IMF Executive Board Completes Fourth Review under Comoros’ ECF Arrangement, and Approves US$2.3 Million Disbursement

The Comorian authorities have made steady progress in fiscal consolidation, reinvigorated their structural reform agenda, and gathered strong public support for sound macroeconomic policies. Macroeconomic developments have been largely positive, mostly thanks to improved policies. External competitiveness has improved step by step in the last year by the recent depreciation of the euro vis-à-vis the U.S. dollar. In the medium term, the government intends to seek further gains in fiscal consolidation and to accelerate reform of public enterprises and civil service.

Abstract

The Comorian authorities have made steady progress in fiscal consolidation, reinvigorated their structural reform agenda, and gathered strong public support for sound macroeconomic policies. Macroeconomic developments have been largely positive, mostly thanks to improved policies. External competitiveness has improved step by step in the last year by the recent depreciation of the euro vis-à-vis the U.S. dollar. In the medium term, the government intends to seek further gains in fiscal consolidation and to accelerate reform of public enterprises and civil service.

The Executive Board of the International Monetary Fund (IMF) today completed its fourth review of the Union of Comoros’ economic performance under the program supported by the Extended Credit Facility (ECF). Completion of the fourth review allows the disbursement of an amount equivalent to SDR 1.5575 million (about US$2.30 million), bringing total disbursements under the arrangement to SDR 10.46 million (about US$15.44 million).

The Executive Board also agreed that the Union of Comoros has taken the steps necessary to reach its completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

This decision on the HIPC completion point is contingent upon the Executive Board of the World Bank concluding that the Union of Comoros has reached the completion point under the enhanced HIPC Initiative, after which a joint press release will be issued.

The three-year Extended Credit Facility (ECF) arrangement was approved in September 2009, for the equivalent of SDR 13.57 million (152.5 percent of quota).

Following the Executive Board’s discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:

“Performance under the ECF-supported program has improved commendably. Economic activity and the fiscal position are strengthening, and Comoros has met the conditions for reaching the HIPC Initiative completion point.

“The recent gains in macroeconomic sustainability will have to be consolidated. This requires further strengthening revenue collection and keeping spending compatible with fiscal sustainability. Critical to that end will be the establishment of the new General Administration of Taxes and implementation of new ministry personnel frameworks, as well as close adherence to the automated wages management system. The efforts to promote good governance will also have to be stepped-up, including rigorous implementation of the new COMESA-based public procurement code.

“Prudent borrowing policies remain indispensable. While debt sustainability will improve following the HIPC Initiative completion point, Comoros remains at high risk of debt distress owing notably to a narrow export base. This underscores the need for fiscal discipline and reliance on grants and highly concessional loans in meeting the country’s financing needs.

“The authorities are to be commended for rekindling the structural reform agenda to invigorate growth and accelerate poverty reduction. The focus will be on enlisting reputable strategic partners in the management of the state-owned telecommunication (Comores Telecom) and electricity (MA-MWE) companies; and on ensuring a more efficient operation of the oil-importing parastatal (SCH). The authorities will also step up removal of excessive administrative requirements to starting a company and of unreliable contract-enforcement mechanisms for the private sector. In the financial sector, the banking supervision agenda and recommendations from the 2010 safeguards assessment will continue to be rigorously implemented, and the establishment of a new credit bureau expedited.

“Comoros’ growth and poverty reduction prospects are broadly favorable in the post-HIPC/MDRI era. Rigorous policy implementation and steady donor support will be key to securing tangible gains in living standards for the population.”

Union of the Comoros: Staff Report for the 2012 Article IV Consultation, Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, and Financing Assurances Review—Staff Report; Staff Supplement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Union of the Comoros.
Author: International Monetary Fund. African Dept.