World Bank backs plan to save Madagascar utility

The World Bank has approved plans to save Madagascar’s ailing state-owned national utility, Jiro Sy Rano Malagasy (Jirama), a senior bank official said. The official said March 22 the bank also is investigating incentives to invest in new hydroelectric projects on the Indian Ocean island.

Burdened by debts and rising fuel costs, Jirama has been rescued from bankruptcy several times by the World Bank, but last year the lender warned it could not continue to subsidize the company unless it made tough reforms. Other international donors approved US$125 million in aid to Madagascar in January to reform Jirama.

However, a government task force published recommendations for reform March 21, suggesting Jirama’s assets should not be privatized but that the company should continue to be managed under contract by a private operator.

Last year, the government contracted Jirama’s management to German infrastructure firm Lahmeyer International, but frequent blackouts continued to hamper business and cripple economic growth. In a bid to tackle its financial shortfall, the company announced in March it would increase tariffs by 10 percent, after hiking prices by 30 percent in July last year and again by 35 percent in November.

Hydropower seen as only viable solution

But analysts say a switch away from diesel generators to hydroelectric power is the only viable long-term solution.

The World Bank’s country director for Madagascar, James Bond, said the bank is studying the possibility of a credit guarantee system to attract investors into new hydroelectric projects on the island.

Jirama says there is potential to generate 7,000 MW from rivers, compared with 120 MW of existing hydropower.

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