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Fuel prices displayed at gas stations will now follow the application of the automatic price adjustment mechanism. The decision was announced during the meeting, which formally approved two IMF assistance programs for Madagascar under the Extended Credit Facility (ECF) and the FRD (Recovery and Sustainability Facility).
The realisation of fuel prices will be implemented gradually, but regardless of changes in fuel prices on the international market, whether international oil prices fall or rise, the upper limit of fuel prices in Madagascar will be limited to 200 A/L. According to the authorities, prices.
Since 2019, the State has subsidized fuel to maintain prices at the pump, despite international market fluctuations. The last increase in prices at the pump was in July 2022. The increase was about 44% for diesel and gasoline. No increase has been seen in two years. These subsidies, although popular, siphon billions of dollars from public finances every year. The total amount of compensation paid by the State for fuel prices, which has long failed to apply price truth, is ARG 790 billion. The main goal is therefore to be able to create budgetary space for social spending and investments to replace the huge expenditures thus incurred. The impact of compensation and untimely and ultimately unproductive subsidies on the majority of people is high.
There are several factors to consider when calculating fuel prices, crude oil prices. The price of a barrel on the stock market changes every day. Refining, this step converts crude oil into fuel. Transportation and distribution costs, various royalties and taxes, and don’t forget the profit that the oil company includes in the final price.
In addition, the state has drawn up a plan to gradually eliminate Jirama’s fuel subsidies. Jirama’s debt for buying fuel from oil companies will reach 144.4 billion alang.
These two decisions are part of the preconditions agreed by the IMF and the country to reduce and eventually close the country’s recurring risks and budget gaps. If these efforts achieve the expected results, they will, among other things, stabilize Madagascar’s public debt below 60% of GDP in the medium term.
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