FOR IMMEDIATE RELEASE



World Bank
1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234


     BANK NEWS RELEASE NO. 88/107                                           Contact: Mary Lou Ingram
                                                                                     (202) 473-4619


                          MADAGASCAR LAUNCHES PUBLIC SECTOR ADJUSTMENT PROGRAM

           WASHINGTON, July 1, 1988 -- Madagascar will launch a major public sector
     adjustment program with a credit of SDR 90.5 million ($125 million) from the
     International Development Association (IDA), the World Bank's concessionary lending
     affiliate. The credit will support the next phase of the country's ongoing economic
     adjustment program, which includes market-oriented incentives and measures to raise
     the efficiency of resource allocation and use.

           The public sector adjustment program focuses on the need for careful planning
     and monitoring of public expenditure programs to increase efficiency and the quality
     of public services; liberalization of export procedures; streamlining of the public
     enterprise sector to eliminate or improve enterprises that are not performing well;
     and improvement of the liquidity and efficiency of the banking system.

           The government will pay particular attention to the social aspects of the
     adjustment process to help cushion possible repercussions on the most vulnerable
     segments of the population.

           Cofinancing and coordinated financing is expected in support of the
     government's adjustment program from the African Development Fund and the
     governments of France, the Federal Republic of Germany, Japan, Switzerland and the
     United States for a total amount of $145 million.

           The government's adjustment program received firm support in January, at the
     meeting of the Consultative Group for Madagascar in January. At that time, nine
     bilateral donors and 12 multilateral agencies reviewed the country's economic
     situation and prospects. They expressed enthusiasm for the progress achieved by the
     government in implementing policy reforms and endorsed further efforts to
     restructure the economy. But the Group agreed that additional quick-disbursing
     financial assistance was needed to support the policies of thP government during the
     transition to a fully liberalized trade regime. A total of $700 million a year over
     the 1988-90 period was pledged for that purpose by the donor community.

           The IDA credit is for 40 years, including 10 years of grace; it carries no
     interest but has annual charges (0.5 percent on the undisbursed balances and 0.75
     percent on the disbursed balances).

     Note:     IDA credits are denominated in SDRs (Special Drawing Rights), which
              are valued on the basis of a "basket" of currencies. The U.S. dollar
              equivalent of the SDR amount of the IDA credit reflects the exchange
              rates existing at the time of the negotiation of the credit.