Madagascar WT/TPR/S/197 
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I. ECONOMIC ENVIRONMENT 
(1) MAIN FEATURES OF THE ECONOMY  
1. Madagascar is a large island in the In dian Ocean with a surface area of 595,790 km2.  In 2006 
its population stood at around 17.5 million (Table I.1), with the vast majority of inhabitants living in 
rural areas;  its demographic growth is re latively strong (2.6 per cent per annum over the 
2000-2006 period).  Madagascar's ne ighbouring islands are Mauritius and Reunion;  Mozambique is 
the closest country to Madagascar on the African ma inland.  Madagascar is party to a number of 
regional agreements, the central objective of whic h is regional integration (Chapter II(3)(ii)). 
Table I.1 
Madagascar in figures, 2000-2006 
  2000 2001 2002 2003 2004 2005 2006a 
Population (thousand) 15,085 15,265 15,692 16,131 16,583 17,047 17,525 
   Urban 26.0 26.5 27.1 27.6 28.2 .. .. 
   Rural 74.0 73.5 72.9 72.4 71.8 .. .. 
Total GDP (MGA billion, at current prices) 5,377 5,969 6,008 6,77 7 8,156 10,095 11,781 
Total GDP (US$ million, at current prices) 3,961. 2 4,527.8 4,556.7 5,462.7 4,359.6 5,039.9 5,499.2 
Total GDP (MGA billion, constant 1984 prices ) 466.2 494.3 431.6 47 3.9 498.8 521.7 547.3 
GDP per capita (US$, at current prices) 262.6 296.6 290.4 338.6 262.9 295.6 313.8 
Share of GDP at current prices  
Agriculture 14.9 14.7 17.5 16.6 16.9 17.1 16.4 
Livestock and fisheries 8.5 7.8 9.3 8.2 7.8 7.0 6.9 
Forestry 5.6 5.1 4.7 4.1 3.8 3.9 4.0 
Manufacturing sector 14.1 14.5 14.3 15.2 15.8 15.7 15.8 
   Food, beve rages and tobacco  5.8 5.7 5.3 5. 3 5.1 4.6 4.4 
   Energy 1.6 1.5 1.3 1.1 1.1 1.1 1.2 
   Industrial Free Zone 2.6 3.1 4.0 4.9 5.7 5.9 6.2 
   Other 4.0 4.2 3.7 3.9 3.9 4.1 4.0 
Services  57.0 57.9 54.2 55.8 55.6 56.3 56.8 
   Construction and public works 1.8 1.9 1.9 2.1 2.5 3.0 3.4 
   Transport 18.3 18.1 16.0 15.5 16.6 18.0 18.6 
   Commerce 11.8 12.0 12.5 12.2 11.9 11.0 10.4 
   Administration 6.0 6.2 5.8 7.5 6.7 6.4 7.1 
   Other services 19.0 19.7 18.0 18.5 17.9 17.8 17.2 
.. Not available. 
a Forecast. 
Source : Central Bank of Madagascar, Annual repor t 2006, and IMF Country Report, No. 05/321. 
2. In 2006, Madagascar's GNP was estimated at  around US$5.5 billion (which includes the 
contribution of the informal sector, estimated  at around 30 per cent of total GDP).  The 
per capita GDP was estimated at US$313 in 2006, which ranks Madagascar among the least 
developed countries (LDCs).  Its human development index is relatively low;  in 2004 the country was 
classed 143rd (out of 177 countries) in the UNDP ranking1, and 80.7 per cent of its population was 
living below the poverty line in 2002.  In 2004, life expectancy in Madagascar was 55 years.  In view 
of the poverty level, in July 2003 Madagascar a dopted its Poverty Reduction Strategy Paper (PRSP)2, 
which was superseded in 2007 by the Madagascar Action Plan (MAP)3 (Chapter II(2)). 
