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Program Update on Madagascar

March 1, 2010

ANTANANARIVO, March 1, 2010 – Effective March 17, 2009, the World Bank’s operations in Madagascar have been guided by its Operational Policy OP 7.30, Dealing with de facto Governments, and no fund withdrawal requests have been processed since that date, with few exceptions (see below).

The World Bank recognizes that the existing political situation and the global financial crisis are exacting a heavy toll on Madagascar’s economy, leading to a decline in economic growth and job losses. With a view to minimizing adverse impact on the lives of poor Malagasy citizens, the World Bank has authorized in 2009, on an exceptional basis, to resume disbursements of critical project components that have a direct bearing on human well-being and to address the risks associated with the compliance of environmental and social policies. These exceptions concern five projects - nutrition, HIV/AIDS, food security (through the FID), environmental protection, and integrated growth poles – for a total amount of US$52 million. In addition, the projects that had their local accounts in Madagascar (Special Accounts) replenished prior to March 17, 2009 have continued to disburse from those accounts to pursue project activities. In 2009, disbursements from the Special Accounts and under the five exceptions have reached about US$50 million. The funds available in the Special Accounts are now almost depleted. It should be noted that the World Bank portfolio in Madagascar (totaling 16 projects) represents a commitment of about US$1 billion of which about US$330 million remain to be disbursed.

In the education sector, of the US$85 million that was authorized by the Catalytic Fund for the Education for All initiative for Madagascar, we were able to obtain the transfer US$15 million to UNICEF so that education programs can continue uninterrupted. Due to the political crisis and delays in project implementation, the Board of the Catalytic Fund has reallocated US$21 million to other countries. In July 2010, the Catalytic Fund will review the situation and then decide on whether to continue the program and the use of the remaining funds (US$49 million).

These various efforts were designed to avoid a situation in which the most vulnerable segments of the population targeted by our programs are disproportionally affected by the crisis. In the interest of the poor segments of the population and in order to secure their access to the benefits of development, we can only hope that conditions for the resumption of our activities will be in place soon. This is the reason why, even though the World Bank is not a member of the International Contact Group and therefore not directly involved in the current phase of mediation, we have nonetheless - within the limits of our mandate - continued to support the efforts of the institutions whose role it is to facilitate the identification of solutions to the political crisis.

The World Bank continues to be active in the area of analytical involvement. To this effect we are in the process of preparing a series of policy notes that will hopefully be useful in informing the public and the decision-makers about the main issues and challenges confronting the country in the various sectors and offering options for the future. The contents of these notes are discussed with the other development partners, representatives of the civil society, academic institutions, private sector and the technical staff in the ministries. We have also initiated a couple of studies on a number of strategic sectors, such as urban development, governance, agriculture marketing, health and the environment. Finally we will continue to produce monthly Economic Updates that will be posted on our web site. The last one provides details of the economic impact of the crisis in 2009. Every week that is lost to the political crisis comes with a huge cost in terms of development benefits and will only aggravate the welfare of the Malagasy population.

The World Bank will continue to monitor the situation including political developments, and periodically review the conditions under which further engagement may be warranted, to avoid that the achievements and the assets built over the last years get lost.