Tales From Madagascar

My recent blog series navigated the complex terrain of Madagascar’s economy. It dissected the budget deficits, scrutinised the impact of IMF loans, traced the flow of remittances, and confronted the corrosive reality of corruption. Yet, last week’s news—the Coface downgrade of Madagascar’s country risk from C to D—feels like a culmination of these individual threads. It is a signal that the press has largely misread, focusing on the static "business climate" rating while ignoring the darker reality of the country risk downgrade.  A Convergence of Risk When we look at the fiscal instability I have documented in earlier posts—the chronic cash flow problems, the delayed payments to teachers and healthcare workers, and the reliance on debt—the Coface downgrade is not a surprise; it is a confirmation.  To understand why this matters, it helps to know who these entities are. Coface is a global leader in trade credit insurance. They provide the insurance that allows companies to tra...

​ This series of twenty blogs has been an exploration of the complex, often contradictory, economic landscape of Madagascar. From the mechanics of remittances and the weight of international debt to the granular realities of tax reform and the corrosive impact of corruption, we have looked at the country not just as a set of statistics, but as a living, breathing system struggling to find its footing. As I conclude this series, three central themes have emerged as the pillars upon which the future of Madagascar’s economy rests: 1. Corruption as a Structural Tax The analysis consistently returned to the idea that corruption is not merely a moral failing; it is an economic barrier. When domestic revenues are siphoned away or mismanaged, it acts as a regressive tax on the most vulnerable. It creates a "cash flow" crisis that prevents the state from meeting its most basic obligations—most notably, the timely payment of teachers and healthcare workers. Eliminating this is not just...

The Paper Wall: When Legislation Meets Reality in Madagascar In my time here in Antananarivo, I have learned that there is often a vast, visible distance between what is written in the law and what happens on the street. We have seen the government introduce new legislation, anti-corruption bureaus, and reform agendas. On paper, the framework for a functioning, rule-of-law society exists. But for those of us living and working here, the reality feels very different. Corruption in Madagascar is not just an occasional occurrence; it is a deep-rooted feature of the system. It has become a "hidden tax" that every citizen pays, but it hits hardest those who have the least. The Institutional Barrier When we talk about the economic challenges of this country—the struggle to pay teachers, the underfunding of clinics, the difficulty of doing business—we cannot ignore where the money is being lost.  The institutions designed to protect the public are often the very places where the sys...

​ The Productivity Paradox: Navigating Wages and Reforms in Madagascar In the twelve months I have spent living in Antananarivo, I have seen the resilience of the Malagasy people firsthand. Whether it is the dedicated teachers in our local schools or the healthcare workers striving to provide care in under-resourced clinics, there is an undeniable spirit of commitment here. Yet, beneath this commitment lies a growing tension: the struggle to maintain a decent standard of living against the backdrop of an economy that is increasingly difficult to navigate. The recent implementation of the 300,000 Ariary Minimum Hiring Wage as of March 2026 is a necessary acknowledgement of the rising cost of living. However, as anyone who has tried to run a business—or even manage a small project—in this city knows, simply raising the wage floor is only one half of the equation. We are currently caught in a "productivity paradox." Small businesses are being squeezed by operational costs, while...

​ Madagascar’s Value Added Tax (VAT), or Taxe sur la Valeur Ajoutée (TVA), currently operates at a 20% standard rate. It is a cornerstone of the national budget, designed to capture consumption across the economy. While the rate is competitive within the African context, the system faces significant structural hurdles. Tax authorities are currently pivoting toward digital modernisation —specifically mandatory electronic invoicing—to combat revenue leakage. However, the system remains burdened by a high compliance threshold for small businesses, inconsistent VAT credit refund mechanisms, and a proliferation of exemptions that complicate tax administration and erode the revenue base. Here are some policy recommendations  Rationalize VAT Exemptions Madagascar’s current tax code is cluttered with a wide array of VAT exemptions that were likely intended to support specific sectors but have ultimately weakened revenue collection. These exemptions create a "leaky" system that is dif...

​ Madagascar’s current corporate tax system is a two-tier regime: small businesses under a turnover threshold use the synthetic tax, while companies above the threshold are generally taxed under the real regime at 20% of profit. The proposed 2026 reforms keep that basic structure but tighten rules, adjust thresholds, and add new tax treatments for several corporate situations.  Current system: - Turnover below MGA 400 million: synthetic tax regime applies; PwC summarizes it as 5% of 70% of turnover, with a minimum tax depending on activity.  - Turnover above MGA 400 million: corporate income tax is 20% of profit under the real regime.  - Minimum tax floors still apply under the real regime, with different floor amounts by activity.  Proposed / 2026 reform highlights: - Companies with turnover between MGA 200 million and MGA 400 million could choose the real income-tax regime without being automatically subject to VAT, if their financial statements are certified by a ...