Financial market development

The program, which supports a larger financial reform program of the World Bank, will provide a grant of $6 million in two tranches, which the Government of the Republic of Madagascar (GRM) will use to service external debt. Program conditionality will have two aims: (1) to develop the capacity of the Central Bank of Madagascar (BCRM) to implement stable monetary policies and (2) to improve operations and savings incentives at the Caisse d"Epargne de Madagascar (CEM, the parastatal National Postal Savings Bank), the only financial institution in Madagascar with good access to low-income clients. Conditionality will ensure that BCRM and CEM possess the basic framework (legal statutes and operating decrees) needed for operational autonomy. Conditions regarding CEM alone will ensure that the negative net worth on its balance sheet is eliminated by the GRM, that it receives a competitive interest rate on money it lends to the Treasury, and that its new statutes make it more a commercial operation and less an appendage of the postal system. Complementary training and TA will be provided under project 6870120.