Madagascar: Economy

Structural reforms began in the late 1980s, initially under pressure from international financial institutions. An initial privatization program (1988-1993) and the development of an export processing zone (EPZ) regime in the early 1990s were key milestones in this effort. A period of significant stagnation from 1991-96 was followed by 5 years of solid economic growth and accelerating foreign investment, driven by a second wave of privatizations and EPZ development. Although structural reforms advanced, governance remained weak and perceived corruption in Madagascar was extremely high. During the period of solid growth from 1997 through 2001, poverty levels remained high, especially in rural areas. A 6-month political crisis triggered by a dispute over the outcome of the presidential elections held in December 2001 virtually halted economic activity in the first half of 2002.

Following the 2002 political crisis, in coordination with international financial institutions and the donor community, the government attempted to set a new policy course and build business confidence. Madagascar developed a recovery plan in collaboration with the private sector and donors and presented it at a 2002 "Friends of Madagascar" conference in Paris organized by the World Bank. Donor countries demonstrated their confidence in the new government by pledging $1 billion in assistance over 5 years. The Malagasy Government identified road infrastructure as its principal priority and underlined its commitment to public-private partnership by establishing a joint public-private sector steering committee.

In 2000, Madagascar prepared a Poverty Reduction Strategy Paper (PRSP) under the Heavily Indebted Poor Countries (HIPC) Initiative. The boards of the International Monetary Fund (IMF) and World Bank agreed in December 2000 that the country had reached the decision point for debt relief under the HIPC Initiative and defined a set of conditions for Madagascar to reach the completion point. In October 2004, the boards of the IMF and the World Bank determined that Madagascar had reached the completion point under the enhanced HIPC Initiative.

The Madagascar-U.S. Business Council was formed in Madagascar in 2002. The U.S.-Madagascar Business Council was formed in the United States in May 2003, and the two organizations continue to explore ways to work for the benefit of both groups. An American Chamber of Commerce was launched at the end of 2008 and remains active even after the 2009 coup d'etat.

Madagascar’s ongoing political crisis continues to negatively impact key economic indicators and the business sector. Due to the actions of the HAT regime, Madagascar no longer met eligibility requirements for the African Growth and Opportunity Act (AGOA) as of the end of 2009, a situation which resulted in the loss of thousands of jobs. Parts of the country have returned to a barter economy, and standards of living have progressively declined since the coup.

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