Major US funding to boost agriculture

Madagascar could be on its way to a brighter economic future after becoming the first recipient of a US aid initiative that rewards developing countries for their commitment to political and economic reforms.

The US $110 million, four-year aid package was officially signed on 18 April in Washington by Madagascar's President Marc Ravalomanana and Millennium Challenge Corporation (MCC) chief executive officer Paul Applegarth.

A statement issued by the US state department on Monday said the funds would be used to tackle widespread rural poverty on the Indian Ocean island by focusing on property rights, the financial sector and agricultural business investment.

Although the vast majority of Madagascar's 15 million inhabitants depend on agriculture, rural development has been hampered by the lack of access to credit and a weak land tenure system. Internal strife and poor weather have seen the agriculturally based economy hit new lows in the past three years as the government struggled to import rice at subsidised prices.

Aid agencies have welcomed the funding, saying the money would "go a long way to alleviate endemic poverty" in a country where about 70 percent of the population lives below the poverty line.

"The decision by the United States to grant these funds to Madagascar is applauded, especially since the country has many social problems which are in need of attention. President Ravalomanana has already prioritised rural development, and so this additional aid will give a new impetus to agricultural production and development in general," the UN Development Programme Country Representative, Bouri Sanhouidi, told IRIN.

Soon after assuming power in the wake of disputed presidential elections in 2002, Ravalomanana embarked on a series of economic reforms, in line with conditions laid down by the International Monetary Fund and the World Bank. As a result, both the IMF and the WB cancelled half of the country's debt last year.

Sanhoudi said: "The government has shown that it is committed to economic recovery, and has undertaken many measures to prove to the international community that it is serious about good governance. There is much emphasis in Madagascar on having a government which is clean of corruption."

The MCC and Madagascar have agreed on various interim indicators to track the progress of the aid programme.

About 62,000 households will benefit from the property rights to approximately 250,000 ha of land, which the programme aims to secure. It will also increase lending in the target areas by about US $30 million, and significantly increase the number of rural producers that adopt new technologies or engage in higher value production.

According to the MCC, disbursements will be made periodically, based on performance, and managed by an independent auditor identified by a competitive process.