© 2006 International Monetary Fund
IMF Country Report No. 06/303
Republic of Madagascar: Poverty Reduction Strategy Paper Annual Progress Report
Poverty Reduction Strategy Annual Progress Reports (PRSPs) are prepared by member countries in broad consultation with stakeholders and development partners, including the staffs of the World Bank and the IMF. Updated every three years with annual progress reports, they describe the country’s macroeconomic, structural, and social policies in support of growth and poverty reduction, as well as associated external financing needs and major sources of financing. This country document for the Republic of Madagascar, dated June 2006, is being made available on the IMF website by agreement with the member country as a service to users of the IMF website.
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International Monetary Fund
Republic of Madagascar
Tanindrazana – Fahafahana – Fandrosoana
Poverty Reduction Strategy Paper
ANNUAL IMPLEMENTATION REPORT
January - December 2005
Table of Contents
- 2.1. Poverty Status
- 2.2. Opinions expressed by households about their living conditions
- 2.3. Evolution of main indicators for monitoring of poverty
- 3.1. Economic and Financial Results
- 3.2. Costing and Financing of the Strategy
- 5.1. Governance
- 5.1.1. Program 1. Governance and anti- corruption program
- 5.1.2. Axis 2. Governance and observance of the democracy
- 5.1.3. Program 3. Governance and legally constituated state
- 22.214.171.124. Subprogram: Rationalize the Processing of administrative activities and implementation of the E-Governance
- 126.96.36.199. Subprogram: Administrative Reform
- 188.8.131.52. Subprogram: Work area Environment
- 184.108.40.206. Subprogram: Justice
- 220.127.116.11. Subprogram: Civil Protection
- 18.104.22.168. Subprogram: Defense
- 22.214.171.124. Subprogram: Public Security
- 5.1.4. Program 4. Local Governance
- 5.1.5. Performance of large projects
- 5.2. Economy
- 5.2.1. Program 5. Macroeconomic Stability and Growth
- 5.2.2. Program 6. Development of Key Growth Sectors
- 5.2.3. Program 7. Rural Development
- 5.2.4. Program 8 the Development and the Revitalization of the Private Sector
- 5.2.5. Program 9. Development and Intensification of Structuring Infrastructure
- 5.2.6. Program 10. Opening to the Global Competition
- 5.2.7. Performances of large projects
- 5.3. Social aspects
- 5.3.1. Program 11. Development of educational level of the population and the research
- 5.3.2. Program 12. Development of Population Health
- 5.3.3. Program 13. Improvement of Access to Drinking Water and to Sanitation
- 5.3.4. Program 14. Reduction of exclusion, and Social protection
- 5.3.5. Program 15. Promotion of Cultural Diversity
- 5.3.6. Performances of Large Projects
- 7.1. Orientation 1: Governance and Rule of Law
- 7.2. Orientation 2: Production and Economy
- 7.3. Orientation 3: Social aspects
- 8.1. Actions completed in monitoring work
- 8.2. Having an Operational PRSP Implementation Monitoring System
LIST OF TABLES
In June 2005, the PRSP was updated to take account of the new strategic and policy orientations included in the Vision Madagascar Naturally (Madagascar Naturellement) and government policy (la Politique Generale de L’Etat - PGE). At the institutional level, the 22 Regions were established and program budgets were implemented.
Monitoring of PRSP implementation is coordinated and facilitated by the Technical Adjustment Secretariat, the secretariat to PRSP Technical Unit, following a participatory process, with the organization of thematic workshops on a quarterly basis at the national level, and technical meetings at the regional level every six months. Implementation reports were produced regularly every six months and annually since July 2003.
Fifteen programs are identified in the updated PRSP for implementing the poverty reduction strategy and to serve as the basis for monitoring. These programs are subdivided into sub-programs and include specific indicators and actions, followed by interim indicators.
