This Selected Issues paper analyzes the decentralization of government in the Union of the Comoros and its economic management functions foreseen under the constitution. The paper examines the special challenge of combining a civil service reform needed to increase the efficiency of the civil service with the decentralization of the civil service foreseen under the new constitution. It discusses developments in a number of civil service indicators that are often used to analyze the government wage bill and employment in relation to economic and fiscal objectives.


This Selected Issues paper analyzes the decentralization of government in the Union of the Comoros and its economic management functions foreseen under the constitution. The paper examines the special challenge of combining a civil service reform needed to increase the efficiency of the civil service with the decentralization of the civil service foreseen under the new constitution. It discusses developments in a number of civil service indicators that are often used to analyze the government wage bill and employment in relation to economic and fiscal objectives.

II. Decentralization in the Comoros—Striking a Balance1

A. Introduction

6. In December 2001, Comorians overwhelmingly voted in favor of a new constitution. Its principal feature was a radical devolution of authority from the central government to island governments led by their own elected presidents. With this vote, the country moved from a unitary state, with local administrations overseen by island governors appointed by the central government, to a federal structure. At the same time, however, the name of the country was changed from “Federal Islamic Republic of Comoros” to “Union of Comoros.” This apparent paradox can be readily understood by drawing a parallel with the European Union, which, though it has an increasing number of supranational features, remains so far primarily a union of independent states. It is clear from the events leading up to the new constitution’s adoption that framers and citizens alike shared this vision of decentralized government.

7. The three islands that make up the Comoros are home to only 630,000 people, and their per capita income is only around US$500 per year.2 The small size and low level of income sharply circumscribe the degree of decentralization that can be considered efficient, at the same time that the country’s pelagic nature creates a degree of natural independence of aspects of public administration on the three islands.

8. There are tensions between the constitutional call for decentralization and farreaching autonomy of the islands on the one hand, and the small size and limited resources of the country, on the other. They are not simple to resolve, and have lain at the heart of much of the political tumult in the country’s fewer than 30 years of independence. Nevertheless, a great deal of progress has been made toward defining a governmental structure that can command a popular consensus. The first serious test of whether these conceptual solutions can be successfully implemented is the agreement on transitional arrangements that was reached in December 2003.3

9. This paper seeks to document the path that the country has followed in defining its approach to intergovernmental relations. It will focus on fiscal relations under the new constitution and draw upon both the existing literature on decentralization and previous Fund technical assistance (many of the issues raised and observations made reiterate advice given by earlier technical assistance missions) to contribute to the internal debate and to establish reference points for the road ahead.

B. Toward New Intergovernmental Fiscal Relations

Establishment of a new constitution

10. Since the time of independence in 1975, Comoros has been afflicted with what has come to look like chronic instability, with frequent changes of government. In August 1997, the situation took a turn for the worse. In response to perceived mismanagement by the central government and inadequate provision of public services, the island of Anjouan declared its independence from the Comoros. The years since have been dominated by the search for a formula, at times in a climate of intense mistrust, under which the Anjouanese would be prepared to return to the Comorian state, with issues of autonomy and decentralization at the forefront (Box II.1).

11. The international community, led by the Organization of African Unity (OAU; now the African Union), reacted negatively to the secession. A trade embargo was declared, and numerous attempts were made at mediation. In August 2000, an end to the Anjouanese secession was agreed between the government of Colonel Azali Assoumani, who had seized power in the capital Moroni (on the island of Ngazidja) the previous year, and the government of Anjouan (Fomboni I). In the face of opposition to the agreement by groups excluded from the negotiations and the agreement’s consequent rejection by the international community, this agreement was followed a few months later by a second, all-party agreement (Fomboni II). The new agreement received the endorsement of the international community and opened the way to national reconciliation. It outlined (i) a schedule for constitutional reform; (ii) the formation of a transitional government of national unity following a referendum on a new constitution; and (iii) elections and the final transition to democratic institutions, under a new structure with broader autonomy for the islands. A broad-based tripartite commission was charged with implementing the agreement, with financial and technical assistance provided mainly by the European Union (EU) and the United Nations Development Program (UNDP). In parallel, the federal government was to help Anjouan rebuild its administration, which had been affected by the trade embargo imposed on the island by the OAU in early 2000 and the suspension of federal government transfers.

