Madagascar

Army seizes power and raises concerns among international observers

Madagascar was shaken by a wave of protests that began on 25 September 2025 in Antananarivo and several other cities. Initially, the “Gen Z Madagascar” movement, mainly composed of young people, protested against repeated water and electricity cuts. The unrest quickly grew to an unprecedented scale, crystallising a broader discontent over corruption, persistent poverty and the concentration of wealth in the hands of a small elite. Despite the dismissal of the government by President Andry Rajoelina, who was re-elected in November 2023, and the appointment of a new Prime Minister, the protests continued amid violent repression. On 12 October, the entire Malagasy army joined the movement, led by the Capsat (Army Corps of Administrative and Technical Personnel and Services). The unit, which had already played a key role in Rajoelina’s rise to power in 2009, this time triggered his departure, forcing France to organise his exfiltration. On 14 October, the army officially seized power, which the ousted President claimed was a coup d’état. A Transitional National Defense Council composed of officers was set up. The High Constitutional Court validated the process and appointed Colonel Michael Randrianirina, head of Capsat, as interim President despite the dissolution of all key institutions except the National Assembly. The new military leadership pledged to organise a constitutional referendum and general elections by October 2027. For now, the takeover by the army appears to enjoy broad support from the population.

The Malagasy army’s takeover sparked strong reaction at international level. The African Union (AU) firmly condemned the coup, suspended Madagascar from all its bodies and demanded a swift return to constitutional order. It called for the establishment of a civilian transitional government and the organisation of free and fair elections. The UN also condemned the military takeover. By contrast, the Southern African Development Community (SADC) adopted a more conciliatory approach, announcing that its Panel of Elders and Mediation Reference Group would act as mediators. France expressed concern over the military’s seizure of power and urged it to uphold democracy and the rule of law. France’s role in exfiltrating President Rajoelina reignited simmering resentment toward the former colonial power. In this context, little progress is expected on the Franco-Malagasy dispute over the Îles Éparses, located in the Mozambique Channel. These territories, administered by France as part of the French Southern and Antarctic Lands (TAAF), have been claimed by Madagascar since its independence in 1960.

China and India will remain important partner countries due to their share in Malagasy imports (24.7% and 5.5%, respectively, in 2024). Beijing, which elevated its bilateral relations to a comprehensive strategic partnership in September 2024, seeks to strengthen its political influence. The dynamic is expected to prompt New Delhi to intensify its diplomatic and commercial engagement, amid growing rivalry between the two Asian powers on the African continent.

Growth revised downward amid uncertainty

Heightened political instability, uncertainty over governance and the pace of transition will weigh on investment and, consequently, growth in 2025 and 2026. At the end of 2025, protest-related riots and looting had caused significant economic loss, along with the destruction of several thousand jobs. The tourism sector was also severely affected, with a wave of cancelled bookings. These disruptions were compounded by strikes that paralysed economic activity and weak agricultural output, including an exceptionally poor rice harvest due to insufficient rainfall. The slight rebound in growth initially expected for 2026 that was supported by public investment in infrastructure and private investment in the mining, tourism, and telecommunications sectors now appears compromised.

On the trade front, Madagascar will face the impact of new 15% US trade tariff on its products, as well as the expiration of the AGOA (African Growth and Opportunity Act) program. Attempts by the former administration to negotiate were unsuccessful. The US, which was the country’s second-largest export market in 2024 (representing 17.7% of total exports), is a key destination for Malagasy garments and vanilla (accounting for 55% and 17% of exports to the US, respectively). However, for textiles, Madagascar is seeking to reduce its dependence on the US market by leveraging the African Continental Free Trade Area (AfCFTA) and exploring economic partnerships with African and Western countries, the United Arab Emirates, and other emerging markets.

Inflation is expected to remain high in 2025, driven by rising import prices, food costs — a consequence of the poor rice harvest — as well as electricity and fuel, which are affected by supply shortages. In response, the Central Bank of Madagascar (BFM) raised its key interest rate by 150 basis points to 12% in May 2025. Further hikes are anticipated to occur by the end of 2025. In 2026, a slight easing is expected thanks to a better rice harvest and lower oil prices, but monetary policy is likely to remain restrictive in the face of persistent inflation.

Fiscal consolidation in question owing to the regime change

The budget deficit is expected to worsen in 2025 before narrowing slightly in 2026. Higher spending will be driven by public investment and emergency energy measures, partially offsetting fiscal consolidation efforts (pension system reform and new fuel pricing mechanism). However, subsidies are declining on back of lower global oil prices and transfers to Jirama, the state-owned electricity and water company (which posted 2,785 billion ariary, or USD 621 million, in payment arrears to private suppliers at end-2024, not including recurring operating losses) should decrease thanks to its recovery plan. At the same time, public revenues will increase through a new tax on mobile transactions, higher vanilla exports from 2026, and tax reforms supported by the IMF (tax on agricultural income, higher VAT on fuel, excise duties on tobacco).

That said, given the recent political upheaval, growth and revenue forecasts could be revised downward, leading to a higher-than-expected budget deficit, which would weigh on fiscal consolidation and debt servicing. Michaël Randrianirina, the new head of state, has nevertheless announced a policy of fiscal restraint aimed at limiting public spending to the population’s essential needs. Political instability could also restrict Madagascar’s access to external financing, particularly from official donors. In addition, the suspension of USAID assistance in January 2025 — which amounted to USD 690 million between 2022 and 2024 that was mainly earmarked for emergency aid, health, and budget support — will have a significant impact on public finances. Despite this, the deficit is expected to remain primarily financed by external and mostly concessional borrowing. The public debt-to-GDP ratio is projected to rise in 2025 and 2026, but the risk of default will be moderate thanks to the largely concessional nature of the debt.

In 2025, the current account deficit is expected to widen as a result of an increase in the trade deficit. Exports of vanilla, cloves and mining products are declining, hampered by oversupply and sluggish global demand. However, clothing exports appear to be continuing to grow despite US customs duties. At the same time, rice imports have risen sharply, more than doubling in the first half of 2025. In 2026, the current account deficit will remain high due to structural dependence on imports but could narrow slightly thanks to a rebound in vanilla export revenues and a decline in imports, driven by a better agricultural harvest and lower global oil prices.

Last updated: October 2025