Madagascar eyes economic recovery as donors resume support

ANTANANARIVO Fri Mar 28, 2014 2:51am EDT

Madagascar's Minister for Finance and Budget Lantoniaina Rasoloelison speaks during an interview with Reuters in his office in the capital Antananarivo, October 24, 2013. REUTERS/Thomas Mukoya

Madagascar's Minister for Finance and Budget Lantoniaina Rasoloelison speaks during an interview with Reuters in his office in the capital Antananarivo, October 24, 2013.

Credit: Reuters/Thomas Mukoya

ANTANANARIVO (Reuters) - Madagascar's finance minister on Thursday forecast its economy could grow by 3 percent this year and hit 12 percent in five years' time following peaceful elections on the Indian Ocean island, whose economy is still reeling from a coup in 2009.

Madagascar, famed for its wildlife and eyed by foreign firms for its minerals, has struggled to lure back tourists and court oil and mining giants since the coup. The economy has since slumped and poverty deepened.

Finance Minister Lantoniaina Rasoloelison said state coffers currently only had enough money to pay salaries and make basic payments, but added growth would pick up once donors resumed lending money to the cash-starved government.

"For now, there is nothing in the budget beyond keeping the state functioning. Once the president has put in place a political programme, we will need to draw up a new budget," Rasoloelison told reporters.

"We forecast GDP growth of 3 percent this year, but we could go as high as 12 percent in 5 years."

Rasoloelison said an IMF mission madmawould visit the island from April 22 to May 5 to draw up a new funding framework.

ECONOMY CRIPPLED

President Hery Rajaonarimampianina's December election is seen as a vital step to rebuild confidence in an economy which was crippled after investors fled and donors suspended support to one of the world's poorest countries.

Nine out of 10 people in the country of 22 million live on less than $2 a day.

Rajaonarimampianina swept to power promising better management of the island's oil, nickel, cobalt and gold and a crackdown on corruption, and saying renewed ties with donors can kick-start the sagging economy.

The World Bank and the European Union have said they will follow in the footsteps of the International Monetary Fund and resume financial support to Madagascar, paving the way for greater financial support.

The World Bank forecasts the economy will expand 3.7 percent this year and 4 percent in 2015, below earlier projections and, it said, insufficient to significantly alleviate poverty which deepened during the crisis.

Haleh Bridi, the outgoing World Bank country representative, told reporters other partners including the EU, the African Development Bank, France and the U.S. had also approved and signed financing arrangements which have not yet been released.

"For now, there is $1 billion on the table, which is not an insignificant amount of money," Bridi told reporters.

"The World Bank has approved and signed on $341 million. This is supposed to be released over three years, but it ... could be accelerated."

The World Bank continued lending to Madagascar during the prolonged political crisis but it halted budgetary support and focused instead on emergency aid.

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