12. As part of that process, a new constitution was drawn up. It is the first of the country’s constitutions to have been prepared with broad participation (Box II.2). In December 2001, the resulting text was submitted to the voters on all islands, who approved it with a 77 percent majority. Island constitutions were approved soon after. In April-May 2002, elections were held for the presidencies of the Union and of the islands. However, legislative elections—which were to have followed—were postponed following the conflict that developed between, in particular, Union President Azali and President Abdou Soule Elbak of Ngazidja.

Drafting by-laws to the constitution

13. The rapid preparation and approval of the new constitution were made possible by deferring decisions on key issues on which agreement could not be reached. This applies in particular to by-laws that would be enacted by the Union Assembly, once installed. Even amid the political tension surrounding the repeated postponement of legislative elections, progress continued to be made on the by-laws at the technical level. Particular progress was made during two workshops hosted by the Organisation Internationale de la Francophonie (OIF) in Paris, in November 2002 and May 2003.

14. These workshops included participation by the four governments. They made substantial progress in preparing drafts, or frameworks for drafts, of the by-laws called for by the constitution with respect to the allocation of responsibilities between the levels of government. The Fund assisted the deliberations in the areas of revenue sharing, customs and budget questions. Fund staff also prepared a consolidated budget for 2003 that was initially agreed among the governments during a December 2002 staff visit, but was never implemented because the implied transfer of responsibility and staff was not considered acceptable by the Union government.

15. A subsequent meeting among representatives of the four governments took place in Pretoria, South Africa, in August 2003. The meeting attempted to reach agreement on transitional arrangements (including provision for legislative elections) for the allocation of responsibility—and budget entitlements to take these up—until the required by-laws could be adopted. The agreements reached in Pretoria quickly broke down when the Union President questioned the revenue-sharing formula that had been agreed.

16. In December 2003, another attempt was made, this time in Moroni, to reach an agreement on elections, power sharing, and joint economic management during a transition period. Present to mediate were a delegation from the African Union led by South African President Mbeki. Malagasy Prime Minister Sylla, and Mauritian Prime Minister Berenger, Abdou Diouf (Secretary-General of the OIF and former President of Senegal), the French Minister of Cooperation, the Secretary-General of the Indian Ocean Commission, and other representatives of the international community also participated. The result was an Agreement on Transitional Arrangements in the Comoros (ATAC) signed by all four Comorian presidents and the above representatives of the international community. In parallel, a group of donors, including the World Bank, UNDP, France, the EU, South Africa, and Mauritius, established a multidonor trust fund in support of the successful implementation of the transition agreement.

The transition agreement

17. The ATAC broadly follows the provisions of previous agreements. The text is quite similar to that of the Pretoria agreement, for example, and builds on technical agreements reached in the Paris workshops and elsewhere. The key differences lie with some of the implementation provisions, which empower key committees to resolve outstanding issues and in some cases to modify provisions of the ATAC itself. The signature of the agreement by the various Comorian heads of government, rather than their representatives, also distinguishes the ATAC from previous agreements and adds to its significance and commitment. The main provisions include the following:

Political and security provisions
  • Legislative elections to be held by end-April 2004.

  • The National Police to be placed at the disposition of the island governments.

Fiscal provisions
  • Union government to issue 2004 budgets for the Union and the islands by decree by the end of 2003.

  • A unified and independent customs authority, comprising four Comorians and three international experts, to oversee the work of customs.

  • Tax and nontax revenues from most sources (the remaining 10 percent being directly earmarked for the use of the island governments) to be deposited in a central bank account, to be divided among the governments in the previously-agreed shares.

  • A onetime transfer to be made to Ngazidja to finance its hitherto arrears-funded 2003 budget.

  • A special donor trust fund to be established to channel aid resources for the transition.

Implementation provisions
  • Both civilian and military observers from the African Union to be deployed throughout the transition period.