                                                      
1 UNDP (2006). 
2 IMF (2003). 
3 IMF (2007a). WT/TPR/S/197 Trade Policy Review 
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3. The Malagasy economy is based on services (appr oximately 57 per cent of nominal GDP in 
2006);  agriculture, including fisheries, livestock and forestry (27 per cent);  and the manufacturing sector (16 per cent).  Around three quarters of the population live in rural areas and work mainly in agricultural subsistence activities.  Increasing the pr oductivity of the agricultural sector is therefore a 
central aspect of the poverty reduction strategy.  The manufacturing sector has slightly increased its 
GDP share since Madagascar 's first trade policy review (TPR) in 2001, primarily through growth of 
the activities of enterprises benefiting from the Indus trial Free Zone (IFZ) regime (Chapter II(4)).  
These enterprises mainly produce clothing for exportation.   Irrespective of the tax benefits granted to 
enterprises in the IFZ and according to a study by th e World Bank, all enterprises experience the same 
difficulties in respect of access to funding, electric ity supply (a priority issue in 2008 under the 
privatization programme) and the supply of water, transport and telecommunications services, not to 
mention macroeconomic instability and poor governance.
4  Such concerns hamper the country's 
economic development and trade. 
4. Madagascar is pursuing a macroeconomic stabili zation and structural reform programme for 
the 2006-2008 period, supported by an IMF Povert y Reduction and Growth Facility (PRGF) and by 
other development partners5 which are heavily involved in the implementation of the MAP, in 
particular the European Union and its members.  Madagascar benefited from a significant reduction in 
its external debt in 2000 and 2004 under the Enha nced Heavily Indebted Poor Countries (HIPC) 
Initiative and under other bilateral and mu ltilateral initiatives (section (2) below). 
(2) RECENT ECONOMIC DEVELOPMENTS  
5. Following its first TPR in 2001, Madagascar experi enced a period of social and political crisis 
between 2001 and 2002 (Chapter II(1)).  As a result, its real GDP fell by around 12.7 per cent in 2002, 
before resuming sustained growth of around 6.1 per cent a year on average between 2003 and 2006 (Table I.2).  Since 2003, economic growth has been driven mainly by an increase in industrial 
activity (particularly in the IFZ), construction a nd public works, and telecommunications, financial 
and transport services;  very little growth has been recorded in the agricultu ral sector due to its low 
level of productivity, a situation exacerbated by climate disturbances. 
6. Consumption has been sustained by an increase in public sector spending and by investment 
spending.  Public spending reached approximately 21.8 per cent of GDP in 2006, of which slightly 
more than half was on public investment.  To tal budgetary revenue stood at approximately 
17.6 per cent of GDP in 2006, of which around a third consisted of grants.  The 2006 primary 
budgetary deficit of around 4.4 per cent of GDP is financed by development aid (net) (grants minus 
debt servicing), estimated at 10.4 per cent of GDP  in 2006.  One of the measures taken since 2006 has 
been to step up the monitoring and control of revenue from foreign trade and, according to the 
authorities, under the 2008 Finance Law there is to be  tighter control of exemptions as part of the 
simplification of the tax system.  In addition, the progressive implementation of the new Government 
Procurement Code provides a legal framework whic h, in principle, favours competitive bidding and 
may contribute to the improved use of public finances (Chapter III(4)(iv)). 
                                                     
 
