Key points of the agreement still under discussion

The effectiveness of implementing an automatic fuel price adjustment mechanism in Madagascar remains uncertain.

Olivier Jean Baptiste, Minister of Energy and Hydrocarbons, reiterated on the sidelines of the joint roundtable between the World Bank and the International Monetary Fund (IMF) on climate action financing that several points still need to be discussed with the IMF before the mechanism can be enforced. The text, adopted in May, regarding the introduction of an automatic price adjustment mechanism, is not yet in effect.

« We are still discussing how to implement it, as there are many factors to consider », said the government official to the press. « However, we must always take into account the social, economic, and structural aspects of globalization. There are many elements to consider, not just this decision », emphasized the Minister. These points were once again highlighted during the latest review of the IMF’s credit facility (FEC) and resilience and sustainability (RSF) projects in Madagascar, according to Olivier Jean Baptiste. The next steps remain uncertain. In its preliminary conclusions ahead of the review publication, the IMF emphasized the importance of an effective implementation of the adjustment mechanism.

Among the issues raised by the IMF are stabilization measures, such as cash transfers, that should be implemented when price increases exceed a specified quarterly threshold. The IMF also stressed the importance of properly budgeting the subsidy and ensuring its quarterly payment to fuel distributors. The decree establishing an automatic fuel price adjustment mechanism was adopted in May 2024. This decree set a cap of 200 Ariary per day (about 0.045 USD) for both price increases and decreases under the automatic price adjustments and was supposed to take effect in the second half of this year.

The adoption was one of the conditions required to reach an agreement with the IMF. Regarding its implementation, the state had requested this report, as stated by the President of the Republic in one of his speeches.