Financial Crime World

Madagascar’s Financial Crimes Pose Threat to Economic Stability

Economic Instability in Madagascar

ANTANANARIVO - A recent report by the World Bank highlights that Madagascar’s economic stability is under threat due to persistent financial crimes. The country’s low growth potential and exposure to frequent crises have hindered its development prospects.

Quotes from Marc Stocker, World Bank Senior Economist

“The government must implement bold reforms to stimulate private investment, improve public sector governance, and reinforce resilience to shocks.”

Growth and Poverty in Madagascar

Prior to the COVID-19 crisis, Madagascar’s growth was insufficient to boost living standards and reduce poverty. The country’s GDP per capita increased at an average pace of 0.7% per year from 2013 to 2019, which is insufficient to create opportunities to lift a share of the population out of poverty.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has triggered one of the deepest recessions in Madagascar’s history, with:

  • A contraction of GDP by 7.1%
  • Income per capita decreased by 9.8%
  • Poverty rate rose to an all-time high of 80.7%
  • An additional 1.8 million people fell below the international poverty line

Future Growth Prospects

New headwinds weigh on growth prospects, including:

  • A third wave of the pandemic
  • Severe droughts
  • Escalating conflicts in Ukraine

Growth is projected to moderate in 2022, reflecting these shocks, but is expected to pick up in 2023-24 driven by a modest rebound in consumer spending and private investment.

Risks of Falling Behind

Madagascar risks falling further behind without new reforms. It would take about 10 years of uninterrupted growth to revert the loss in average incomes that occurred during the crisis, and 73 years to reach current living standards in Rwanda, which is Madagascar’s closest aspirational peer.

Recommendations for Reducing Poverty

To reduce poverty, the country needs to sustain significantly higher and more inclusive growth. This can only happen if the government implements far-reaching reforms that:

  • Enable new investments in sectors critical to job creation and structural transformation
  • Improve access to basic infrastructure
  • Increase resilience of vulnerable populations
  • Promote transparency and accountability in public policies

Boosting School Performance

Reform strategies that combine measures boosting transparency and effectiveness of teachers’ selection and evaluation, salary and school grant management, citizen engagement, school management, and teacher incentives can significantly boost school performance and learning outcomes.

Conclusion

Madagascar’s financial crimes pose a significant threat to its economic stability. The government must take bold reforms to stimulate private investment, improve public sector governance, and reinforce resilience to shocks.