowing (on even highly concessional terms) in order to maintain a reasonable level o f international reserves (three months o f imports) would almost double the debt burden measured in term o f the N P V o f debt as share o f exports and GDP. The debt service ratios would also be significantly higher and continue to increase even by the end o f 2023. 34 These represented a little over 20 per cent o f nominal exports over 2002 to 2003. 35 This i s generally in line with the variations in the grant to GDP ratio over the last five years.  - 29 - I V . CONCLUSIONS 59. The completion point triggers have been broadly met, albeit with a delay in one trigger and a small deviation in a second. The economic and political crisis o f 2002 led to a delay in the production and submission o f the budget execution laws for 1999 to 2002. In addition, while the number o f teachers hired was slightly less than outlined in the decision point document, the government had partially compensated communities for the salaries o f 8,000 teachers, without hiring them on the payroll. 60. Taking into account the political strife and exogenous shocks which affected the economy since the decision point, macroeconomic performance has been broadly satisfactory. These factors also affected the speed o f the structural reforms which has been somewhat slow. The authorities are committed to maintaining macroeconomic stability and believe that the foundations are in place to this end. They believe that obtaining full debt relief would be critical for further progress. 61. The NPV of Madagascar’s debt at end-1999 has been revised upward by US$22 million. As a result, the required HIPC assistance to Madagascar, in N P V terms, w i l l need to be revised from the decision point estimate o f US$814 million to US$836 million. Also, the new common reduction factor applicable to the revised end- 1999 debt stock would be 40.2 percent instead o f 39.5 percent as estimated in the decision point document. 62. Madagascar has obtained adequate financing and assurances (conservatively estimated at 90 percent of total HIPC assistance as estimated at the decision point) for HIPC assistance to be delivered on an irrevocable basis. 63. Debt relief at the completion point, including delivery of additional bilateral assistance, together with appropriate macroeconomic policies and structural reforms, would provide Madagascar with the basis to exit from the HIPC Initiative to attain debt sustainability.As the results under the baseline scenario and the sensitivity analysis illustrate, i t i s critical that sound macroeconomic policies are maintained and that structural reforms are implemented. Measures that aim at the diversification o f the economy would be important to maintain growth over the longer term and reduce the impact o f large and sustained declines in prices o f commodities such as vanilla and shellfish. The authorities would also need to adhere to prudent debt management and continue to borrow only on concessional terms. Debt levels, after delivery o f enhanced HIPC assistance, remain relatively high in the initial years but come down after the delivery o f additional bilateral assistance. The N P V o f debt-to-exports ratio, after the delivery o f additional bilateral debt relief, would remain below 150 percent during the complete period o f analysis. Therefore, Madagascar does not qualify for a topping-up o f HIPC assistance under the topping-up framework. 64. I n light of all of these factors, the staffs recommend that the Executive Directors approve the completion point for Madagascar as well as the proposed revision to the enhanced HIPC Initiative debt relief agreed at the decision point.  - 30 - v. ISSUES FOR DISCUSSION 65. Executive Directors may wish to focus on the following issues and questions: 0 D o Directors agree that Madagascar has satisfied the conditions for reaching the completion point under the enhanced HIPC Initiative, as established at the time o f the decision point, albeit with delay in the completion o f the trigger on budgetary execution laws and a small deviation in the trigger on hiring o f teachers? 0 D o Directors agree with the staffs recommendation to revise the debt r e l i e f to Madagascar under the enhanced HIPC Initiative given the findings o f the data reconciliation exercise? 0 D o Directors agree that sufficient assurances have been given by Madagascar’s other creditors to commit enhanced HIPC Initiative assistance to Madagascar as approved at the decision point and amended in the data reconciliation exercise, on an irrevocable basis? 0 D o Directors agree that the debt relief under the HIPC Initiative and bilateral initiatives beyond HIPC will provide Madagascar with a sound basis for debt sustainability? 0 D o Directors agree that Madagascar’s PRSP and expenditure-tracking mechanism provide assurance that enhanced HIPC Initiative assistance and other resources will further poverty reduction effort?  -31 - Table 4. Madagascar: Monitoring Indicators 1999 2000 2001 2002 2003 Reference Target Realization Target Realization Target Realization Target Realization 1, Budget allocation o f the Ministry of Primary and Secondary Education assigned to primary schools, percent of non-salary current expenditures: HIPC funds not included 43.2 49.4 44.0 HIPC funds included 43.3 54.3 54.3 63.1 53.6 63.1 67.9 63.1 65.8 2. Budget allocation o f the Ministry of Health assigned to district health administrations and district hospitals, percent of total non-salarycurrent expenditures: HIPC funds not included 31.2 29.7 37.8 HIPC funds included 20.0 30.0 27.7 32.5 51.2 35.0 41.9 37.5 61.1 3. Ratio of public sector procurement prices and equivalent private sector procurement prices, Ministries of Education and Health 172.0 na nd 135.0 144.0 125.0 125.0 4. Curative medical consultation rate of public and private primary health care centers, number per persodyear 0.46 0.52 0.50 0.58 0.48 0.64 0.52 0.60 0.73 5. Professionallyattended births in all health care institutions, percent of total 24.2 expected births 20.9 33.4 20.2 35.4 18.3 36.4 20.0 37.0 (54.2 DHS) 6. Caesarien births in all health care institutions, as percentageof total expected births 0.41 0.46 0.47 0.51 0.45 0.56 0.48 0.61 0.62 7. Immunization rate of DPT3 for infants under 85.1 age I.percent 31 70.9 72.0 83.0 74.0 78.3 76.0 61.5 80.0 (61.4 DHS) 8. Realization rate of medical prescriptionsin primary health centers, percent 86.4 87.4 87.4 88.4 88.0 89.4 84.3 89.4 87.1 9. Gross revenue of the central drug procurement agency, billion of FMG 22.9 20.3 24.4 32.5 44.8 35.6 45.9 46.8 49.1 I O . Total enrollments in public and private primary schools 41 Number of pupils in grades 1-5 2,018,700 2,208,300 2,208,321 2,329,500 2,307,314 2,456,900 2,405,496 2,488.000 2,510,091 Number of non-repeatersin grades 1-5 1,348,800 1,573,760 1,597,832 1,6 10,492 1,610,492 1,901,000 1,673,909 1,737,000 1 I. Number of new first grades in public primary schools 375,000 409,200 409,264 466,000 422,752 498,100 456,561 597,700 473,283 12. Repetition rate, public primary schools 51, percent 33.0 32.0 31.2 25-30 33.8 25-30 34.2 20-25 30.0 13. Pseudo Cohort Survival Rate at the end of primary cycle, public primary schwls, percent 61 28.0 na 28.6 30-35 21.7 30-35 21.0 35-40 30.0 14. Percentage of Road Maintenance Fund spent on rural roads na 1.o 2.3 2.0 3.2 10.0 10.3 10.0 10.9 I1 See I-PRSP, AMeXeS U, m, and IV. 21 Percentage of all given prescriptionsactually used by patients to obtain drugs. 31 Vaccination rate against diphtheria, pertussis and tetanus. 41 Education indicators refer to the preceding school year (e& 2001 refers to school year 2000101. 51 The I-PRSP (Annex IV) spells out an aggregate target for public and primary school first graders which i s consequently higher than the public school target in this list. 61 The cohort survival rate measures the percentage of all children entering primary school who also complete it. I t i s "pseudo" as i t i s derived from cross-sectional data and not from time-series data.  - 32 - Table 5. Madagascar: Selected Economic and Financial Indicators, 2001-23 I 1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020 2022 2023 Est. Proj. Roj. (Annual percentage change, unless otherwise indicated) National income and prices Nominal GDP growth 13.7 0.7 12.8 16.4 16.2 12.3 11.5 11.5 11.2 11.2 11.1 11.1 11.1 11.1 Real GDP growth 6.0 -12.7 9.8 5.3 7.0 7.0 6.3 6.3 6.0 6.0 5.9 5.9 5.9 5.9 GDP deflator 7.3 15.3 2.8 10.5 8.6 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 Consumer price index (period average) 7.0 16.3 -1.7 10.1 7.6 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Consumer price index (end of period) 4.8 13.9 -0.8 14.9 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 External sector Export, f.0.b 20.6 -50.5 63.0 -2.4 23.7 9.7 9.4 8.2 7.8 7.8 7.1 6.8 6.3 6.3 Imports, c.i.f. 5.5 -37.6 70.3 8.5 8.3 5.4 6.2 5.1 6.0 6.4 6.7 7.2 6.9 6.8 Export volume 4.4 -5 1.2 51.8 -1.2 18.1 8.8 8.0 7.2 6.7 6.8 6.2 5.9 5.4 5.5 Import volume 6.6 -45.3 70.4 -5.3 7.6 7.3 6.5 6.7 6.3 6.4 5.9 6.2 6.2 6.2 Terms ofnade (deterioration -) 21 16.6 -11.0 7.4 -13.9 4.1 2.6 1.5 2.4 1.3 1.0 0.1 -0.2 0.2 0.3 Public finance Revenue (excluding grants) -1.3 -20.7 45.4 35.0 20.4 14.7 15.4 14.5 14.2 13.4 13.3 11.1 11.1 11.1 Total expenditure 31 26.2 -10.5 40.6 37.9 12.6 10.8 9.2 7.7 10.3 10.6 11.9 9.2 10.7 10.8 Current expenditure 28.3 0.9 24.1 18.6 11.4 9.3 11.7 12.7 12.8 13.1 13.1 13.1 13.1 13.1 Investment expenditure and net lending 23.5 -26.6 72.7 64.7 13.8 12.4 6.9 2.7 7.5 7.7 10.0 1.6 5.2 4.9 (In percent of GDP) Public finance Total revenue (excluding grants) 10.1 8.0 10.3 12.0 12.4 12.7 13.1 13.5 13.8 14.1 15.5 16.2 16.2 16.2 Ofwhich: tax revenue 9.7 7.7 10.0 11.2 11.8 12.1 12.6 13.0 13.4 13.7 15.2 15.9 15.9 15.9 Total grants 3.9 2.2 5.1 7.9 5.9 5.8 5.6 5.4 5.2 5.1 4.2 3.4 3.2 3.0 Capital expenditure 7.3 4.8 7.8 11.5 11.3 11.3 10.8 10.0 9.7 9.3 7.9 6.3 5.6 5.3 Total expenditure 17.6 15.7 19.5 23.1 22.4 22.1 21.7 21.0 20.8 20.7 20.3 19.8 19.6 19.5 Overall balance (commitment basis, incl. grants) -4.3 -5.5 -4.2 -3.4 -4.1 -3.7 -3.0 -2.1 -1.7 -1.5 -0.5 -0.2 -0.2 -0.2 Overall balance (commitment basis, excl. grants) -8.2 -7.7 -9.3 -11.3 -10.0 -9.5 -8.6 -7.5 -7.0 -6.6 -4.8 -3.6 -3.4 -3.3 Domestic financing 1.9 2.4 1.8 -1.1 0.0 0.0 -0.1 0.1 -0.1 0.2 0.1 0.1 0.0 0.0 Savings and investment Resource gap -3.2 -6.6 -10.1 -15.2 -1 1.7 -10.1 -9.2 -8.2 -7.5 -7.0 -6.3 -6.0 -6.0 -6.1 Investment 18.5 14.3 17.9 23.7 25.3 24.8 24.2 23.3 23.0 22.6 21.1 19.4 18.6 18.3 Government 7.3 4.8 7.8 11.5 11.3 11.3 10.8 10.0 9.7 9.3 7.9 6.3 5.6 5.3 Nongovernment 11.2 9.5 10.1 12.2 14.0 13.5 13.4 13.3 13.3 13.3 13.2 13.1 13.1 13.1 Gross domestic savings 15.3 7.7 7.8 8.6 13.6 14.7 15.0 15.1 15.4 15.6 14.8 13.4 12.6 12.2 Government 1.8 -0.2 1.1 3.0 3.4 3.6 4.0 4.1 4.2 4.2 4.3 3.5 2.9 2.6 Nongovernment 13.5 7.9 6.7 5.6 10.2 11.1 11.0 11.1 11.2 11.4 10.5 9.9 9.7 9.6 Gross national savings 17.2 8.3 11.9 14.6 17.5 18.5 18.6 18.5 18.6 18.6 17.3 15.6 14.8 14.4 Public 3.0 -0.7 3.7 8.1 7.2 7.7 7.9 7.9 7.9 7.8 7.4 6.1 5.4 5.0 Private 14.2 9.0 8.2 6.4 10.3 10.8 10.7 10.6 10.7 10.8 9.9 9.5 9.4 9.4 External sector, public debt, and debt service Export, Eo.b 21.3 11.0 15.6 19.7 23.7 24.0 24.4 24.5 24.6 24.6 24.0 23.5 23.0 22.8 Imports, c.i.f. 24.7 16.0 23.9 33.5 35.2 34.3 33.8 33.0 32.5 32.2 31.1 30.7 30.2 30.1 Current account balance (excluding grants) -2.0 -6.1 -8.6 -13.2 -10.1 -8.6 -7.8 -6.8 -6.3 -5.8 -5.2 -4.8 -4.7 -4.8 Current account balance (including grants) -1.3 -6.0 -6.0 -9.2 -7.8 -6.3 -5.7 -4.9 -4.3 -4.0 -3.8 -3.8 -3.8 -3,9 (In units indicated) Gross oficial reserves (in millions of SDRs) 318 267 285 328 369 421 474 518 565 623 959 1,326 1,417 1,451 In months ofimports ofgoods and nonfactor services 3 4 3 3 3 3 4 4 4 4 5 5 4 4 Exchange rate: Malagasy Bancs per SDR (period average) 8,391 8,774 8,646 .I. ... Exchange rate: Malagasy francs per US. dollar (period average) 6,592 6.592 6,203 ... ... GDP per capita (in US. dollars) 285 278 324 255 254 269 281 295 307 321 396 486 528 550 Nominal GDP (billions of Malagasy francs) 29,843 30,042 33,893 39,446 45,822 51,440 57,369 63,982 71,156 79,134 134,495 227,724 281,119 312,342 Sources: Malagasy authorities; and Fund staff estimates and projections. I/ Data may not add up due to rounding. 2/ Based on 1993 trade weights. 3/ 2003 includes extrabudgetary expenditure.  - 33 - Table 6. Madagascar: Balance o f Payments, 2001-23 (In millions of SDRs, unless othmvise indicated) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020 2022 2023 Prel. Rev. Revised Projections Pro& Current account -204.1 -234.6 -277.6 -241.5 .212.9 -206.4 -190.0 -183.0 -180.2 -246.3 -350.5 -406.8 -443.8 Goo& and services -224.8 -393.9 -458.7 -364.2 -339.0 -335.2 -320.1 -316.7 -317.5 -406.4 -550.3 -637.9 -692.1 Trade balance -90.5 -181.4 .284.2 -193.6 -172.7 .157.9 -138.6 -129.5 -123.7 -158.9 -236.5 -282.8 -313.3 Exports 375.0 611.3 596.4 737.9 809.5 885.5 958.4 1,033.3 1,113.9 1,SS 1.1 2,165.0 2,445.5 2,600.7 Imports -465.5 -792.7 480.6 .931.5 -982.2 -1,043.4 -1,097.0 -1,163 -1,238 -1,710 -2,402 -2,728 -2,914 Net services (net) -134.3 -212.5 .174.5 .170.6 -166.4 -177.3 -181.5 .187.2 -193.8 -247.6 -313.8 -355.1 -378.8 Services, receipts 173. I 228.9 156.7 287.1 316.7 331.2 351.7 373.9 397.4 528.5 687.9 764.5 805.9 Services, payments -307.4 -44 I.4 -431.2 ,457.1 -483.1 -508.5 -533.3 -561.1 -591.2 -776.1 -1001.8 -1 119.6 -1 184.7 Income (net) -53.5 -57.0 -48.6 -50.8 -52.5 -54.0 -55.6 -57.2 -58.8 -63.3 -72.0 -76.3 -79.0 Receipts 20.1 11.7 22.0 20. I 21.0 21.9 22.6 23.3 24.0 33.1 38.4 40.7 41.9 Payments -73.6 -68.7 .70.6 -70.9 -73.5 -75.9 .78.2 -80.4 -82.8 -96.4 -110.3 -117.0 -120.9 Ofwhich : govemment interest I/ -43.9 .40.5 .40.9 -42. I -42.9 -43.6 -44.0 -44.4 -44.8 -46.8 -45.3 -44.5 -44.4 Current transfers 74.2 2 16.4 229.7 173.6 178.6 182.8 185.7 190.9 196.1 223.5 271.8 307.4 327.3 Govemment 6.2 102.0 119.7 73.6 75.6 76.7 77.0 80.0 83.0 90.5 87.9 94.9 98.8 Budget aid 22.1 91.6 109.3 73.6 75.6 76.7 77.0 80.0 83.0 90.5 87.9 94.9 98.8 HlPC relief21 20.2 22.2 20.3 27.1 26.9 25.8 23.8 24.6 25.2 19.6 1.1 0.8 0.8 Grants 1.9 69.5 89.0 46.5 48.8 50.9 53.2 55.4 57.7 70.8 86.7 94.0 97.9 Other (net) 31 -15.9 10.4 10.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Private 68.0 114.4 110.0 100.0 103.0 106. I 108.7 110.9 113.1 133.0 183.9 212.6 228.5 Capital and financial account 105.1 208.5 250.4 257.8 259.4 264.8 237.3 237.3 244.9 310.4 377.7 427.0 455.9 Capital account (govemment project grants) 44.7 63.8 124.5 ll5.0 121.0 127.1 133.5 140.0 146.7 182.7 223.6 239.7 248.2 Financial account 24.7 37.1 125.9 142.8 138.3 137.6 103.8 97.3 98.2 127.8 154.1 187.3 207.7 Direct investment 6.4 9.1 30.0 46.7 50.6 54.5 58.7 63.1 67.8 97.0 138.2 159.2 170.9 Ofwhich: privatization receipts 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 18.3 28.0 95.9 96.2 87.7 83.1 45.0 34.2 30.4 30.8 15.9 28.1 36.8 Govemment 48.2 51.3 105.6 107.0 108.0 103.2 66.7 60.8 52.8 24.6 3.9 14.1 21.8 Drawing 120.3 124.7 173.6 166.0 171.0 160.0 127.9 125.7 122.4 124.0 150.2 173.2 185.9 Project drawings 54.6 83.5 122.9 126.0 131.0 120.0 97.9 94.7 90.4 97.0 138.2 159.2 170.9 Budgetary support 65.7 41.2 50.7 40.0 40.0 40.0 30.0 30.0 30.0 20.0 0.0 0.0 0.0 No"-govemment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 I.o 2.0 7.0 12.0 14.0 15.0 Amortization I/ -72.1 .73.4 .68.0 -59.0 -63.0 -56.8 -61.2 -64.9 -69.6 -99.4 -146.3 -159.1 -164.1 Private sector amortization -8.8 -7.0 -9.7 -10.8 -20.2 .20. I -21.7 -26.6 -22.5 6.2 12.0 14.0 15.0 Drawings 0.0 0.0 0.0 0.0 0.0 0.0 0.0 I.o 2.0 7.0 12.0 14.0 15.0 Banks, net -21.1 -16.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other (incl. errors and omissions) 41 35.7 107.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Overall balance -99.0 -26.0 -27.2 16.4 46.5 58.3 47.3 54.3 64.7 64. I 27.2 20.2 12.1 Financing 99.0 26.0 27.2 -16.4 -46.5 -58.3 -47.3 -54.3 -64.7 -64.1 -27.2 -20.2 -12.1 Net foreign assets (increase -) 40.0 .12.3 -13.4 -39.1 -70.0 .71.6 -61.4 -69.1 -80.1 -79.3 -49.7 -40.7 -34.3 Use of Fund credit (net) 8.6 5.9 29.5 2.3 -17.8 -18.4 -17.8 -22.4 -21.9 0.0 0.0 0.0 0.0 Disbursements 11.4 11.3 34.9 11.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Repayments -2.7 -5.4 -5.4 -9.1 .I73 -18.4 -17.8 -22.4 -21.9 0.0 0.0 0.0 0.0 Other assets, net (increase .) 31.4 -18.2 .42.9 -41.3 -52.3 -53.2 -43.5 -46.7 -58.2 -79.3 -49.7 -40.7 -34.3 Net change i n arrears (excluding central bank) I.5 -9.