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been dependent on massive support from the IMF, World Bank, EU and various bilateral
donors led by France and the USA.
The local currency, the franc malgache , was maintained in parity with the French franc
long after its real value had declined. In 2003 the franc was replaced by the ariary. Rava-
lomanana's abolition of a wide range of import taxes, designed to stimulate the economy,
led in the short term to a rapid increase of imports without a corresponding rise in exports.
The consequent increase in the trade gap caused a spectacular collapse of the currency in
the first half of 2004, with the ariary losing over half its value.
The economy has always been based on agriculture, with rice by far the largest crop,
providing enough to feed the population and leave some over for export. However, under
the Second Republic the severe decline in the road infrastructure isolated many rice-grow-
ers from the markets, while the low official price paid to the growers discouraged them
from growing a surplus for sale and led them to revert to a subsistence economy. Rice pro-
duction accordingly failed to keep pace with the growing population so that the country
nowhastoimportsome30%ofitsneeds,atconsiderableexpenseinforeignexchange.The
main cash crops for export have been vanilla, of which Madagascar is the world's largest
producer, and coffee; but while vanilla has remained a leading export earner, coffee pro-
duction has declined and the sector seems unlikely to recover. In the last decade prawns,
either fished or farmed along the west coast, have become a major export item.
Much hope has been invested in tourism, and with the doubling of visitor figures in sev-
en years things were looking promising until the 2009 coup decimated the industry. Only
time will tell how quickly it can recover.
The hitherto small mining sector (semi-precious stones, mica and chromite) has recently
expanded with the discovery of large deposits of sapphire but, partly because of govern-
ment corruption, nearly all the gems have been exported illegally so that the economy has
not benefited. Several major mining projects, principally for ilmenite, nickel and cobalt,
have made headway over the past five years and are already responsible for a considerable
part of the country's export earnings. Plans to exploit deposits of copper, bauxite, platinum
andgoldarealsobeinglookedat.Thereareknowntobesubstantialreservesofoilandgas,
which were hitherto uneconomic to extract when the oil price was low. The rise in global
prices has caused a revival of interest.
The 2009 coup had a devastating effect on the country's economy. A World Bank report
oneyearonnotedamodestrecoverygettingunderway,butemphasisedthatuncertaintyhas
become the main feature of the economy, exacerbated by a lack of consistency in policy
decisions.
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