This under poverty country has its Malagasy citizens living under less than two dollars a day (Raisins, 2012). It is important to understand how this low income country has contributed to their financial instability. Madagascar main exports are vanilla, coffee, seafood, cloves, petroleum products, chromium, and fabrics. They are particularly vulnerable to global shutdown because they are an open economy. The economy revenues from 80% tourism earnings, 50% export of goods, and 15% foreign direct investment (Measuring Impact of the Political Crisis, 2013).
Madagascar new president was ailing to create an important step to the five year political crisis because of the suspension of funds. The suspension caused a depriving of cash and stunting economic growth. An important organization that would help bring Madagascar back to their feet would be MIFF, International Monetary Fund. MIFF has an important role in helping developing countries like Madagascar. MIFF has six primary roles in helping developing countries. There to five policy advice to governments and central banks based on analysis of economic trends and cross country experiences.
They research statistics, forecasts, and analysis based n tracking of global, regional or individual economics and markets (International Monetary Fund). Learn to help countries overcome economic difficulties. They provide concession loans to help fight poverty to developing countries like Madagascar. Lastly, technical assistance and training to help countries improve the management of their economies. Madagascar is in desperate need of all of these things. Madagascar ranked poorly on the ease of doing business indicator. It was apparent to Africa Competitiveness Report of 2011 that Madagascar had five constraints.
There was a large issue of government instability and coups. This country is under public stress because of financial cut backs. Madagascar is doing its best to sustain their macroeconomic stability, but with falling tax revenues this country would continue to see strain. Foreign policy is unstable, access to finance was minimal, crime, theft and corruption is rising. The cost of doing business in Madagascar is unfavorable causing workers to be laid off from textile and garment firms because they have lost their eligibility under the African Growth and Opportunity Act (Measuring Impact of the Political Crisis, 013).
Aid began to decline in 2009 and ending in 2013, dropping 30 % because aid was put into humanitarian programs. Madagascar economy became vulnerable when it became reliable on their tourism, export of goods, and foreign investments. This economy began to see a scarcity in tourism and export of goods because of cyclones, flooding, and droughts. Agriculture is a large part of Madagascar export system. Many of their crops became scarce because of a locust infestation and food security. Despite the crisis with federal aid, malnutrition has begun to increase close to 0%. Health care clinics have closed because of federal funding cuts.
Poor families have needed to pay the cost of health care expenses and school tuition. Low budget funding has caused Madagascar to not meet there UN Millennium Development Goals of 2015 (Measuring Impact of the Political Crisis, 2013). The goals of reducing child mortality, student enrollment in primary school, and poverty will not be met because of the decrease in revenue and funding. All of these issues have put Madagascar in a desperate position. What is World Bank or MIFF doing to help Madagascar? After five years of not being granted funding, it has finally reached an agreement with IMP and the World Bank.
On February 27, 2014, World Bank decided to grant 13 million Malagasy citizens with emergency financing for food security (World Bank, 2014). The Malagasy citizens have been affected by locust infestation and drought. Emergency financing worth $65 million dollars will target areas by locust infestation and drought under the Emergency Food Security and Social Projection Project. This project will create temporary employment through cash for work and create nutritional services. These nutritional services will help pregnant and nursing mothers; also children under the age of five years old.