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt r e l i e f and cancellation 57.5 47.8 40.6 22.7 23.6 13.2 14.1 14.7 15.4 15.2 22.5 20.5 22.2 Memorandum items: Grants (in percent ofGDP) 1.5 4.2 8.1 6.1 5.8 5.6 5.4 5.2 5.1 4.2 3.4 3.2 3.0 Loans (in percent of GDP) 1.4 1.3 3.5 3.4 3.2 2.8 1.7 1.4 1.2 0.4 0.0 0. I 0.2 Direct investment (in percent ofGDP) 0.2 0.2 I.o 1.5 1.5 1.5 I.5 1.5 I.5 1.5 1.5 I.5 1.5 Current account (in percent of GDP) Excluding net official transfers -6.1 -8.6 -13.2 -10.1 -8.6 -7.8 -6.8 -6.3 -5.8 -5.2 -4.8 -4.7 -4.8 Including net official transfers -6.0 -6.0 .9.2 -7.8 -6.3 4.7 -4.9 -4.8 -4.0 .3.8 -3.8 -3.8 -3.9 Gross official reserves 266.6 284.8 327.5 368.8 421.1 474.3 517.9 564.5 622.7 958.9 1325.9 1416.8 1451.1 (in months of imports of goods and nonfactor services) 4. I 2.8 3.0 3.2 3.4 3.7 3.8 3.9 4. I 4.6 4.7 4.4 4.2 Exchange rates Malagasy francsISDR (period average) 8774.3 8646.0 Malagasy francs/U.S. dollar (period average) 6592.3 6203.4 Sources: Central Bank of Madagascar, Ministry o f Finance: and Fund staff estimates and projections. I/ Interest and amortization payments assume Paris Club stock-of-debt reduction will occur at the completion point, envisaged to be i n 2004. 2/ Interim reliefprovided by the ABican Development Bank Group (AfDB), IDA, and the IMF for 2001-03. The distribution o f interim relief among these years differs from the original program due to AfDBs choice of a different delivny option than assumed at the time o f the decision point 31 Other official grants less payments due to scholarships and contributions to intemational organizations. 41 Includes commercial credits received or granted.  - 34 - Table 7. Madagascar: Nominal and Net Present Value o f External Debt Outstanding as of End-December 1999 11 (in million of U.S. dollars) Nominal Debt NPV of Debt after Rescheduline under Naples terms 21 From decision Revised 31 From decision Revised 31 point point Total 4,357.8 3,950.1 2,058.2 2,080.2 Multilateral 1,830.1 1,841.7 902.0 899.8 1,359.8 1,359.8 637.7 637.7 62.9 62.9 55.5 47.7 312.7 312.7 149.5 149.5 288.5 288.5 123.7 123.7 37.2 47.8 23.9 30.1 BADEA 7.1 4.1 6.4 3.7 IFAD 40.0 44.0 20.5 22.3 OPEC Fund 10.4 10.4 8.4 8.8 Bilateral and Commercial 2,527.7 2,108.4 1,156.2 1,180.4 Paris Club 2,049.3 1,594.3 968.5 975.4 Austria 51.9 51.9 19.2 19.2 Belgium 43.3 43.3 18.1 18.1 Canada 22.1 22.1 15.2 15.2 France 462.2 456.8 232.3 229.0 Germany 58.6 60.9 42.8 44.1 Israel 2.1 2.1 0.8 0.8 Italy 190.6 190.6 75.4 75.4 Japan 364.1 365.9 343.2 344.6 Russia 41 590.4 136.4 120.1 127.6 Spain 166.8 167.1 63.5 63.6 Sweden 8.5 8.5 6.4 6.4 Switzerland 7.0 7.0 2.9 2.9 United Kingdom 43.2 43.2 15.3 15.3 United States 38.4 38.4 13.1 13.1 Non-Paris Ciub official bilaleral 453.1 497.4 179.4 199.5 Algeria 95.9 115.3 31.7 38.1 Angola 3.7 3.7 1.2 1.2 China 46.6 44.0 15.6 14.1 Iraq 114.2 138.9 58.9 72.2 Kuwait 13.6 13.6 9.4 10.4 Libya 167.4 170.3 55.3 56.3 Saudi Arabia 9.2 9.2 5.5 5.5 United Arab Emirates 2.5 2.5 1.7 1.7 Commercial Credirors 25.3 16.7 8.4 5.5 AGIP 7.9 7.9 2.6 2.6 ENI International L t d Bank 9.8 1.7 3.2 0.6 Hong Kong CITOH Bank 4.2 4.2 1.4 1.4 London Club Debt 3.4 2.1 1.1 0.7 IPITRADE 51 0.0 0.7 0.0 0.2 Sources: Malagasy authorities; and Bank-Fund staff estimates I/ Public and publicly guaranteed debt only. 21 Refers to public and publicly guaranteed external debt only and assumes a stock-of-debt operation on Naples terms (67 percent NPV reduction) by Paris Club creditors, and at least comparable action by other official bilateral and commercial creditors. 31 Due to updated information through creditors' statements. 4/ The revised data take into account the 1997 Paris Club agreement signed i n 2000 and amended in 2001 for post cut-off arrears. The decision point data are prior to this agreement. 51 IPITRADE was classified under France in the decision point document.  - 35 - Table 8. Madagascar: Estimated Assistance at Decision Point (Amended) 1/ Total HIPC Initiative assistance based on end-1999 data Common N P V o f debt- reduction factor to-exports-target at the decision 150 Total Bilateral 21 Multilateral point 31 (In percent) (In millions o f U S dollars) Assistance (decision point document) 814 457 357 39.5% Assistance (revised) 836 474 362 40.2% N P V of debt 41 2,080 1,180 900 Multilateral institutions 900 Paris Club 51 975 Non-Paris Club bilaterals 51 199 Commercial creditors 5/ 6 Three-year average o f exports (1997-1999) 830 N P V o f debt-to-exports ratio 61 25 1 Sources: Malagasy authorities and Bank-Fund staff estimates and projections. 11 Assistance i s provided under the principles ofproportional burden sharing which i s described in "HIPC Initiative - Estimated Costs and Burden Sharing Approaches" (EBSl971127, 7/7/97) and (IDNSECM97-306, 7/7/97). 2/ Includes official bilateral and commercial creditors. 31 Percentage ofNF'Vof debt reduction required from each creditor to reach the 150 HIPC threshold under the export criterion. 41 Based on revised data at the decision point after full application o f traditional debt relief mechanisms. 51 Assumes a stock-of-debt operation on Naples terms (67 percent N P V reduction) by Paris Club creditors, and at least comparable action by other official bilateral and commercial creditors at end-1999. 61 Based on the average o f three consecutive years o f exports o f goods and services ending in 1999.  - 36 - Table 9. Comparison ofDiscount Rate and Exchange Rate Assumptions at End-1999 and End-2003 Discount Rates 1/ 2/ Exchange Rates 2/ (In percent per annum) (Currency per US. dollar) At decision At completion At Decision At Completion point point Point Point Currency Austrian schilling 5.47 4.63 13.70 10.92 Belgian franc 5.47 4.63 40.16 32.02 Canadian dollar 6.67 5.18 1.44 1.29 Swiss franc 4.27 3.21 1.60 1.24 Chinese yuan 5.59 4.20 8.28 8.28 Deutsche mark 5.47 4.63 1.95 1.55 Danish kroner 5.32 4.77 7.40 5.91 Domestic currency: Malagasy ftanc 5.59 4.20 6543.20 6098.09 European currency unit 5.47 4.63 1.oo 0.79 Spanish peseta 5.47 4.63 165.62 132.09 Finnish markaa 5.47 4.63 5.92 4.72 French franc 5.47 4.63 6.53 5.21 Indian rupee 5.59 4.20 43.49 45.61 Iraqi dinar 5.59 4.20 0.31 0.31 Italian lira 5.47 4.63 1927.40 1537.10 Japanese yen 1.98 1.70 102.20 107.11 Kuwaiti dinar 5.59 4.20 0.30 0.29 Netherlandguilder 5.47 4.63 2.19 1.75 Norwegian kroner 6.64 5.30 8.04 6.67 Portuguese escudo 5.41 4.63 199.56 159.15 Saudi Arabian rial 5.59 4.20 3.75 3.75 Special drawing rights 5.59 4.20 0.73 0.67 Swedish kroner 5.80 5.00 8.53 7.20 UAE Dirham 5.59 4.20 3.67 3.66 United Kingdom pound sterling 6.70 5.37 0.62 0.56 United States dollar 7.04 4.47 1.oo 1.00 Memorandum item: Paris Club cut-off-date i s July 1, 1983 Sources: OECD; and IMF, International Financial Statistics. 1/ The discount rates used are the average commercial interest reference rates (CIRRs) for the respective currencies over the six-month period ending in December 2003 for the completion point and in December 1999 for the decision point. 2/ For all Euro area currencies, the Euro CIRR i s used. For the Kuwaiti Dinar, the U S dollar CIRR i s used for completion point calculations (compared to the decision point calculations, when the SDR CJRR was used), in accordance to the explicit peg of the Dinar to the U S dollar in the beginning o f 2003. For a l l other currencies for which the respective CIRRs are not available, the SDR discount rate i s used as a proxy.  - 37 - Table 10. Madagascar: External Public and Publicly GuaranteedDebt at End-December 2003 1/ (In millions o f U.S. dollars, unless otherwise indicated) Legal Situation NPV o f Debt Nominal Debt NPV o f Debt After Enhanced After Additional HIPC 21 Bilateral Assistance Total 4,843.0 3,429.2 2,078.6 1,466.9 Multilateral 2,634.7 1,6 13.4 1,231.3 1,23 1.3 IDA 1,981.2 1,165.8 888.3 888.3 IMF 172.2 143.7 126.2 126.2 African Development Bank 337.8 203.5 160.0 160.0 Ofwhich: African Development Fund 335.2 200.7 159.2 159.2 EU 61.1 43.8 20.9 20.9 BADEA 10.5 9.7 7.2 7.2 IFAD 64.3 40.0 27.8 27.8 OPEC Fund 7.5 6.9 0.8 0.8 Bilateral 2,208.3 1,815.7 847.3 235.6 Paris Club 1,636.9 1,249.2 656.4 45.2 Austria 57.1 28.8 11.5 0.0 Belgium 31 0.0 0.0 0.0 0.0 Canada 16.8 12.9 3.9 0.0 France 491.4 280.4 156.9 5.0 Germany 36.4 43.7 22.2 0.4 Israel 2.1 1.3 0.4 0.4 Italy 160.6 99.6 38.5 0.0 Japan 41 406.3 431.0 307.9 0.0 ' Russia 198.9 169.9 39.5 39.5 Spain 174.4 125.6 56.5 0.0 Sweden 6.8 8.3 1.6 0.0 Switzerland 7.9 4.7 1.6 0.0 United Kingdom 40.3 18.9 8.2 0.0 United States 37.9 24.2 7.9 0.0 Non-Paris Club ofjciaI bilaferal 556.8 551.9 186.6 186.6 Algeria 127.8 127.8 30.4 30.4 Angola 3.7 3.7 0.6 0.6 China 34.6 32.3 15.3 15.3 Iraq 178.7 178.7 85.4 85.4 Kuwait 8.2 8.0 2.0 2.0 Libya 192.5 192.5 48.4 48.4 Saudi Arabia 8.6 6.1 3.5 3.5 United Arab Emirates 2.7 2.7 1.1 1.1 Commercial creditors 14.7 14.6 4.4 3.8 AGIP 11.1 11.1 2.6 2.6 EN1 International Ltd Bank 1.9 1.9 0.5 0.5 Hong Kong CITOH Bank 0.7 0.6 1.2 0.6 London Club Debt 51 0.0 0.0 0.0 0.0 IPITRADE 61 0.9 0.9 0.1 0.1 Source8 Malagasy authorities:and Bank-Fundstaff estimates. I/Public and publicly guaranteed debt only. 2/ Assums full d e l i v q o f HlPC assistance at end-2003. 