The present report relates to monitoring of the PRSP implementation for the year 2005 with the objective of providing information on the evolution of poverty and on the poverty monitoring indicators. Furthermore, it provides analyses on the achievements completed, results obtained and the evolution of indicators compared to the defined objectives. The results of the data analysis will serve to formulate recommendations for the ministry officials and their programs. In addition, they will serve as decision making tools for the country leadership in orienting and adjusting the strategies, policies, programs and actions, in line with the fight against poverty.
2. Poverty Status and Poverty Indicator Analysis
In 2005, the incidence of poverty incidence decreased to 72.1% from 68.7% in 2004. The phenomenon of poverty is more pronounced in rural areas with a poverty rate of 75.3% compared to 52% in urban areas. The regions on the East coast of the country, namely Atsimo Atsinanana, Vatovavy Fitovinany, and Androy are the ones most affected by poverty, with rates close to 80%. Among the rural regions, those of Analamanga, Boeny and Alaotra Mangoro are the least poor ones.
Economic growth occurring between 2004 and 2005 benefited both rural and urban populations but the impact is more significant in rural areas which benefited from an increase in the producer price of food items. Urban areas were much more affected by the significant price increases.
Regarding the opinion of households on their living conditions, almost half of the population state they are in difficulty, especially in rural areas. Concerning the evolution in the standard of living of individuals in the last year, 41% of households affirm that their status had deteriorated and more than 40% declared a status quo. As for optimism regarding the future of the country, a slight decrease is noted in the “rate of optimism” between 2004 and 2005. The percentage of households that are optimistic about the future of the country increases with the consumption quintile and the education level of the head of the household.
3. Economic and Financial Analysis
Economic and Financial Results
In 2005, the economic growth rate is 4.6% against a projection of a 7%. Power outages, as well as the dismantling of the Multi Fiber Agreement, had harmful consequences on activities of enterprises. Growth was driven by private investment, which was 12.3% of GDP compared to 12.2% last year. The tertiary sector is the one that contributed the most to GDP growth, with a 6.1% increase in production.
The rate of inflation is 11.5% in 2005 whereas 2004 recorded a high increase in consumer prices of about 27% year-on-year. Relative stability is noted for prices and the exchange rate due to a tight monetary policy in conjunction with a decrease in the price of rice.
At the end of 2005, the national currency depreciated by about 7.2% against the Euro and the dollar, while in 2004, the depreciation was about 67% and 53% respectively. As a matter of fact, the establishment of the continuous MID (foreign exchange inter-bank market) in 2004 is starting to yield consequential results. However, the currency supply is still insufficient.
Export revenues recorded a 20.7% decrease in SDR terms compared to 2004. The main underlying causes are the dismantling of the Multi Fiber Agreement and the decline in the export price of vanilla. Similarly, imports decreased compared to last year after the removal of detaxation on capital goods and the decrease in the imports of consumption goods. The ratio of revenue to GDP is 10.1% and has not improved compared to 2004 despite efforts to improve collection and strengthened measures.
In terms of expenditures, the ratio of total expenditures to GDP declined to 21.2% in 2005 compared to 25.9% in 2004 and the budget deficit on a commitment basis is - 4.7% of GDP versus -5.1% of GDP last year.
Strategy Costs and Financing
In the course of the year 2005, the total cost of implementing the strategy, measured by total non salary expenditures amounts to 1,437 billion Ariary of which 16% is for governance, 58% is for economic growth, and 26% is for social protection, human and material security.
The commitments of non salary expenditures were provisionally estimated at 97.3% of resources planned for the year 2005.
The expenditures planned to support the governance axis were committed up to 96.9% of the open credit amount. The local governance program distinguishes itself from the other programs with a commitment rate of 107.5% due to the good performance of the development activities in communes and regions (176.2%), and the improvements in budget management and accounting of local governments (99.8%).
The axis of economic growth with a broadened social basis for which resources were committed up to 108.8% of the open credit amount benefited from the strong contribution of almost all the programs supporting the strategy: development of key growth sectors, rural development, private sector development, and the development of infrastructure.
