IMF国际货币组织全球-Republic-of-Madagascar_Selected-Issues_47页_1mb

Summary of Selected Issues Paper on Madagascar

Core Content

This paper provides an analysis of key economic issues in Madagascar, focusing on tax revenue mobilization, public investment scaling-up, and monetary policy under excess liquidity. It aims to support the government's development goals by identifying potential improvements, challenges, and policy recommendations based on international experiences and empirical analysis.

Tax Revenue Mobilization Potential in Madagascar

Main Points

• Current Situation: Madagascar's tax-to-GDP ratio is one of the lowest in sub-Saharan Africa (SSA), currently at 10.4% of GDP.
• Growth Needs: The country has significant development needs, which require increased domestic revenue to support fiscal sustainability and priority spending in infrastructure, education, and health.
• Tax Potential: Empirical analysis suggests that Madagascar's tax potential is around 7% of GDP, which is higher than the average for SSA countries (4.8–5.5%) and other fragile states (3.9–5.0%).
• Key Revenue Sources: Taxes on goods and services, particularly VAT and excises, represent a large untapped potential.
• Challenges: Tax collection has been volatile, with periods of increase followed by sharp declines. This is attributed to political instability and institutional weaknesses.

Lessons from Other SSA Countries

• Reforms Needed: A broad range of tax policy and administrative reforms is essential for sustained revenue mobilization.
• Political Commitment: Strong and sustained political will is required to implement reforms and ensure tax compliance.
• Social Contract: Establishing a social contract between the state and citizens is critical for improving tax compliance and transparency.
• Focus on Efficiency: Improving the efficiency of tax collection and administration is crucial for maximizing the growth impact of increased tax revenues.

Recommendations

• Rationalize Tax Expenditures: Improve VAT yields by evaluating and reducing tax exemptions.
• Modernize Excise Taxes: Expand the excise tax base and optimize the management of existing excise duties.
• Continue Reforms: Strengthen the reforms initiated in 2015 by the Tax General Department, including tax controls, performance evaluation, and taxpayer identification.
• Enhance Communication: Improve coordination between tax and customs administrations to detect and prevent fraud.
• Stakeholder Engagement: Ensure stakeholder buy-in by explaining the rationale of the tax system and improving administrative procedures for taxpayers.

Scaling-Up Public Investment in Madagascar: Challenges and Opportunities

Main Points

• Infrastructure Deficit: Madagascar's infrastructure quality is below the average of low-income countries and SSA, with limited access to treated water, schools, and hospitals.
• Public Investment Trends: General government investment has been low, averaging about 5% of GDP in recent years, far below the SSA average.
• Financing Gaps: The estimated needs for public investment to realize the PEM are nearly double the projected financing for the next two years, creating a significant gap.
• PPP Contribution: Public-private partnerships (PPPs) have contributed little to date, but two upcoming hydroelectric projects could provide about 1.3% of GDP annually for five years.
• Execution Weakness: Despite increased budget allocations, public investment execution has remained low, especially for externally-financed projects.

Growth Impact

• Efficiency Matters: The growth impact of public investment depends heavily on its efficiency. Poor management and corruption can reduce the effectiveness of investment.
• DIG Model: The Debt-Investment-Growth (DIG) model is used to estimate the macroeconomic effects of public investment scaling-up. It highlights the importance of aligning investment with debt sustainability and growth objectives.
• Absorptive Capacity: The pace of scaling-up must be matched with the country's absorptive capacity to ensure successful delivery of infrastructure and economic benefits.

Recommendations

• Improve Management Practices: Strengthen public investment management to enhance efficiency and reduce the risk of corruption.
• Strengthen Institutional Framework: Develop a robust institutional framework for planning, selecting, and implementing investment projects.
• Enhance Coordination: Improve coordination among stakeholders, including international development partners, to ensure effective project execution.
• Prioritize Projects: Ensure that investment planning prioritizes the most impactful projects to maximize the growth and development benefits.

Monetary Policy Under Excess Liquidity

Main Points

• Excess Liquidity: Madagascar has experienced periods of excess liquidity, which can lead to inflationary pressures and weaken the effectiveness of monetary policy.
• Constraints on Policy: The effectiveness of monetary policy is constrained by weak institutional frameworks and limited communication between the central bank and the treasury.
• Interest Rate Channel: Strengthening the interest rate channel is critical for improving monetary policy transmission.
• Alternative Instruments: The use of alternative monetary policy instruments such as treasury bills and foreign exchange interventions needs to be evaluated for effectiveness.

Recommendations

• Enhance Communication: Improve coordination between the central bank and the treasury to better manage liquidity.
• Strengthen Policy Instruments: Evaluate the effectiveness of existing monetary policy tools and enhance their implementation.
• Improve Fiscal- Monetary Coordination: Ensure that fiscal and monetary policies are aligned to avoid conflicts and enhance macroeconomic stability.

Financial Sector Development and Access to Credit

Main Points

• Financial Sector Weakness: The financial sector in Madagascar is underdeveloped, with limited access to credit for many businesses and households.
• Tax Compliance: Improving tax compliance is essential for enhancing the reliability of taxpayer identification and reducing fraud.
• Public Investment Management: Efficient public investment management is crucial for improving the growth impact of investment scale-up.

Recommendations

• Improve Tax Compliance: Implement measures to improve tax compliance and reduce tax evasion.
• Strengthen Tax Administration: Continue reforms in tax and customs administrations to enhance efficiency and reduce fraud.
• Facilitate Access to Credit: Simplify administrative procedures and promote the use of online tax declaration and payment systems to improve access to credit for businesses.

Key Figures and Tables

• Figure 1: Tax Revenue Trends in Madagascar and SSA
• Figure 3: Tax Potential Estimate
• Figure 2: Public Investment Scale-up Challenges
• Table 1: Structure of the Financial System (as of end-December 2018)

Conclusion

Madagascar has significant potential for increasing tax revenues and scaling-up public investment, but this requires sustained political commitment, institutional reforms, and improved coordination between different sectors and stakeholders. The paper emphasizes the importance of a comprehensive revenue strategy, efficient public investment management, and alignment of fiscal and monetary policies to achieve sustainable development and economic growth.