IMF enables another disbursement of US$43.7 million for Madagascar

On July 26, the Executive Board of the International Monetary Fund (IMF) enables the disbursement of US$43.7 million, bringing total disbursements under the arrangement to US$304.5 million for Madagascar.

The Executive Board completed the fifth review under the Extended Credit Facility (ECF) Arrangement.

Following the Executive Board discussion, the Deputy Managing Director and Acting Chair, Mitsuhiro Furusawa, said Madagascar’s performance under its economic program supported by the Extended Credit Facility (ECF) arrangement has remained generally strong.

Madagascar’s 40-month arrangement for US$305 million, or 90 percent of Madagascar’s quota was approved on July 27, 2016. Additional access of 12.5 percent of Madagascar’s quota was approved by the Executive Board in June 28, 2017, bringing Madagascar’s access to SDR 250.55 million (about US$347 million) at that time. This arrangement aims to support the country’s efforts to reinforce macroeconomic stability and boost sustained and inclusive growth.

Furusawa said the country’s growth has been solid, inflation has been moderate, and the external position has remained robust. Going forward, the authorities’ continued commitment to strong policies and an ambitious structural reform agenda will be key to mitigating internal and external risks, strengthening macroeconomic stability, and achieving higher, sustainable, and inclusive growth.

He noted that the authorities’ economic reform agenda requires continued efforts to enhance investment capacity, essential for scaling up priority investment spending.

He said, “Increasing social spending, as planned in the revised budget law, and developing social safety nets is also crucial. Further enhancing revenue mobilization through tax collection is central to this strategy and warrants renewed efforts to avoid eroding the tax base.

“Resolute actions are needed to contain risks to macroeconomic stability and debt sustainability, including fiscal risks from the financial situation of JIRAMA, the sustainability of the civil servant pension fund, and liabilities to the fuel distributors. On the latter, the recent progress towards the implementation of an automatic fuel pricing mechanism while limiting its impact on the poorest is encouraging.

“The recent adoption of the law on illicit asset recovery brings the anti-corruption legal framework into closer alignment with international standards. The authorities should continue to build on these efforts. Making further progress on modernizing public financial management and improving the business climate will be essential to promote good governance. Allocating sufficient human and financial resources will allow for effective enforcement of this framework.

“The ongoing reform agenda should continue to benefit from IMF technical assistance in various areas, such as fiscal policy, governance, and the monetary and financial sectors.”

Sierra Leone: Seven Military Personnel in CID over Capt. Kamara’s Escape

By Joseph S. Margai

Officials of the Ministry of Defence (MOD) and the Republic of Sierra Leone Armed Forces (RSLAF), have on Wednesday, 29th May, 2019, disclosed to newsmen at MOD’s headquarters on Tower Hill, Freetown, that seven military personnel are currently being investigated at the country’s Criminal Investigation Department (CID) in relation to the escape of Captain Patrick Edwin Kamara.

Capt. Kamara, who is believed to have escaped from the military custodial centre at Wilberforce Barracks in Freetown, in the early hours of Tuesday, 21st May, 2019, was on a court martial trial with two other accused persons.
Major Yayah Brima, Staff Officer Grade II in-charge of public relations and information, said Capt. Kamara and the other two accused persons-Warrant Officer Class I Samuel Conteh and Warrant Officer Class II Abu Bakarr Jalloh-were on court martial on five count charges.

“These charges include conspiracy to steal service property, larceny by servant, wilfully damaging service property, wilful neglect causing damage to service property and conduct to prejudice of good order and military discipline,” he noted.

He said Capt. Kamara and the two others were key members of the security detail of former President Ernest Bai Koroma from 1st January, 2008 to 19th June 2018.

“The quantities of ammunition for which they were being tried under the various offences include 4,245 rounds of 12.7 millimetre (mm) anti-aircraft rounds, 3,828 rounds of 14.5mm anti-aircraft rounds, 11 bombs of rocket propel grenade, six rounds 7.62 × 39mm ball lint, 11,476 rounds of 7.62×39mm ball, 14,100 rounds of 7.62×39mm tracer, 6,740 rounds of 7.62×51mm ball lint and 515 rounds of 9×18mm ball,” he explained.

