Country Summary

Macroeconomic performance and outlook

Real GDP growth in 2019 is estimated at 5.2%. The primary sector, with 22.4% in 2019, is driven by traditional agriculture, greatly exposed to the effects of climate change (droughts, cyclones). In a shifting environment, exporting companies (extractive industries in an export processing zone) drove the secondary sector’s contribu- tion up from 18.5% in 2015 to 21.3% in 2019. There was no significant change in the tertiary sector (growth of 0.8 point), the largest in the economy, with 58% of GDP in 2019, but driven by the least productive sectors, where informal activities are concentrated (trade, transport).

Public finances improved with increased tax collec- tion to reach an estimated 12.2% of GDP in 2019, up from 10.5% in 2015. Although public investment spending rose steadily, from 3.5% of GDP in 2015 to 8.3% in 2019, it remains inadequate to meet infrastructure requirements.

The budget deficit, 1.5% of GDP in 2018, rose to 2.4% in 2019 and is expected to climb to 4.1% in 2020 and 4.9% in 2021. The current account, after a surplus of 0.8% of GDP in 2018, shifted to a deficit of 0.2% in 2019, and is expected to widen to 1.5% in 2020 and 2.4% in 2021. The risk of external debt overhang, moderate in 2015, moved to low in 2019, according to the IMF. Inflationary pressures remained strong between 2015 and 2019, reaching a high of 8.6% in 2018, and gradually falling to 6.2% in 2019.

Tailwinds and headwinds

Real GDP growth is projected at 5.3% in 2020 and 5.1% in 2021, driven by public and private investments in infrastructure (port, airport, roads, energy).

To support public investment, a high priority should be to mobilize more government revenue. Prudent

monetary policy has consolidated the central bank’s gross official reserves (4.3 months of imports in 2019 compared with 2.4 months in 2015). Inflation should also lessen, to 6.1% in 2020 and 5.8% in 2021.

To support monetary policy and consolidate foreign trade, the authorities should focus on promoting import substitution industries for food products and interme- diate goods. The most structured and productive sub- sectors in services (telecommunications, banks, and insurance) are still underdeveloped (4% of GDP in 2019) but have been increasingly dynamic. Greater support for them could promote greater growth and the creation of decent jobs over the next few years.

A more open African market through regional inte- gration could become an outlet for food surpluses, as long as there is infrastructure to improve access and facilitate trade.

The country is vulnerable to external shocks, specifi- cally a drop in nickel and vanilla prices and a rise in the prices of oil and imported goods. The economy remains heavily dependent on imported goods (food and inter- mediate products, oil products), which represent more than 71% of imports.

The strongest value-added export commodities (vanilla, cloves, cocoa beans) are grown on small farms, and the food industry remains underdeveloped (barely 2% of GDP), with almost no progress in recent years. Public policies have not eased the structural constraints on the sector (lack of roads, financing, energy), the inse- curity in production areas, or the difficult access to land and financing.

Almost 80% of the population works in agriculture based on subsistence crops (rice, cassava, corn), and jobs in the sector are mainly low paying, with consider- able underemployment. The poverty rate in agriculture was 86.4% in 2013.

Health sector preparedness

Madagascar’s health system is ill-prepared to face the pandemic. The 2018 Global Health Security Index ranks Madagascar 86 among 195 countries globally, with a score of 40.1 (of 100). The country received a very low score of 0.6 for health capacity in clinics and hospitals, ranking 194 for this criterion.

Policy responses

Once the first confirmed cases of COVID–19 appeared, the public authorities took strong measures, declaring a health emergency that included restrictions on public gatherings and travel. On a therapeutic level, the gov- ernment quickly adopted a traditional plant-based treat- ment, labeled Covid Organics (CVO). For the private sector, the public authorities established a six-month tax break for tourism businesses and delayed employer contributions to the national social security fund (Caisse Nationale de Prévoyance Sociale) until late July 2020. To face the crisis, the government should accelerate the implementation of a global response plan to better coordinate the health response with economic and social measures. Particular attention must be paid to implementing a transparent mechanism for managing crisis-related funds.

Source: African Economic Outlook 2020

Fixed Income


  • The government securities yield curve extended to 3 years with three benchmark points along the curve (1-2 and 3 years). 
  • The issuance strategy is to finance budget deficits. 
  • Madagascar is 37th in the ABMDI 2017 Ranking Report. 

The Central Government's debt at end-December 2019 was estimated at MGA 17,214.9 billion (c/v USD 4,794.4 million), equivalent to 33.2 percent of Gross Domestic Product.

Domestic debt accounts for 22.5% of the Central Government's total debt, i.e. MGA 3,869.4 billion (c/v USD 1,077.6 million). Domestic debt is mainly composed of short-term and high interest rate Treasury Bills by Auction (BTAN). The State's debt portfolio remains exposed to both interest rate and refinancing risks. This is mainly due to the issuing of domestic public securities, most often short-term and at a high interest rate, to meet the State's growing financing needs.

