- IMF says Madagascar’s recovery faces fresh strain from cyclone damage and global shocks
Madagascar’s economic recovery is facing renewed strain from a combination of domestic disruption and global instability, with the International Monetary Fund warning that cyclone damage, weak tax performance, and the fallout from the war in the Middle East are eroding the country’s policy buffers at a delicate moment.
At the end of a mission to Antananarivo, IMF staff said discussions on the combined third and fourth reviews of Madagascar’s programme under the Extended Credit Facility and the Resilience and Sustainability Facility would continue in the coming weeks. If the IMF Executive Board completes and approves the reviews, Madagascar could receive total disbursements of SDR134.4m, or about $183m.
That prospect matters because Madagascar no longer deals with one shock at a time. The Fund said the economy has been hit by “a series of domestic and external shocks, including cyclone Gezani and the war in the Middle East, which are weighing on economic activity and eroding policy buffers.”
The IMF’s language is careful, but the message is clear: Madagascar is being pulled between the immediate need to stabilise its public finances and the longer-term need to keep its recovery plan alive.
The authorities are now preparing a supplementary 2026 budget for submission to parliament in early May, a move that the Fund said would reaffirm their commitment to domestic revenue mobilisation and support economic recovery. That budget is likely to become the next test of whether the government can rebuild fiscal credibility without choking off already fragile growth.
The fiscal picture is more complicated than it first appears. According to the IMF, the deficit in 2025 came in significantly lower than expected, but not because the state suddenly found a stronger revenue base. Instead, heightened cash pressures forced substantial spending restraint, even as the new administration began redirecting investment projects to better align with its own strategic priorities. At the same time, tax revenue “underperformed markedly”.
That combination is revealing. A lower deficit, in this context, is not necessarily a sign of healthier fiscal capacity. It may equally reflect constraints, compression, and postponed expenditure in an economy that still faces deep development needs.
The Fund’s response is to push for policy discipline on several fronts at once. It said “heightened uncertainty puts a premium on contingency planning to preserve budget credibility on the one hand and allowing the exchange rate to play its shock absorber role for external sustainability on the other hand.” It also argued that the central bank should keep monetary policy tight to guard against emerging inflation pressure.
Those recommendations point to a familiar IMF balancing act. The exchange rate must be allowed to absorb external shocks, but that can bring domestic political discomfort. Monetary policy must stay tight, but that risks restraining activity. Fiscal credibility must be protected, but public needs remain large. In other words, Madagascar’s programme is now less about easy reform sequencing and more about managing conflicting imperatives under stress.
Fuel pricing sits at the centre of that tension. The IMF said it was important to maintain the application of an automatic fuel pricing mechanism after the current pause, both to limit the budget impact of higher global oil prices and to free resources for development spending. But it paired that with a warning that compensatory measures would be urgently needed to shield vulnerable households from higher pump prices and from the rationalisation of tax expenditures.
That is where the politics of reform becomes hardest. Automatic pricing may be fiscally rational, but in low-income economies it can quickly become socially combustible unless mitigation is visible, targeted, and credible.
The Fund also tried to keep sight of the longer horizon. It welcomed the government’s ambition to expand renewable energy as a way to reduce dependence on fossil fuels, and it linked the success of Madagascar’s recovery plan to deeper structural reform. In the IMF’s view, growth in priority sectors such as energy, agro-industry, textiles, tourism and ICT will depend not only on macroeconomic adjustment, but on confronting deeper governance failures.
“The IMF team noted that the success of the authorities’ economic recovery plan… hinges on advancing foundational structural reforms to address state capture and combat corruption,” the statement said. Such reforms will create a fairer environment for economic agents and promote private sector development.
That may be the most thought-provoking line in the entire mission statement. It suggests that Madagascar’s problem is not simply one of insufficient financing or temporary shocks, but of whether the state can create an economic system in which productive investment is not distorted by entrenched interests.
The IMF’s talks included meetings with President Michael Randriarinirina, Prime Minister Mamitiana Rajaonarison, Finance Minister Herinjatovo Ramiarison, Energy Minister Lucas Rabearimanga, Environment Minister Luck Andriatsihala, Central Bank Governor Aivo Andrianarivelo, as well as donors and private sector representatives.
The country is not only trying to recover from shocks. It is also being asked to prove that recovery can rest on stronger revenue, tougher policy choices, and cleaner economic governance at the same time.