4 World Bank Group (2005). 
5 IMF (2007b). Madagascar WT/TPR/S/197 
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Table I.2 
Main economic indicators, 2000-2006 
 2000 2001 2002 2003 2004 2005 2006 
National accounts Annual variation, per cent 
Real GDP at market prices 4.7 6.0 -12.7 9.8 5.3 4.6 4.9 
   Import duties and taxes 15.2 10.5 -23.5 34.4 7.6 6.3 6.3 
Real GDP at factor cost 3.7 5.5 -11.4 7.4 5.0 4.4 4.7 
Primary sector 1.0 4.0 -1.3 1.2 3.1 2.5 2.1 
   Agriculture -2.1 5.8 0.7 2.6 3.5 4.5 2.6 
   Livestock 2.9 5.9 2.6 4.1 3.3 0.8 1.8 
   Forestry 5.6 -6.2 -20.3 -14.8 0.0 0.7 1.4 
Industries 7.1 8.8 -19.9 16.5 10.2 5.8 7.7 
   Food, beve rages and tobacco  6.0 1.1 -10.2 7.1 3.9 0.0 4.5 
   Energy 5.6 -4.3 -31.1 9.7 5.9 2.8 4.1 
   Industrial Free Zone (IFZ) 25.0 26.0 -39.7 73.7 25.8 0.0 0.0 
   Construction 8.1 17.5 -14.9 28.8 30.1 18.7 22.6 
   Other 5.3 18.9 -24.3 12.6 87.0 13.3 12.9 
Services 5.0 6.2 -15.0 10.6 6.0 6.1 7.1 
   Transport 4.0 4.6 -24.3 15.4 5.7 5.2 7.4 
   Commerce 2.1 5.3 -7.4 4.2 3.4 4.5 4.5 
   Administration 0.0 2.3 1.8 6.2 1.7 2.9 2.0 
   Other services  9.8 8.4 -15.6 10.2 6.2 6.6 7.3 
 Percentage of GDP 
Final consumption 92.3 84.7 92.3 97.1 93.9 91.4 88.7 
   Public 6.8 8.3 8.2 10.5 9.1 9.0 8.8 
   Private 85.5 76.4 84.1 86.6 84.8 82.4 79.9 
Total investment 15.0 18.5 14.3 16.2 24.0 26.0 26.7 
   Public 6.7 7.3 4.8 7.2 10.0 9.3 10.6 
   Private 8.3 11.2 9.5 9.0 14.0 16.7 16.1 
Exports of goods and non-factor services 30.7 29.1 16.0 19.9 35.0 28.2 28.5 
Imports of goods and non-factor services 38.0 32.3 22.6 33.3 52.9 45.5 43.9 
Price index (December 2000=100) .. .. 125.2 122.6 154.1 .. .. 
External sector US$ million 
Trade balance -103.7 14.8 -48.4 -254.3 -435.8 -593.1 -546.7 
   Exports f.o.b. 828.9 964.8 499.1 857.0 990.2 856.0 974.1 
   Imports f.o.b. -932.6 -950.0 -547.6 -1,111.3 -1,426.0 -1,449.1 -1,520.7 
Current account -211.5 -60.0 -199.0 -324.4 -397.3 -547.8 -483.4 
Current account (percentage GDP) -5.3 -1.3 -4.4 -5.9 -9.1 -10.9 -8.8 
Transfers of capital and financial accounts 159.7 228.5 93.4 225.3 406.5 413.0 828.2 
Overall balance -124.6 24.8 -132.4 -38.3 -37.3 -39.7 234.0 
Gross reserves 288.4 404.2 352.7 398.5 493.5 .. .. 
   In weeks of goods and non-factor 
services imports 10.2 14.3 19.2 11.9 11.7 .. .. 
Nominal effective exchange rate 
(1990=100) .. .. .. .. .. .. .. 
Real effective exchange rate (1990=100) ..  .. .. .. .. .. .. 
Exchange rate (MGA/US$) 1,357.4 1,318.3 1,318.5 1,240.6 1,870.8 2,003.0 2,142.3 
Financial transactions by the State US$ million 
Revenue and grants 593.2 636.0 446.9 843.9 884.7 839.9 3,277.7 
Total expenditure and net loans 643.8 798.7 689.3 1,069.6 1,094.4 1,027.6 1,151.2 
Net cost of structural reforms  -71.3 -33.8 0.9 -3.1 -4.7 -4.2 -4.6 
Balance (commitment basis, including 
grants) -121.9 -196.6 -241.6 -228 .9 -214.4 -192.0 2,121.9 
Variation in arrears -9.3 -4.1 -31.1 -33.1 -33.8 -27.1 -41.6 
Balance (transactions basis, including 
grants) -131.2 -200.7 -272.7 -262 .0 -248.2 -219.0 2,080.2 
Balance (transactions basis, including 
grants in percentage of GDP)  -3.3 -4.4 -6.2 -4 .8 -5.7 -4.3 37.8 
Table I.2 (cont'd)WT/TPR/S/197 Trade Policy Review 
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 2000 2001 2002 2003 2004 2005 2006 
Financial indicators (end of period) Annual variation, per cent 
M1 money supply .. .. .. 2.1 19.1 1.1 24 
Quasi money .. .. .. 23.7 6.6 60.6 67.4 
M3 money supply 18.7 24.4 7.1 8.2 23.8 3.1 25.9 
External debt servicing (SDR million) 12 8.9 118.9 130.0 112. 6 111.0 108.9 116.7 
   After relief (SDR million)  69.3 44.3 52.3 74. 8 85.5 81.5 43.6 
   After relief (percentage of exports of 
goods and non-factor services) 7.7 4.3 9.0 5.8 8.5 8.9 3.9 
Total external debt (percentage of GDP) 106.4 89.5 97.9 88.7 117.7 81.4 28.8 
Total external debt (percentage of exports 
of goods and non-factor services) 346.8 308.0 611.3 412.6 366.0 .. .. 
