MADAGASCAR

The Republic of Madagascar is a semi-presidential unitary country. The president of the Republic is elected for a five-year term by direct universal suffrage. The last elections took place in 2018, the next are scheduled for 2023. Madagascar has a two-chamber parliament whose lower house, the National Assembly, is composed of 151 deputies elected for a five-year term according to a parallel voting system: 87 seats are allocated using the first-past-the-post system and 64 using the multi-party proportional representation system. The last parliamentary elections took place in May 2019. The Senate, the upper house, is composed of 18 senators elected every five years, two-thirds of whom are indirectly elected by regional and municipal elected representatives and the remaining third appointed by the president of the Republic. On the initiative of the president, the Senate was reformed in 2020, reducing the number of senators from 63 to 18.

The Constitution of 11 December 2010 states that “the Republic of Madagascar is a State based on a system of decentralised local and regional authorities (DLRAs) composed of communes, regions and provinces whose powers and principles of administrative and financial autonomy are guaranteed by the Constitution and defined by the Law” (Article 3). “Democracy and the principle of the rule of law constitute the foundation of the Republic” (Article 1).

According to Article 6 of the Organic Law 2014-018, “Decentralisation is accompanied by a deconcentration of State services with the aim of strengthening the LRAs’ ability to take action”. The local and regional administration is therefore composed of the deconcentrated technical services (DTS or services techniques déconcentrés) and the decentralised local and regional authorities (DLRAs).

Coordinated by the State representatives who are responsible for the area (Law 2014-021 and Decree 2015-593), the DTSs participate in the management of national public affairs at the subnational level according to their respective sectoral responsibilities. The powers of the DTSs are limited within a given administrative area (province, prefecture, region, district, administrative arrondissement). The heads of the DTSs are appointed by the central government. The different levels of deconcentration are part of a hierarchy. With a few exceptions, all ministries have DTSs at the provincial, regional and district levels.

According to the Organic Law 2014-018, the LRAs are responsible for the governance of public affairs that fall within their remit and are of either provincial, regional or communal interest. The powers of the LRAs are limited to a specific geographical area. They have a separate legal personality from the State. They have administrative (their own structure: deliberative body, executive body) and financial autonomy (their own budget: revenues and spending). The LRAs are self-governing. However, they are subject to the laws and regulations in force nationally. To this end, the acts of the LRAs are subject to ex-post legality control by the representatives of the State. State bodies in charge of public finance monitoring (financial courts, General State Inspectorate, regional procurement commission, financial control, etc) are responsible for verifying - systematically or not - the accounts and the quality of management of the LRAs.

At commune level, mayors and commune councillors are elected by direct universal suffrage. The last elections took place in 2019 for a four-year term. Regions are administered by governors. The current governors were temporarily appointed by the Council of ministers until the regional elections provided for by Law 2014-020 (Title VI Territorial Elections) are organised. The provinces are not yet operational.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
Communes (Kaominina)	Regions (Faritra)	Provinces (Faritany)
Average size of the communes: 16 336 inhabitants	Average size of the regions: 1 203 957 inhabitants	Average size of the provinces: 4 615 170 inhabitants
1 695	23	6	1 724

Name and number of sub-communal entities:

19 830 Neighbourhoods (Fokontany)

OVERALL DESCRIPTION: Madagascar has 1 695 communes, 23 regions and 6 provinces, which add up to 1 724 local and regional authorities (LRAs). The number and boundaries of the LRAs are a legal matter (Annex 1 of the amended Law 2014-020). The boundaries of the LRAs take into account several technical-administrative parameters: social (demographic base), economic (level of urbanisation) and geographical (river crossings). At the communal or municipal level, the State is represented by a head of administrative arrondissement. At the regional level, the State is represented by a prefect, and at the provincial level by a general commissioner.

REGIONAL LEVEL: Provinces are made up of two or more regions.

