Steering and monitoring the economic recovery

The news conference held by Prime Minister Jacques Sylla, on August 1, 2002, revealed the present administration?s mindset, and stance with regards to the handling of Madagascar?s economic reform, and recovery process. First, and foremost, we must restore, and earn the financial sponsors? confidence.

With this in mind, persuasive government financing measures, and strategies, designed to show the government?s resolve to crack down on corruption, and to maintain an open-door policy, have been carefully, and thoroughly worked out. The treasury director was on hand to provide more detailed explanations, and to further clarify the issues. She stated that sweeping reforms have been implemented to manage the country?s budget, most specifically government spending.

Monitoring and cracking down on corruption

The treasury director also indicated that government usage of the funds allocated by the ?Friends of Madagascar? is effectively monitored by World Bank. It is a known fact that a portion of the $2.477 billion is to be used by a reputedly corrupt public sector, famous for embezzlement, and misappropriation of funds. The standard control and oversight mechanism, and systems, such as the General State Inspection, or the Trust Fund Control, have been reinforced. In an effort to optimize the usage of financial resources, a general project coordination group was formed within each government agency. This group reports to the National Coordination Bureau, which has a direct link to the Office of the President. An anti-corruption agency was also created.

Keeping an eye on monetary stability

Within this framework, the private sector has not been forgotten because the rapid development, which was promised, relies heavily on its recovery. The Banque Centrale has already been asked to back the national currency, as soon as interbanking currency transactions resume. While currency stability is indeed essential for maintaining investor confidence, it involves two key factors: the Malagasy Franc?s parity status vis-à-vis other currencies, and the inflation rate. Currency stability depends heavily on the equilibrium between these two vital elements, and the balance of payments. The fact remains, however, that the key parity determining factor of a nation?s currency is the amount of wealth produced within the country.

The value of the informal, or unofficial sector

Within this context, one wonders, today, how to value the real wealth generated by the Malagasy people, or real GDP, if you will. The enormous importance of the informal sector raises doubts as to the authenticity of the wealth figures provided by the financial, and budgetary experts. Do they have any idea what the real worth is of the work performed, or the added value generated by stone carvers of the capital?s shantytowns, while it takes place in a wholly ?illegal? setting, entirely outside the banking system? Has anyone ever evaluated the man-hours, the fuel costs, and the technical expertise of the craftsmen and women who weave baskets, and build go-carts using recycled products from around the capital city? In any event, for many young people, it is time to reevaluate the real wealth produced within the country.

Other measures, and fiscal exception

Meanwhile, in an effort to support the private sector, the government has adopted some specific fiscal measures. Apparently, it has declared a moratorium on tax payment for the private sector. Thanks to initiatives outlined by the Transportation Minister, and subsequently endorsed by the Commerce Minister, warehousing, and storage fees for merchandises blocked within the port cities of Toamasina, and Mahajanga, have been reduced, with the full cooperation of the warehouse owners. Funds have been allocated, insurance funds created, and lines of credit opened to meet the financing needs of private business owners. At the government level, CAPE, a business recovery support, and guidance committee, is up and running, designed to put these measures into practice. Admittedly, fiscal stability is very important in the eyes of investors.

Translated by J. F. Razanamiadana