  • An Implementation Committee chaired by the AU (delegated to South Africa) to oversee implementation of the agreement. Designated members include the Union and three island governments, other countries in the region, and a number of international organizations, including the IMF4

  • A Harmonization Committee to oversee the budget process and the macroeconomic data on which it is based, as well as the implementation of the agreement on customs. Moreover, the committee was given the authority to adjust the revenue shares assigned to each of the four governments in line with agreed spending authority.5 Named to the Harmonization Committee were the Union and island governments, the UNDP, the World Bank, the AU, the EU, the OIF (chosen to chair the committee), and the IMF.

The agreement also calls on the international community to provide technical assistance in relevant areas and to disburse promised funds; on the latter, the World Bank and the Fund were explicitly mentioned.

Implementing the agreement on transitional arrangements

18. As has been the case since the approval of the 2001 constitution, decisions on a significant number of key issues were deferred under the ATAC. Deferral was either to the two committees or to final resolution by the Union Assembly to be installed following the April elections.

19. The Implementation Committee was initially mandated by the ATAC to meet every two weeks but has met somewhat less often. Its principal contribution to the transition process has been threefold: to interpret the ATAC text, to recognize measures taken by the parties—and by the external partners—in accordance with the ATAC, and to encourage, sometimes through the delegation of individual members, required measures to be taken in a timely manner.

20. The operationalization of the ATAC has been principally the task of the Harmonization Committee. It met under the chairmanship of the former Prime Minister and Minister of Finance of Senegal, Mr. A. L. Loum, and focused on the time-consuming task of seeking agreement on the ATAC’s provisions for fiscal management during the transition. Meeting in almost continuous session from January 26 until March 2 (and with the attendance of Fund staff until February 4), the Harmonization Committee submitted agreements for endorsement by the Implementation Committee in seven key areas:

  • Promulgation of a revised budget for the first half of 2004 for the Union and island governments (Table II.1). This budget incorporated revised shares for the allocation of revenue based on the centralization of salary administration for the Union, Ngazidja, and Mohéli governments during the transition. The dispute over competencies and revenue was resolved by further adjusting the revised revenue shares agreed for Ngazidja and Mohéli by a fixed percentage of revenues to cover salary payments effected on their behalf by the Union government.

  • Establishment of a system of seven bank accounts for shared revenue sources, and daily procedures for directing the flow of revenues to meet the agreement’s provision for an “automatic” transfer of funds: a central account, one for each government, and separate accounts for wages and debt service.

  • The establishment of procedures and guidelines for budget execution across governments, to ensure that budget execution conforms to the agreed budgets. This includes the circulation of detailed budgets and monthly cash plans based on the framework below, and commitments not to incur new arrears, to engage new staff, or to raise salaries. Improved monitoring mechanisms were also agreed.

  • Both the principles for calculation and the amount of the Agreement’s special allocation for Ngazidja to cover 2003 arrears. Some donor funding has been pledged toward the €1.5 million agreed (against the €2.4 million that had been requested), and the balance is being sought.

  • Supervision of the establishment of the unified customs authority, including the harmonization between the Union and Anjouan of customs procedures, which has been completed, and of tariff rates, planned for end-April.

  • Delegation to a technical committee of work to strengthen the collection and transparent dissemination of statistics among the parties to the agreement, with a view both to monitoring the transition and to preparing for an eventual staff-monitored program with the Fund. Fund and Bank staff contributed to the initial stages of this work.

  • Harmonized staffing levels and salaries for the senior levels of the new island administrations and establishment of terms of reference for a study of the civil service called for by the transition agreement. The study will focus on how to divide staff between union and island governments.

Table II.1.

Comoros: Agreed Budget Framework, January–June 2004 1/

(In billions of Comorian francs)

article image
Source: Harmonization Committee.

Each budget is a priori balanced, as no domestic financing is envisaged, and foreign assistance channeled through the multidonor trust fund has been excluded from the budget framework.

21. Successful implementation of these agreements, while often concerning narrow technical issues, would represent substantial progress. This is particularly so, given the complexity of the issues involved, the high level of mistrust among the various governments, and the lack of confidence expressed by many participants that the transition process would proceed to the envisaged installation of a smoothly functioning national legislature.