INTERMEDIATE LEVEL: Regions are made up of a number of communes. Established in 2004, the regions are still in a transitional phase (Decree 2004-859, Decree 2019-1866). Decree 2019-1866 specifies that regions are led by a head of region called governor (Article 1). Although according to Law 2014-020, the regions are supposed to be governed by an elected head of region, no regional elections have taken place since their establishment. The number of regions has been increased from 22 to 23 in 2021, with the region of Vatovavy-Fitovinany in the province of Fianarantsoa being split into two.

MUNICIPAL LEVEL: The communes have been operational as LRAs since 1999. Each commune has several neighbourhoods or fokontany. There are two categories of communes (Decree 2015-592 on the classification of Communes):

Urban communes or municipalities (76):

- Category 1 of urban communes (8) are the municipalities located in the six provincial capitals. The urban commune of Nosy-Be and that of Sainte-Marie have a special status.

- Category 2 of urban communes (67) are municipalities located in other cities or towns.

- The urban commune of Antananarivo, the capital of Madagascar (1), which is considered to be outside of these categories, has a special status.

Rural communes (1 619):

- Category 1 of rural communes (99)

- Category 2 of rural communes (1 520)

Communes are classified depending on their demographic base. An urban commune must have a population of at least 20 000 inhabitants.

HORIZONTAL COOPERATION: The Public Body for Intercommunal Cooperation (OPCI or Organisme public de coopération intercommunale), a public structure governed by decree 99-952, is the only form of horizontal cooperation. According to art. 2 of the decree, the OPCI “is based on the free will of the communes to create and manage services and infrastructures in common within a coherent geographical area constituting a solidarity area”. Since then, several laws have been passed to promote inter-communal cooperation. Law 2014-018 defining the revenues and powers of local and regional authorities in Madagascar refers to inter-communal cooperation in article 28, paragraph 4: “The communes are primarily responsible for the administration of the implementation of inter-communal and decentralised cooperation and the development of partnerships”. Madagascar currently has 108 OPCIs.

According to the Constitution, the LRAs are involved in the implementation of the national development plan through the territorial application of public policies by drawing up development plans (Communal Development Plan, Urban Master Plan, Regional Development Plan). In this context, with the support of the State, the LRAs ensure the coordination and harmonisation of development actions of local, regional and provincial interest.

Organic Law 2014-018 (articles 26 to 28 for the communes, 29 to 30 for the regions and 31 to 33 for the provinces) defines the role and attributions of the LRAs in four main sectors: administrative, economic, social and cultural, while Law 2014-020 of 27 September 2014 describes the revenues of the LRAs, the election methods, the organisation, functioning and attributions of their governing bodies.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	REGIONAL LEVEL	INTERMEDIATE LEVEL	MUNICIPAL LEVEL
1. General public services (administration)	-Administration and general coordination of provincial public affairs -Managing the province’s administrative, financial and property affairs-Relations with technical and financial partners (TFPs) (shared): inter-provincial and decentralised cooperation	-Administration and general coordination of regional public affairs-Managing the region’s administrative, financial and property affairs-Relations with TFPs (shared): inter-regional and decentralised cooperation	-Administration and general coordination of communal public affairs -Civil status management- National service (shared)-Census of population (shared)-National and local elections (shared)-Issuing administrative acts and administrative authorisations-Managing the commune’s administrative, financial and property affairs-Relations with TFPs (shared): inter-communal and decentralised cooperation
2. Public order and safety	Implementing appropriate actions and measures relatingto natural risks and disasters and public safety (shared)	Implementing appropriate actions and measures relatingto natural disasters and public safety (shared)	Security and civil protection (public order)Natural disasters (shared)
3. Economic affairs/transport	-Developing and implementing the Provincial Spatial Planning Scheme (SPAT or Schéma provincial d'aménagement du territoire) (shared)-Ensuring coherence and programming of province-wide development actions	-Developing and implementing the Regional Spatial Planning Scheme (SRAT or Schéma régional d'aménagement du territoire) (shared)-Programming and defining the framework for regional development actions (RDP) in the areas of hydro-agricultural development, fishing, and the environment.Promoting the industrial, artisanal craft and commercial sectors, promoting the service sector, agriculture and livestock farming-Managing roads of interest to the region	-Drawing up the Master Plan for urban communes-Drawing up the Communal Development Plan for rural communes (shared)-Economic Development Plan (CDP)-Managing market infrastructure and facilities (markets, parking areas, slaughterhouses, roads of interest to the commune, etc.)
4. Environmental protection	Planning and implementing actions to protect the environment (shared)	Planning and implementing actions to protect the environment (shared)	Road, water, sanitation and hygiene managementHousehold waste management (public health)Planning and implementing operations related to environmental protection (fighting bushfires and deforestation)
5. Housing and community amenities		Managing social housing construction projects	Drawing up and implementing programmes for housing and public facilities (shared)Managing and allocating social housing
6. Health	Managing provincial public health facilities (University Hospital Centres - CHU or Centres Hospitaliers Universitaires)	Managing regional public health facilities (Regional Hospital Centres - CHR or Centres Hospitaliers Régionaux)	Constructing and managing basic public health facilities and infrastructure (Basic Health Centre - CSB or Centre de Santé de Base) (shared)
7. Culture and leisure	Creating and managing parks and recreation areas of provincial significance	Creating and managing parks and leisure areas of regional significance	Creating and managing basic public cultural and sports infrastructures and facilities (parks, communal leisure areas)
8. Education	Managing public educational facilities at the provincial level (universities)	Managing public education facilities at the regional level (high schools)	Creating and managing basic public education facilities and infrastructure (primary schools, general education colleges) (shared)
9. Social welfare			Social actions for disabled, elderly and vulnerable people