External debt, mostly concessional (91.7%), constitutes 77.5% of the public debt portfolio, 54.8% and 26.8% of which are exposed to the US Dollar (USD) and the Euro (EUR) respectively.

Issuance strategy 

The implementation of the latest Medium-Term Debt Strategy (MTDS) 2019-2021 for the 2019 results in a preferred debt portfolio composition that minimizes costs and risks by taking into consideration various parameters for the period 2020-2022.

During 2019, an increase in drawings on the domestic debt is recorded, i.e. MGA 3,199.5 billion against MGA 2,840.5 billion initially planned to meet the State's cash flow needs. Draw-downs on BTAs amounted to MGA 2,081.5 billion, accounting for 65.1% of total domestic debt draw-downs, while those on medium-term Treasury Bills (2- and 3-year BTFs) amounted to MGA 428.4 billion, i.e. 13.4%. The actions conducted with a view to popularizing medium-term Treasury Bills have borne fruit. 2-year and 3-year FIHARY Treasury Bills (BTFs) are gaining ground on the domestic government securities market, although this is still less for Treasury Bills by Auction (BTAs).  Regarding the break-down of subscriptions to government securities (excluding negotiable debt securities) by banking and non-banking sector, the banking sector holds about 66% of the shares. For BTAs and BTFs, the banking sector holds about 82% and 70% respectively. While 100% of subscriptions in BTS are held by the non-banking sector.

Regarding external debt, the strategy recommended for the State is to step up recourse to concessional external borrowing, accompanied by various risk target indicators related to debt management in order to control refinancing, interest rate and exchange rate risks at the end of 2022. However, there are plans for an increase in the use of semi-concessional and non-concessional borrowing, but at a limited level compared to previous years in order to meet the State's financing needs. To limit exposure to interest rate fluctuations, long-term fixed-interest external loans are preferred to variable-rate loans.

 [Source: Annex to Draft Law No.005/2019 on Finance Law 2020]

Benchmark issues 

Yield curve construction is not taken into account in the issuance strategy. However, the government of Madagascar targets 1-2 and 3 years as benchmarks maturities. The auction and underwriting methods are used for securities issuance. There is no benchmark yield curve in Madagascar. 

Yield curve 

There is no yield curve in Madagascar and the government issuance strategy does not plan to build a benchmark yield curve. 

Challenges in building an efficient yield curve 

  • Narrow investor base: commercial banks are the main investors in government securities. Based on banks’ seasonal liquidity. 
  • Illiquid secondary market

Guide to Buying Bonds

Procedures for market participation 

The participation rules for the treasury bill market are available on the Central Bank's website; these rules differ depending on whether the treasury bills are short-term or medium-term bills. 

To participate in Medium-Term Treasury Bills (Fihary Treasury Bond) auctions, it is necessary to hold an account with the Malagasy Treasury. The participation is organised as follows: from the 1st to the 10th of the month, only commercial banks can participate for up to 50%, the non-banking sector can participate in the other 50%; from the 11th to the 15th of the month, all other investors can participate. 

A bank account is required to participate in BTA auctions. Auctions are open to everybody. The minimum subscription amount for competitive and non-competitive bids is 20 million Ariaries and a sum equal to 5% of the bid is required initially; any additional bid must be made in tranches of 10 million Ariaries.

Settlement Cycle

After 8:50 am which is the deadline for the receipt of bids, no bid can be withdrawn or modified. All non-bank subscribers must make a deposit equal to 5% of the nominal amount of their bids at the time of submission.  Once the bids have been accepted, the subscriber must fund his cash account with the BFM with the net amount to be paid on the Thursday following the auction:

  • before 12:00 p.m. for the submission of the cheques.
  • before 4 p.m. for receipt of the bank's credit advice or transfer order.

Treasury Securities Specialists

Currently, nine (9) out of the eleven (11) banks are market intermediaries of BTAs to drive the secondary market. According to the provisions of the BTA intermediation agreement, these market intermediaries must post their daily BTA buying and selling rates.


The income tax on movable capital assets is the tax rate applicable on all interest payments and is set at 21%. The income tax on movable capital assets is declared intermittently (on the 15th of the month following the distribution of capital gains).


Credit rating

Rating agency Current rating Perspectives
Standard and Poor’s B- Negative

Openness to international investors

The Economic Development Board of Madagascar (EDBM) continues to provide support to foreign investors, despite the temporary suspension of funding by the World Bank. The Malagasy Government encourages public foreign investment by making it as non-bureaucratic as possible; it now takes four business days to register a business and one week to gather the necessary signatures for business start-up.

Furthermore, there are no law or regulation authorizing private firms to adopt articles of incorporation or association that limit or prohibit foreign participation or control.

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