The axis of social protection, human and material security performed less well with a commitment rate provisionally estimated at 71.5% of the open credit amount in 2005. The contribution was stronger for the three sub-programs of social protection, human and material security, and valorization of cultural diversity.
4. Implementation of the Fifteen PRSP Programs
On the Governance and Anti-corruption Program, regarding the fight against corruption in 2005, the CSLCC (Council for the fight Against Corruption) and BIANCO (National Independent Bureau Against Corruption) collaborated together to establish the anti-corruption strategy which was oriented towards expanding economic sectors.
For civil service reform, the operation VOY RINDRA related to the classification of posts, the harmonization of treatments and the setting up of a skill database was launched.
On Democracy, the actions related to making electoral operations reliable are under way through the establishment of non-mandatory rulings and the preparation of election lists. The decree setting up the organization and the modalities of functioning of the National Election Council [Conseil National Electoral (CNE)] is adopted. Regarding participation for citizen life, civic education programs have been conducted and the journalists have been trained.
Rule of Law Program, concerning civil protection, contingency plans have been made available to the Regions, to the Communes, and to the Districts, as well as risk and disaster management committees to reduce the population vulnerability during cyclones. Administration functioning has been improved due to the establishment of a manual of procedures, improvement of the means of working, as well as computerization of the working system.
As regards to work environment, the National Employment Policy was adopted and the National Monitoring Committee for the National Employment Policy and Poverty Reduction has been set up and is operational.
Regarding security and defense, the strengthening of material means and capacities had some positive results. The crime rate has manifestly decreased. The same applies to offences on immigration and emigration, arms, drugs and alcohol traffic, road insecurity and people safety. The confidence rate among the rural population has improved, and the crime rate decreased.
In the justice area, Administrative and Financial Courts have been set up in the 6 main towns of province (Faritany), along with the decentralization effort and the effective budget control and legality. The actions of controls have been intensified in 2005 in keeping with corruption prevention. Concerning the procedures, the pending cases have been cleared among the lower Courts of Antananarivo, Toamasina, Fianarantsoa, and Antsiranana, leading to positive results (96%). However, ambulant hearings held are still insufficient.
Concerning Local Governance (gouvernance de proximité), the consolidation of the decentralization process is effective through the capacity building of officials in the regions and communes on leadership, management, and regional planning. Financial resources allocated to communes have been enhanced. In terms of deconcentration, the services of the administration are currently effective across the whole national territory.
On Macroeconomic Stability and Growth, the growth objective has not been reached. We notice also the low performance of the tax revenue to GDP ratio. Issues in power outages, the cash flow problem in JIRAMA, and oil price increase have much disrupted the economic activity. Some measures have been taken in such a situation to reduce the deficit in public expenditures. Concerning JIRAMA, the actions undertaken were relative to the preparation of the implementation of the management contract with Lahmeyer and the elaboration of the recovery plan with the development of an investment plan in the short, medium and long term. However, the Government abided by its commitments in terms of the poverty reduction strategy by allocating significant budgets to the Ministry of Education and the Ministry of Health, which are among the priority sectors in poverty reduction.
On the development of expanding sectors, in tourism, boosting of the promotion of the destination to Madagascar, along with the identification of new tourist sites and the creation of new infrastructure had positive results with an increase in operational rooms, new jobs created, as well as increase in tourist arrivals and generated foreign exchange revenues. Furthermore, actions in standardization, labeling, and certification of the hotel facilities are under way in several sites.
For the mining sector, the amounts of investment in mining, the collection of mining royalties and mining exports increased. Such results are the results of awareness raising and sensitization actions conducted among the operators, and of the reinforcement of transparency and good governance. Concerning the reduction in mineral substance smuggling, controls and unexpected visits allowed seizing an important quantity of substances.
For fishery, the amount of fishing and aquaculture royalties recorded a very important increase of 64% between 2004 and 2005, exceeding the annual objective of 2%, thus contributing in soaring catches in 2004, the high number of licenses issued and the impact of publications of permit and royalties status on a six months basis.