C. Key Issues in Decentralization in the Comoros

22. Despite the significant progress achieved on a number of issues, critical questions remain unresolved. While the constitution is clear regarding certain key competencies of the central government, most functions, including the provision of basic services (which represent the dominant share of public expenditure and employment), remain for final resolution. Some progress has been made, in principle, among representatives of the various governments: in education, for example, primary and secondary education was designated as an island competency, whereas higher education was designated a national function (the country’s first university was formally inaugurated in February 2004).

23. It is expected that these tentative agreements, for the most part embodied in draft organic laws to be considered by the Union Assembly once it is in place, will indeed come into effect in time. However, there is likely to remain some uncertainty on the ground for some time to come. In addition, there remain issues on which a common understanding over competencies has not yet been reached. Finally, some of the issues that have been resolved for the transition, such as a unified customs administration between the Union and Anjouan and a unified salary administration between the Union and Grande Comore, are likely to be reopened after the transition is completed.

24. It is, therefore, useful to revisit the basic issues that the country is confronting in the design of its intergovernmental fiscal relations. As decentralization has been pursued by an increasing number of countries both in Africa and elsewhere, a growing literature has developed to analyze and assess the issues involved (see, for example, Indeed, a Fund-sponsored conference on the subject in November 2000 brought together many of the leading specialists in this area. Certain conclusions of relevance to the Comoros emerge quite clearly from the literature.

25. The economics of decentralization dates to the seminal texts on public economics of the 1950s. They emphasize that decentralization can be beneficial by improving the efficiency of public good provision through competition among jurisdictions and through better matching the mix of public goods to the desires of local residents. Tiebout (1956), who argued that jurisdictional competition disciplines governments, wrote that, when firms and citizens can move freely, this should pressure local governments to provide local public goods efficiently. Stigler (1957) made the point that fiscal decentralization brings government closer to the people, and representative government works best when it is closer to the people. Musgrave (1959) argued that local governments should be permitted to tailor their policies to reflect the preferences of their residents. This suggests that the Comorian constitution, which centralizes public goods (like national defense) that cannot be provided differentially at the island level and decentralizes public services which can, begins from a sound conceptual base. However, while the modern literature largely retains these arguments in favor of decentralization (see, for example, Breton (2002)), it adds important nuance to the arguments, most often in the form of cautionary qualifications, as well as looking at the empirical evidence.

26. One question that arises concerns the potential loss of scale efficiencies from decentralization. Tanzi (2002), for example, argues that, if local governments are so much better able to meet the needs of citizens as to outweigh the loss of scale efficiencies in the provision of public services, then maybe they should be separate countries (and that, if not, then decentralization may not provide net benefits). Indeed, Easterley and Kraay (1999) show that, for a sample of 153 countries, poverty and welfare indicators are significantly better in small countries. But their definition of small is less than 1 million people; at the scale of the Comorian islands, the question of lost scale economies remains open, at best. Treisman (2002), for example, might argue against decentralization in the Comoros, as he suggests that the best governments tend to occur in small countries with only limited decentralization.

27. The so-called fiscal illusion problem raised in the recent literature by Ahmed, Hewitt, and Ruggiero (1997) appears highly relevant to the Comoros. Reliance on grants and transfers from the central government to finance sub national government spending creates an incentive for sub national governments to over provide services, inflate expenditures, and engage in perennial negotiations with the central government to attract more grants and transfers.

28. Much of the recent research examines whether decentralization improves public accountability or whether it makes it easier for local elites to effectively control government. While Brosio’s (2002) view of the evidence permits no conclusions either way, papers by von Braun and Grote (2002) and by Gurgur and Shah (2002) conclude that the evidence shows that decentralization is beneficial. They say it supports greater public sector accountability, reduces corruption, and is generally good for the poor. However, von Braun and Grote also note that most of the observed benefits come from political decentralization, while the evidence for fiscal decentralization remains more ambiguous. In the context of the Comoros, with political decentralization already well advanced, this would argue for caution in the design of fiscal mechanisms to support the decentralization. Indeed, de Mello (2000) looks at 30 countries and concludes that coordination failures in intergovernmental fiscal relations are likely to result in a deficit bias in decentralized decision making. Given the tensions between Union and island governments, this is a warning that should be taken seriously in the Comoros.

