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Union of the Comoros: Staff Report for the 2018 Article IV Consultation— Informational Annex

Author(s):
International Monetary Fund. African Dept.
Published Date:
June 2018
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Fund Relations

(As of March 31, 2018)

Membership Status: Joined September 21, 1976, Article VIII

General Resources Account:SDR Millions% Quota
Quota17.80100.00
Fund holdings of currency (Holdings Rate)14.9884.15
Reserve position in Fund2.8415.94
SDR Department:SDR Millions% Allocation
Net cumulative allocation8.50100.00
Holdings6.3875.05
Outstanding Purchases and Loans:SDR Millions% Allocation
ECF Arrangement9.0650.88

Latest Financial Arrangements :

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
ECF 1/Sep. 21, 2009Dec. 23, 201313.5713.57
SAFJun. 21, 1991Jun. 20, 19943.152.25

Formerly PRGF

Formerly PRGF

Overdue Obligations and Projected Payments to Fund 2/ (SDR millions; based on existing use of resources and present holdings of SDRs):

Forthcoming
20162017201820192020
Principal1.512.711.871.41.09
Charges/interest0.010.020.020.020.02
Total1.532.731.891.421.11

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Implementation of HIPC Initiative: Enhanced framework

I. Commitment of HIPC assistance
Decision point dateJuly 2010
Assistance committed
by all creditors (US$ Million) 1/144.80
Of which: IMF assistance (US$ million)4.27
(SDR equivalent in millions)2.89
Completion point dateDecember 2012
II. Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member2.89
Interim Assistance
Completion Point balance2.89
Additional disbursement of interest income2/0.07
Total disbursements2.97

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Summary of Safeguards Assessment

Safeguards assessments were completed in 2007 and 2010. In addressing recommendations, the Banque Centrale des Comores (BCC) started publishing its financial statements with enhanced disclosures on transactions with the IMF. In addition, the external audit process was strengthened, including through increased oversight by the audit committee. However, the BCC has not yet implemented International Financial Reporting Standards (IFRS) and continues to lack an internal audit function.

Exchange Rate Arrangements

The currency of Comoros is the Comorian franc, which is pegged to the Euro at €1 = CF 492. Comoros has accepted the obligations of Article VIII, Sections 2(a), 3, and 4, and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions.

Article IV Consultation

The last Article IV consultation was concluded on December 7th, 2016 (Country Report No. 16/393). Directors noted that the Comorian economy was experiencing weak growth due to difficult challenges and that poor tax revenue performance and a rising public wage bill had led to a structural fiscal imbalance. Directors emphasized the need to address the fiscal gap to create space for growth-enhancing infrastructure investment and priority social spending. They welcomed the important revenue administration and public financial management measures already taken to rebalance the budget and minimize and eventually eliminate domestic arrears. They saw the need however for further measures to enhance revenue mobilization and contain the wage bill, and welcomed the authorities’ commitment to implement a six-month staff monitored program aimed at stabilizing the fiscal situation. Directors noted that Comoros will need additional external support, however they stressed that borrowing to meet development needs should be on concessional terms only. Directors noted that the recent acquisition of new diesel generators was necessary to address inadequate electricity provision in the country, and recommended further reforms to the business environment to catalyze additional private sector investment.

Recent Technical Assistance

DepartmentDateSubject
MCM, AFSJan-16Risk Based Supervision
MCMJan-16Bank Supervision and Regulation
STAJan-16Balance of Payments Statistics
FADJan-16Treasury Single Account
FADJan-16TADAT Assessment of the Comoros Tax Authority
FAD, AFSMar-16Strengthen Customs Control on Non-Petroleum Excisable Goods Including Exemptions
MCMApr-16Revisions to the Banking Law and Strengthening the Operational Framework for Monetary Policy
MCMMar-16Bank Restructuring
STA, AFSApr-16National Accounts
STAJun-16Government Finance Statistics
FAD, AFSJun-16Development of Customs Code Regulations – Offsite
FADJul-16Revenue Administration
FAD, AFSJan-17PFM priority action plan for 2017–2019
MCM, AFSJan-17Risk Based Supervision
STA, AFSApr-17National Accounts
AFSApr-17Revenue Administration
MCM, AFSApr-17Risk Based Supervision
STA, AFSMay-17Price Statistics
AFSJun-17Development of Customs value evaluation
AFSJul-17Revenue Administration
FAD, AFSAug-17Macro-fiscal framework and budget credibility
STA, AFSAug-17Consumer Prices/Producer Price
MCMSept-17Introduction of Central Bank Securities
AFSSept-17Pension Fund
AFSSept-17Revenue Administration
STA, AFSDec-17National Accounts
AFSJan-18Pension Fund
AFSJan-18Strengthening the Accounting System
AFSMay-18Strengthening of large enterprises Service
AFSMay-18National Accounts
AFSMay-18Improve the preparation of the budgetary implementation