Scope of fiscal data: 1 183 rural and urban municipalities for which administrative accounts for 2020 are available

General Operations of the Treasury and Observatory for Decentralisation and Local Development

Availability of fiscal data: Low

Quality/reliability of fiscal data: Low

GENERAL INTRODUCTION: Law 2014-020 outlines the legal provisions relating to the finances of the LRAs. Articles 137 to 238 outline the various provisions relating to the budget and resources of decentralised local and regional authorities. Articles 138 to 146 state that each must have an annual budget (programme), including authorised spending and revenue forecasts. Provincial heads, governors and mayors are the authorising officers for their respective budgets. A public investment programme adopted by the council must be implemented in each LRA for a period of three years. Data on the finances of decentralised local and regional authorities are centralised in the Observatory for Decentralisation and Local Development (ODDL or Observatoire de la décentralisation et du développement local) at the Ministry of the Interior and Decentralisation (MID or Ministère de l'Intérieur et de la Décentralisation). In 2020, only the budgetary data of 1 183 communes out of the 1 695 communes of the country are available, whose population represents a little more than half of the national population. Budgetary figures and indicators for the 23 regions and provinces are not available.

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	3	< 0.2%	< 1.0%	100.0%
Current expenditure	3	-	-	99.4%
Compensation of employees	2.60	-	-	85.0%
Intermediate consumption	0.3	-	-	10.8%
Social expenditure	0	-	-	0.2%
Subsidies and current transfers	0.05	-	-	1.6%
Financial charges (including interest)	0.03	-	-	1.0%
Other current expenditure	-	-	-	-
Capital expenditure	0.02	-	-	0.6%
Capital transfers	-	-	-	-
Direct investment (or GFCF)	-	-	-	-

: EXPENDITURE: In 2020, the spending of the 1 183 communes for which data are available amounts to USD 3 PPP per capita. On this basis, communal spending is estimated to account for less than 1.0% of the country’s total public spending and barely 0.2% of GDP. This spending consists almost entirely of current spending, as 85% of the budget is spent on staff costs.

DIRECT INVESTMENT: According to Article 22 of Decree 2015-959, the share of a local or regional authority’s budget allocated to capital investment must amount to at least 15% of its own budgetary revenue. In practice, this percentage is rarely respected. Most communes only invest if they receive grants from the local development fund, exceptional grants from the State or support from technical and financial partners.

