Wednesday, June 16, 2004
Economic downturn stirs unrest in Madagascar
Reuters Antananarivo, June 16
Cyclones, rising oil prices and an import surge are plunging Madagascar deeper into poverty and stoking unrest over the soaring cost of living, analysts said on Wednesday.
The world's fourth largest island has been hit by a sliding currency and spiralling inflation in recent months, forcing people from many walks of life to take to the streets to protest, sometimes violently, against price hikes.
In the last 10 days demonstrations by former army reservists, university students and professors, civil servants and poverty-stricken mothers have shaken the capital Antananarivo and provincial towns on the island off Africa's east coast.
Thirty-two people were injured on Tuesday when police clashed with hundreds of demonstrating former army reservists, who have been demanding more compensation for backing President Marc Ravalomanana during a political crisis in 2002.
More than 75 per cent of Madagascar's 16 million population live on less than a dollar a day in an emerging economy ill-equipped to withstand this year's series of shocks.
"The first shock was cyclone Gafilo, considered to one of the most violent cyclones in the last 50 years," said Hafez Ghanem, country director for the World Bank.
"Then, there was the oil crisis which raised the cost of a barrel of oil to more than $40 and at the same time, the price of the island's traditional vanilla and shrimp exports dropped," Ghanem added.
"I don't think any country the size of Madagascar with its level of income could support all these external shocks without an important social impact," said Ghanem.
Over a thousand university students in the capital took to the streets last week to protest against a 50 per cent hike in public transport fares. In the violence that ensued, 28 people were injured and 11 vehicles damaged.
Even hundreds of mothers from the capital's slums marched through the city holding up empty plates, demanding authorities help families suffering due to price hikes in even the most basic commodities.
Stoked by rises in oil prices, inflation averaged 6.5 per cent in the first six months of 2004 with economists predicting it could reach 12 per cent by the end of the year.
While the government has managed to keep prices of staples like rice and bread relatively low, the cost of foods like condensed milk have doubled.
"The rise in fuel prices and the dramatic fall of the franc is affecting people's purchasing power and made me increase my fares", said one taxi driver.
ECONOMIC WOES
Cyclones Elita and Gafilo hit in January and March, killing 295 people, rendering 300,000 people homeless, destroying infrastructure and ruining rice fields, the main staple crop.
Cash crops including cocoa and coffee suffered in the storms' aftermath, while local sources estimate the island - the world's biggest vanilla producer - will see vanilla production drop by about a third from the average annual crop.
Shrimps, another one of the island's key exports, have also suffered a drop in prices on the world market.
Analysts say the introduction of tax exemptions on over 300 imports in September created surging import demand, contributing to a slump in the Malagasy franc against the dollar in the last 10 months and worsening an already chronic trade deficit.
While the government has established funds to reconstruct cyclone ravaged areas and buy basic commodities for the poor, analysts say more steps to support the poor are needed.
In July, the World Bank aims to approve $125 million to support the island's balance of payments and slow down the decline of the franc as well as an additional $72 million for health and development projects for cyclone affected areas.
© HT Media Ltd. 2004.