.. Not available. 
Source : Central Bank of Madagascar, Annual report, vari ous issues, and IMF Country Report No. 05/321, p122. 
7. Monetary policy is managed by the Central Bank of Madagascar (BCM).  Since 2005, this 
policy has tried to limit the inflationary pressures that arose in 2004 by controlling the growth of the M3 money supply, while taking care not to hamper financing of the private sector.  The instruments of 
the monetary policy are the key interest rate (reduced  to 12 per cent as of the third quarter of 2006) 
and the reserve requirement (15 per cent for overa ll deposits).  The BCM regularly informs the public 
of its monetary policy by publishing a quarterly bulletin in the press.  The inflation rate is particularly 
influenced by the price of rice – th e Malagasies' staple food.  The libe ralization of the price of fuel at 
the pump in 2004 has created another source of infl ationary pressure.  Since its first TPR, Madagascar 
has experienced several periods of inflationary pr essure, linked most notably to rice shortages, as was 
the case in 2005. 
8. The monetary unit is the ariary (MGA), whic h replaced the Malagasy franc in 2005.  The 
BCM intervenes in the Interbank Foreign Exchange Ma rket to mitigate the eff ects of changes in the 
supply and demand of foreign currencies, as a net buye r or seller according to the situation.  The real 
exchange rate has remained relatively stable since mid-2004, which has helped maintain the 
competitiveness of Malagasy goods and services on th eir export markets.  In 2006, thanks to the 
improvement in the current balance of external payments, to a huge inflow of foreign direct 
investment (FDI) linked most notably to mining, and to foreign aid, the country's international 
reserves saw a sharp increase of nearly 90 million sp ecial drawing rights (SDR).  Madagascar reached 
its completion point under the HIPC Initiative in 200 4 and consequently bene fited from relief which 
lowered the servicing of its external debt to 3.9 per cent of the revenue from exports of goods and 
non-factor services in 2006 and reduced the outstan ding amount of 2,661 million SDR in 2005 to 
1,119 million SDR in 2006 (30 per cent of GDP).
6 
9. Madagascar accepted Article VIII of the IMF Articles of Agreement on 18 September 1996 
and thus liberalized payments for current transactions.7  The Foreign Exchange Code adopted in 2006 
consolidates this liberalization.8  Exports of goods must be domic iled with an approved intermediary 
(primary banks or post offices approved by decree of the Minister of Finance).  Export revenue must be repatriated within 90 days of the shipping of the goods, and up to 90 per cent of it must be converted into ariary on the local inter-bank market  (10 per cent may be placed in a foreign currency 
                                                     
 
6 IMF Press Release No.04/219,  IMF and World Bank Support US$836 Million in Debt Service Relief 
for Madagascar , 21 October 2004.  Consulted at:  http://www. imf.org/external/np/sec/pr/2004/pr04219.htm 
[12 November 2007]. 
7 IMF (2006). 
8 Law No. 2006-008 of 13 July 2006. Madagascar WT/TPR/S/197 
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account).9  Capital outflows are subject to administra tive control by the Government Council, on the 
proposal of the Minister responsible for finance. 