29. The practical problems that have tended to occur in the implementation of decentralization efforts are looked at by many writers. Ter-Minassian (1997) agrees that decentralizing government operations can improve economic welfare but requires close coordination among levels of government. There are potential efficiency gains, she believes, but they can be easily dissipated in waste. In particular, arrangements that assign most or all taxes to the center are undesirable: own revenue should match expenditure for accountability. While this may not be practical in the case of the Comoros, it does argue for close attention to the revenue-sharing apparatus.

30. Other problems are also flagged in the literature. Unfortunately, as noted by Ebel and Yilmaz (2002), local governments generally don’t have adequate own revenue; local revenues are not responsive enough to changing needs; and local governments lack the legal authority to levy enough taxes to meet their needs. Although these are not immediate issues but medium-term problems, they will nevertheless need to be addressed by the Comoros in the coming years.

31. Ebel and Yilmaz also note that there are large variations in the size and capacity of local governments. Even in the central government, there is little depth in the civil service, with well-trained staff spread thinly around the administration. Indeed, the need to conserve talent is so great that one may find former ministers running departments in their former ministries. To the extent that new administrations are created in the islands, this problem is likely to be even more acute. Attention will need to be focused, in this context, on whether the Mohéli government in particular has the financial and human resources to fulfill its responsibilities, and on how appropriate assistance can be provided to remedy any shortcomings.

32. For Africa, implementation problems have been looked at by Brosio (2002) and by Smoke (2000). They conclude that there are certain prerequisites for successful decentralization, a theme that runs all through the literature. For Smoke, for example, the minimum elements of a decentralized fiscal system include an adequate legislative and institutional enabling environment; assignment of an appropriate set of functions to sub national governments; assignment of an appropriate set of own-resource revenues to sub national governments; establishment of an effective intergovernmental transfer system; and establishment of adequate access to development capital. These are the precisely the questions with which the Comorian authorities are grappling—with mixed success so far—and which will need to be resolved in a satisfactory manner by the incoming Union Assembly.

D. Ensuring Effective and Efficient Economic Management

33. Political instability has been a major factor in the decline in the Comoros’ per capita income from over US$600 in the early 1990s to around US$500 at present. The new constitution with its high degree of political devolution, offers an opportunity for the country to make a new beginning and focus on the economic challenges posed by rising poverty.

34. In order to be able to make the best use of this opportunity, however, it will be important that the country’s scarce resources not be dissipated in the establishment of additional levels of administration with redundant functions. There is no reason why political devolution must be accompanied by the duplication of administrative structures at the island level of functions already performed at the Union level. The civil service in the Comoros is already large, yet it is short of appropriately trained staff.

35. The small size of the country and the even smaller size of the islands imposes restrictions on decentralization. What appears to be needed, to the extent practical, is for island governments to delegate the administration of their policies to a central service not necessarily controlled by the central government, in order to exploit economies of scale, minimize duplication and overlap, and make efficient use of scarce skills.

36. The most obvious domain for the application of this principle is in the area of tax collection. Under the transition, a unified customs administration is collecting customs revenue for the benefit of all, with participation on the Customs Management Board of all three islands and the Union government. This is an approach that could be extended to the entire tax system. It appears to be particularly needed because the administration and collection of taxes earmarked for the islands and those destined to be shared are inextricably intertwined. Indeed, there has been a working agreement between the Tax Department of the Union and that of Ngazidja to work together on the collection of taxes during the transition, whereby each officer will be allowed to pursue his or her duties without regard to where the moneys collected eventually go.

37. The expenditure side of the fiscal administration is also well-suited to collective administration. The Civil Service Administration (fonction publique) is paying salaries to civil servants of the Union, Ngazidja, and Mohéli governments during the transition—mainly through computerized transfers to staff bank accounts—with the information on payments made shared with each government. This is another area in which the compelling logic that has pushed the different entities to work together during the transition should be made a permanent feature of the fiscal system; indeed, it is possibly that economies could be made by integrating Anjouanese staff into the same system.6

38. It must be recognized, however, that for such a system to be acceptable to all of the parties, there will need to be changes in macroeconomic policy formulation. It has been not uncommon in the past for the Union government to respond to fiscal pressures by delaying salary payments. It is believed that, in these circumstances, the payments that do get made are made on a discriminatory basis, for example, civil servants on Grande Comore get paid first, and those on the other islands only later.