He added that the MOD/RSLAF would like the public to know that the value of the above mentioned ammunition is eighty thousand, four hundred and two dollars and thirty cent (US$80,402.30), approximately six hundred and eighty-three million, four hundred and nineteen thousand, five hundred and fifty Leones (Le683,419,550).
He recalled that the very day Capt. Kamara escaped from the military custodial centre, his twin brother coincidentally passed away at Makoth, seven miles off Yonibana near Mile 91, Tonkolili district, Northwest of Sierra Leone, after a long illness.

He said the deceased, Michael Kamara, had first been admitted at the Chinese Infectious Diseases Prevention and Control Centre at the 34 Military Hospital in Freetown before later moved to the village for native treatment, where he died.

“Following these coincidences, the MOD/RSLAF has followed some misleading and inaccurate story purporting that Capt. Kamara has died in detention. The writer is believed to have deliberately mistaken the death of Michael Kamara for the fugitive Capt. Kamara,” he said. However, he said, the remains of Michael Kamara was conveyed to Freetown on the very day by deceased’s wife, Capt. Alice Koria Sesay, who is also a serving military officer.

The Chief of Defence Staff (CDS), Lt. Gen. Brima Sesay, said they have instituted necessary and proper actions regarding the escape and they have acted swiftly to hand over seven military personnel who were on duty during the escape, noting that they are being investigated at CID headquarters.

He said they have always been taking stringent actions against any military personnel who misbehaves, noting that the military would always be as good as the citizens want it to be. He called on media practitioners to always crosscheck with MOD before they publish anything relating to the military.
Deputy Minister of Defence, Col. (Rtd.) Simeon Nasiru Sheriff, said regarding the escape, they have enhanced standard operating procedures, revisited security advisory, among other measures.
He also called on all media practitioners to crosscheck with MOD before they publish anything relating to the military.

IMF Team admonishes Madagascar that ‘passing laws to strengthen governance are key to advance program priorities’

President Hery Rajaonarimampianina

A team from the International Monetary Fund (IMF) led by Marshall Mills, Mission Chief for Madagascar, says passing laws to strengthen governance are key to advance program priorities.

The team visited Antananarivo from March14–28, 2018 to hold discussions on the third review of Madagascar’s economic reform program supported by the IMF’s three-year Extended Credit Facility (ECF).

• Performance under the ECF-supported program is positive overall.
• Economic growth is projected at 5.0 percent in 2018, and prudent monetary policy is helping to contain inflation.
• Scaling-up public investment, accelerating reforms at JIRAMA, and passing laws to strengthen governance are key to advance program priorities.

Good progress was made during the discussions, and they will continue in the coming weeks. Following conclusion of ongoing discussions, the IMF Executive Board could consider the third ECF review in June 2018.

At the end of the mission, Mr. Mills issued the following statement:

“Madagascar’s economic conditions remain favorable, with sustained growth and macroeconomic stability in spite of some shocks. Economic growth was estimated at 4.2 percent in 2017, despite the effects of a major cyclone and drought on agriculture and hydropower, as well as an outbreak of the plague on tourism. Growing export revenues from vanilla—boosted by high prices—and light manufactured goods led to a strong currency and created room for a substantial accumulation of foreign exchange reserves, which exceeded 4 months of imports at end-2017. The central bank has appropriately managed an associated increase in bank liquidity. Growth is projected to accelerate to 5.0 percent in 2018, led by rising public investment, continued growth in manufacturing, a rebound in agriculture and a recovery in the mining sector. Inflation is expected to decline gradually to below 8 percent by end-2018, after it rose slightly to 9 percent in 2017 due to weather-related shocks.

“Performance under the ECF-supported program remains broadly satisfactory. Based on current data, all quantitative performance targets for end-December were met and for most with a large margin. In particular, reserve accumulation and the fiscal balance continued to exceed program targets. Implementation of structural reforms in the program generally advanced as planned, except for fuel pricing and a minor delay in the new statistics law.