Typically, capital spending goes to the construction of administrative offices, schools, health centres, roads and bridges and market facilities. In the communes’ accounts, the main areas of investment are not broken down according to economic function but grouped according to economic destination (tangible, intangible assets).

ⓘ No detailed data available for this country

The breakdown of LRA spending by programme started in 2018 following inter-ministerial instruction 001-MFB/MID of 22 March 2017. The functional and programmatic nomenclature is not yet operational in all the LRAs. The training programme for territorial actors on this subject was suspended due to the spread of the COVID-19 pandemic.

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	4	< 0.3%	< 2.0%	100.0%
Tax revenue	1	-	-	25.2%
Grants and subsidies	2	-	-	34.1%
Tariffs and fees	2	-	-	40.6%
Income from assets	0	-	-	0.2%
Other revenue	-	-	-	-

OVERALL DESCRIPTION: To finance their spending, the LRAs have access to their own-source revenues, which may or may not be of a fiscal nature (territorial taxes, fees and charges), to State subsidies (operating or investment) and to other revenue sources obtained from technical and financial partners (donations and aid as part of decentralised cooperation in particular).

In 2020, municipal revenues were of USD 4.3 PPP per capita. This accounts for less than 0.3% of the GDP and less than 2.0% of central government total revenue. Approximately two-thirds of these resources are own-source revenues and the one-thirds are central government grants and subsidies.

TAX REVENUE: Tax revenues are made up of territorial taxes and charges. The rates, base and collection methods of local taxes are the responsibility of the State and are established by the Finance Act and various legislative and regulatory texts. There are three main taxes: the combined tax (IS or impôt synthétique), the property tax on land (IF or impôt foncier sur les terrains) and the property tax on real estate (IFPB or impôt foncier sur les propriétés bâties). The combined tax applies to the income of legal entities or individuals engaged in a professional activity whose gross annual turnover does not exceed MGA 20 million (~USD 17 000 PPP). In particular, it applies to farmers, producers, traders, craftsmen, artists and service providers. The rate is 5% of the taxable amount, calculated on the basis of the previous year's turnover, with a minimum annual tax payment of MGA 16 000 (~USD 14 PPP). Land tax is levied on owners of undeveloped land and amounts to 1% of the market value of the property. The property tax on real estate is between 5 and 10% of the rental value of the property. If the property is owner-occupied, the tax rate is estimated at one-third of its rental value.

GRANTS AND SUBSIDIES: In accordance with the provisions of Organic Law on Finance and Order 9483-2018 on the harmonisation of the transfer of subsidies, all the LRAs have received operating subsidies, as authorised by the finance laws. These grants amounted to MGA 12 million (~USD 10 000 PPP) per commune in 2020 regardless of size and are to be increased to MGA 25 million in 2021 and MGA 30 million in 2022.

A local development fund (FDL or fonds de développement local) was created in 2007 to facilitate and optimise support for capital investment by decentralised local and regional authorities (Decree 2007-530). By Decree 2017-014 of 4 January 2017, the FDL was reorganised to “ensure equitable, balanced and sustainable socio-economic development of all decentralised local and regional authorities through the financing of their capital investments and related strengthening of their capacities”.

In 2014, the national equalisation fund (FNP or fonds national de péréquation) was also created, defined by Article 3 of Law 2017-014 as a “redistribution mechanism that aims to reduce inequalities between local and regional authorities”. The FNP is managed by the FDL and its revenue is made up of mining rebates, taxes on hydrocarbons, combined taxes and taxes on radio and television games and advertisements in the proportions described in Law 2014-020.

The LRAs’ access to FNP and FDL is based on performance criteria relating to the fulfilment of legal obligations. These grants are not awarded systematically, even if the communes meet the eligibility criteria, but depend on the availability of budget lines for this purpose in the Finance Acts. In 2020, only 400 communes out of the 1 183 in the sample received capital investment grants amounting to MGA 30 million (~USD 25 000 PPP) under the implementation of the World Bank-funded Public Sector Performance Support Programme.