31 Belgium sold its debt to a private creditor in June 2000. 4/Assumed Cologne flow implemented. S i London Club debt was paid off in May 2002. 61 lPlTRADE was classifiedunder France in the decision point dowment.  - 38 - Table 1 1. Madagascar: Comparison o f N e t Present Value o f External Public Debt Between Decision Point and Completion Point (In millions o f U.S. dollars; unless otherwise indicated) Stock at end-2003 Decision Point DSA (Projection) l / Completion Point DSA 21 After enhanced After traditional Afier enhanced After additional HIPC debt relief debt relief HIPC debt relief 3/ bilateral relief 4/ NPV of debt using end-December 1999 parameters 1,519 2,488 1,720 1,144 Multilateral 892 1,26 1 94 1 94 1 Official bilateral 627 1,228 719 203 N P V o f debt using end-December 2003 parameters ... 3,053 2,079 1,467 Multilateral ... 1,613 1,23 1 1,23 1 Oflicial bilateral ... 1,439 847 236 NPV o f debt-tc-exports ratio 5/ Using end-December 1999 parameters 133 Using end-December 2003 parameters ... 284 194 137 Exports of goods and services (three-year average) 5/ Decision point 1I 4 1 ... ... ... Completion point ... 1074 1074 1074 Sources: Malagasy authorities; and Bank-Fund staff estimates. 1/ Debt sustainability analysis (DSA) based on stock o f debt at the decision point. 21 Based on stock of debt reconciled as o f end-December 2003. 3/ Assuming full (hypothetical) delivery o f enhanced HIPC assistance at end-2003 4/ Assuming full (hypothetical) delivery o f enhanced HIPC assistance at end-2003, and debt relief beyond HIPC by some Paris Club and commercial creditors on a voluntary basis. 51 Based on the average o f three consecutive years o f exports of goods and services ending in the current year.  - 39 - Table 12. Madagascar: Net Present Value ofExtemal Debt, 2003-23 1/ (In millions o f U.S. dollars; unless otherwise indicated) 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020 2022 2023 2003-13 2014-23 Actuals Projections Averages I.After traditional debt-relief mechanisms 2/ 1, N P V o f total debt (2+6) 3,429.2 3,157.7 3,267.6 3,354.5 3.443.9 3,505.2 3,557.4 3,605.2 3,830.6 3,836.9 3,805.1 3,793.4 3,494.9 3,828.4 N P V o f total debt after full delivery 31 3,052.8 3,157.7 3,267.6 3,354.5 3,443.9 3,505.2 3,557.4 3,605.2 3,830.6 3.836.9 3,805.1 3,793.4 3,460.8 3,828.4 Multilateral 1,613.4 1,611.7 1,605.8 1,582.6 1,552.3 1,517.1 1,472.4 1,425.9 1,239.9 1,010.7 894.6 833.6 1,493.3 1,074.4 Bilateral 1,439.3 1,408.2 1,378.9 1,348.6 1,333.2 1,316.8 1,300.5 1,285.7 1.246.6 1,110.4 1,023.1 970.3 1,33 I.2 1,144.0 2. N P V o f outstanding debt (3+4) 3,429.2 3,019.9 2,984.7 2,931.2 2,885.5 2,833.9 2,772.9 2,711.6 2,486.5 2,121.1 1,917.7 1,803.9 2,858.6 2,218.5 3. Official bilateral and commercial 1,815.7 1,408.2 1,378.9 1,348.6 1,333.2 1,316.8 1,300.5 1,285.7 1,246.6 1,110.4 1,023.1 970.3 1,365.3 1,144.0 Paris Club 1,249.2 1,151.8 1,122.3 1,092.0 1,076.7 1,060.8 1,045.2 1,030.9 996.3 877.3 808.3 767.2 1,081.8 908.8 Other official bilateral and commercial 566.5 256.4 256.6 256.6 256.5 255.9 255.4 254.8 250.3 233.1 214.8 203.1 283.5 235.3 4. Multilateral 1,613.4 1,611.7 1,605.8 1,582.6 1,552.3 1,517.1 1,472.4 1,425.9 1,239.9 1,010.7 894.6 833.6 1,493.3 1,074.4 IDA 1,165.8 1,173.5 1,179.1 1,181.1 1,178.5 1 ,I70.7 1,158.8 1,142.5 1,016.2 829.4 731.6 680.0 1,149.1 880.7 IMP 143.7 140.8 133.9 113.8 91.9 69.9 43.7 20.6 0.0 0.0 0.0 0.0 70.1 0.0 African Development Bank 203.5 201.4 201.1 200.7 199.8 198.5 195.9 192.8 173.2 146.8 133.6 126.8 195.6 154.3 Others 100.4 96.0 91.7 87.0 82.1 78.0 74.0 70.0 50.5 34.5 29.3 26.8 78.5 39.5 5. Nominal stock o f total debt 4,841.6 4,448.1 4,621.4 4,763.6 4,905.2 5,025.2 5,089.3 5,149.0 5,375.3 5,335.2 5,301.3 5,293.5 4,967.0 5,347.9 11. After enhanced HIPC assistance 1, NPV o f total debt (2+6) 3,370.7 2,248.1 2,388.1 2,513.2 2,625.2 2,708.3 2,785.6 2,861.6 3,179.1 3,333.5 3,328.4 3,332.2 2,771.8 3,273.4 NPV o f total debt after full delivery 31 2,078.6 2,248.1 2,388.1 2,513.2 2,625.2 2,708.3 2,785.6 2,861.6 3,179.1 3,333.5 3,328.4 3,332.2 2,654.3 3,273.4 Multilateral 1,231.3 1,381.5 1,539.6 1,682.3 1,811.6 1,911.7 2.004.6 2,093.7 2,471.2 2,719.1 2,776.4 2,818.4 1,855.7 2,637.3 Bilateral 847.3 866.6 848.4 831.0 813.7 796.7 781.0 767.9 707.9 614.4 552.0 513.7 798.6 636.1 2. N P V o f outstanding debt (3t4) 3,370.7 2,110.2 2,105.2 2,089.9 2,066.9 2,037.0 2,001.1 1,967.9 1,834.9 1,617.6 1,441.0 1,342.7 2,13 5.6 1,663.5 3. Official bilateral and commercial 1,796.3 866.6 848.4 831.0 813.7 796.7 781.0 767.9 707.9 614.4 552.0 513.7 884.9 636.1 Paris Club 1,226.3 670.5 652.4 635.2 618.3 601.6 586.3 573.6 517.0 436.4 387.6 358.0 656.0 456.5 Other official bilateral and commercial 569.9 196.1 196.1 195.7 195.4 195.1 194.7 194.3 190.9 178.0 164.4 155.7 228.9 179.7 4. Multilateral 1,574.4 1,243.6 1,256.7 1,259.0 1,253.2 1,240.3 1,220.1 1,200.1 1,127.0 1,003.2 889.0 829.0 1,250.7 1,027.4 IDA 1,152.1 901.6 914.6 925.8 934.7 940.5 943.6 943.5 915.8 829.4 731.6 680.0 951.0 842.6 IMF 142.1 125.6 121.3 109.4 91.9 69.9 43.7 20.6 0.0 0.0 0.0 0.0 67.0 0.0 African Development Bank 196.9 163.1 166.8 170.7 174.6 178.6 182.0 185.7 173.2 146.8 133.6 126.8 179.6 154.3 Others 83.2 53.3 54.0 53.1 52.1 51.4 50.8 50.2 38.1 27.1 23.8 22.2 53.1 30.5 5. Nominal stock oftotal debt 4,437.6 3,088.4 3,315.5 3,518.3 3,704.1 3,867.2 3,977.4 4,086.0 4,505.9 4,702.6 4.729.3 4,753.1 3,892.5 4,637.0 111. After bilateral debt relief beyond HIPC asslstance 4/ 1, N P V o f total debt (2+6) 3,344.7 1,618.2 1,776.3 1,918.5 2,047.4 2,147.1 2,239.5 2,328.2 2,699.8 2,926.8 2,964.7 2,994.5 2,261.4 2,848.5 NPV o f total debt after full delivery 31 1,466.9 1,618.2 1,776.3 1,918.5 2,047.4 2,147.1 2,239.5 2,328.2 2,699.8 2,926.8 2,964.7 2,994.5 2,090.7 2.848.5 Multilateral 1,231.3 1,381.5 1,539.6 1,682.3 1,811.6 1,911.7 2,004.6 2,093.7 2,471.2 2,719.1 2,776.4 2,818.4 1,855.7 2,637.3 Bilateral 235.6 236.8 236.7 236.3 235.8 235.4 234.9 234.5 228.7 207.7 188.3 176.1 235.0 211.2 2. N P V o f outstanding debt (3+4) 3,344.7 1,480.4 1,493.4 1,495.3 1,489.1 1,475.7 1,455.1 1,434.5 1,355.7 1,210.9 1,077.3 1,005.1 1,625.2 1,238.6 3. Official bilateral and commercial 1,770.3 236.8 236.7 236.3 235.8 235.4 234.9 234.5 228.7 207.7 188.3 176.1 374.5 211.2 Paris Club 1,203.8 41.5 41.4 41.4 41.4 41.4 41.4 41.4 39.0 30.6 24.7 21.0 146.9 32.5 Other official bilateral and commercial 566.5 195.3 195.3 194.9 194.4 194.0 193.6 193.1 189.7 177.1 163.6 155.1 227.6 178.7 4. Multilateral 1,574.4 1,243.6 1,256.7 1,259.0 1,253.2 1,240.3 1.220.1 1,200.1 1,127.0 1,003.2 889.0 829.0 1,250.7 1,027.4 5. Nominal stock o f total debt 4,403.4 2.449.0 2.693.5 2,913.3 3,116.2 3,296.1 3,421.8 3,543.3 4,019.5 4,290.6 4,361.1 4,411.3 3,372.8 4,206.2 Memorandum items: 6. NPV of new borrowing ... 137.8 282.9 423.3 558.3 671.3 784.4 893.6 1,344.1 1,715.9 1,887.4 1,989.5 699.8 1,609.9 Official bilateral 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ... .I. Multilateral 137.8 282.9 423.3 558.3 671.3 784.4 893.6 1,344.1 1,715.9 1,887.4 1,989.5 699.8 1,609.9 Sources: Malagasy authorities; and Bank-Fund staff estimates and projections. I/ Discounted on the basis of the 6-month average commercial interest reference rate for the respective currency, ending in December 2003. 21 Refers to public and publicly guaranteed extemal debt only and assumes a stock-of-debt operation on Naples terms (67 percent N P V reduction) by Paris Club creditors, and at least comparable action by other official bilateral and commercial creditors. 3/ Assumes the entire HIPC Initiative assistance is fully delivered as o f end-2003. 41 Includes additional debt relief provided on a voluntary basis b y the Paris Club and commercial creditors beyond the requirements of the enhanced HIPC framework.  - 40 - Table 13. Madagascar: External Debt Service AAer Full Implementation o f Debt-Relief Mechanisms, 2004-24 (In millions o f U.S. dollars; unless otherwise indicated) 2004 2005 2006 2007 2008 2009 2010 2015 2020 2022 2023 2004-13 2014-23 Total debt service 167.4 160.3 180.7 173.9 180.4 189.8 193.2 215.4 282.4 300.1 307.2 181.2 259.5 After traditional debt-relief mechanisms li 164.5 154.2 171.4 161.6 165.7 172.8 170.6 150.4 176.1 182.0 187.7 160.4 167.4 Multilateral 69.0 73.0 90.2 96.2 99.9 107.9 107.8 89.8 97.1 98.6 98.3 93.2 94.5 IDA 41.6 43.9 47.8 52.5 57.5 61.3 65.2 72.6 80.8 82.6 82.4 58.2 78.0 IMF 8.9 12.9 25.8 26.6 25.9 29.1 24.9 0.0 0.0 0.0 0.0 17.6 0.0 African Development Bank 9.6 7.8 7.9 8.3 8.8 10.0 10.4 11.2 12.0 12.1 12.0 9.5 11.7 Others 8.9 8.5 8.8 8.8 7.7 7.4 7.3 6.0 4.3 3.9 3.8 7.8 4.9 Official bilateral 95.5 81.2 81.2 65.3 65.8 64.9 62.8 60.6 79.0 83.4 89.4 67.2 72.9 Paris Club 91.9 70.4 70.1 54.3 54.2 53.3 51.2 48.7 63.7 64.3 69.0 56.6 57.9 O f which: ODA 37.2 30.4 29.8 15.7 15.2 13.7 10.9 11.9 11.0 11.8 12.2 18.3 11.7 Other official bilateral and commercial 3.5 10.8 11.1 11.1 11.6 11.6 11.6 11.9 15.2 19.2 20.4 10.6 15.0 Total debt service 59.6 92.4 105.9 116.3 124.8 132.1 133.6 164.4 247.5 268.7 273.4 119.8 213.5 After enhanced HIPC assistance 56.7 86.3 96.6 104.0 110.1 115.0 111.0 99.4 141.3 150.6 153.8 98.9 121.4 Multilateral 38.1 38.5 50.0 58.2 65.1 71.8 70.8 61.1 95.4 97.3 97.0 58.8 76.7 IDA 24.2 25.1 27.4 30.1 33.6 36.6 39.8 45.8 80.0 82.6 82.4 35.0 61.5 IMF 6.0 9.6 17.0 22.1 25.9 29.1 24.9 0.0 0.0 0.0 0.0 15.7 0.0 African Development Bank 2.8 2.3 2.3 2.5 2.5 3.2 3.2 11.2 12.0 12.1 12.0 4.4 11.7 Others 5.1 1.6 3.4 3.5 3 .O 2.9 2.9 4.1 3.4 2.6 2.6 3.7 3.6 Official bilateral 18.6 47.8 46.6 45.9 45.1 43.2 40.2 38.3 45.9 53.3 56.8 40.2 44.7 Paris Club 15.1 39.5 38.0 37.3 36.4 34.6 31.6 29.3 34.3 38.6 41.3 32.1 33.3 O f which: ODA 5.9 9.8 9.2 8.6 8.0 7.4 7.0 5.7 5.0 4.8 4.7 7.5 5.2 Other official bilateral and commercial 3.4 8.3 8.6 8.6 8.6 8.6 8.6 9.0 11.6 14.6 15.6 8.1 11.5 Total debt service 50.3 54.8 69.9 81.0 90.3 99.4 104.0 137.7 217.0 234.4 236.8 90.0 183.6 After bilateral debt relief beyond HIPC 2/ 47.4 48.8 60.6 68.7 75.6 82.4 81.4 72.7 110.7 116.3 117.2 69.2 91.6 Multilateral 38.1 38.5 50.0 58.2 65.1 71.8 70.8 61.1 95.4 97.3 97.0 58.8 76.7 Official bilateral 9.3 10.2 10.6 10.6 10.5 10.5 10.5 11.6 15.3 18.9 20.2 10.5 14.9 Paris Club 5.8 1.9 1.9 1.9 1.9 1.9 1.9 2.6 3.8 4.4 4.8 2.3 3.5 Of which: ODA 5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 Other official bilateral and commercial 3.5 8.4 8.7 8.7 8.7 8.7 8.7 9.0 11.5 14.5 15.4 8.1 11.4 Memorandum Items: Debt service of new debt 2.9 6.1 9.3 12.3 14.7 17.0 22.6 65.0 106.3 118.1 119.6 20.8 92.0 Multilateral 2.9 6.1 9.3 12.3 14.7 17.0 22.6 65.0 106.3 118.1 119.6 20.8 92.0 OEcial bilateral 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Nominal HlPC relief Under the enhanced HIPC initiative 107.8 67.9 74.8 57.5 55.6 57.7 59.6 51.0 34.8 31.4 33.8 61.5 45.1 Sources: Malagasy authorities; and Bank-Fund staff estimates and projections. l/ Assumes a stock-of-debt operation on Naples terms (67 percent NPV reduction) by Paris Club creditors, and at least comparable action by other bilateral and commercial nseditors. 2/ Includes additional debt relief provided on a voluntary basis by the Paris Club and commercial creditors beyond the requirements o f the enhanced HIPC , ftamework.  -41 - Table 14. Madagascar: External Debt Indicators, 2003-23 l/ (In percent, unless otherwise indicated) 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020 2022 2023 2003-2012 2013-2023 Actuals Projections Averages Afier traditional debt relief mechanisms 21 NPV of debt-to-GDP ratio 62.7 71.1 71.7 67.7 64.4 60.8 57.4 54.1 40.2 28.3 24.3 22.6 60.9 33.2 NPV o f debt-to-exports ratio 31 284.3 299.9 249.3 228.1 208.8 195.6 184.2 173.6 133.2 97.0 85.2 80.1 214.4 112.0 NPV of debt-to-revenue ratio 41 598.2 627.3 631.2 583.4 536.5 493.4 453.9 420.0 283.5 190.6 164.1 152.4 509.3 230.5 Debt service-to-exports ratio ... 13.3 10.7 10.9 9.7 9.3 9.2 8.7 7.0 6.7 6.3 6.1 9.7 6.8 Debt service-to-revenue ratio 41 ... 33.3 31.0 31.4 27.1 25.4 24.2 22.5 15.9 14.0 12.9 12.3 25.8 14.7 After enhanced HIPC assistance NPV o f debt-to-GDP ratio 61.7 50.6 52.4 50.7 49.1 46.9 44.9 43.0 33.4 24.6 21.3 19.8 47.9 28.1 NPV o f debt-to-exports ratio 31 314.0 213.5 182.2 170.9 159.1 151.1 144.2 137.8 110.5 84.3 74.5 70.3 173.1 94.9 NPV of debt-to-exports ratio (existing debt only) 314.0 200.4 160.6 142.1 125.3 113.7 103.6 94.8 63.8 40.9 32.3 28.3 142.2 50.3 NPV ofdebl-lo-exports ratio ajierfull delivery in 2003 3/ Y 193.6 213.5 182.2 170.9 159.1 151.1 144.2 137.8 110.5 84.3 74.5 70.3 161.0 94.9 NPV of debt-to-revenue ratio 41 588.2 446.6 461.3 437.1 409.0 381.2 355.4 333.4 235.2 165.6 143.5 133.9 401.5 195.0 Debt service-to-exports ratio ... 4.7 6.2 6.4 6.5 6.5 6.4 6.0 5.4 5.9 5.7 5.4 6.0 5.5 Debt service-to-revenue ratio 41 .I. 11.8 17.9 18.4 18.1 17.6 16.8 15.6 12.2 12.3 11.6 11.0 16.1 11.9 Afier bilateral debt relief beyond HIPC assistance 61 NPV o f debt-to-GDP ratio 61.2 36.4 39.0 38.7 38.3 37.2 36.1 35.0 28.3 21.6 19.0 17.8 38.8 24.3 NPV of debt-to-exports ratio 31 311.5 153.7 135.5 130.4 124.1 119.8 115.9 112.1 93.9 74.0 66.4 63.2 141.6 82.0 NPV of debt-teexports ratio (existing debt only) 311.5 140.6 113.9 101.7 90.3 82.3 75.3 69.1 47.1 30.6 24.1 21.2 110.8 37.4 NPVofdebl-lo-exports ralio a jierfuli delivery in 2003 31 51 136.6 153.7 135.5 130.4 124.1 119.8 115.9 112.1 93.9 74.0 66.4 63.2 124.1 82.0 NPV of debt-to-revenue ratio 41 583.7 321.5 343.1 333.7 319.0 302.2 285.7 271.2 199.8 145.4 127.8 120.3 325.8 168.2 Debt service-to-exports ratio ... 4.8 4.2 4.7 4.9 5.0 5.1 5.0 4.8 5.5 5.2 5.0 4.8 5.0 Debt service-to-revenue ratio 41 ... 10.0 10.6 12.1 12.6 12.7 12.7 12.1 10.2 10.8 10.1 9.5 11.7 10.2 Memorandum items (in millions of U.S.dollars): NPV o f debt after enhanced HIPC assistance 3,370.7 2,248.1 2,388.1 2,513.2 2,625.2 2,708.3 2,785.6 2,861.6 3,179.1 3,333.5 3,328.4 3,332.2 2.742.8 3,254.2 Ofwhich: existing debt only 3,370.7 2,110.2 2,105.2 2,089.9 2,066.9 2,037.0 2,001.1 1,967.9 1,834.9 1,617.6 1,441.0 1,342.7 2,160.5 1,683.8 Debt service after enhanced HIPC assistance I.. 59.6 92.4 105.9 116.3 124.8 132.1 133.6 164.4 247.5 268.7 273.4 116.2 207.8 GDP 5,466.0 4,443.2 4,559.1 4,957.6 5,350.8 5,769.1 6,199.6 6,660.9 9,527.4 13,576.1 15,642.1 16,790.2 5.825.2 12,080.0 Exports o f goods and services 31 1,174.8 1,254.6 1,502.5 1,655.2 1,791.4 1,930.1 2,073.6 2,227.0 3,064.3 4,203.9 4,730.0 5,019.8 1,850.8 3.769.1 Exports o f goods and services (three-year mvg. Avg.) 31 1,073.6 1,052.9 1,310.6 1,470.8 1,649.7 1,792.2 1,931.7 2,076.9 2,876.5 3,955.4 4,464.9 4,737.0 1,695.8 3,547.0 Government Revenue 41 573.1 503.4 517.7 575.0 641.9 710.4 783.8 858.4 1,351.4 2,012.7 2,318.9 2,489.1 713.3 1,762.9 Sources: Malagasy authorities; and Bank-Fund staff estimates and projections 11 A l l debt indicators refer to public and publicly guaranteed (PPG) debt and are defined after rescheduling, unless otherwise indicated. 21 Assumes a stock-of-debt operation on Naples terms (67 percent NPV reduction) by Paris Club creditors, and at least comparable action by other bilateral and commercial creditors. 31 Based on the average o f three consecutive years o f exports of goods and services ending in the current year. (e.&, export average over 2001-2003 for NPV of debt-to-exports ratio in 2003). 41 Revenue i s defmed as central govemment revenue, excluding grants. 51 Assuming full delivery o f HIPC assistance at end-2003. 61 Includes additional debt relief provided on a voluntary basis by the Paris Club and commercial creditors beyond the requirements o f the enhanced HlPC framework.  -42 - Table 15. Madagascar: Sensitivity Analysis, 2003-22 l i (In percent; unless otherwise indicated) 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020 2022 2023 2003-13 2014-23 Rojections Averages Baseline scenario NPV of debt-to-exports ratio 21 193.6 213.5 182.2 170.9 159.1 151.1 144.2 137.8 110.5 84.3 74.5 70.3 157.4 92.3 NPV o f debt-to-GDP ratio ... 50.6 52.4 50.7 49.1 46.9 44.9 43.0 33.4 24.6 21.3 19.8 45.5 27.3 Debt senice-to-exports ratio 21 ... 4.7 6.2 6.4 6.5 6.5 6.4 6.0 5.4 5.9 5.7 5.4 6.0 5.5 Debt service-to-revenueratio 31 ... 11.8 17.9 18.4 18.1 17.6 16.8 15.6 12.2 12.3 11.6 11.0 15.8 11.7 Memorandum items (in millions o f U.S. dollars): NPV o f debt 2,078.6 2,248.1 2,388.1 2,513.2 2,625.2 2,708.3 2,785.6 2,861.6 3,179.1 3,333.5 3,328.4 3,332.2 2654.3 3273.4 Of which: new debt 137.8 282.9 423.3 558.3 671.3 784.4 893.6 1,344.1 1,715.9 1,887.4 1,989.5 699.8 1609.9 Debt senice 59.6 92.4 105.9 116.3 124.8 132.1 133.6 164.4 247.5 268.7 273.4 119.8 213.5 O f which: new debt 2.9 6. I 9.3 12.3 14.7 17.0 22.6 65.0 106.3 118.1 119.6 20.8 92.0 Exports of goods and services, three-year average 1,073.6 1,052.9 1,310.6 1,470.8 1,649.7 1,792.2 1,931.7 2,076.9 2,876.5 3,955.4 4,464.9 4,737.0 1771.7 3648.6 Exports of goods and services, annual 1,174.8 1,254.6 1,502.5 1,655.2 1,791.4 1,930.1 2,073.6 2,227.0 3,064.3 4,203.9 4,730.0 5,019.8 1927.3 3876.7 GDP 5,466.0 4,443.2 4,559.1 4,957.6 5,350.8 5,769.1 6,199.6 6,660.9 9,527.4 13,576.1 15,642.1 16,790.2 6046.6 12461.9 Revenues 573.1 503.4 517.7 575.0 641.9 710.4 783.8 858.4 1,351.4 2,012.7 2,318.9 2,489.1 750.9 1826.4 Alternative scenario 141 NPV of debt-to-exports ratio 21 ... 