“Staff urged the authorities to maintain the momentum of the program to date. In particular, shifting from less productive public spending to investment and social spending is a core program objective. In the context of discussions between the authorities and the fuel distributors on a new price structure, there were delays in adjusting pump prices to rising world prices, which led to the authorities accumulating liabilities to fuel distributors. Staff recommended that the authorities adjust pump prices gradually to align them with world market prices and to eliminate the liabilities by year end.

“Financial difficulties at the state-owned public utility JIRAMA continue to weigh heavily on public finances despite the launch of an ambitious plan to restructure the company. Large losses last year exacerbated by the drought exceeded budgeted transfers, putting additional pressure on public resources. Under the authorities’ current plans, JIRAMA’s transfer needs are also expected to exceed budgeted transfers this year, as higher world fuel prices and service on the debt accumulated in recent years offset the impact of favorable rainfall on hydropower production. Staff urged the authorities to implement measures to limit these operational losses and JIRAMA’s need for government transfers. In addition, higher than expected needs for the government’s wage bill and pensions will also require increased public resources.

“Discussions also addressed priority medium-term structural reforms in monetary policy, financial sector development, and public investment. The BFM continues to develop its operational framework for monetary operations, through a better focus on managing excess bank liquidity and strengthening the legislative framework. The central bank and the ministry of finance and budget also plan to update the legal and regulatory framework for the operation of the foreign exchange market. Building on the Financial System Stability Assessment (FSSA), the authorities will update the legal and regulatory supervisory framework, move towards risk-based prudential supervision, and submit a revised banking law by year end. They are also working to speed up the execution of investment spending that is central to the program’s growth strategy. The recently adopted investment management strategy should improve implementation monitoring and ensure the consistency of new investment projects with the national development strategy.

On governance, staff stressed the vital importance of enacting the asset recovery and Anti-Money Laundering laws submitted to parliament, to fight corruption and maintain good banking relationships internationally. It also remains important to follow through with implementation of the strengthened anti-corruption legislation, asset declaration framework, and improvements to public financial management.

“The mission met with President Hery Rajaonarimampianina, Minister of Finance and Budget Vonintsalama Andriambololona, Minister of Economy and Plan Herilanto Raveloharison, Central Bank of Madagascar Governor Alain Rasolofondraibe, senior officials, as well as private sector representatives, and development partners.

“The mission thanks the Malagasy authorities for their strong cooperation and the constructive discussions.”

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The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems. The arrangement for Madagascar in the amount of SDR 220 million (about US$304.7 million or 180 percent of quota) was approved by the IMF Executive Board on July 28, 2016 (see Press Release No. 16/ 370 ). Augmentation of access was granted under the program for SDR 30.55 million (about US$42.39 million or 12.5 percent of the country’s quota) following the IMF Executive Board meeting on June 28, 2017 (see Country Report No. 17/223 ).

IMF team says improving the business climate in Angola is critical for economic diversification and growth

An International Monetary Fund (IMF) team led by Ricardo Velloso visited Luanda from March 1-15, 2018, to conduct discussions for the 2018 Article IV consultation has advised the government that improving the business climate is critical to tackle impediments to economic diversification and growth.

• The Angolan economy is experiencing a mild economic recovery.
• The new administration is rightly focused on restoring macroeconomic stability and improving governance.
• Improving the business climate is critical to tackle impediments to economic diversification and growth.

Mr. Velloso issued the following statement:

“The Angolan economy is experiencing a mild economic recovery. The new administration is rightly focused on restoring macroeconomic stability and improving governance. Also, the more benign outlook for oil prices opens a window of opportunity to strengthen macroeconomic policies and give new impetus to structural reforms, allowing Angola to realize its full potential.

