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ECONOMY – The International Monetary Fund makes suggestions

by drbyos

Recommendations, perhaps. Thoughtful thoughts, no doubt. The International Monetary Fund, IMF, in its report on informality and growth in Madagascar, published this month, puts forward ideas to be explored. “The IMF believes that easing financial constraints in order to increase and facilitate access to financial services and reduce their cost should encourage increased investment”. The analysis, focusing mainly on the informal sector and its contribution to the national economy, the IMF deduces that to facilitate access to financing, the Malagasy authorities could set up a national guarantee fund with subsidized rates and a start-up to help businesses comply with regulations. He adds: “Malagasy authorities can also design and implement effective regulations that reconcile financial stability and the opening of new financing channels for companies”. The objectives of the Sovereign Wealth Fund may be of the same nature.

But it is more designed to finance major infrastructure investments by the public sector. The IMF focuses on the concerns of the private sector, in search of accessible financing. Thus, the IMF advises that the state can also encourage investor participation. Support for the private sector through the creation of a development bank and the provision of more resources for formal financial intermediation at lower costs is also put forward. Implicitly, the IMF recognizes the importance of the informal sector on Malagasy economic life. And he wants to think outside the box. “The transition from informal to formal should consider the dimension of social protection is necessary, with a strategic approach less focused on taxation”. An obsession today to increase the rate of tax pressure reduced to the Gross Domestic Product. Everyone is now waiting for the release of the fourth tranche of the Extended Credit Facility. 24.44 million SDRs, or the equivalent of approximately 32 million dollars. The agreement in principle, following the review mission led by Fréderic Lambert from May 3 to 12, was published by the IMF on May 19. A reassuring announcement which should allay the apprehensions of operators on the front of economic recovery.

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