(3) TRADE AND INVESTMENT  
(i) Trade in goods and services 
10. Madagascar's goods and services trade to nominal GDP ratio in Madagascar was around 
70.8 per cent in 2006 – roughly the same as when its trade policy was first reviewed, in 2001.  IFZ exports were severely disrupted as a result of the 2002 socio-political crisis (Chapter II(1)), but 
quadrupled between 2003 and 2006.  Not until 2006 did total exports (e xpressed in US dollars) exceed 
the level they reached in 2001, i. e. an increase of only 8 per cent since Madagascar's first TPR;  in 
SDR terms the level nevertheless declined.  Impor ts were also disrupted in 2002, but have since 
recovered and far exceed their 2001 level.  Overall,  the trade balance has been in deficit since 2002, 
although the level of deficit decreased between 2005 a nd 2006 (Table I.3).  Madagascar is also a net 
importer of services, even though the deficit has been  greatly reduced by the increase in net revenues 
from tourism, a fast-growing sector (Chapter IV(5)(ii)). 
Table I.3  
Balance of payments, 2000-2006  
(US$ million)  
 2000 2001 2002 2003 2004 2005 2006 
1 – Current transactions -211.5 -60.0 -199.0 -324.4 -397.3 -547.8 -483.4 
1.1 Goods and services  -276.4 -146.6 -227.2 -552 .6 -646.4 -710.9 -617.1 
Trade balance -103.7 14.8 -48.4 -254.3 -435.8 -593.1 -546.7 
Exports f.o.b. 828.9 964.8 499.1 857.0 990.2 856.0 974.1 
Imports f.o.b.  -932.6 -950.0 -547.6 -1,111.3 -1,426.0 -1,449.1 -1,520.7 
Net services -172.8 -161.4 -178.8 -298.3 -210.6 -117.8 -70.4 
Services exports 364.0 350.7 230.4 320.2 424.9 498.2 663.6 
Transport 51.3 56.3 43.4 57.7 99.9 118.1 146.2 
Travel 121.2 114.8 37.1 75.7 157.0 183.0 231.9 
Private 141.0 102.3 81.5 118.1 101.5 118.1 177.2 
Public 50.5 77.1 68.3 68.7 66.6 79.0 108.2 
Services imports -536.9 -512.0 -409.1 -618 .5 -635.4 -616.0 -734.0 
Transport -209.2 -212.5 -170.4 -230 .4 -237.2 -224.1 -264.4 
Travel -112.2 -129.8 -93.2 -63.9 -92.9 -73.8 -84.6 
Private -88.8 -83.1 -62.4 -184.5 -142.4 -165.3 -231.0 
Public -126.6 -86.6 -83.2 -139.7 -162.9 -152.8 -154.1 
1.2 Investment income -70.3 -59.3 -70.5 -77.1 -76.5 -78.4 -80.0 
Revenue 21.9 23.9 26.8 16.4 15.2 23.6 29.4 
Investment income 0.3 12.9 9.4 8.5 8.0 14.0 18.5 
Other 21.6 11.1 17.3 7.8 7.3 9.6 10.9 
Of which:  used 11.2 10.8 17.0 7.8 7.3 9.2 10.9 
Payments -92.2 -83.3 -97.3 -93.5 -91.8 -101.9 -109.4 
Investment income -88.0 -90.9 -97.3 -88.7 -85.7 -88.4 -99.7 
Dividends -29.5 -38.2 -37.8 -31.7 -23.2 -38.4 -71.5 
Interest on debt -58.4 -52.7 -59.5 -57.0 -62.4 -50.0 -28.2 
Used -4.2 -11.5 0.0 -4.8 -6.1 -13.4 -9.7 
1.3 Current transfers 135.3 146.0 98.8 305.3 325.4 241.5 213.7 
Public administration 33.6 31.8 8.3 145.0 162.8 64.4 68.1 
Budgetary assistance 21.8 46.7 29.4 130.5 142.5 78.7 80.3 
European Union 21.8 22.8 26.9 76.6 20.7 42.1 28.1 
World Bank n.a. n.a. 2.5 0.0 88.6 0.0 0.0 
Other n.a. n.a. n.a. 0.0 0.0 6.5 17.6 
Table I.3 (cont'd)
                                                      
9 Circular No. 005 of 30 June 1994. WT/TPR/S/197 Trade Policy Review 
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 2000 2001 2002 2003 2004 2005 2006 
HIPC relief n.a. 23.9 n.a. 29.0 33.1 30.1 34.7 
Other net 11.9 -14.9 -21.2 14.6 20.3 -14.3 -12.2 
Other sectors 101.7 114.2 90.5 160.3 162.6 177.1 145.6 