Resident Representative

A resident representative post established in September 1991 was closed in December 1995; in the 2000s, the IMF’s field operations in the country were managed by the resident office in Madagascar. The Comoros post was reestablished in May 2012.

Joint World Bank-IMF Work Program, 2018–2019

TitleProducts TitleProvisional timing of missionExpected delivery date
A. Mutual information on relevant work programs
1. Development Policy OperationsAppraisal 12/20/2016February 2017
2. Statistics ProjectAppraisal 10/04/2016January 2017
3. Electricity Sect. Recovery (AF)Appraisal January 2017April 2017
4. Financial Sector Development & Implementation Plan – TADecember 2016
5. Strengthening Social Protection TA.February 2017
6. CL4D- Multi-stakeholder leadership TA.December 2016
7. Poverty Assessment EWt.May 2017
8. DeMPA and MTDS training TANovember 2016
9. From Remittances to Savings TAJune 2017
10. Action plan for targeting and UHC AAJune 2016
12. Strengthening Payment Systems & Fin InfraMarch 2018
Bank work program in next 12 months13. Agri Value Chains & Food SecurityMay 2018
14. Revenue Management NTLAJune 2018
15. Governance & Political Economy Filter of DRMJune 2018
16. Regional Com. Infra Program (AF)May 2018
17. Solar Energy Development (ComoSol)October 2018
18. Integrated Business Dev. ProjectSeptember 2019
19. Health & Nutrition Systems For Universal Health CoverageSeptember 2019
20. Financial Sector Development ProjectApril 2019
21. Development Policy OperationApril 2019
IMF work program in next 12 months2019 Article IV ConsultationMarch 2019
B. Requests for work program inputs
Fund request to BankUpdate on Bank’s assistance in the area of PFM reforms and PRSP implementation and energy sector reforms and financial sector.Continuous
TA on the Restructuring of SNPSFContinuous
Bank request to FundSharing macro-framework updates; policy notes produced in the area of monetary and fiscal policy, and AFRITAC reports on PFM support.Continuous
Launch of the New National Statistical Data through SN98 Sharing info on new loans, & contracts signed by the GovernmentContinuous
Comoros: Recent World Bank Operations
ProjectType of FundingAmount Approved (in mln of US$)Date ApprovedDescription
Coastal Resources Co-management for Sustainable LivelihoodTF2.734/5/2011Grant to increase access to revenues and to basic social services in the fishing community of the recipient’s territory.
Second Economic Governance ReformIDA Grant3.006/02/2015To improve economic governance & transparency, and competition & management of the electricity and ICT sectors
Emergency Response Project (Additional Financing)IDA Grant3.03/28/2013The objective of the project is to increase access to short-term employment and to basic and social services in areas affected by the crises, both global and internally-generated.
Electricity Sector Recovery projectIDA Grant5.06/9/2013To contribute to the improvement in the electricity sectors’ commercial & financial performance.
Regional Telecom ProjectIDA Grant229/10/2013To support the Recipient’s efforts to lower prices for international capacity and extend the geographic reach of broadband networks
Economic Governance TA ProjectIDA Grant5.311/12/2013Grant to increase the efficiency, accountability and transparency of public financial management and to improve the management of civil service human resources and wages.
Social Safety Net ProjectIDA Grant6.03/19/2015Provide poor communities with access to safety net and nutrition services.
South West Indian Ocean Fisheries GovernanceIDA