“In 2018, output growth is projected to accelerate to 2¼ percent, compared to 1 percent last year, driven by a more efficient foreign exchange allocation system and additional availability of foreign exchange due to higher oil prices; LNG production inching up to full capacity; and improved business sentiment. Annual inflation is projected to remain high, reaching 24¾ percent by end-year reflecting, inter alia, the effect of the kwanza depreciation. Over the medium term, the outlook is for a continued gradual recovery in economic activity, but there are risks, including a decline in oil prices and slippages in the implementation of the needed structural reforms to promote economic diversification.

“Fiscal policy was loosened last year, and the overall fiscal deficit widened to about 6 percent of GDP in 2017, while public debt, including the debt of Sonangol and TAAG, reached 64 percent of GDP. The recently-approved budget for 2018 appropriately aims at a significant fiscal retrenchment, reducing the deficit to 3½ percent of GDP under a conservative oil price assumption. Higher oil prices than envisaged in the budget would result in a revenue windfall that should be used to clear domestic payments arrears faster and/or retire public debt. Gross financing needs in 2018 are substantial, but appear manageable in the current favorable external environment. Gradual fiscal consolidation over the medium term will be needed to put public debt, as a share of GDP, on a clear downward path.

“The authorities’ objective of lowering public debt to under 60 percent of GDP over the medium term provides an adequate fiscal anchor. This objective would be consistent with a non-oil primary fiscal consolidation path averaging ¾ percent of GDP annually until 2023. This fiscal effort would be achieved by ongoing efforts to enlarge the tax base, including by introducing a VAT on January 1, 2019, as planned; and rationalizing public spending. These fiscal consolidation efforts should be complemented by containing contingent liability risks; improving the quality of public investment; adjusting domestic fuel prices to reflect changes in international fuel prices and the exchange rate; expanding well-targeted social programs to protect the most vulnerable and reduce poverty; and implementing a medium-term fiscal framework, focusing on a well-designed fiscal stabilization fund to reduce procyclicality of spending.

“Downsizing the public corporate sector in important to reduce their burden on the Treasury and increase economic efficiency. Insolvent state-owned enterprises should be closed; and economically viable but inefficient SOEs should be restructured and/or privatized. In this connection, Sonangol’s restructuring should make it leaner, more efficient, and focused on its core businesses.

“The National Bank of Angola (BNA) has appropriately tightened monetary policy to support the new exchange rate regime and, so far, the pass-through of the depreciation to inflation appears to have been contained. The parallel-official exchange rate spread has been significantly reduced, but remains wide reflecting short-term pressures in the foreign exchange market as a backlog of foreign exchange purchase orders is gradually eliminated. Completing the transition to a fully functioning foreign exchange market will require further reforms to the foreign exchange allocation mechanism, including phasing out direct sales.

“The banks’ balance sheets need to be strengthened to help with economic recovery and foster inclusive growth. Central to this objective is raising the efficiency of the state-owned banks, by fully implementing their restructuring plans. In the case of BPC, restructuring efforts should be accelerated, and further recapitalization should be made conditional on demonstrable actions that the restructuring plan approved in early 2017 is on track.

“Implementation of structural reforms is critical to tackle impediments to economic diversification and growth. Achieving these objectives requires addressing: (i) the weak insolvency processes, protection of minority shareholders, and contract enforcement; (ii) the still limited access to finance; (iii) the large footprint of the State in the economy; and (iv) governance issues. The Law on Competition and the Private Investment Law under consideration in the National Assembly are welcome steps in the right direction of improving the business climate and fostering the private sector.

“The mission met with Minister of State for Economic and Social Development Manuel Nunes Júnior, Finance Minister Archer Mangueira, Economy and Planning Minister Pedro da Fonseca, Commerce Minister Joffre Van-Dúnem Júnior, Public Administration and Social Security Minister Jesus Faria Maiato, National Bank of Angola (BNA) Governor José Massano, and other senior officials of the executive branch. The mission also held discussions with members of the Economic and Finance Committee of the National Assembly, and representatives from the financial sector, the non-financial private sector, the state-owned oil company Sonangol, the sovereign wealth fund, the diplomatic and IFI community, and non-governmental organizations.