OTHER REVENUE: In 2020, non-tax revenues accounted for 40% of total commune revenues. These revenues are mainly made up of: (i) revenue from the operation of services, i.e., fees and charges collected for services rendered (revenue from the sale of goods or the provision of services, income from the domain) and administrative fees collected for services (revenue from the issue of administrative authorisations); (ii) rebates and levies on agricultural and livestock products and on the extraction of sand and stone; and (iii) the share of rebates, royalties, levies and payments of administrative costs from the mining sector due to the LRA.

ⓘ No detailed data available for this country

FISCAL RULES: The rules for allocating and balancing the operating and investment budgets, as well as the borrowing rules for LRAs, are defined in Law 2014-020 and Decree 2015-959. In accordance with the provisions of Articles 167 and 168 of Law 2014-020, the approval of the Ministry of Finance is required for LRAs to take out loans. In addition, loans can be taken out by the State and on-lent to the LRAs. LRAs may also receive advances and loans from the State. All the communes in the sample recorded a budget surplus in 2020.

DEBT: In principle, LRAs can access national and international financial markets to finance investment projects. Borrowing must be deliberated and authorised by the council and approved by the Minister of Finance. No borrowing transactions were recorded in the accounts of the LRAs in the sample in 2020.

TERRITORIAL MANAGEMENT OF THE CRISIS: The government has set up an Operational Command Centre for COVID-19 Management (CCO or Centre de commandement opérationnel) to coordinate the various measures taken to manage the pandemic, but has not precisely defined the CCO's tasks, administrative and financial responsibilities, or the ministries/entities of which it is composed. The COVID-19 CCO was officially launched by the president of the Republic on 23 March 2020.

At the level of each region, this Centre is represented by the Regional Operational Command Centre (CRCO or Centre régional de commandement opérationnel), which is responsible for managing the health crisis in the region with the communes that make it up.

A decree creating a “COVID-19 pandemic response fund” was issued by the government council on 1 July 2020. This fund is intended to pool “revenue to finance urgent actions in the fight against the pandemic.” It is expected to finance the implementation of the Madagascar Multisectoral Emergency Plan (PMDU or Plan multisectoriel d'urgence de Madagascar) to combat the adverse impact of the pandemic, which is based on the analysis of urgent and priority needs in the LRAs and the changing health, social and economic situation. The objectives of the PMDU are to: (i) contain the spread of the coronavirus and contain the pandemic; (ii) assist vulnerable populations and respond effectively to the vital needs of the population, the challenges of reducing poverty, vulnerability and insecurity; and (iii) protect the economy, maintain human capital and facilitate recovery.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: A state of health emergency was declared on 21 March 2020 and, in the affected cities, mandatory lockdowns, shutdowns from 1pm onwards, a ban on travel between regions, except for freight transport, and a curfew between 9pm and 4am were put in place.

At the local level, through the PMDU, several social emergency measures were taken as part of various programmes: Vatsy Tsinjo - food distribution, Tsena Mora - sale of basic necessities at subsidised prices, Tosika Fameno - cash transfer programme for the poorest, HIMO -Money for work.

Economic measures to support businesses and the population were also taken, including the deferral of tax payments.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The lockdown caused a severe economic downturn with the closure of many SMEs and thousands of employees being made partially or technically unemployed. The informal sector suffered a heavy blow: small street traders, rickshaw pullers, washerwomen and others had to stop their work or could only do it part-time.

This situation has led to a significant decrease in the revenue collected by the LRAs. At the same time, their expenses, especially social intervention expenses, have increased. The operating grants given to the LRAs by the government were continued.

ECONOMIC AND SOCIAL STIMULUS PLANS: For the time being, the measures taken to revive the economy and respond to the social emergency consist of tax relief, rescheduling of tax payments, the setting up of the pandemic response fund and continuing social actions. These actions are carried out as part of the PMDU programme.