Republic of Madagascar: Selected Issues

This Selected Issues paper explores the electricity sector and Jiro sy rano Malagasy (JIRAMA) in Republic of Madagascar. JIRAMA’s production is relatively inefficient as the company produces less than what is generally acceptable, and at a higher cost. Electricity is the second biggest constraint to competitiveness reported by businesses in Madagascar, based on the Enterprise Survey conducted by the World Bank. A recovery plan is currently under preparation by the new JIRAMA management. While a first objective is for JIRAMA to reach financial sustainability and no longer be dependent on government transfers, other important objectives relate to electricity access and a shift of the production mix toward more renewables. The expansion of production capacity should take place through an increase in renewable energy to reach 85 percent of the production mix. Tariffs should be in line with recovery costs, including operational, distribution, commercialization, and investment costs. A first-best approach is to have one single household tariff and compensate most vulnerable households with targeted transfers.