On manufacturing industries, the dismantling of the Multi Fiber Agreement provoked a regression in the number of authorized Export Processing Zone enterprises. The consequences of malfunctioning problems due to power outages during the year 2005 are also noted. Conversely, the investment objectives in Export Processing Zone firms were achieved with the creation of 9,335 jobs.
Rural Development Program, in the agriculture area, results are satisfactory. The fulfillment of agriculture contests, the rehabilitation of hydro agricultural networks and resorting to credit and financing enabled positive results for the agricultural output (3% to 6%), and agricultural production also increased. Conversely, the growth rate of the value of export on agricultural product decreased due to decrease in shrimp catch. As regards land tenure, the objectives in land titling are almost achieved. In livestock, the vaccination rate for cattle against anthrax is achieved at 78%.
In the area of environment, water, and forest, the objectives defined for the year 2005 are achieved. Strengthened good governance is undertaken through actions for monitoring and repressing infractions. The achievement of a communication campaign in the main towns of the province (Faritany) contributed to the creation of 5 new protected areas having a provisional status and an area of 1,050,000 ha. The setting up of 6 MECIE resource centers (process to make investments compatible with the environment Mise en Compatibilité des Investissements avec I’Environnement (MECIE)), contributed to achieving the objectives in the issuance of environment permits (35). Regarding the burnt areas, deserving communes were granted bonuses, providing positive results. Indeed, the areas destroyed by fire decreased by 17% compared to 2002.
Developing and Boosting the Private Sector, in the area of industry, trade, and private sector, actions for securing investment, promoting investment, developing partnerships in Madagascar produced positive results. The investment rate is 12.37% out of an objective of 14%. At GUIDE, the objectives in firm setup are exceeded (882 out of 820). Conversely, some delay was recorded in the execution of the program for developing and boosting the private sector due to a procedure problem in the recruitment of officials. As regards trade, a decrease in export values was recorded due to decrease in the exports of some main products (vanilla, textile products).
On the development and the intensification of structuring infrastructures, the achievements in the rehabilitation of rural roads have improved compared to those of 2004 but the objectives for the year are not achieved (65%). As for national roads, results have recorded decreases compared to 2004, and the objectives are half reached. Such results in general are related to constraints in redeployment of personnel, expenditure regularization, restructuring of the Sector Transport Program (PST) and the increase in prices of cement and laminates. Conversely, positive results were recorded regarding maintenance of road networks and construction works as a whole. Reform in the transport sector is achieved at 65%, the autonomous management of the port is established, and the port concession management is under way. For the sector of meteorology, net progress is recorded compared to results in 2004 on the rehabilitation and the modernization of physical infrastructure, close to 75% at end 2005.
For territory management, the satisfaction rate among population towards the services provided is satisfactory Territory management tools were made available to decentralized Local Governments and the town planning were completed by observing procedures. The elaboration of the scheme for regional development is postponed to 2006.
In the area of energy, results are satisfactory as regards to the establishment of the institutional and organizational reform in the sector. In 2005, the electricity access rate was 25.31% and the objectives in terms of number of electrified villages are not achieved. The sector is facing a problem of financing and equipment clearance.
In posts and telecommunication, for the postal service, the number of savings “Tsinjolavitra” recorded a net improvement compared to the previous year. In telecommunication, the production center for feeding sixteen remote centers is operational and the computer equipment for equipping them is acquired. In keeping with the setting up of the National Optic Fiber Backbone, the work has started. The pilot site “Government Intranet” is starting off at the Ministry of Telecommunication, Post and Communications. Furthermore, the State portal site is developed on line. For communication, results are satisfactory as to extension and modernization of the Radio Television station. To improve the quality of produced programs, RNM (National Malagasy Radio) and TVM (National Television Chain) were equipped with digital equipment in all Regions.
