Country Summary

Macroeconomic performance

Real GDP growth reached an estimated 5.0% in 2018, up from 4.2% in 2017. The agricultural sector expanded by 4.5% in 2018 (down from 6.6% in 2017). The industrial sector expanded by 6.7%, driven mainly by textiles and the manufacture of essential oils. Despite the plague epidemic in early 2018, the service sector expanded by 5.4%. Growth in aggregate demand in 2018 was driven largely by public and private investments in infrastructure (roads, airports, energy, and the port of Toamasina). External demand for textiles, vanilla, and essential oils also contributed to growth.

The budget deficit was contained at an estimated 2.3% of GDP in 2018, compared with 2.4% in 2017, thanks to measures targeting some low-priority expenditures. Total public debt, 70% of which is from multilateral creditors, fell from 38.4% of GDP in 2016 to 35.1% in 2018. According to the International Monetary Fund, public debt remains sustainable, with a moderate risk of external debt overhang. Inflation declined slightly from 8.3% in 2017 to an estimated 7.7% in 2018. Gross official reserves reached 4.1 months of imports in 2018. The current account deficit deteriorated to an estimated 2.0% of GDP in 2018, due to a 19% rise in the value of oil imports and a 13% rise in the value of capital goods. Exports are dominated by products with little added value, including cloves, vanilla, and mining products.

Tailwinds and headwinds

Real GDP growth is projected to be 5.4% in 2019 and 5.2% in 2020. The main drivers remain transport, energy, public works, extractive industries, and businesses in the export processing zone. Inflation is projected to level off at 7.1% in 2019 and 6.1% in 2020.

Madagascar has a comparative advantage in some niche products (such as cloves, lychee, vanilla, cocoa beans, green coffee, and essential oils) that can be easily processed locally with high value added. Effectively implementing industrial policy and the special economic zone regime could turn this potential into jobs and economic growth.

Political instability that could result from the 2018 presidential election is the greatest risk to economic prospects. In addition, Madagascar has benefited little from membership in the Indian Ocean Commission, the Southern African Development Community, and the Common Market for Eastern and Southern Africa and from being a signatory to the African Continental Free Trade Agreement. Like other island states, it faces high transportation costs. The infrastructure deficit makes commercial transactions expensive, hindering private sector competitiveness. To better integrate with the rest of Africa, the country should improve logistics at the main ports and airports and along the main corridors. Applying international norms and standards and eliminating nontariff barriers could boost trade with regional partners.

Madagascar faces a high incidence of poverty and inequality. The electricity access rate, 15.2%, is one of the lowest in Africa. Agriculture is still traditional and highly vulnerable to climatic shocks, such as cyclones and drought. Other shocks, such as the 2018 plague epidemic, reduced prices for raw materials, or increased oil prices, could also compromise the country’s prospects.

Source: African Economic Outlook 2019

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. 

Issuance strategy 

The issuance strategy is to finance budget deficits. The issuance programs are conducted according to the importance of the liquidity situation in the market in order to obtain the lowest possible cost. 

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

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.

Procedures for market participation 

Participation rules to the Treasury securities markets are listed in the Malagasy Treasury website; they differ for the Treasury bills market than for the Treasury Notes market.

To participate in the Treasury Notes (Bons du Trésor FIHARY), one must open an account at the Malagasy Treasury. Participation is organized as follows: from the 1st to the 10th of each month, banks can bid up to a maximum of 50%; non-banks can bid the remaining 50%; from the 11th to the 15th: all other investors can participate to the bidding process. The minimum bidding amount is Ariary 1 million; any subsequent bids must be in tranches of Ariary 1 million.

To participate to the Treasury Bills markets (Bons du Trésor par Adjudication or BTA), investors must have an account at a bank. Auctions are open to all. The minimum bidding amount in both methods is A20 million and a minimum of 5% of the bidding amount is required upfront; any subsequent bid must be in tranches of A10 million.


Treasury bills are subject to the IRCM (Impôt sur le revenu des capitaux mobiliers) rate of 23%.

Credit rating

Standard & Poor’s stopped releasing a rating for Madagascar sovereign credit since the country experienced political turmoil, back in 2008.

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