Antananarivo, Madagascar

After more than two years of political crisis, Madagascar finally appears to be moving towards the restoration of democracy. A new prime minister has been appointed, and elections are planned for 2012. Donors who suspended aid to the impoverished island nation are watching these developments closely.

"I think no one will be coming out of the woodwork unless they see that the Malagasy are serious about their transition," said USAID Country Director Rudolph Thomas, who underscored the need for free, fair and transparent elections.

After Andry Rajoelina's ousting of President Marc Ravalomanana was branded a coup in 2009, many foreign donors suspended all but emergency aid to the country. The European Union (EU) halted programs and froze all development aid channeled through the government.

The United States followed suit by shelving the African Growth and Opportunities Act (AGOA), its preferential trade agreement with Madagascar , as well as plans to make the country the first beneficiary of its bilateral aid agency, the Millennium Challenge Corporation.

Many aid workers expected the sanctions to be as short-lived as the crisis. "At the beginning, we had to make a clear statement that we don't like coups," Thomas said. "If we did nothing, it would have seemed like an endorsement."

More than two years later, Rajoelina remains in power and the sanctions remain in force. The effects have been disastrous in a country dependent on foreign aid for 70 percent of its national budget. Work on infrastructure and environmental protection has come to a halt, suspension from AGOA has resulted in exports being cut by half, and at least 50,000 people, mainly textile factory workers, have lost their jobs.

When the UN Special Rapporteur on the Right to Food, Olivier de Schutter, visited Madagascar in July 2011, he declared that "all food security indicators are in the red", with food insecurity affecting at least half the population. One of the highest levels of child malnutrition in the world made him urge the international community to reconsider the sanctions.

However, donors remain cautious. Some programs have been allowed to run their course but few have been renewed. The Swiss Development Cooperation (SDC), for example, decided to cut Madagascar as one of its partner countries in 2010. Although some reduced program funding will continue, its rural development program, SAHA (Sahan'Asa Hampandrosoana ny eny Ambanivohitra), will end in 2012.

"In any program there is a moment when the donor thinks it's been enough. Program SAHA has basically reached its goal, although the development process... is not finished, of course. Follow-up and up-scaling work will now continue through a partnership of NGOs," said Nicolette Matthijsen of Helvetas Swiss Intercooperation, a Swiss NGO specializing in agricultural development and good governance, that implements SAHA.

Aid to the government remains suspended, but many NGOs report that they have increased their budgets in response to the worsening humanitarian situation in Madagascar. USAID's spending increased from US$57 million in 2008 to over $80 million in 2010. "We're doing more than before the crisis and have emerged as the biggest bilateral donor," Thomas said.

The Netherlands-based Inter-church Organization for Development (ICCO), which supports the national land reform program, one of the projects expected to benefit from the US Millennium Challenge Corporation, has also expanded its program.

"We do our own fundraising, so while we receive less money from the Dutch government, we managed to double our budget here in Madagascar," said the ICCO's Peter Egging.

He noted that the Millennium Challenge withdrawal had "taken the wind out of the sails" of the national land reform program, sections of which had to be closed down, but that several organizations, including the ICCO, had increased their support and the land reform program was now working in 30 municipalities.

As public expenditures on health and education nosedived during the crisis, aid organizations stepped in to keep social services functioning. When the budget for education dropped from $82 to a little over $14 million, for example, UNICEF jumped in with $37 million to pay teachers' salaries and fund schools . The agency provided similar support to the public health sector after 214 health centers closed at the beginning of 2011, mostly due to lack of personnel.

"As a result of the crisis, development aid has been frozen and funding lost," commented UNICEF Country Representative, Bruno Maes. "However, UNICEF succeeded in securing significant funding, in order to save, for example, primary school children from the negative impact of the crisis."

The sanctions mean aid organizations have had to walk a fine line when working with the authorities. "In general, the collaboration with ministries at technical level is accepted by donor organizations. On the other hand, an institution such as the EU isn't allowed to finance development projects in communes with a government-appointed PDS [Président de la Délégation Spéciale - regional leader], if the work dictates that the implementing organization has to work with him," said Egging.

Some aid agencies have seen their budgets increase because of ongoing international programs. At USAID, for example, budget increases are mainly linked to the President's Malaria Initiative, of which Madagascar is one of 15 participating countries in Africa. Similarly, the Humanitarian Aid department of the European Commission has provided funding through its international program for disaster preparedness.

NGOs are also trying to tap into the private sector for extra funding or assistance. Telecommunication companies, for instance, provide free helplines to UNICEF, while cement factories have donated building materials. In return, UNICEF helps them develop child-friendly business practices.

"There are all kinds of ways to find extra money. We have a fund from a Swiss commune, which we use to aid a project for street children. If you have a good plan, you'll find money," said Matthijsen.

Some organizations have circumvented the sanctions by channeling their funding directly into projects. Maes said that UNICEF had managed to uphold basic education services during the crisis "by targeting the beneficiaries directly".

Although this approach is often successful, it may not be sustainable in the long term. "You need to work with the authorities, as you want your projects to upscale," Matthijsen said.

A SAHA program to promote the cultivation of yams, a nutritious food regarded by Malagasy as being for the very poor, took off only after the national nutrition organization spread the word about the value of growing yams, and farmers start planting and eating them.

As Matthijsen pointed out, "A government can say: 'We want everyone to do this.' As a project, you can't do that."

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