Regarding the opening to Global Competition, external exchanges were intensified, and Madagascar strengthened its international presence and its participation in the regional cooperation system.
In the program of the development of educational level of the population and research, for fundamental education, an important number of classroom buildings were constructed. The enrolment rate clearly improved due to the reduction in schooling costs for families (school fees, kit) and among establishments (subsidy). The efforts undertaken for the development of teaching staff provided positive results in terms of the completion rate, the pupil/teacher ratio, and the repetition rate.
In terms of development of the health of the population, regarding health, the vaccination coverage rate has improved considerably and the objectives were exceeded due to the implementation of advanced and mobile vaccination strategies in each district. Despite the efforts accomplished in the construction and rehabilitation of Basic Health Centers (CSB), it was not possible to improve the ratio of population per CSB in 2005. The objectives regarding the increased rate in curative medicine consultation in CSBs were not achieved. The objectives of the availability of drugs in the CSBs were achieved. An important number of recruitments were completed, and the objective in terms of staff coverage is achieved at 90%.
Regarding family planning, actions were undertaken for having an operational new PF sites and the supply of integrated products along with essential drugs. However, the objectives in contraceptive coverage rate were not achieved.
In the fight against HIV / AIDS, the establishment of the Local anti-AIDS Council is under way, as well as sensitization among communes. All the actions planned for awareness-rising and information through television and radio broadcasting are achieved. The same applies to the management of People Living with HIV/AIDS.
In nutrition, at the institutional level, the National Nutrition Office is operational. The National Community based Nutrition Program was validated and it started as a pilot program among 110 sites. Various actions for the intensification of the fight against malnutrition, such as de-worming, Vitamin A and iron Supplementation enabled to improve malnutrition prevalence (underweight). Communication actions were conducted across radio and television stations to intensify access to information in malnutrition prevention.
For the program on enhancement of access to drinking water and sanitation, new construction works were set up and new latrines were built, improving the rate of access to drinking water and use of latrines.
Program for the reduction of exclusion and social protection, as regards the non informal education, the numbers of literate people increased.
Within the domain of population and social development, the training of the responsible officials and technicians in planning, improved the planning in the approach to gender and development. Support to elderly people also improved (green cards). The number of non-mandatory rulings for birth registration increased considerably under the Program “Ezaka Kopia ho an’ny Ankizy” (EKA).
In terms of safety nets, and response to shocks, the main results are satisfactory compared to the objectives for creating part time jobs, the creation and construction of community based basic infrastructure, and the creation of income generating activities.
Program on valorization of cultural diversity, for young people, the objectives of supervising and mobilizing young vulnerable people are achieved. In sport, construction and rehabilitation of sport facilities improved the practice of sport by the population.
In the area of culture, the objectives in terms of cultural celebrations and the participation in international events are achieved.
5. Main Recommendations
The main overall constraints in the implementation of the programs are related to the application of the program budgets in 2005. The execution of public expenditures was delayed due to the need to appoint and train the new officials.
The level of coordination among the ministries to achieve the overall objectives is weak in terms of governance. In terms of security and defense, the financial and technical resources are insufficient to deal with the magnitude of problems of insecurity. A national security and safety policy has to be developed with the participation of all institutions and departments involved (defense, public security, justice, interior, foreign affairs …).
The means of local governments need to be strengthened so as not to delay the decentralization/ deconcentration process. The process has to be implemented through a work plan integrating all the ministries involved.
In the area of justice, actions are to be strengthened in increasing ambulant hearings taking account of their current numbers.
Inter-ministerial coordination is weak in the implementation of economic development programs (telecommunication, agro-industry, electrification). The development of Master Management Plans provide a tool for coordinating project implementation. Furthermore, private operators capacities are to be strengthened because they are still very limited (roads, buildings, electrification).
Regarding external trade, one path is to find a solution to the dismantling of the Multi Fiber Agreement to boost the Export Processing Zones. On the other hand, actions for improving export revenues in vanilla and shrimps are necessary.