213.5 186.1 178.2 170.4 164.2 159.1 153.9 130.5 103.4 91.1 85.5 165.8 111.3 NPV of debt-to-GDP ratio ... 50.6 53.3 53.4 53.1 52.1 51.1 49.9 43.4 34.9 30.9 29.1 50.6 37.3 Debt sewice-to-expons ratio 2/ ... 4.7 6.5 6.9 7.1 7.2 7.2 6.9 6.6 7.6 7.5 7.2 6.7 7.0 Memorandum i t e m (in millions o f U.S. dollars): NPV o f debt ... 2,248.0 2,380.6 2,489.9 2,585.6 2,654.9 2,716.4 2,775.2 2,999.8 2,998.5 2,902.4 2,852.5 2,648.1 2,978.6 Ofwhich: new debt ... 137.8 275.4 400.0 518.7 617.9 715.3 807.3 1,164.9 1,380.9 1,461.5 1,509.7 636.1 1,315.1 Debt senice ,.. 59.5 92.2 105.3 115.4 123.6 130.5 131.7 157.9 232.1 248.7 251.1 118.1 200.5 Of which: new debt ... 2.9 5.9 8.7 11.4 13.4 15.4 20.6 58.5 90.9 98.1 97.2 19.2 79.0 Exports of goods and services, three-year average 1,073.6 1,053.0 1,279.2 1,397.1 1,517.5 1,617.1 1,707.7 1,803.0 2,299.4 2,899.9 3,184.6 3,338.0 1,585.6 2,729.7 Exports of pads and services, annual 1,174.8 1,254.6 1,408.3 1,528.4 1,615.9 1,707.2 1,800.0 1,901.8 2,407.1 3,036.3 3,335.4 3,496.6 1,697.8 2,858.0 GDP 5,466.0 4,443.2 4,465.1 4,664.7 4,873.2 5,091.0 5,318.6 5,556.3 6,913.9 8,603.2 9,389.4 9,809.0 5,280.1 8,120.8 Alternative scenario U 51 NPV of debt-to-exports ratio 21 ... 213.8 193.1 190.9 177.5 163.9 152.6 145.8 116.2 87.6 77.1 72.7 163.8 96.4 NPV of debt-to-GDP ratio ... 50.6 53.7 53.3 51.8 49.6 47.4 45.3 35.0 25.4 21.9 20.4 47.5 28.4 Debt senioe-to-exports ratio 21 ... 4.8 6.8 7.2 6.7 6.7 6.6 6.2 5.7 6.2 6.0 5.6 6.3 5.8 Memorandum items: (in millions o f U S dollars): NPV o f debt ... 2,248.1,2,449.5 2,643.0 2,773.9 2,860.1 2,940.7 3,020.2 3,332.7 3,453.6 3,433.3 3,432.4 2,841.0 3,403.5 Ofwhich: new debt ... 137.8 344.3 553.1 707.0 823.2 939.6 1,052.3 1,497.8 1,836.0 1,992.3 2,089.7 828.9 1,740.0 Debt senice ... 59.6 93.9 109.0 119.8 128.3 135.5 137.1 174.8 260.7 281.4 282.8 123.6 225.6 Of which: new debt ... 2.9 7.5 12.4 15.7 18.2 20.5 26.1 75.4 119.4 130.8 129.0 24.6 104.1 Exports of goods and services, three-year average 1,073.6 1,051.6 1,268.4 1,384.3 1.562.6 1,745.4 1,926.8 2,071.5 2,867.3 3,943.8 4,452.3 4,723.8 1,744.7 3,637.7 Exports o f goods and services, annul 1,174.8 1,250.5 1,379.8 1,522.5 1,785.6 1,928.1 2,066.7 2,219.7 3,054.9 4,192.5 4,717.7 5,007.0 1,899.5 3,865.9 GDP 5,466.0 4,443.2 4,559.1 4,957.6 5,350.8 5,769.1 6,199.6 6,660.9 9,527.4 13,576.1 15,642.1 16,790.2 6,046.6 12,461.9 Alternative scenario UL 61 NPV of debt-to-exports ratio 21 ... 213.5 184.9 175.7 165.7 159.2 153.7 148.5 126.5 103.4 94.0 89.8 162.0 110.3 NPV o f debt-to-GDP ratio ... 50.6 53.2 52.1 51.1 49.5 47.9 46.3 38.2 30.1 26.8 25.3 48.0 32.6 Debt senice-to-expons ratio 21 ... 4.7 6.2 6.5 6.6 6.6 6.6 6.2 5.9 6.8 6.7 6.4 6.2 6.3 Memorandum items: (m millions of US. dollars): NPV of debt ... 2,248.1 2,423.2 2,584.3 2,733.1 2,853.7 2,969.4 3,084.7 3,639.9 4,090.3 4,195.5 4,252.9 2,884.0 3,939.8 Of which: new debt ... 137.8 318.0 494.3 666.2 816.7 968.3 1,116.8 1,805.0 2,472.7 2,754.5 2,910.2 872.0 2,276.3 Debt senice ... 59.6 93.3 107.6 118.9 128.2 136.3 138.7 181.6 285.3 315.1 322.9 124.2 245.1 Ofwhich: new debt ... 2.9 6.9 11.0 14.8 18.1 21.2 27.7 82.2 144.1 164.6 169.0 25.3 123.6 Exports of goods and services, three-year average 1,073.6 1,052.9 1,310.6 1,470.8 1,649.7 1,792.2 1,931.7 2,076.9 2,876.5 3,955.4 4,464.9 4,737.0 1,771.7 3,648.6 Exports o f goods and xnices, mual 1,174.8 1,254.6 1,502.5 1,655.2 1,791.4 1,930.1 2,073.6 2,227.0 3,064.3 4,203.9 4,730.0 5,019.8 1,927.3 3,876.7 GDP 5,466.0 4,443.2 4,559.1 4,957.6 5,350.8 5,769.1 6,199.6 6,660.9 9,527.4 13,576.1 15,642.1 16,790.2 6,046.6 12,461.9 Sources: Malagasy authorities: and Bank-Fund staff estimates and projections. I1 A l l debt indicators refer 10 public and publicly guaranteed debt and assistanceunder the HlPC Initiative and debt relief beyond HlPC Initiative assistanceare assumed to be fully delivered at end-2003. 21 Exports o f goods and s e n i c e s as defined in IMF, Bolonce of Payments Manual. 5th editioq 1993 and excludes transit trade. The NPV o f debt-to-sxports ratio is based on the average o f three consecutiveyears of exports o f goods and services ending in the current year; the debt-senice ratio i s base on the c m n t export year. 3/ Revenues are defined as central govement revenues, excluding grants. 41 Scenario Iassumes an average 4 per cent GOP g r o w h rate OVSI the medium term. S I Scenario 1 1 assumes a 50 percent reduction in the price o f Madagascar's huo main export commodities. 61 Scenario 111 assumes a change i n the composition of external financing, with a reduction i n grants equivalent to Ipercentage point o f GDP  - 43 - Table I 6 Madagascar: Status of Creditor Participation Under Enhanced HIPC Initiative ~ Revisedassistance I ! Debt Relief Percentage Satisfactory Modalities To Debt relief PRUXItage in NPV Terms o f Total Reply Deliver Debt Relief i n NPV terms o f total (US$ mil.) I/ Assistance (US$ millions) assistance IDA 252.2 31.0 Yes IDA assistance i s being provided over a period of 19 yean (2001-2020). Interim 256.2 30.7 assistance has been provided equivalent to a 50% reduction on Madagascar's debts service fo IDA on debt disbursed and outstanding as ofend-December 1999. ARR Completion Point, assistance will be provided in the same manner, adjusting the percentage of debt stmice reduction to 5 I pment in order to achieve the revised total assistance. IDA will be providing a cumulative nominal assistanceo f W 4 4 4 . 4 million i n nominal terms. IMF 22.0 2.7 YS IMF assistancewill be delivered through grants t o m the PRGFiHIPC Trust to an 19.2 2.3 Umbrella Account These resources, plus accrued interest, would be used to reduce the payments falling due to UdF during 2001-2008 on Madagascar'sobligations. Total nommal debt service savings are expected to amount SDR18.2 million in NPV, ofwhich SDR5.7 million WBS provided as interim assistancethrough September2004. AfDB 59.1 7.3 Yes Assistance will be delivered through a reduction o f 80 percent ofthe debt sewice 60. I 7.2 payments falling due to the AfDB Gmup until full debt relief i s provided. Interim relief of US$32.0 million has been provided as o f October, 2004. IFAD 8.1 1.0 Yes Assistance will be delivered at the completion point, thmugh a reduction of debt 8.9 1.1 service payments on eligible debt by up to IO0 percent until the target i n NPV terms i s reached. Reliminaw estimates show that WAD'Sreliefcould be delivered OVR 7 years. OPEC Fund 3.3 0.4 Yes Full assistance will be provided thmugh concsssional loans, which will be used to 3.5 0.4 meet the payments to the OPEC Fund until the resourcesare exhausted. BADEA 2.5 0.3 Yes Has agreed In principle to participate in the initiative, but sill has to agree on 1.5 0.2 specific delivery modalities for Madagascar EU 9.5 1.2 Ya Debt-servicerelief on selected EU loans during the interim period, supplemented 12.1 I.4 with grants to pay off EU loans at the completion point. As o f end-October2004, approximately U S 2 . 3 million of interim assistance has been provided. Total Multilateral 356.7 43.8 361.5 43.3 Paris Club Creditors 382.9 47.1 YS Interim assistancei s being provided through Cologne flow rescheduling and some 391.9 46.9 creditors have cancelled 100%o f flow during the interim period. The Paris Club creditors will deliver the rest ofthe relief at the completion point Japan is i n the pmcess of implementing the Cologne flow rescheduling HZlich has been agreed in principle. Belgium sold its debt to a commercial creditor i n June 2000. No" Paris Club Creditors 70.9 8.7 80.1 9.6 Algeria 12.5 I.5 No 15.3 1.8 Angola 0.5 0. I No 0.5 0.1 China 6.2 0.8 Partial Partial cancellation o f loans agreed In November 2001. 5.7 0.7 Iraq 23.3 2.9 No 29.0 3.5 Some debt relief has been provided through a 1999 debt rescheduling Kuwait 3.7 0.5 Partial 4.2 0.5 Libya 21.9 2.7 No 22.6 2.7 Some debt relief has been provided through a 2001 debt rescheduling Saudi Arabia 2.2 0.3 Partial 2.2 0.3 United Arab Emirates 0.7 0. I No 0.7 0. I Commercial Creditors 3.3 0.4 2.2 0.3 AGIP I.o 0. I No 1.0 0.1 EN1 International Ltd Bank 1.3 0.2 No 0.2 0.0 HIPC debt relief has been provided through a 2001 debt rescheduling Hong Kong ClTOH Bank 0.6 0. I Yes 0.6 0. I London Club Debt 0.4 0.1 No Debt settledwithout any relief, 0.3 0.0 IPlTRADE I/ 0.0 0.0 N/A 0.1 0.0 Total B i l a t m l and Cammenial 457.3 56.2 474.2 56.7 TOTAL 813.8 100.0 835.7 100.0 Source: Malagasy authorities and Bank-Fund staff estimates I/PITRADE WBS classified under France i n the decision point document.  - 44 - Table 17: Madagascar:Delivery of IDA Assistance Under the Enhanced HIPC Initiative, 2000-20 I/ (In millions of U.S. dollars, unless otherwise indicated) Annual averages Cumulative 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020 2001-10 2011-20 2001-20 Debt service to I D A before HIPC Assistance 27.6 30.0 31.1 32.9 34.8 36.8 39.9 43.7 46.7 48.4 49.6 52.5 53.6 39.4 52.9 922.6 Ofwhich: principal 17.5 20.0 21.2 23.2 25.2 27.5 30.8 34.8 38.0 40.0 41.6 46.1 49.0 30.2 46.7 769.2 Ofwhich: interest 10.2 10.0 9.9 9.7 9.5 9.3 9.1 8.9 8.6 8.3 8.0 6.4 4.6 9.2 6.2 153.4 Debt Service afler HlPC Assistance 21.6 14.9 15.5 16.4 17.3 18.4 19.9 21.8 23.3 24.1 24.7 26.1 52.7 19.6 29.0 485.9 Savings on debt service to IDA afler revision 0.0 15.0 15.6 16.5 17.4 18.5 20.0 21.9 23.4 24.3 24.9 26.3 0.8 19.8 23.9 436.1 Debt Service afler revised HIPC Assistance 21 21.6 14.9 15.5 16.4 17.3 18.0 19.5 21.3 22.8 23.6 24.2 25.6 52.7 19.4 28.5 478.1 Savings on debt service to IDA afler revision 0.0 15.0 15.6 16.5 17.4 18.9 20.4 22.4 23.9 24.8 25.4 26.9 0.9 20.0 24.4 444.4 Savings as percent o f debt service due 0 50 50 50 50 51 51 51 51 51 51 51 2 51 46 48 Source: I D A staff estimates. I/ Debt service corresponds to prorated projections based on the disbursed and outstanding debt as of end-1999, wnverted into U.S. dollars using end-1999 exchange rates. 21 Subject to Board approval.  -45 - Table 18. Madagascar: Delivery o f lMF Assistance under the HIF'C Initiative 1/ (Inmillions o f SDRs, unless otherwise indicated) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Jan.-Sep. 0ct.-Dec. Delivery schedule of I M F assistance (in percent o f total assistance) 0.0 4.6 9.8 19.6 4.1 3.7 8.0 31.5 18.7 0.0 0.0 Debt Service due on current IMP obligations 21 0.0 2.5 3.7 6.3 4.7 1.7 9.3 16.8 14.0 11.3 11.2 Principal 0.0 I.3 2.7 5.4 4.1 1.4 8.1 15.7 13.0 10.3 10.3 Interest 0.0 1.2 1 .o 0.9 0.7 0.4 1.1 1.1 1.o 0.9 0.9 IMF assistance-deposits into Madagascar' account Interim assistance 0.7 I.4 2.9 0.6 Completion point assistance 31 9.1 IMF assistance--drawdown schedule 0.0 0.7 1.4 2.9 0.6 1.3 2.2 5.9 3.0 0.0 0.0 I M F assistance without interest 0.0 0.7 1.4 2.9 0.6 0.5 1.2 4.6 2.8 0.0 0.0 Estimated interest eamings 0.0 0.0 0.0 0.0 0.0 0.8 1.1 1.3 0.3 0.0 0.0 Debt service due on current I M F obligations after I M F assistance4/ 0.0 I.8 2.3 3.4 4.1 0.4 7.0 10.9 11.0 11.3 11.2 Share of debt service due on current I M F obligations covered by I M F assistance (in percent) 0.0 27.5 38.8 45.8 13.5 76.9 24.1 35.2 21.7 0.0 0.0 Proportion (in percent) o f each repayment falling due during the period to be paid'by I M F HIPC Initiative assistance from the principal deposited in member's account 0.0 53.3 53.3 53.2 44.9 5' 39.8 14.5 29.5 21.1 0.0 0.0 Memorandum Items: Total debt service due (millions o f U.S. dollars) 61 148.7 154.4 170.4 ... 167.4 160.3 180.7 173.9 180.5 190.1 Of which : debt service due on I M F obligations 3.1 5.0 8.9 111 8.9 12.9 25.8 26.6 25.9 29.1 (millions o f US. dollars) Debt service due on current I M F obligations after IMF assistance 61 In millions of U.S. dollars 2.3 3.0 4.8 0.4 7.0 10.9 11.0 11.3 11.2 ... I.. In percent o f exports of goods and nonfactor services 0.2 0.4 0.4 0.2 4.4 6.0 6.3 6.2 5.9 Share of total debt service covered by I M F assistance (in percent) 61 0.5 0.9 1.7 ... 0.8 1.4 3.3 1.7 0.0 0.0 Source: Member authorities; and Fund staff estimates I/ Total I M F assistanceunder the HIPC Initiative i s SDR 14.73 million calculated on the basis of data available at the decision point, excluding interest eamed on member's account and on committed but undisbursed amounts as described in footnote 4. The amount of I M F assistance committed at decision point i s revised from SDR 16.6 million to SDR 14.73 million owing to data revisions. to the 1999 year-end stock o f debt. 21 Forthcoming obligations estimated based on rates and principal schedules in effect at decision point in December 2000. Interest obligations include net SDR charges and assessments. 31A final disbursement o f SDR 9.1 1 1 million (plus accrued interest) assumed to be deposited into Madagascar's account at the completion point in October 2004. 41 Includes estimated interest eamings on: (I) amounts held in member's account; and (2), up to the completion point, amounts committed but not yet disbursed. I t i s assumed that these amounts earn a rate of r e m o f 5 percent in SDR terms; actual interest eamings may be higher or lower. Interest accrued on (I) during a calendar year will be used toward the first repayment obligation(s) falling due in the following calendar year except in the final year, when it will be used toward payment o f the final obligation(s) falling due in that year. Interest accrued on (2) during the interim period will be used toward the repayment of obligations falling due during the three years after the completion point. 51 This proportion was not applied to two principal repayment obligations falling due in March and September 2004, as no interim HIPC assistance was approved at the time of repayment. 61 After traditional debt r e l i e f mechanisms.2004 represents the amount for the whole year ,  -46- Table 19. Madagascar: HIPC Initiative: Status of Country Cases Considered Under the Initiative, end-Sep 2004 Target Estimated Total NPV of Debt-to- Assistance Levels 1/ Percentage Nominal Debt Decision Completion Gov. (In millions of U.S. dollars, present value) Reduction Service Relief Country Point Point Exports revenue Multi- World in NPV of (In millions of (in percent) Total Bilateral lateral IMF Bank Debt 2/ U.S. dollars) Completion point reached under enhanced framework Benin lul. 00 Mar. 03 150 265 77 189 24 84 31 460 Bolivia 1,302 425 876 84 194 2,060 original framework Sep. 97 Sep. 98 225 448 157 291 29 54 14 760 enhancedframework Feb. 00 Jun. 01 150 854 268 585 55 140 30 1,300 Burkina Faso 553 83 469 57 23 1 930 originalframewrk Sep. 97 Jul. 00 205 229 32 196 22 91 27 400 enhancedframework Jul. 00 Apr. 02 150 I95 35 161 22 79 30 300 topping-up Apr. 02 150 129 16 112 14 61 24 230 Ethiopia 1,982 63 7 1,315 60 832 3,275 original framework Nov. 01 Apr. 04 150 1,275 482 763 34 463 47 1,94 1 topping-up Apr. 04 150 707 155 552 26 369 31 1,334 Ghana Feb. 02 Jun. 04 69 250 2,186 1,084 1,102 112 782 56 3,486 Guyana 591 223 367 75 68 877 original framework Dec. 97 May 99 107 280 256 91 I65 35 27 24 440 enhancedjramework Nov. 00 Uec-03 150 250 335 132 202 40 41 40 43 7 Mali 539 169 370 59 185 895 original framework Sep. 98 Sep. 00 200 121 37 84 14 43 9 220 enhancedframework Sep. 00 Mar. 03 150 41 7 132 285 45 I43 29 675 Mauritania Feb. 00 Jun. 02 137 250 622 261 361 47 100 50 1,100 Mozambique 2,023 1,270 753 143 443 4,300 original framework Apr. 98 Jun. 99 200 1,717 1.076 641 125 381 63 3,700 enhancedjramework Apr. 00 Sep. 01 1.70 306 lY4 112 18 62 27 600 Nicaragua Dec. 00 Jan-04 150 3,308 2,175 1,134 82 191 73 4500 Niger 664 234 428 42 240 1,190 original@omework Dec. 00 Apr. 04 150 521 21 1 309 28 170 54 944 lopping-up Apr. 04 150 143 23 119 14 70 25 246 Senegal Jun. 00 Apr. 04 133 250 488 212 276 45 124 19 850 Tanzania Apr. 00 Nov. 01 150 2,026 1,006 1,020 120 695 54 3,000 Uganda 1,003 183 820 160 517 1,950 original framework Apr. 97 Apr. 98 202 347 73 2 74 69 160 20 650 enhancedfromework Feb. 00 May 00 150 656 110 546 91 357 37 1,300 Decision point reached under enhanced framework Cameroon Oct. 00 Floating 150 1,260 874 324 37 179 27 2,000 Chad May. 01 Floating 150 170 35 134 18 68 30 260 Congo, Democratic Rep. of Jul. 03 Floating 150 6,311 3,837 2,474 472 83 1 80 10,389 Gambia, The Dec. 00 Floating 150 67 17 49 2 22 27 90 Guinea Dec. 00 Floating 150 545 215 328 31 152 32 800 Guinea-Bissau Dec. 00 Floating 150 416 212 204 12 93 85 790 Honduras Jul. 00 Floating 110 250 556 215 340 30 98 18 900 Madagascar Dec. 00 Floating 150 814 457 357 22 252 40 1,500 Malawi Dec. 00 Floating 150 643 163 480 30 331 44 1.000 Rwanda Dec. 00 Floating 150 452 56 397 44 228 71 800 SBo Tom6 and Principe Dec. 00 Floating 150 97 29 68 24 83 200 Sierra Leone Mar. 02 Floating 150 600 205 354 123 122 80 950 Zambia Dec. 00 Floating 150 2,499 1,168 1,331 602 493 63 3,850 Preliminary HIPC document issued C6te dIvoire Mar. 98 3 ... 141 280 345 163 182 23 91 6 41 800 Total assistance providedlcommitted 32,325 15,686 16,503 2,551 5 1,669 53,203 Preliminaly HIPC document issued C6te dIvoire 61 ... ... 