Grant

Regional

IDA

TF
1.2



8.3



3.5
4/30/2015Grant to boost regional cooperation and integration in the fisheries sector.
Development Policy Operation (pipeline)IDA Grant3.0002/20/2017To enhance fiscal management and the conditions for economic growth
Statistics Project (pipeline)IDA Grant2.5001/09/2017To strengthen the capacity of the National Office to improve the production & dissemination of Statistics
Electricity Sect. Recovery-AF (Pipeline)IDA Grant604/05/2017To contribute to the improvement in the electricity’s sector commercial and financial performance To contribute to the improvement in the electricity’s sector commercial and financial performance

Relations with the African Development Bank Group

A. Bank Group’s Support in Comoros

1. The African Development Bank Group (AfDB) started its operations in Comoros in 1977 and has since then approved seventeen (24) operations and seven (7) economic and sector work (ESW). Cumulative Bank Group commitments net of cancellation amounted to UA 133.5 million as of April 2018. These operations targeted the public sector and were mainly financed from ADF resources (87.6 percent). One (1) port infrastructure project was financed through the ADB window for a net UA 10 million representing 7.5% percent of total net commitments. In addition, the AfDB approved three (3) emergency operations to assist in mitigating the adverse impact of the food crisis in 2008 (UA 1.5 million) and support victims of floods in 2009 and in 2012 (UA 1.28 million). Since 2009, in addition to the ADF, Comoros are eligible for Pillars I and III of the Fragile States Facilities (FSF), on which they have received additional resources of UA 41.1 million. On the Pillar I, Comoros received UA 10 million in ADF 12 and UA 15 million in ADF 13 and ADF14, respectively addressed to support Energy Sector in the ADF 12 and Road sector in the ADF 13 and ADF14 . The resources on Pillar III have supported the statistical capacity building in the PRCI (UA 595.000), the preparation of SCA2D (UA 241.000), the assistance to private sector (UA 625.000). In November 2015, the Bank approved a PRCI phase 2 under the resources of pillar I of TSF (UA 6 million). Recently there has been in November 2017 under pillar III a support to investment promotion (UA 1.1 million).

2. Overall, AfDB operations in Comoros have been mainly directed toward supporting economic-related infrastructure, support to public finances and improvement of rural livelihoods. They have primarily concerned Transport sector (39.8 percent), multi-sector (27 percent) and Energy sector (11.5 percent).

B. Strategic Orientation

3. The Bank Group concretely re-engaged in Comoros in 2010 following the resolution of the Anjouan crisis and the lifting of sanctions in February 2009 after clearance of its arrears with the Bank. A two-year Interim Country Strategy Paper (I-CSP) 2009–2010 focusing on economic and financial governance and water and sanitation was approved in April 2009. In December 2011, the Board of the AfDB approved a full Country Strategy Paper (CSP) for 2011–2015 based on a single pillar focusing on the energy sector in support of economic diversification. This new CSP draws on the Growth and Poverty Reduction Strategy Paper for 2010–2014 and spans over two ADF cycles – ADF 12 and ADF 13. In April 2016, the Bank approved a second full CSP for 2016–2020, based one single pillar: Developing basic energy and road infrastructure to support economic diversification. The current CSP is aligned on the national Strategy of growth and sustainable development (SCA2D 2015–2019) and is financed by ADF 13 and 14 resources, corresponding to a total amount of UA 60.54 million, including UA 25 million from the Transition States Facility (TSF). These resources will primarily aim to finance (i) a road project (UA 15.165 million), (ii) an energy investment project (UA 17.38 million), (iii) Capacity building for resource mobilization and economic governance (UA 5.0 million) and (iv) a sectoral budget support -energy and road- operation (UA 5.0 million) whose main objective will be to support government efforts in rehabilitation of roads and energy sectors in which the country faces major challenges.

4. Moreover, aware of the weak of institutional capacity of Comoros, the Bank approved, in November 2015, the second Phase of the Project of Institutional capacity building (PRIC 2) to strengthen the operationalization of Tax department (AGID), improve the capacity of programming and management of public investment (CGP), and improve the effectiveness of the department in charge of energy (DGME).

