Union of the Comoros: Performance Under the Emergency Post-Conflict Assistance and Requests for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility Informational Annex

This paper discusses an assessment of Comoros’s performance Under the Program Supported by the Emergency Post-Conflict Assistance (EPCA). Overall performance under the EPCA-supported program has been broadly satisfactory. Nearly all EPCA performance indicators for end-March 2009 were observed. Revenue collection was stronger than anticipated. On the spending side, recent measures to improve expenditure management are gradually restoring order in spending operations, although continued difficulties have been experienced in managing the wage bill. All but one of the structural indicators were met.

Abstract

This paper discusses an assessment of Comoros’s performance Under the Program Supported by the Emergency Post-Conflict Assistance (EPCA). Overall performance under the EPCA-supported program has been broadly satisfactory. Nearly all EPCA performance indicators for end-March 2009 were observed. Revenue collection was stronger than anticipated. On the spending side, recent measures to improve expenditure management are gradually restoring order in spending operations, although continued difficulties have been experienced in managing the wage bill. All but one of the structural indicators were met.

I. Comoros: Relations with the Fund

(As of July 31, 2009)

I. Membership Status: Joined September 21, 1976; Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Obligations to Fund (SDR millions; based on existing use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative: Not applicable

VIII. Summary of Safeguards Assessment. An update of the August 2007 safeguards assessment of the Banque Centrale des Comores (BCC) is in progress. BCC had begun taking steps to strengthen its safeguards framework and its financial statements were subject to an external audit. The main remaining vulnerabilities concern the quality of the external audit mechanism, the absence of a recognized accounting framework, and no publication of audited financial statements. The assessment recommended measures to alleviate these weaknesses.

IX. Implementation of Multilateral Debt Relief Initiative (MDRI): Not applicable.

X. Exchange Rate Arrangements: The currency of the Comoros is the Comorian franc, which is pegged to the Euro at €1 = CF 492. The 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.

XI. Article IV Consultation: The 2008 Article IV consultation was concluded on December 15, 2008 (Country Report No. 09/42). Executive Directors noted that the return to political stability is allowing the authorities to address deep-rooted macroeconomic distortions and structural rigidities. Directors welcomed the authorities' intention to implement a broad-ranging macroeconomic and structural reform program aimed at achieving fiscal sustainability, while improving the investment climate and strengthening institutions and governance. Directors recognized that Comoros' fiscal prospects remain difficult as illustrated by sizeable financing requirements for 2009 and beyond and by unsustainable public debt levels. It is proposed that the next Article IV consultation with Comoros take place within 24 months subject to the provisions of the decision on consultation cycles in program countries.

XII. Recent Technical Assistance

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XIII. Resident Representative: None. A resident representative post established in September 1991 was closed in December 1995.

II. Comoros—Joint World Bank-IMF Work Program, 2009–10

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III. Comoros: Relations with the African Development Bank Group

Background

1. Due to arrears accumulation, Comoros was under sanctions with the Bank Group during 1993-2009. In June 2007, the Bank started its re-engagement in the country after the Board’s approval of the Country Dialogue Note. Comoros was defined as a post-conflict country based on the following criteria: (i) progress in restoring peace despite the on-going political situation involving Anjouan; (ii) improved governance (progress in revenue sharing agreement, adoption of a consolidated budget, measures to improve transparency in public finance management and civil service reforms); and (iii) progress in the resettlement of displaced population. This facilitated the Board’s approval in December 2007 of the arrears clearance operation through the Post-Conflict Country Facility (PCCF) mechanism.

Arrears clearance operation

2. As of October 31, 2007 the arrears with the Bank Group had reached UA 21.94 million, comprising UA 12.48 million owed to ADB and UA 9.47 million owed to ADF. According to the Bank’s plan, the financing of arrears was through a tripartite burden sharing whereby the country, the PCCF and the donors share the burden on a case-by-case basis. The share and contribution of the three partners in the financing of the arrears was as follows:

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3. The Bank’s reengagement plan involved the following activities: (i) lifting of sanctions in December 2007; (ii) resumption of Bank operations-preparation of an interim strategy; and (iii) positive net transfer in favor of Comoros through ADF-XI to support the country’s poverty reduction efforts.

4. Comoros has been current on its debt service obligations to the Bank since February 2009.

Strategy and instruments for cooperation with Comoros

5. There is currently no valid Country Strategy Paper (CSP) for Comoros. However, in December 2008, the Bank granted an emergency food crisis grant to Comoros, in an amount equivalent to UA 1.5 million, which was disbursed in early 2009.

6. On July 15, 2009, the Bank’s Board approved a budget support operations under an Interim Country Strategy Paper (I-CSP) for 2009-10, in an amount equivalent to UA 2 million to be disbursed in two tranches of UA 1 million respectively in 2009 and 2010. The Board also approved an ISP grant of UA 5.26 million. Both grants were signed on July 22, 2009. Under the I-CSP, the Bank will contribute to: (i) improving economic management through support for institutional capacity building; and (ii) creating a better environment through improved water supply and sanitation.

7. A full-fledged CSP will be prepared in 2010 and will contain in-depth analysis of the issue of sustainable growth for Comoros, based on the economic and sector studies and analyses to be carried out during the interim period. The Bank’s operations will fall under two pillars: (i) strengthening institutions and the macroeconomic framework, and (ii) improving water supply and sanitation. The basic package available for the 2009-2010 period stands at UA 15 million, comprising the normal performance-based ADF XI allocation (UA 5 million) and the FSF Enhanced Support (UA 10 million). Comoros will also benefit from several other Bank facilities, such as resources of the FSF Targeted Support Window for capacity building.

IV. Comoros: Statistical Issues

Comoros—Statistical Issues Appendix

As of July 29, 2009

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Technical Assistance Missions in Statistics (1986–present)

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Forthcoming technical assistance

In 2005, the authorities requested a Statistics Department (STA) multi-topic technical assistance mission with a view to a thorough revamping of the statistical system. STA is planning to provide technical assistance in the area of national accounts. A Statistics Department GDDS metadata development mission scheduled for January 2007 has been postponed at the request of the authorities. As regards monetary statistics, the authorities are requesting a technical assistance mission to review the SRF test data and identify possible methodological departures from the recommendations of the Monetary and Financial Statistics Manual.

Comoros: Table of Common Indicators Required for Surveillance

as of July 29, 2009

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Any reserve assets that are pledged of 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-a-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); reported when there are changes (C).