Decreased Growth Forecast
Consumer prices on the world's fourth largest island are expected to rise by 9.7 percent compared to an earlier forecast of 13.7 percent. This is due to a good rice harvest and stable rice prices on the international market, the statement said.
Foreign diplomats fear Madagascar could be shunned abroad if President Andry Rajoelina fails to deliver free and fair elections after he overthrew former leader Marc Ravalomanana following weeks of deadly protests in March last year.
A referendum on constitutional reform initially slated for next month has been indefinitely postponed.
Ravalomanana opened Madagascar's doors to major foreign companies keen to exploit its oil, nickel, cobalt and uranium deposits, and overseas investment surged to around $1.47 billion in 2008 from $86 million in 2005. Analysts say inflows collapsed during last year's crisis, but by how much is not clear.
The European Union, the island's largest donor, is demanding a "consensus-based solution for a return to constitutional order" before unlocking suspended aid totaling 600 million euros.
"Because of this (budgetary assistance shortfall), a gap has been recorded in the Finance Law. It is due to this that the state is re-allocating funds," the statement said. (Writing by Richard Lough; editing by Patrick Graham)
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