Madagascar - Economy

Economy

During Madagascar's First Republic, France heavily influenced Madagascar's economic planning and policy and served as its key trading partner. Key products were cultivated and distributed nationally through producers' and consumers' cooperatives. Government initiatives such as a rural development program and state farms were established to boost production of commodities such as rice, coffee, cattle, silk and palm oil. Popular dissatisfaction over these policies was a key factor in launching the socialist-Marxist Second Republic, in which the formerly private bank and insurance industries were nationalized; state monopolies were established for such industries as textiles, cotton and power; and import–export trade and shipping were brought under state control. Madagascar's economy quickly deteriorated as exports fell, industrial production dropped by 75 percent, inflation spiked and government debt increased; the rural population was soon reduced to living at subsistence levels. Over 50 percent of the nation's export revenue was spent on debt servicing.

The IMF forced Madagascar's government to accept structural adjustment policies and liberalization of the economy when the state became bankrupt in 1982 and state-controlled industries were gradually privatized over the course of the 1980s. The political crisis of 1991 led to the suspension of IMF and World Bank assistance. Conditions for the resumption of aid were not met under Zafy, who tried unsuccessfully to attract other forms of revenue for the State before aid was once again resumed under the interim government established upon Zafy's impeachment. The IMF agreed to write off half Madagascar's debt in 2004 under the Ravalomanana administration. Having met a set of stringent economic, governance and human rights criteria, Madagascar became the first country to benefit from the Millennium Challenge Account in 2005.

Madagascar's GDP in 2009 was estimated at 8.6 billion USD, with a per capita GDP of $438. Approximately 69 percent of the population lives below the national poverty line threshold of one dollar per day. The agriculture sector constituted 29 percent of Malagasy GDP in 2011, while manufacturing formed 15 percent of GDP. Madagascar's sources of growth are tourism, agriculture and the extractive industries. Tourism focuses on the niche eco-tourism market, capitalizing on Madagascar's unique biodiversity, unspoiled natural habitats, national parks and lemur species. An estimated 365,000 tourists visited Madagascar in 2008, but the sector has declined as a result of the political crisis with 180,000 tourists visiting in 2010.