Tales From Madagascar

Madagascar's tax system consists of several key components designed to generate revenue for the government, but it also faces challenges that impact its effectiveness. 1. Corporate Taxation:    - Corporate Income Tax (CIT): Companies are subject to a 20% tax on net profits if their turnover exceeds MGA 400 million. Smaller businesses with turnover below this threshold pay a synthetic tax of 5% of 70% of turnover, effectively 3.5%.    - Minimum Tax: All companies must pay a minimum tax of 0.5% of annual turnover, with specific minimum amounts based on the sector.    - Withholding Tax for Non-Residents: Non-resident entities face a 10% withholding tax on Madagascar-source income, while capital gains are taxed at 20%. 2. Personal Income Tax:    - Madagascar employs a withholding tax system (IRSA) on salary income with rates ranging from 0% to 20%, depending on income levels.     - For self-employed individuals, a presumptive tax applie...

I first came across the term remittance economy when playing chess in Armenia.  Back in the 90’s post the collapse of the Soviet Union, Armenia was significantly dependent on remittances. Madagascar can be considered to some extent a remittance economy.   Remittances total around $ 500 million.  Remittances from Malagasy citizens working abroad significantly impact Madagascar's economy in several ways: 1. Income Support: Remittances provide essential financial support to families, improving their living standards. This additional income helps cover basic needs, such as food, healthcare, and education. 2. Poverty Reduction: By supplementing household incomes, remittances play a crucial role in reducing poverty levels. They can help families escape poverty traps and improve their overall economic well-being. 3. Consumption Boost: Increased disposable income from remittances often leads to higher consumer spending. This boost in demand for goods and services can stimulate lo...

​ Madagascar's budget deficit is primarily financed through several key sources: 1. External Aid: The country receives significant financial assistance from international donors and organizations, such as the World Bank, International Monetary Fund (IMF), and various bilateral aid agencies. This aid often comes in the form of grants and concessional loans. 2. Foreign Loans: Madagascar borrows from foreign governments and international financial institutions to cover budget shortfalls. These loans may have favorable terms but still contribute to the country's overall debt burden. 3. Domestic Borrowing: The government may issue treasury bills or bonds to raise funds from domestic investors, including banks and private sector entities. 4. Remittances: Money sent home by Malagasy citizens working abroad contributes to the economy and can help support public finances indirectly. 5. Tax Revenue: Although the tax system in Madagascar has challenges, the government relies on tax collec...

Budget deficits   ​ Madagascar generates approximately US$1. 5 billion in annual government revenue with GDP around $17 billion. However, government spending exceeds revenue: - In 2024, total government expenditure was US$2.67 billion (16.43% of GDP). - In 2025, the budget deficit was 4.1% of GDP (~US$0.62 billion), and in 2024 it was 3.8% of GDP (~US$0.57 billion).  - Projected deficits for 2026–2027 remain around 4.0% of GDP annually.   Conclusion:   Madagascar’s current revenue is not sufficient to cover its expenses. The country consistently runs a budget deficit of 3.8–4.1% of GDP, relying on external aid, remittances, and borrowing to finance public services. Poor revenue generation (only ~11–12% of GDP) limits fiscal sustainability and constrains spending on education, health, and social protection. In the Financial Flows scenario (a development projection), government revenue could rise to 18.8% of GDP (~US$7.7 billion by 2043), enabling full coverage of expe...

​ Madagascar's economy is characterised by a mix of agriculture, mining, and tourism, but it faces significant challenges.  Summary of Sector Contributions: - Agriculture: 25-30% of GDP - Services: 50% of GDP - Industry: 15-20% of GDP - Agriculture remains a cornerstone of the economy, while the services sector is the largest contributor, reflecting a shift towards urbanisation and economic diversification. - The mining sector, although smaller in percentage terms, plays a crucial role in export earnings and foreign investment Here are some key points: 1. Agriculture: Agriculture is a vital sector, employing about 70% of the population. Key Products: Rice, vanilla, coffee, cloves, and other crops. Agriculture employs a significant portion of the population and is vital for food security The sector is vulnerable to climate change and natural disasters. 2. Mining and industry The country is rich in natural resources, including minerals like nickel, cobalt, and graphite. Mining has th...

​Average  salary $ 120 per month   Madagascar, an island nation rich in biodiversity and culture, faces significant economic challenges that impact its most vital sectors: education and healthcare. As the country strives to develop and improve living standards, the struggles of teachers and healthcare workers have become increasingly evident. Many dedicated professionals find themselves grappling with the harsh reality of delayed or even unpaid salaries, leaving them in precarious situations. In my conversations with teachers and healthcare professionals, I have witnessed firsthand the toll that these wage issues take on both providers and the communities they serve. The burden often falls on patients and parents, who are forced to navigate a system strained by financial insecurity.  This series will delve into the complexities of Madagascar's economy, examining the crucial role of wages in sustaining these essential services, the historical context behind the current sta...