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IMF Executive Board Concludes the Article IV Consultation with the Union of the Comoros

June 18, 2018

On June 13th, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with The Union of the Comoros.

The Comorian economy’s performance improved in 2017. Growth is estimated at 2.7 percent for 2017, half a percentage point higher than in the previous year. A combination of factors contributed to this outcome, notably an improved electricity situation relative to 2016, increased exports, and stronger remittances flows. However, the economy was held back by a perceived deterioration in the business climate and tensions in the financial sector. Inflation remained moderate.

Reform measures aimed at improving revenue performance, and the first steps towards clearing external arrears, started to bear fruit in 2017, despite challenges in fiscal policy implementation. Cash revenue collections increased substantially in 2017, by some 2.5 percentage points of GDP over the 2016 outturn, driven by both tax and customs. Revenue execution, which fell well short of the ambitious supplementary budget target and was insufficient to meet current expenditure needs, was supplemented by budget support grants from Saudi Arabia and the Emirate of Sharjah (about a combined 3 percent of GDP) and borrowing from the financial sector. At the same time, investment budget execution was far below the level required to close the significant infrastructure gap and support medium-term growth prospects.

The near-term outlook remains challenging in the absence of further reform efforts. Containing vulnerabilities and achieving sufficiently-high sustainable growth rates that can boost living standards require building on current reform efforts through implementing a comprehensive set of policy measures. Overcoming persistent and severe physical and human capacity constraints—particularly bottlenecks in basic infrastructure provision such as roads and electricity—improving the business climate, further boosting revenue mobilization, strengthening governance and judicial effectiveness, and addressing financial sector fragilities, will all be key to boosting long-term growth prospects.

The authorities’ reform agenda and investment plans, undertaken in the context of their revised strategic development plan (SCA2D), will help raise potential growth rates going forward. A realistic budgetary framework, based on achievable revenue and investment targets and continued reform implementation, is essential to underpin development plans. To obtain much-needed external development financing on favorable terms, greater engagement with the donor community will be needed, to preserve the hard-won gains on debt sustainability of recent years.

Executive Board Assessment [2]

Executive Directors welcomed Comoros’s recent economic performance despite continued difficulties. Noting the challenging medium‑term outlook, Directors encouraged the authorities to build on the progress made thus far and to continue to pursue comprehensive policy measures and structural reforms, to achieve a higher and more inclusive growth rate.

Directors emphasized that sustained efforts are needed to create fiscal space needed to scale up priority infrastructure and social spending. They highlighted the importance of controlling current public expenditure and further strengthening revenue mobilization by strengthening tax and customs administration. Directors also called for continued steps to improve budget execution through public financial management reform. They underscored that maintaining commitment to prudent debt management, including relying mainly on concessional borrowing, is necessary to preserve debt sustainability.

Directors welcomed the steps taken to modernize the monetary policy framework and encouraged the authorities to carefully sequence the envisaged reforms. They noted that although the financial sector is well capitalized and liquid, addressing growing financial sector vulnerabilities, including high NPLs, will be key to enhancing credit growth and private sector development. Directors encouraged the authorities to ensure that the AML/CFT framework is in line with international standards, as this would also help counter problems with correspondent banking relationships.

Directors commended the progress made in implementing structural reforms. However, they agreed that deeper reforms are needed to improve growth prospects. Directors emphasized that priority needs to be given to addressing infrastructure gaps, maintaining a stable electricity supply, strengthening governance, and reducing gender inequality. They stressed that implementing the ambitious development agenda will require the identification of sustainable financing sources in the context of a realistic budgetary framework, to safeguard debt sustainability. Directors took positive note of the authorities’ interest in closer Fund engagement. They emphasized that continued efforts to improve the statistical capacity and enhance the reliability, timeliness and consistency of economic data are critical for macroeconomic surveillance and policymaking.

Comoros: Selected Economic and Financial Indicators, 2015-23

2015

2016

2017

2018

2019

2020

2021

2022

2023

Prel.1

Proj.1

(Annual percentage change, unless otherwise noted)

National income and prices

Real GDP

1.0

2.2

2.7

2.8

2.8

2.9

3.1

3.2

3.3

GDP deflator

1.6

2.4

1.2

2.4

2.2

2.3

2.3

2.3

2.3

Consumer price index (annual averages)

2.0

1.8

1.0

2.0

2.0

2.0

2.0

2.0

2.0

Consumer price index (end period)

2.0

0.8

2.9

1.9

1.6

1.8

1.7

1.9

1.9

Money and credit

Net foreign assets

37.9

-13.1

10.4

2.4

2.7

2.0

1.7

1.5

1.0

Domestic credit

-4.7

33.5

-0.4

2.3

3.9

5.0

5.5

5.9

6.3

Credit to the private sector

16.8

7.2

6.3

5.4

5.4

5.8

6.4

6.5

6.2

Broad money

17.1

10.3

1.8

5.3

5.1

5.3

5.5

5.6

5.7

Velocity (GDP/end-year broad money)

2.3

2.2

2.2

2.2

2.2

2.2

2.2

2.2

2.2

External sector

Exports, f.o.b.

-21.7

82.0

26.2

-12.8

5.5

5.7

6.0

6.7

7.4

Imports, f.o.b.

