At the end of 2010, the fiscal situation appears under control with a relatively small deficit estimated around 2 percent of Gross Domestic Product (GDP). This is good news in a country that still suffers from uncertainty about its political future. Yet, this fiscal stability was the result of a severe decline in public spending that accumulated for only 12 percent of GDP-one of the lowest ratios in the world. The weak share of public investment has become especially alarming, because it may further exacerbate the existing deficiencies in both physical and human capital that are observed in Madagascar. This development raises the fundamental questions about the conduct of future fiscal policy and its contribution to economic growth.