The World Bank Adopts an Interim Strategy for Madagascar

February 21, 2012

WASHINGTON, February 21, 2012 - The Board of Directors of the World Bank today discussed the Interim Strategy Note (ISN) for Madagascar. The previous Country Assistance Strategy (CAS) covering the period 2007-2011 came to an end in July 2011. However, the CAS could not be implemented given the unconstitutional change of regime triggered the start of the political crisis in early 2009. The country is not in a position to warrant the preparation of a new CAS due to the implementation of operational procedure OP 7.30 (dealing with de facto governments), which results in the absence of normal dialogue with an internationally recognized government, and poses restrictions on the borrowing capacity of the country with the World Bank.

The World Bank portfolio currently consists of 14 projects with total commitments of approximately $ 900 million and a net non-disbursed amount of $ 220 million. After an initial suspension, portfolio disbursements gradually resumed in several waves in late 2009, mid 2010 and April 2011 to (i) alleviate the plight of the most vulnerable people (ii) deal with the most pressing fiduciary, social and environmental, safeguards and reputational risks, and (iii) maintain the integrity of human and physical infrastructure of projects. In addition in June 2011, the Board agreed to an exceptional additional financing to support the third Environmental Program due to its global public good nature, and the substantial risks associated to social safeguards linked to the end of the current funding. Despite these measures, Madagascar remains under OP7.30 and the World Bank does not intend to resume normal relations with the Government at this point.

The three-year crisis and resulting suspension of international aid by many donors has had a very high cost on one of the world’s poorest populations. As a result, along with a dramatic rise in poverty levels and an alarming deterioration in governance, Madagascar is gradually sinking into a state of increased fragility. Clearly, achieving the Millennium Development Goals (MDGs) has become an increasingly distant target. The state of health and education is close to an emergency situation because the system of delivery of public services risks paralysis, and humanitarian aid, bypassing public institutions, is showing its limits. "With 77% of the population living below the poverty line, Madagascar is among the poorest countries in the world;  the population must be prevented from becoming hostage to the political crisis," said Adolfo Brizzi, Country Manager of the World Bank office in Madagascar. The infrastructure is in an alarming state of disrepair. Furthermore, exogenous shocks (financial crisis, food or oil prices) and extreme climate risks (hurricanes, drought) to which Madagascar is prone, ignore the political signals and further aggravate the vulnerability of the poor in a context where the State has only limited capacity to respond.

Given the uncertain environment in Madagascar, and despite the absence of a clear Government strategy, the ISN is considered to be the appropriate instrument for the World Bank to review its strategic position and focus its actions during this transition period. This interim strategy focuses on the most immediate short-term problems while maintaining a medium-term vision based on three themes: i) governance and public sector capacity, ii) vulnerability and resilience, and iii) employment and competitiveness. The ISN will work on the basis of four instruments. First, a portfolio restructuring to maximize its impact and reallocate funds to priority projects in the health sector and urgent rehabilitation of infrastructure. Second, the continued focus on an  analytical effort to refine the knowledge necessary to facilitate re-engagement and to raise public awareness of the cost of the crisis and the risk of fragility. Third, the building of stronger partnerships with other development assistance agencies, civil society and the private sector, to improve coordination and the impact of existing interventions. Fourth, the provision of new financing  in the health / nutrition and education sectors, to reduce the risk of  an interruption in basic services, as well as in the response to potential crises and natural disasters, in terms of the rehabilitation of infrastructure and provision of safety nets for those affected.

The ISN capitalizes on lessons learned from the World Development Report 2011, whose theme was "Conflict, Security and Development", and recommends on the one hand great attention to preventing fragility, and on the other the need to remain engaged even in situations of political instability and poor governance. In line with the entire international community, the World Bank faces the dilemma of preventing Madagascar from falling into fragility, while working in the context of an unrecognized government. “The ISN is trying to balance the importance of supporting international mediation efforts, while keeping in mind the cost of inaction on the poor, in an environment of degraded  public services and poor governance” explained Haleh Bridi, Country Director for Madagascar, Mauritius, Comoros and Seychelles.

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