5. As of April 2017, the Bank’s ongoing portfolio in resources amounts to UA 37.6 million comprising 5 operations: (i) Energy Sector Support Project (ii) Energy Production, Transport & Distribution Plan, (iii) Rehabilitation of road network project, (iv) Support to Investment Promotion Agency, and (v) the Institutional Capacities Building (PRCI 2). A Midterm review of CSP combined to Country Portfolio Performance Review (CPPR) is planned in 2018.

C. Non-Lending Activities

6. Along with other developing partners, the AfDB aims to provide Comoros’s authorities with policy advice and decision tools on key strategic directions with the objective of leveraging and sustaining economic growth over the medium-long term. In this respect, the first phase of a study on the sources of growth in Comoros was completed in December 2010 and provided a series of preliminary key recommendations on ways of boosting growth and improving the economic and business climate. A second ESW concerning Fragility study is achieved in April 2014, to support the finalization of SCA2D.

D. Summary of AfDB Current Lending Portfolio

ProjectSectorEffectivenessClosing DateAmount
Millions of Units of AccountMillions of U.S. Dollars
Energy Sector Support ProjectPower11/27/201303/01/202013.38019.45
Energy Production, Transport & Distribution PlanPower11/27/201507/30/20182.0002. 907
Institutional Capacity BuildingMultisector11/27/201501/31/20206.0008.72
Road rehabilitation projectTransport04/17/201712/31/202115.16522.05
Investment Promotion projectMultisector11/22/201712/03/20211.11.6
Total37.6454.727
Source: AfDB, 2018.
Source: AfDB, 2018.

E. IMF-African Development Bank Collaboration

7. Collaboration between the IMF and Africa Development Bank teams has been largely through exchanges, sharing of information and joint missions. Also, the Bank has always participated of the Article IV mission.

