The boards of directors of the African Development Bank (AfDB) Group have noted that Madagascar has effectively met the conditions and reached the completion point under the enhanced framework of the Heavily Indebted Poor Countries (HIPC) Initiative.

The bank group will, as a result, provide irrevocable debt relief of US$80mn in nominal terms to the country, with effect from December 2001. The debt relief will be provided by releasing Madagascar from up to 80% of its debt service obligations to the bank group each year, until the entire amount is delivered sometime in early 2013.

Madagascar reached its decision point, the first step in obtaining HIPC relief, in December 2000. On October 20, 2004, it became the 12th regional member country to reach the completion point – an achievement that resulted in US$836mn in total debt relief, in end-1999 Net Present Value (NPV) terms, from the bilateral and multilateral creditors, where the latter includes the World Bank, the International Monetary Fund (IMF), and the bank group.

The government had broadly met all the triggers that were set at the decision point to monitor the country’s progress in meeting the completion point conditions. The government, with assistance from the bank group, prepared a fully participatory PRSP in 2003 and the first annual progress report concluded that significant progress had been made in implementing the strategy.

The boards note that the country has made progress, albeit slowly, in implementing structural reforms in the areas of budgetary management, tax administration and privatisation, and had made improvements in the management of public services towards better controls and transparency. The private sector environment had also been made more business friendly through reforms of the investment code and the regulatory framework.

On the question of the use of budgetary savings from debt relief, the boards took note of the fact that resources had been used broadly in line with the criteria set forth at the decision point. Progress had also been made in the area of governance and institutional reforms with the objective of improving public financial monitoring and control.

The African Development Bank group operations in Madagascar started in 1977. To date, the cumulative commitments of the bank group in Madagascar amount to about US$810mn for 74 operations.