Madagascar: World Bank Provides $75M to Mitigate the Impacts of COVID-19 and Support Recovery

The World Bank Board of Directors recently approved a US$75 million development policy operation for Madagascar to mitigate the impact of the COVID-19 crisis.  

The Madagascar COVID-19 Response Development Policy Financing will help close a financing gap caused by the COVID-19 crisis while supporting key reforms to reinforce the effectiveness and transparency of the government’s crisis response and to lay the foundation for sustained and resilient recovery. 

“The economic and fiscal impact of the COVID-19 crisis in Madagascar will be substantial in 2020 and could reverse past progress in poverty reduction and deepen fragility. This operation will help the government save lives, protect the livelihoods of the most vulnerable populations and preserve jobs, while implementing policy reforms and strengthening institutions in order to lay the foundation for a stronger social and economic recovery” said Marie-Chantal Uwanyiligira, World Bank Country Manager for Madagascar. 

The COVID-19 pandemic has substantially redefined economic prospects, in particular through the collapse of international trade and tourism. Containment measures needed to halt the pandemic also had severe effects on the economy and people’s livelihoods. In this context, extreme poverty is predicted to increase in 2020, undoing three years of consecutive declines. 

This operation aims to alleviate the immediate impact of the COVID-19 outbreak and to help rebuild a stronger and more resilient economy. Policy commitments made by the Government in the context of this operation include: (i) a multisectoral national emergency plan; (ii) a dedicated COVID-19 Response Fund to transparently manage emergency spending; (iii) the simplified procedures to open individual e-money accounts to facilitate cash transfer payments to vulnerable populations; (iv) a response plan to support the private sector and protect jobs; (v) measures to sustain liquidity and access to credit for viable companies; (vi) new electricity connection and tariff structures, benefiting vulnerable populations; and (vii) measures to boost debt transparency.  Together, the program of reforms supported by this operation are expected to have positive effects on poverty. In particular, cash transfers provide direct support to vulnerable groups who have lost income as a result of the crisis and confinement measures, and enhanced access to finance, coupled with the alleviation of short-term costs, can promote business resilience.

This operation is part of a series of World Bank Group country program adjustments that comprise the activation of Contingent Emergency Response Components within the portfolio to support the government’s health, social, education, water and sanitation response; the development of new operations responding to the pandemic and reinforcing resilience to future shocks; and the frontloading of future operations to help accelerate the recovery.

This operation complements the IMF Rapid Credit Facility, additional budget support by the AFD (Agence Française de Developpement) and AfDB (African Development Bank), and participation in the G20’s Debt Service Suspension Initiative, bringing the total amount of emergency support to US$476 million this year, equivalent to 3.1 percent of GDP.