2 – Capital operations 114.7 112.8 59.4 140.7 180.4 160.3 2,574.2 
Public administration 114.7 112.8 59.4 140.7 180.4 160.3 2,574.2 
Project grants 114.7 112.8 59.4 140.7 180.4 160.3 2,574.2 
Of which MDRIa n.a. 0.0 0.0 0.0 0.0 0.0 2,284.5 
3 – Financial operations 45.0 115.7 34.1 84.6 226.1 252.7 -1,746.0 
Direct investment 69.8 93.1 8.5 12.8 52.8 85.6 221.3 
Other investment -24.8 22.7 25.6 71.9 173.3 167.1 -1,967.4 
Draws 114.7 114.8 160.1 207.4 302.0 265.4 -1,837.9 
Public  112.9 111.0 160.1 207.4 302.0 265.4 -1,837.9 
Public Investment Programme (PIP) 60.9 76.9 72.7 155.1 227.0 185.8 190.5 
Budgetary assistance 52.0 34.1 87.4 52.3 75.0 79.6 75.6 
MDRIa n.a. n.a. n.a. 0.0 0.0 0.0 -2,103.8 
Private 1.8 3.8 0.0 0.0 0.0 0.0 0.0 
Amortization -106.6 -97.0 -106.5 -112.7 -115.3 -96.4 -63.4 
Public n.a. -87.5 -96.0 -105.8 -100.9 -88.9 -54.9 
Private n.a. -9.5 -10.5 -6.9 -14.4 -7.5 -8.5 
Banks net -33.0 4.8 -28.1 -22.8 -13.5 -1.9 -66.0 
4 – Errors and omissions  -72.8 -143.7 -26.9 60.8 -46.3 94.9 -110.7 
5 – Overall balance -124.6 24.8 -132.4 -38.3 -37.3 -39.7 234.0 
6 – Reserves and other financing 124.6 -24.8 132.4 38.3 37.3 39.7 -234.0 
IMF net 45.9 27.2 11.6 8.1 43.7 4.7 -190.2 
Purchases 50.1 28.9 15.2 16.0 51.6 16.7 11.6 
Repurchases -5.0 -1.7 -3.6 -7.8 -8.3 -12.0 -201.8 
BCM reserves net [increase]   -7.5 -125.1 41.8 -24.2 -72.5 -10.2 -65.0 
Exceptional financing 86.3 73.1 79.1 54.4 66.3 45.3 21.3 
n.a. Not applicable. 
a Multilateral Debt Relief Initiative. 
Source:   Central Bank of Madagascar, Annual report 2006, online at: http://www.banque-centrale.mg/. 
11. The structure of trade in Madagascar has not changed much since 2001.  Roughly half of all 
exports are primary products (shr imps, vanilla, cloves, chromite a nd graphite) and one quarter are 
exports of clothing from the IFZ (Chart I.1 and Ta ble AI.1).  Madagascar imports all of its oil 
requirements (20 per cent of the total in 2006);  imports of medicines and other consumer goods and 
machinery and equipment are also substantial, as ar e imports of textiles for the production of clothing 
in the IFZ (Chart I.1 and Table AI.2). 
12. The European Union is the primary destin ation for exports from Madagascar, with a 
63 per cent share in 2006 (mainly fishery products, vanilla and other primary products), followed by 
the Unites States (16 per cent).  The European Un ion (EU) is the main source of imports into 
Madagascar (Chart I.2 and Tables AI.3 and AI .4), although imports of oil from Bahrain and 
manufactured products from China are also substantia l.  Madagascar's trade with Mauritius and other 
neighbouring countries remains limited. 
(ii) Investment 
13. Since the end of the socio-political crisis, the authorities have focused on improving the 
business climate in order to attract investment.  They have added a large-scale mining investment framework to the IFZ incentive fra mework (Chapter II(4)) with a view to starting up a number of Madagascar WT/TPR/S/197 
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large projects (Chapter IV(3)(i)).  The privatiza tion programme has led to significant divestiture, 
particularly in the field of telecommunications  (Chapter III(4)(iv)), thus favouring FDI flows. 
