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The recent debate on the $658 million in financing provided by the IMF within the framework of the ECF (Extended Credit Facility) and FRD (Resilience and Sustainable Development Fund) programs challenges us… raising questions about the real impact of this financing, as well as their usefulness and the impact on debt generation. But this is not the problem: if their usefulness is to be assessed, it should be based on the country’s real and global needs if it wants to achieve the Sustainable Development Goals.
We recall that these programs are aimed at: a) strengthening governance, b) addressing climate vulnerability and responding to natural disasters, c) reducing debt and increasing energy supply, d) improving agricultural productivity, e) consolidating monetary and financial stability, f) supporting industrialization through appropriate reforms, g) improving road infrastructure, h) promoting the development of human capital…
Phew! That’s it ☹… Obviously, certain governance conditions and priorities need to be met. These are typical conditions from these donors in terms of rigor, structural alignment, good budget governance, and consideration of sustainable development issues… etc… etc…
The single 7 item “Improving road infrastructure” listed above raises a question in itself when we ask the question: “What funding does the country need to repair its road infrastructure and maintain the 30,000 km road network?” We need to remember that this network is vital to ensuring growth and inclusive development of the country.
It should be noted that Madagascar’s current road network is one of the least developed in the world, with a road density of only 5.4 km per 100 km², compared to 52 km per 100 km² in our “neighbor” Rwanda and 102 km per 100 km² (!) in Mauritius.
The EIB financed a €235.5 million road network modernisation project, which aims to renovate 348 km of roads on the RN13 and RN6. Extrapolating this ratio, the financing requirement for 30,000 km is approximately €20.3 billion.
Similarly, a World Bank project costing US$ 300 million hopes to maintain 1,200 km of roads. Extrapolating this ratio to 30,000 km, the maintenance financing requirement is approximately EUR 6.8 billion.
We arrive at (the authors’ forecast) a reasonable average estimate of financing needs for the modernization and maintenance of infrastructure alone of around 15 to 28 billion euros. We are still far from that… very far.
By relating this forecast to the size of all the projects in Madagascar’s budget, we can easily imagine the investment needs （1） The scale of funding required to achieve the Sustainable Development Goals (SDGs) is enormous… in the tens of billions of dollars.
“Infrastructure” projects account for 5.5% of the budget. “Social sectors” account for 30.6% of the budget. Based on this, the forecast roughly estimates the budget needs for the social sectors (education, health, social security, etc.) at around 83 billion to 155 billion euros. （2）. The reality shows that we are far from having the means to commit to these…both in terms of internal resources…and in terms of external resources.
For if internal financing is clearly insufficient, then in any case financing and development assistance to Madagascar also remain woefully inadequate.
Madagascar has one of the lowest per capita aid in the world. In 2020, the country received a total of about $533 million in ODA (Official Development Assistance). This is therefore equivalent to $19 per capita… while the world average ODA seems to be about $68 per capita… There is a clear difference in the distribution of this aid… It is not that the poorest are poorer. Help… Normal, someone will say: we lend only to the rich.
This weakness in aid reflects a certain distrust in the government’s ability to fully utilize the aid in question. Beyond the logic of corruption, the country also faces real difficulties in its ability to pay. We received help, but we were unable to use the allocated funds.
The real difficulty in using these funds effectively seems to stem from the weakness of the administrative infrastructure and its management capacity. In 2020, only 60% of the allocated funds were actually disbursed and used for development projects. This is equivalent to 40% of unused funds… This is equivalent to funds lost in injecting productive investments… This is equivalent to delays in the implementation of important projects.
There are rumors today that the current efficiency of fund utilization is only around 20%.
While necessary, development assistance has been a corollary to Madagascar’s growing debt levels, which stood at about $6.6 billion, or about 35% of GDP, in 2022. This debt has hampered the country’s ability to invest in its own infrastructure and develop sustainable local initiatives without external support.
But debt itself should not be a problem. If it does not (and cannot) finance everything (raising domestic revenues is essential), then debt is necessary for the country to invest and develop. Debt levels become a problem only if we do not have the confidence of investors and major international financiers. This is clearly the problem: the Malagasy government has the ability to appease its financial partners… Without trust, there is no investment…
Thus, the 2023 Finance Law set out guidelines for the external borrowing program for 2023-2024, with the authorities planning to resort to external borrowing of 3.6 billion euros. Only a third of this envisioned envelope has been realized… including the last 660 million dollars provided by the IMF.
When we need a Marshall Plan to get out of this deadly spiral of poverty, we are like putting a plaster on a wooden leg in terms of the amount of investment. And the fear must be extreme. The inability to meet basic needs and the inadequate resources invested in the face of population growth seem to lead to only one thing: accelerated national decline… We are on the edge of the abyss, we are on the edge of the abyss. A giant step forward in the process
According to the Human Development Index, the country ranked 173rd out of 191 countries in 2022. In 2018, it ranked 158th, and the poverty rate continued to worsen: 90.9% of the population lived on less than $3.10 a day, and 77.4% of the population lived in extreme poverty (74.3% in 2019). The locomotive was heading for the cliff, and no one knew how to stop it.
There is no longer a question of complaining about the negligence of those in power. There is not much left to discover on this subject. As the saying goes “You only get the leaders you deserve”. But faced with this alarming situation, it is necessary to sound the alarm. With demands amounting to tens of billions of dollars, the gap between the resources promised and the actual needs is alarming. The lack of foresight and transparency on the part of the actors is dramatic, but also shameful… We must pull ourselves together and think about a fundamental change in posture and mentality to at least slow down, if not avoid, this inexorable disintegration of the great island.
Patrick Rakotomalala (Lalatiana PitchBoule) – July 8, 2024
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