The Economy of Madagascar
A 500 ariary banknote of Madagascar(Photo credits: James Blackstock)
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 economic indicators 2007-2013 (source: http://www.meed.com)
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.
Natural resources and trade
Madagascar's natural resources include a variety of unprocessed agricultural and mineral resources. Agriculture, including raffia, fishing and forestry, is a mainstay of the economy. Madagascar is the world's principal supplier of vanilla, cloves and ylang-ylang. Other key agricultural resources include coffee, lychees and shrimp. Key mineral resources include various types of precious and semi-precious stones, and Madagascar currently provides half of the world's supply of sapphires, which were discovered near Ilakaka in the late 1990s. The island also holds one of the world's largest reserves of ilmenite (titanium ore), as well as important reserves of chromite, coal, iron, cobalt, copper and nickel. Several major projects are underway in the mining, oil and gas sectors that are anticipated to give a significant boost to the Malagasy economy. These include such projects as ilmenite and zircon mining from heavy mineral sands near Tôlanaro by Rio Tinto, extraction of nickel near Moramanga and its processing near Toamasina by Sherritt International, and the development of the giant onshore heavy oil deposits at Tsimiroro and Bemolanga by Madagascar Oil.
celestite druze first quality from Madagascar minerals
Exports formed 28 percent of GDP in 2009. Most of the country's export revenue is derived from the textiles industry, fish and shellfish, vanilla, cloves and other foodstuffs. France is Madagascar's main trading partner, although the United States, Japan and Germany also have strong economic ties to the country. The Madagascar-U.S. Business Council was formed in May 2003, as a collaboration between USAID and Malagasy artisan producers to support the export of local handicrafts to foreign markets. Imports of such items as foodstuffs, fuel, capital goods, vehicles, consumer goods and electronics consume an estimated 52 percent of GDP. The main sources of Madagascar's imports include France, China, Iran, Mauritius and Hong Kong.