91 250 2,569 1,027 918 166 438 37 3,900 Sources: IMF and World Bank Board decisions, completion point documents, decision point documents, preliminary HIPC documents, and staff calculations. 1/ Assistance levels are at countries' respective decision or completion points, as applicable. 2/ In percent of the net present value of debt at the decision or completion point (as applicable), after the full use of traditional debt-relief mechanisms. 3/ Cate d'Ivoire reached its decision point under the original framework in March 1998. The total amount of assistance committed thereunder was US$345 million in NPV terms. 41 Nonreschedulabledebt to non-Paris Club official bilateral creditors and the London Club, which was already subject to a highly concessional restructuring, i s excluded from the NPVof debt at the completion point in the calculation of this ratio. 5/ Equivalent to SDR 1,721 million at an S D W S D exchange rate of 0.6730, as of December 1,2003. 6/ It is suggested that enhanced HIPC relief for Cate dIvoire overtake the commitments made under the original HIPC framework.  -47 - Table 20. Madagascar: Pans Club Creditors' Delivery o f Debt Relief Under Bilateral Initiatives Beyond the HIF'C Initiative 1/ . ~~ Countries covered ODA (in percent) Non-ODA (in percent) Provision of relief Pre-cutoff date debt Post-cutoff date debt Pre-cutoffdate debt Post-cutoff date debt Decision point Completion (In percent) point (1) (2) (3) (4) (5) (6) (7) Australia HIPCs 100 100 100 100 2/21 2/ Austria HIPCs 100 100 - Case-by-case, flow Stock Belgium HIPCs 100 100 100 100 flow Stock Canada HIPCs 31 ~ 4/ - 4. 100 100 100 flow Stock Denmark HIPCs 100 100 5. 100 100 51 100 flow Stock France HIPCs 100 100 100 100 flow 61 Stock Finland HIPCs 100 - 7, 100 - 71 Germany HIPCs 100 100 100 - 81 100 flow Stock Ireland Italy HIPCs 100 100 9, 100 100 91 100 flow Stock Japan HIPCs 100 100 100 Stock Netherlands, the HIPCs I00 100 100 90-100 flow I( Stock IO/ Noway HIPCs 101 1 11 121 121 Russia Case-by-case Stock Spain HIPCs 100 Case-by-case 100 Case-by-case Stock Sweden HIPCs - I 100 Stock Switzerland HIPCs 100 100 Case-by-case 100, flow 14 Stock United Kingdom HIPCs 100 100 100 100 I: 100 flow I: Stock United States HIPCs 100 100 100 100 I 1 100 flow Stock Source: Paris Club Secretariat. 11 Columns (1) to (7) describe the additional debt reliefprovided following a specific methodologyunder bilateral initiatives and need to be read as a whole for each creditor. I n column (I), "HIPCs" stands for eligible countries effectively qualifying for the HIPC process. A "100 percent" mention in the table indicates that the debt relief provided under the enhanced HIPC Initiative framework will be topped up to 100 percent through a bilateral initiative. 21 Australia: post-cutoff date non-ODA relief to apply to debts incurred before a date to be finalized; timing details for both flow and stock relief are to be finalized. 31 Canada: including Bangladesh. Canada has granted a moratorium of debt service as of January 2001 on all debt disbursed before end-March 1999 for 13 out of 17 HIPCs with debt service due to Canada. Eligible countries are Benin, Bolivia, Cameroon, Dem. Rep. O f Congo, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Rwanda, Senegal, Tanzania, and Zambia. 100% cancellationwill be granted at completion point. As of July 2004, Canada has provided completion point stock of debt cancellation for Benin, Bolivia, Guyana, Senegal and Tanzania. 41 100 percent of ODA claims have already been cancelled on HIPCs, with the exception of Myanmar's debt to Canada. 51 Denmark provides 100 percent cancellation of ODA loans and non-ODA credits contracted and disbursed before September 27, 1999. 61 France: cancellationof 100 percent of debt service on pre-cutoff date commercial claims on the government as they fall due starting at the decision point. Once counties have reached their completion point, debt relief on ODA claims on the government will go to a special account and will be used for specific development projects. 71 Finland: no post-COD claims 81 Germany proposes to cancel all debts incurred before June 20, 1999 depending on a consensus within Paris Club creditors 91 Italy: cancellationof 100 percent of all debts (pre- and post-cutoff date, ODA and non-ODA) incurred before June 20, 1999 (the Cologne Summit). At decision point, cancellation of the related amounts falling due in the interim period. At completion point, cancellation of the stock of remaining debt. 101 The Netherlands: 100 percent ODA (pre- and post-cutoff date debt will be cancelled at decision point); for non-ODA: in some particular cases (Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Mali, Mozambique, Nicaragua, Rwanda, Tanzania, Uganda and Zambia), the Netherlands will write off 100 percent of the consolidated amounts on the flow at decision point; all other HIPCs will receive interim relief up to 90 percent reduction of the consolidated amounts. At completion point, all HIPCs will receive 100 per cent cancellationo f the remaining stock of the pre-cutoff date debt. 1 11 Noway has cancelled all ODA claims. 121 Due to the current World B a M M F methodologyfor recalculating debt reduction needs at HIPC completion point, Noway has postponed the decisions on whether or not to grant 100% debt reduction until after the completion point. 131 Sweden has no ODA claims. 141 Switzerland: I n principle 100 percent cancellation of Pre-cutoff date non-ODA debt. However, Switzerland claims the right at the decision point to forgive only 90 percent in case of major political and/or political weaknesses. 151 United Kingdom: "beyond 100 percent" full write-off of all debts of HIPCs as of their decision points, and reimbursement at the decision point o f any debt service paid before the decision point. 161 United States: 100 percent post-cutoff date non-ODA treated on debt assumed prior to June 20, 1999 (the Cologne Summit).  - 48 - APPENDIX I Debt Management Institutional framework The Malagasy debt management i s shared between two units, the “Direction des Services Etrangers et de la Dette Exterieure” o f the Central Bank and the “Direction de l a Dette Publique” o f the Ministry o f Finance. The Central Bank i s in charge o f the database management, including the updating o f all public and publicly-guaranteed external debt database, as well as the debt and debt service projections. The Ministry o f Finance i s responsible for the administration o f all multilateral loans with exception o f IMF loans, and for the direct payment o f certain loans and the policy aspects o f the debt strategy, such as contracting new loans and negotiating debt relief. Debt management In 2001, the authorities acquired UNCTAD’s D M F A S (Data Management and Financial Analysis System) system and since then, the Central Bank has been migrating the debt data into the software. The lack o f adequate training with few employees involved has slowed the migration process, which (including the testing o f the system) i s now planned to be completed in 2005. The installation o f D M F A S as a network across the two units could help more efficient sharing o f the data base but this may require further substantial investment. N o timeline has been defined for this project. The country’s debt management capacity would benefit from more training on debt management and debt sustainability analysis. The country has been advised, among others, by U N C T A D and DRI to provide tools and training to staff to be able to manage i t s debt more pro-actively, but there i s currently no budget to provide training for employees in charge o f debt management. Graduating from HIPC, this challenge becomes even more crucial as the country will have to set up a prudent debt strategy which i s fully coordinated with macroeconomic policies. Policy coordination The two units in charge o f debt management are located in two different buildings in the city and even though there i s good communication between them, there i s scope for increasing efficiency through the establishment o f a network for sharing the data. Costs are a constraint in moving in this direction. The disbursement and repayment units do not report systematically to the two debt units, which may make it difficult to get an accurate picture o f the debt situation. The authorities are aware o f this flaw and plan to rectify weaknesses. However, no timelines have been set. Although informal communication has improved, it would be useful to institutionalize a coordination committee.