Statistical Issues

I. Assessment of Data Adequacy for Surveillance
General. Data provision has serious shortcomings that significantly hamper surveillance. Inadequate staffing, funding, and institutional environment undermine the accuracy and comparability of almost all macroeconomic statistics, with the partial exception of monetary and financial statistics.
National accounts. The recently published annual national accounts series 2007–2015 have many shortcomings and are currently under revision. . Source data from either surveys or administrative sources do not support compilation of key aggregates required to compile GDP. The national statistical office lacks adequate financial resources, staff capacity, and institutional environment. The next STA technical assistance missions will coordinate with the World Bank and AFRISTAT in order to enhance the finalization of the GDP estimates for the period 2007–2017. No quarterly estimates are produced.
Consumer prices. Comoros adopted the Common Market for Eastern and Southern Africa (COMESA) Harmonized Consumer Price Index (HCPI) as its national consumer price index (CPI) from January 2017. The results are of superior quality to those produced with the previous methodology. The base year is 2011 and the expenditure weights are based on the results of the 2014 household survey. Prices are collected across the islands and the CPI is only compiled for the country’s capital. The end in 2019 of the African Development Bank’s fund that supports data collection and compilation is a risk and lack of funds has already disrupted the dissemination of the CPI in the past. Understaffing and poor IT infrastructure also limit the scope of the CPI. The Institut National de la Statistique et des Etudes Economiques et Démographiques (INSEED) could continue the process of improvement by adopting best practice compilation methodology, namely the use of a geometric mean rather than an arithmetic mean in the calculation of the elementary indexes, and the imputation of price changes for missing seasonal items.
Government finance statistics. In August/September 2005 an STA mission found that the public chart of accounts did not accurately record the execution of the budget and that a standardized presentation on outstanding public debt is not compiled. Classification of budgetary data is often not consistent over time or across the islands. In particular, problems arise in data on domestic arrears, external debt, and external support, including its investment spending components, complicating fiscal analysis. An August 2016 STA mission proposed various steps to improve compilation and quality of data. Two officials from Comoros participated in a joint AFC-AFS workshop on GFS during April 23–27, 2018 in Libreville.
Monetary and financial statistics. The Central Bank of Comoros (BCC) produces adequate monetary statistics on its own accounts, for the commercial banks, the development bank, the deposits collected by the Société nationale des postes et des services financiers (chèques postaux and saving passbooks), and for two microfinance networks. The Franc Zone arrangement has established accounting and prudential standards that prevent data disruptions. A major shortcoming is the absence of data on the large amount of Euro cash in circulation, handicapping surveillance. In June 2009 the BCC started reporting monetary and financial statistics to the IMF using Standardized Report Forms (SRFs). The current presentation and content of monetary statistics accords largely with the methodology in the IMF’s Monetary and Financial Statistics Manual 2000.
External sector statistics. Despite technical assistance and some improvements over the past few years, shortcomings in coverage and compilation continue to affect accuracy and reliability. Currently two BCC economists are responsible for compiling balance of payments statistics. BOP data up to 2012 are published in BOPSY. No data on IIP and external debt are reported. The April 2016 mission recommended to incorporate revised trade data into the BOP and to use the new average CIF / FOB coefficient. The Central Bank of Comoros should collaborate with Customs to identify other transfers and update the registry of direct investment enterprises established in 2012 using the updated questionnaire. The last TA mission (January 2016) recommended the recruitment of one additional staff, to assure regular compilation of balance of payments (BP) and the development of the International Investment Position (IIP). A TA mission is planned for FY19.
II. Data Standards and Quality
Comoros has participated in the enhanced General Data Dissemination System (eGDDS) since February 2013 and disseminates metadata for 11 of the 15 recommended data categories, as well as one supplementary category (industrial production index). The metadata was last updated in February 2013.No data ROSC is available.
III. Reporting to STA
National accounts. Comoros is not reporting any national accounts data to STA.
Consumer prices. In July 2015 Comoros delivered to STA a set of monthly consumer price indexes covering period January 2000 – October 2014. Since then no further reporting.
Government finance statistics. There is no regular compilation and dissemination of fiscal data (TOFE). No GFS data are reported to GFSY or IFS. Data are compiled on GFSM 1986 / TOFE basis, only when it is requested by the African Department; this data is incomplete (both transactional and institutional coverage) and thus data do not accurately reflect the fiscal position. The last TA mission (June 2016) noted deficient material and technical resources.
Monetary and financial statistics. The Central bank of Comoros (CBO) compiles monetary statistics for the central bank and other depository corporations (ODCs) using the standardized report forms (SRFs), which are published in the International Financial Statistics (IFS). The CBO does not compile the SRFs for the other financial corporations.
Financial Sector Surveillance. Comoros compiles eleven of the twelve core Financial Soundness Indicators for deposit takers. Reporting to the Statistics Department of the IMF is irregular. The latest reported data refer to December 2016.
External sector statistics. Only annual BP data are reported to STA; the most recent dataset (received in 2014) is related to year 2012. Data on IIP and External Debt are not reported.
Comoros Table of Common Indicators Required for Surveillance(As of May 10, 2018)
Date of Latest Observation (mm/yy)Date ReceivedFrequency of Data7Frequency of Reporting7Frequency of Publication7
Exchange RatesJun. 2018Jun. 2018DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1May 2018Jun. 2018MMM
Reserve/Base MoneyMay 2018Jun. 2018MMM
Broad MoneyMay 2018Jun. 2018MMM
Central Bank Balance SheetMay 2018Jun. 2018MMM
Consolidated Balance Sheet of the Banking SystemMay 2018Jun. 2018MMM
Interest Rates2May 2018Jun. 2018MMM
Consumer Price IndexMay 2018Jun. 2018MMM
Revenue, Expenditure, Balance and Composition of Financing3—General Government4Dec. 17Mar. 2018III
Revenue, Expenditure, Balance and Composition of Financing3— Central GovernmentDec. 17Mar. 2018III
Stocks of Central Government and Central Government-Guaranteed Debt5Dec. 17Mar. 2018III
External Current Account BalanceDec. 17Mar. 2018III
Exports and Imports of Goods and ServicesDec. 17Mar. 2018III
GDP/GNP2017Mar. 2018AAA
Gross External Debt2017Mar. 2018NANANA
International Investment Position6NANANANANA

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

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