The Development Challenge

	Malagasy baby being weighed, one means of determining if the baby has had proper nutrition. Photo Credit: Santénet

The Government of Madagascar (GOM), led by President Marc Ravalomanana, is engaged in an ambitious effort to address the country's immense development challenges. Stricken with widespread poverty and endemic corruption, Madagascar has an average per capita income of only $260; 70% of its population lives below the poverty line; 49% of children under five years of age are malnourished; infant, child and maternal mortality rates are unacceptably high and life expectancy is only 55 years; HIV prevalence is 1.1%; the annual population growth rate is high at 2.8%; and, 46% of the population is illiterate. The projected 2004 real GDP growth rate of 5.3% is considerably less than the 9.6% rate of growth achieved last year. Overall macroeconomic management has been sound, but the economy was been buffeted by a rapid depreciation of the currency in early 2004, and rising world prices for rice and petroleum products, resulting in a projected inflation rate of 24.3%. In mid-2004, Madagascar reached the Completion Point under the Highly Indebted Poor Countries Initiative, resulting in extensive cancellation of sovereign debt ($1.9 billion USD). Based on sound economic, governance, and social investment indicators, Madagascar was selected as one of the first of 16 countries worldwide eligible to receive Millennium Challenge Corporation (MCC) funding.

Under the country's Poverty Reduction Strategic Plan (PRSP), GOM development priorities emphasize good governance, economic growth, and social welfare. To promote good governance, the GOM has established an Anti-Corruption Commission in the Presidency, as well as an independent, anti-corruption agency, both of which are supported by USAID under the Presidential Anti-Corruption Initiative. The GOM also requires public disclosure of assets by state officials; is introducing public finance and customs sector reforms; is working to reduce the illicit trade of precious and semi-precious gemstones; and has canceled illegal forestry permits and banned exports of endangered species. To stimulate economic growth, the GOM has strengthened partnerships with the private sector, and with donor support will have invested over $1 billion in roads and other transportation infrastructure by 2005. The GOM also declared a two-year tax holiday on investment and limited consumer imports, and has opened the sale of land to foreign investors. Recognizing the importance of its unique environment to the long-term health of the Malagasy economy and the welfare of its people, and building upon support of USAID and other donors, the GOM has dramatically increased planned protected areas from 1.7 million to 7 million hectares. In the social sector, the GOM is committed to preventing the spread of HIV/AIDS; fighting malaria; strengthening health care at the community level; and increasing access to and quality of primary education through its "Education for All" program.

Installed in 2002, the Ravalomanana government maintains considerable public support for its ambitious programs. However, it faces a number of risks: that a weak and poorly equipped bureaucracy will be unable to accomplish many of the planned reforms and results; that ambitious social programs will outstrip government revenues; that the public will grow impatient with the pace of reform under the weight of grinding poverty and rising food prices; that vested interests will retard the reform agenda; that foreign investment will fail to materialize at the rate necessary to met economic growth objectives; or, that natural disasters -- the country is vulnerable to annual cyclones -- will undermine GOM progress. USG development assistance mitigates these risks.

Donor Relations: USAID maintains positive and constructive relationships with all Major donors in Madagascar . The country's major donors are: the World Bank (governance, institutional development, public finance, judicial reform, gemstone trade, Maternal/Child Health, HIV/AIDS, environment, education, privatization, agriculture, food security, rural development, micro-credit), EU (public finance, judicial reform, environment, agriculture, rural development, food security, transportation infrastructure), United Nations System (Maternal/Child Health, family planning, environment, rural development, food security, disaster mitigation), France (judicial reform, public finance, Maternal/Child Health, family planning, environment, rural development, food security, micro-credit, agriculture, urban development), the United States and Japan (health and behavior change). Governance and institutional development are the central themes of World Bank and IMF support. The World Bank is the lead HIV/AIDS and education sector donor in Madagascar . Madagascar also receives funding from the Global Fund for AIDS, Tuberculosis and Malaria, and the Global Alliance for Vaccinations and Immunizations. The World Food Program is the lead donor for food security in the country.