Donors approve $125m Madagascar energy rescue plan

Donors have approved $125 million in aid to Madagascar to reform its ailing state energy company, burdened by rising fuel costs and huge debts, the government has said.

Donors met Madagascan officials in Paris this week to discuss a plan to reform Jirama, the wholly state-owned energy and water company which has several times been rescued from bankruptcy by the World Bank.

In a statement handed to local press late on Thursday, the government said donors had finally approved the plan.

"Our partners, taking account of the government's efforts, have affirmed the urgency of the plan to redress Jirama in the short term and are ready to contribute funds to putting it into action," said the statement.

Measures for solving Jirama's financial woes include in the short-term raising prices and catching electricity thieves, and in the long-term moving away from expensive, petrol-based generators.

Jirama says about 20 percent of its total electricity production is lost to fraud. Frequent blackouts have hampered business and caused rioting.

The government says power cuts, which have crippled the Indian Ocean island since June last year, took more than half a point off Madagascar's 2005 economic growth, estimated at 5 percent.

Last November, the World Bank warned it would not continue to subsidise Madagascar's arificially cheap electricity in the absence of serious reforms.

In a bid to end inefficiency, the government contracted Jirama's management to German infrastructure firm Lahmeyer International in March.

The company hiked tariffs by 30 percent in July and 35 percent again in November last year, but power cuts continued.

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

Jirama says there is potential to generate 7,000 megawatts of power from rivers, compared with 120 megawatts currently.

Rocketing fuel bills last year forced the company to cut its consumption of diesel, which now accounts for 35 percent of its elecricity, compared with 60 percent in early 2005.

The company was to be privatised under a World Bank initiative drafted in 1998 but late last year President Marc Ravalomanana ruled out selling Jirama.


By Tim Cocks

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