Madagascar's external debt stands at over US$3.3 billion, its annual deficit at around 4 percent of GDP (1999). This is some improvement over the previous 6 years, when the deficit had averaged in excess of 6 percent per annum, but it remains a heavy economic burden, and has put considerable pressure on its currency. Inflation has long been a problem, with an average of 60 percent as recently as 1994. But while efforts by Madagascar's central bank have seen this fall in 1998 to 6.4 percent, further progress is hindered by the high world oil price; and increased government spending saw this bounce back up to 14.4 percent in 1999.
Since the Malagasy franc was first floated in 1994 it has lost about half its value against the U.S. dollar. Although this has made imports more expensive, it has also enhanced Madagascar's export competitiveness. The Malagasy franc now sits at about 7,000 to the U.S. dollar.