39. The constitution clearly provides for monetary affairs to be managed at the central level. One issue that arises is the provision for statutory advances to the government from the central bank, ostensibly to smooth intrayear fluctuations in revenue. The limit on these advances is determined as a function of average annual revenue. Over the medium term, the government should return to compliance with the loan condition that stipulates that all such loans be repaid by the end of each year. This measure will be helpful in avoiding new arrears on government payments as a financing item.

40. Finally, it is essential that the line ministries be made to function as efficiently as possible. This will require very clear delineation of competencies. While the issue is to be taken up by the Union Assembly, it is likely that upcoming legislation will not be sufficiently detailed to cover all the questions that might arise. In this event, it will be critical that the various governments work together. The experience over the past few months has demonstrated an enormous capacity to work together when necessary; it is to be hoped that this spirit of cooperation will carry forward, as it must, to the implementation of the new constitution and its new laws.

Key Dates

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The Constitution of the Union of Comoros

The 2001 constitution is relatively short, with some 40 articles. Its brevity comes in part from the fact that, on many issues, it calls for decisions to be made in subsequent legislation. Key decisions are delegated to “organic laws” requiring a two-thirds majority in the Union Assembly.

The executive

The President is the head of state, of government, and of the armed forces. The presidency rotates among the three islands, with a first-round election held only on the island whose turn it is. The three candidates with the highest vote tallies then compete in a nationwide election at the second round. The President and two Vice-Presidents (one from each of the other two islands) are elected for four-year terms.

The legislature

The constitution provides for a unicameral Union Assembly of 33 members elected for five-year terms. Five members each are selected by the island Assemblies, and eighteen are elected by district in a tworound national election. Each island must have at least two of the elected seats. The Union Assembly is to meet in two sessions per year lasting not more than six months combined. Two-thirds majorities are needed for organic laws and the annual budget law.

The judiciary

The Supreme Court is the highest judicial organ, with authority in all judicial and administrative matters, and its decisions are binding on the executive and the legislature. There is also, however, an independent Constitutional Court, composed of judges appointed to renewable six-year terms, one each by the Union president and vice-presidents, island presidents, and the president of the Union Assembly. The court may judge the constitutionality of both Union and island laws, has jurisdiction over election disputes, and may rule on disputes among government bodies, including between the Union and island governments.

Decentralization provisions

Union law takes precedence over island law. The Union government has exclusive authority over questions of religion, nationality, monetary affairs, foreign relations, and national defense. The Union government may share jurisdiction with the islands in areas to be defined by legislation, with the Union’s role limited to functions that it can perform more effectively than can the islands.

Island governments enjoy exclusive jurisdiction in all other matters. Each island may establish its own “basic law”, or constitution. It has the right to administer its own affairs, and is granted financial autonomy within the context of the annual budget law.


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Prepared by Wayne Camard.


The country is made up of the islands of Ngazidja (known also as Grande Comore), with a population of 350,000; Anjouan, with a population of 240,000; and Mohéli, with a population of 40,000. A fourth island in the archipelago, Mayotte, is still held by France.


Accord sur les dispositions transitoires aux Comores, Moroni, January 20, 2003. The agreement was brokered by the African Union, through the personal involvement of President Thabo Mbeki of South Africa.


Although explicitly named to the committee in the ATAC, both the Fund and the World Bank staffs have, given the essentially political nature of the deliberations, declined to participate in its meetings. The staff has, however, participated as an observer in meetings of the Harmonization Committee.


The original shares under the transition agreement reflected structural indicators of population and economic development, as well as a rough assignment of tasks to the Union government in line with the constitution. However, in the absence of concrete agreements on power sharing in the form of by-laws to the constitution, adjustments in line with actual spending authority became necessary.


A related feature of a central civil service would be the right of all Comorians to work in whichever administration could make best use of their skills.