World Bank Group support to Madagascar between fiscal years 2007 and 2021 was increasingly relevant to the country’s core development constraints of elite capture (or state institutions being run to the personal benefit of a few high-status individuals), weak governance (including inadequate public financial management), limited access to basic infrastructure and services (particularly in rural areas), and declining human capital. The three Bank Group–supported country strategies over the evaluation period adapted in response to significant changes in Madagascar, including, critically, the disruptive political crisis (2009–14) and, more broadly, the country’s fragility and evolving political economy and governance constraints. These included the interruption of the Country Assistance Strategy (fiscal years 2007–11) because of the 2009 coup and the resulting triggering of the Bank Group’s Operational Policy 7.30 on dealing with de facto governments.

Adaptation was supported by analytical work focused on identifying and understanding the political economy and governance constraints affecting the portfolio. This led the World Bank to a partial pivot in its operational engagements to the local level that entailed moving from a centralized, top-down approach to a more bottom-up approach that prioritized reinforcing the capacity of local administrations to deliver services and manage revenue in a more transparent and accountable way. The partial pivot contributed to more effective implementation of several projects.

Substantial additional financing through the International Development Association’s Fragility, Conflict, and Violence Envelope allowed the Bank Group to help Madagascar avert a potential social and economic crisis through a series of development policy operations. The significant International Development Association top-up from the Turn Around Allocation (previously the Turn Around Regime) helped leverage the commitment of the Malagasy government while also providing a platform for dialogue with development partners. It also helped the World Bank more directly address issues of the use of public resources for the benefit of a few high-status individuals and of weak institutions by recalibrating its portfolio to better support a pathway out of fragility. The country ended up making moderate to substantial progress toward the bulk of objectives set forth as part of the Turn Around Allocation.

The World Bank contributed to progress in some aspects of governance in Madagascar as it adapted its approach over the evaluation period. First, it helped reverse the declines in transparency, accountability, and participation that occurred during the 2009–14 political crisis, particularly by supporting fiscal and corporate transparency, social accountability mechanisms at the local level, and accountability institutions. World Bank support was crucial to building the capacity of the nongovernmental organization Soa Afafy Hampahomby ny ho Avy and its civil society organization partners, which have become an important source of external oversight of the government, helping to increase citizen participation in the elaboration of local action plans, implementing participatory budgeting, and advocating for transparency of resource allocations to communes. Second, World Bank support contributed to modernizing the country’s tax and customs revenue administrations, improving revenue collection (particularly from natural resources), and generating local revenues. Third, World Bank support to public expenditure management contributed to reductions in subsidies and nonpriority expenditures, although in some cases, progress was not sustained or fell short of targets. Fourth, World Bank support contributed to improved subnational public financial management and decentralized management of natural resources and land certificates, increasing the fiscal autonomy of local governments through grants from the Local Development Fund (Fonds de Développement Local).

Overall progress on governance was hampered by the World Bank’s limited success in designing interventions to avoid misuse by elites. Some prior actions were reversed as a result of pressure from vested interests (as well as limited institutional capacity, a lack of strong political commitment, and changes in government personnel), and accountability institutions were undermined. World Bank support was not successful at significantly reducing high tax expenditures, and several fiscal transparency measures supported by the World Bank were either not fully implemented or did not help reduce costly and unproductive tax expenditures and exemptions. Vested interests undermined progress toward improving the financial and operational performance of key state-owned enterprises, such as Jiro sy Rano Malagasy. Although the World Bank’s efforts to improve performance by Jiro sy Rano Malagasy have contributed to the reduction of total electricity losses and interruptions in electricity service, the utility’s costs have continued to rise. Regarding support to the country’s decentralization agenda, although the World Bank contributed to advances in the decentralized management of resources, little progress was made on the transfer of responsibilities, competencies, or resources from central to local governments.

The Bank Group had a limited but positive impact on rural development over the evaluation period. Support contributed to short-term increases in agricultural production and greater food security. Cash transfers and productive safety nets continue to mitigate the impacts of various shocks on the living conditions of Madagascar’s most vulnerable populations. The Bank Group also contributed to the development of value chains, including for cocoa, cotton, seaweed, lychees, and vanilla, as part of an integrated regional approach focusing on geographical areas with high growth potential. Although limited in scope, targeted project areas saw reductions in the stunted growth of children, increases in school enrollments, and the expansion of a social protection system that proved crucial in helping the government respond to the coronavirus (COVID-19) crisis.

However, Bank Group support to rural development was less successful in reducing rural poverty. Support for increased agricultural productivity through improved technology tended to overestimate farmer capacity. Productivity increased in the aggregate, but selective adoption of new technologies meant that the overall increase in productivity was lower than expected. Support to the environment fell short of achieving its objectives because it did not provide sufficient incentives for farmers in the forest frontier to change their land use practices.

The following lessons are offered for consideration in future World Bank engagement in Madagascar and may be of relevance to countries facing similar challenges:

1. The World Bank had some success in identifying and analyzing political and governance risks, but less in operationalizing its findings. Although the World Bank was able to tackle some political economy constraints through disbursement-linked indicators and recalibration of the Country Partnership Framework to directly address fragility drivers, project design sometimes fell short with respect to political risk mitigation. In some cases, this undermined results and may have helped contribute to unintended consequences, such as weakening the authority of the independent anticorruption court (Pôles Anti-Corruption) by supporting the establishment of a separate court dedicated to trying high-profile politicians.
2. Given significant reversal of reforms supported by development policy operations in the face of elite capture in Madagascar, the World Bank may want to (i) strengthen how it assesses whether the conditions for budget support operations are adequate, (ii) more clearly identify the risks to sustainability, and (iii) better articulate risk mitigation strategies. Vested interests in Madagascar were often successful at undermining reform efforts, particularly as they related to increasing the transparency of tax expenditures and improving governance in the energy sector, suggesting the need to better tailor project design to the challenging context.
3. Strengthening the World Bank’s engagement with civil society organizations to a more collaborative one could help achieve a greater level of accountability in a context such as that of Madagascar with weak checks and balances. The results of the World Bank’s sustained but limited support to civil society organizations (coordinated through the nongovernmental organization Soa Afafy Hampahomby ny ho Avy) to improve social accountability mechanisms demonstrate the potential value added of supporting civil society on a larger scale. Increased collaboration could also make the World Bank more aware of unintended consequences for homegrown anticorruption initiatives.
4. Addressing longer-term development in rural areas requires adapting support to the needs of Malagasy smallholders and smallholder production systems. The World Bank–supported strategy to improve agricultural productivity largely focused on yield per hectare, which did not fully consider the high vulnerability and low investment capacity of Malagasy smallholders or their preference for diversification over specialization. For example, World Bank support that introduced new technologies insufficiently considered that most smallholders are constrained by poverty and are not able to adopt new techniques that require additional investments. Indeed, the World Bank Group’s agribusiness interventions supporting value chains largely benefited medium- to large-scale clients, as smallholders did not have the capacity to take advantage of new markets. This reflects a more general finding that poverty traps are not conducive to risk taking or delayed benefits, which are often necessary when adopting new technologies.
5. The World Bank worked best in Madagascar’s rural areas when it coordinated across sectors—a lesson adopted and reflected in the current portfolio. Addressing natural resource management in Madagascar required complementary support across sectors. As an example, the World Bank’s decision not to deliver some forms of complementary assistance to support local community livelihoods had a negative impact on its forest management activities. Although there are often impediments and disincentives to coordination within both government and the World Bank, sectoral coordination, when it occurred (from the ministerial to the community level), fostered more sustainable gains in rural areas.