"The government can afford the increase the president has announced, the impact on the budget is not that huge," Hafez Ghanem, the World Bank's country director, told the BBC's World Business Report.

The government needs to ensure that foreign investors feel safe operating in Madagascar and ensure security in regards land, repatriating profits, the legal system and reduced corruption

Hafez Ghanem World Bank

"If a minister is being paid $300 per month, the incentive for dishonesty is very high," he said.

Ministers are now expected to earn as much as $3,500 per month, almost 10 times more than they were paid under the previous administration.

"If ministers, who are the key to our development, are properly paid, there will be no more corruption," President Marc Ravalomanana said on Saturday.

"We will begin with the ministers, and move on bit by bit," he said, indicating that civil servants would eventually receive wage hikes.

Madagascar, an Indian Ocean island nation of 16 million people about 400 kilometres (240 miles) off the coast of Mozambique, is one of the world's poorest countries with an average annual per capital income of $250.

Political upheaval

Seven months of turmoil ended earlier in July when incumbent President Didier Ratsiraka fled the country after refusing to recognise Mr Ravalomanana's victory in elections in December.

Madagascar had come close to civil war, with some provinces ceding after two governments were established.

"The first priority is to get the private sector operating again," said Mr Ghanem adding it would take "some time" to return to pre-crisis levels.

"Many enterprises had to shut down or operate at lower activities and they have to be restructured and need to get finance."

Economic revival

Economists estimate the dispute cost the country about $14m in revenues as its two fastest growing industries, tourism and textiles, were hit and foreign investors lost confidence.

A report published by the US embassy in Madagascar, the "Trade Information Bulletin", indicated textile exports were not seriously affected until May.

Between January and April 2002 they rose from $8.7m to $11.1m before falling to $1.9m.

"For those companies...looking at the cost-competitiveness of Madagascar, it is still a cheap place to produce," Mr Ghanem said.

"The government needs to ensure that foreign investors feel safe operating in Madagascar and ensure security in regards land, repatriating profits, the legal system and reduced corruption," he said.