14. FDI stock almost quadrupled between 2003 a nd 2006, rising from MGA 277 billion in 2003 
to MGA 1,014 billion in 2006.  Mining investments of Canadian origin made Ca nada the main source 
of FDI in 2006, with around 38 per cent, followe d by France with 23 per cent and Mauritius with 
10 per cent.  However, the financial market is r udimentary, so portfolio investments are almost 
non-existent. 
(4) OUTLOOK  
15. Subject to  social and political stability, the economic outlook for Madagascar is on the whole 
good in the short and medium term.  Counting on substantial FDI flows in the mining sector 
(Chapter IV(3)(i)) and an increase in external development assistance, the authorities envisage an 
average annual economic growth rate of about 8 per cent for the 2007-2011 period.10 
16. Mining investments in particular, followed by economic growth, should lead to an increase in 
imports, particularly of mining machinery and equipm ent.  Despite the deterioration of the external 
current account which is likely to ensue (20 pe r cent of GDP) and which is expected to last 
notwithstanding mining exports (due to payments and dividends), the balance of payments should 
remain in surplus (with gross o fficial reserves estimated at 3.9 months of imports by 2010, not 
including those generated by mining projects) because of significant FDI flows.11  Such a 
performance should allow for the fulfilment (in this  period) of the MAP objectives, whose cumulative 
cost (projects relating to governance, health, education, inter alia ) has been estimated by the 
authorities, in collaboration with the IMF and the Wo rld Bank, at US$11.6 billion;  the financing plan, 
however, is far from complete.12 
17. As implementation of the current monetary polic y continues, inflation should drop steadily to 
5 per cent by the end of the period.  Better mon itoring of Central Bank refinancing, an increase in 
government revenue through improvement of th e tax and customs regimes (including their 
administration) and further privatization of public  enterprises in financial difficulty (most notably 
JIRAMA, the water and electricity supplier) are expe cted to contribute to a downward trend in the 
public finance deficit, for which no cure is envisaged  given the substantial public investment planned 
under the MAP. 
18. Overall, the various reforms are expected to improve the business environment and create 
favourable conditions for private investment. 
                                                      
10 According to the IMF, the annual economic growth rate should be around 5.6 per cent in 2007 and 
2008, an increase over the rate of 4.7 per cent recorded in 2006.  The volume of exports should rise from 3.8 per cent in 2006 to 4.1 per cent in 2007 and 5.2 per cent in 2008. 
11 The appearance of "Dutch disease"  in the economy and substantial appreciation of the ariary due to 
FDI flows could hinder the export performance of traditional products. 
12 IMF (2007(c)) WT/TPR/S/197 Trade Policy Review 
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0%10%20%30%40%50%60%70%80%90%100%
2000 2001 2002 2003 2004 2005 2006Chart I.1
Structure of trade in goods, 2000-2006
(a) Exports, including re-exports (f.o.b.)
(b) Imports (c.i.f.)
0%10%20%30%40%50%60%70%80%90%100%
2000 2001 2002 2003 2004 2005 2006
Source :      WTO Secretariat calculations on the basis of data from the Comtrade database, United Nations Statistics
                    Division (UNSD) (SITC, Rev.3).Mining Spices (except pepper) Articles of apparelAgriculultural raw materials Crustaceans, frozen Textiles
Other food products Machinery and transport equipment Other
Rice Chemicals Transport equipment
Other semi-manufactures Fuel Textiles
Other primary products Non-electrical machinery Other
Iron and steel Electrical machinery
 Madagascar WT/TPR/S/197 
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%2000200120022003200420052006Chart I.2
Direction of trade in goods, 2000-2006
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%2000200120022003200420052006(a)  Exports, including re-exports (f.o.b.)
(b) Imports (c.i.f.)
Source :        WTO Secretariat calculations on the basis of data from the Comtrade database, United Nations Statistics
                      Division (UNSD) (SITC, Rev.3).Germany UnitedStates China
Italy FranceUnited Kingdom
Africa Other
Bahrain Germany IndiaSouth Africa United States China Other
France Japan Mauritius