No plans to revise Malagasy contracts soon-finmin

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Madagascar‘s government said on Thursday it had no immediate intentions of revising existing oil and mining contracts and accused the donor community of double standards over aid freezes.

Reuters says Africa‘s youngest incumbent, Andry Rajoelina, seized power of the world’s fourth largest island — endowed with oil, gold, uranium, nickel, cobalt and coal — in March and pledged to review existing contracts.

The political crisis has rattled investor confidence while low commodity prices and the global downturn have forced major mining companies on the hydrocarbon and mineral-rich Indian Ocean island to review business plans.

“For the moment we have no intention of revising the terms of agreements. What’s essential is that the mining companies continue to see through their projects,” Finance Minister Benja Razafimahaleo told Reuters in an interview.

Razafimahaleo said his priority was to revive activity in all sectors of the crisis-hit economy and that he was optimistic gross domestic product for this year would top 5 percent.

“We see a growth rate superior to 5 percent,” he said — in line with a previous outlook of 5-6 percent he gave in March.

Political turmoil since the beginning of the year has decimated country’s $320 million-a-year tourism industry and could kill textile exports to the United States worth some $280 million annually if Madagascar is suspended from a trade deal.

The International Monetary Fund (IMF) said in May that instability would leave 2009 growth considerably below the 7.5 percent predicted earlier by ousted leader Marc Ravalomanana.

Razafimahaleo said the economy would survive, albeit perhaps with difficulty, if traditional donors including the European Union (EU), Washington and the IMF maintained their freeze on aid worth hundreds of millions of dollars.

The international community was punishing a “serious and prudent” government after financing Ravalomanana’s alleged looting of state funds for years, he said.

“We’re tightening the belt after years of waste and state theft. We’re getting on top of inflation, we’re getting the currency under control, and now they no longer finance us. Fine,” he said.

The government has said new investors are ready to fill the void should traditional donors shun Madagascar. But two recent visits by Saudi delegations yielded no firm investment pledges.

Razafimahaleo denied reports diminished government revenues meant foreign reserves were running low. “Foreign reserves are in the region of $700 million and not $150 million as reported.”

While there are no problems with the day-to-day finances of the state, the government has reined in public spending by suspending almost all infrastructure projects, he said.

There is scope to ease monetary policy to help spur growth, he said. “We are going to lower the central bank’s benchmark interest rate which at the moment stands at 10 percent.”



“We don’t know how much by, but it won’t be lower than 9 percent,” Razafimahaleo said.