The prospects for educational development are excellent in Madagascar, in light of the increasingly favorable, policy environment for the sector. Public spending for education, relative to the gross domestic product declined in the 90s, coinciding with a five-fold rise in the country's interest payment for external debt. As the debt service burden began to ease in the late 90s, public spending on education began to recover, and can be expected to grow. A key challenge however, is to transform the sector's public spending into educational outcomes that would make significant contributions to poverty reduction. The report identifies challenges at all levels of formal education, where a medium term goal is to achieve universal access to basic education, and of reasonable quality, while closely linking expansion of other levels, and types of education and training, to labor market demand. In primary education, challenges remain to raise educational enrollment rates and reduce grade repetition; including the rationalization of teacher allocation, and provision of learning materials. At the secondary level, policy issues should expand enrollment at a moderate pace, focusing on quality improvements. As for vocational and technical education, the provision of training should be rationalized, to reduce costs, aligning training to labor demand; similarly, for higher education.