In the road and transport sector, actions must be focused on reducing isolation. The institutional reform process has to be completed so as not to hinder the activities in the sector.
Concerning post and telecommunication, the procedures for connecting rural areas have to be accelerated. Savings must be boosted to motivate savers.
In the energy sector, actions must be taken to improve the electrification rate through an increase in the number of villages that are electrified and resolving problems concerning financing and the equipment clearance.
In the social sector, the sectors are mostly handicapped by the inadequacy of financial means and the needs. It is noted also that the investments in social infrastructure are not sustainable. To this end, public/private partnerships need to be strengthened.
In the sector of health, efforts have to be continued to improve the coverage of CSBs and drug availability. Family planning actions must be directed to improving the contraceptive coverage rate especially in rural and remote areas.
As regards malnutrition prevention, the integration of nutrition policy in the development programs needs to be strengthened.
6. Monitoring & Evaluation System
The monitoring of the implementation of the PRSP has evolved with the experience acquired by the Technical Adjustment Secretariat, which coordinates and facilitates the work. Regular quarterly workshops at the national level and workshops every six months at the regional level have allowed the different interlocutors of Ministries, deconcentrated services and programs to own the methodology and the operational tools.
The collection of information and the quality of the data provided by the various departments has improved, but actions to strengthen the monitoring structures and capacity of those responsible needs to be undertaken to improve the capacity for analysis in Ministries.
Efforts to harmonize and articulate the operational tools were undertaken at the national level and are worth continuing by various institutions in charge of monitoring and evaluation at national level: Prime Minister’s office, STA, General Planning Directorate, Public Investment Directorate, INSTAT.
The Government working relations with the technical and financial partners for monitoring the implementation of the PRSP were formalized in a partnership framework. Periodic joint reviews between the both parties took place twice a year to discuss the level of achievements attained and the results obtained and the new orientations to take.
The plan for having an operational PRSP monitoring system at the regional level has already been proposed to regional officials. However, organizing workshops for PRSP monitoring in the regions is still difficult because the Ministries do not yet all have a Regional Directorate and monitoring structure that is operational. The actions to be undertaken for the monitoring system to be effective at the regional level are the standardization of approaches and working tools, while taking account of the specificities of each Region, the establishment of regional monitoring structures, and capacity building among officials.
In the course of the last three years, the PRSP implementation has left its mark on the landscape of the planning and programming process by bringing in a number of innovations in terms of conducting the development of the country by linking PARTICIPATION - PARTNERSHIP and RESULTS.
After implementing the PRSP for close to two and a half years, the following paradigms are worth highlighting:
- The PRSP process has enabled a notable and tangible increase in the PHYSICAL and HUMAN CAPITAL of Madagascar, as many results and achievements were obtained in the country as a whole. The physical and economic infrastructure is expanding and this development contributes gradually to smoothing the deficits and imbalances within and between regions.
- Nevertheless, despite the many achievements, the poverty reduction strategy which was conducted was not generally favorable to the poor people because the benefits of growth were rather kept by those who did not immediately need it, and this was due to a lack of targeting. This issue will have to be solved urgently so as to sustain the actions undertaken to benefit those who are truly needy.
- Furthermore, despite the partnership process that was engaged, it seems that the contribution of the private sector as an engine of development remains relatively weak in spite of its effort in some privileged areas and sectors.
Obviously the achievements of the PRSP process will be capitalized and improved within the framework of the process of Madagascar Action Plan (MAP) which will start in year 2007. It is a question of improving in particular:
- - the analysis of the public policies
- - the macro-economic policy in the medium term should support the objectives of development
- - the development and the coordination of the programs in order to improve their effectiveness
- - the evaluation of the needs in terms of means and costing
- - the prioritization of the actions of the governmental actions by taking into account the means and the risks of external shocks
- - the clarification of the institutional arrangements of the system of monitoring-evaluation, and
- - the reinforcement of the institutional capacities for budgetary process (formulation, execution, control) at the central, regional and communal levels.