-7.8

-0.4

14.2

3.0

3.1

4.4

5.6

5.7

6.2

Export volume

-21.0

32.3

-0.9

-10.2

4.7

4.8

5.0

5.4

5.9

Import volume

-4.9

13.4

9.7

8.9

6.0

6.1

6.2

6.3

6.3

Terms of trade

3.5

22.3

8.6

-0.2

2.6

1.7

1.2

1.3

1.2

(in percent of GDP, unless otherwise noted)

Investment and savings

Investment

18.4

21.0

21.4

21.6

21.8

22.1

22.5

22.8

23.1

Public

8.4

10.3

9.9

10.7

10.9

11.1

11.1

11.2

11.3

Private

10.0

10.7

11.6

10.9

10.9

11.0

11.4

11.5

11.8

Gross national savings

18.0

13.6

17.3

15.6

14.1

14.7

15.2

15.7

16.2

Public

10.7

-0.8

5.1

3.8

0.4

0.1

-0.1

-0.3

-0.6

Private

7.3

14.5

12.2

11.8

13.7

14.6

15.3

16.0

16.8

Government Budget

Total revenue and grants

31.6

23.4

28.5

28.3

25.5

25.7

26.0

26.3

26.6

Tax Revenue

11.1

13.0

15.5

15.6

14.7

14.8

14.9

15.0

15.0

Total grants

15.1

8.9

11.7

10.6

8.6

8.6

8.5

8.5

8.6

Total expenditure and net lending

27.4

30.8

27.9

30.2

30.8

31.5

32.0

32.6

33.3

Current expenditure

17.4

18.2

16.9

19.5

19.4

19.8

20.3

21.0

21.6

Capital expenditure

8.4

10.3

10.4

10.7

11.3

11.7

11.7

11.6

11.6

Domestic primary balance

-1.4

-5.1

-1.8

-3.5

-5.1

-5.6

-5.7

-6.0

-6.4

Change in arrears

-1.6

0.0

-0.2

-1.2

-0.1

0.0

0.0

0.0

0.0

External (Interest)

0.0

0.1

0.1

0.0

-0.1

0.0

0.0

0.0

0.0

Domestic

-1.6

-0.1

-0.3

-1.2

0.0

0.0

0.0

0.0

0.0

Overall balance (cash basis)

2.8

-8.1

0.4

-3.1

-5.4

-5.8

-6.0

-6.3

-6.7

Excluding grants

-12.3

-17.0

-11.3

-13.7

-13.9

-14.4

-14.6

-14.9

-15.3

Financing

-1.5

6.9

-0.3

3.1

5.4

5.8

6.0

6.3

6.7

Foreign (net)

3.2

2.0

-0.4

3.5

5.5

5.8

6.0

6.3

6.7

Domestic (net)

-4.7

4.9

0.1

-0.3

-0.2

0.0

0.0

0.0

0.0

Financing gap/errors and omissions

-1.3

1.2

-0.1

0.0

0.0

0.0

0.0

0.0

0.0

External sector

Exports of goods and services

16.5

17.9

19.1

18.1

18.2

18.3

18.5

18.8

18.9

Imports of goods and services

45.4

43.8

46.9

47.0

47.0

47.0

47.0

47.1

47.3

Current account balance

-0.4

-7.4

-4.1

-6.0

-7.7

-7.4

-7.3

-7.1

-7.0

Excl. official and private transfers

-42.1

-25.0

-27.1

-28.2

-28.0

-27.8

-27.8

-27.7

-27.7

Private remittances, net 2

17.1

16.1

18.6

18.6

18.7

18.8

19.0

19.1

19.2

External debt

22.8

26.4

28.8

25.8

25.7

26.0

26.3

26.7

27.3

External debt service3

0.8

1.2

1.2

3.6

2.0

1.9

1.7

1.6

1.5

Overall balance of payments (in millions of U.S. $)

47.1

-38.3

23.6

1.9

3.2

0.0

0.0

0.0

0.0

Official grants and loans

18.3

11.1

11.7

12.7

10.8

10.9

11.0

11.1

11.2

Gross international reserves (end of period)

In millions of U.S. dollars

204.0

167.3

205.6

216.6

219.2

221.1

222.7

223.9

224.8

In months of imports of goods & services

9.2

7.5

8.1

7.3

7.0

6.6

6.3

5.9

5.6

Real effective exchange rate (2010=100)

81.7

76.3

71.1

Exchange rate CF/US$ (period average)

443.4

444.6

435.7

Memorandum items:

GDP (nominal, in bilions of CF)

260.9

273.1

283.9

298.8

314.0

330.6

348.8

368.2

389.1

GDP per capita (nominal, in US Dollars)

751

763

788

887

918

952

984

1,020

1,055

Sources: Comorian authorities; and IMF staff estimates and projections.

1 From 2017, includes budgeted-for revenues and expenses related to fuel subsidies of SOEs.

2 From 2015, net private official transfers include estimates made by the Central Bank of Comoros of debit items other than wire transfers.

3 In percent of exports of goods and services and private remittances.


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Lucie Mboto Fouda

Phone: +1 202 623-7100Email: MEDIA@IMF.org

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