Front Matter Page
IMF Country Report No. 15/34
February 2015
UNION OF THE COMOROS
2014 ARTICLE IV CONSULTATION—STAFF REPORT, PRESS RELEASE AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR UNION OF THE COMOROS
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2014 Article IV consultation with Comoros, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on February 4, 2015, following discussions that ended on November 4, 2014, with the officials of Comoros on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 13, 2015.
An Informational Annex prepared by the IMF.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.
A Press Release summarizing the views of the Executive Board as expressed during its February 4, 2015 consideration of the staff report that concluded the Article IV consultation with Comoros.
A Statement by the Executive Director for Union of the Comoros.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 • Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
© 2015 International Monetary Fund
Front Matter Page
UNION OF THE COMOROS
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION
January 13, 2015
KEY ISSUES
The Comorian economy continues to grow although at a slightly slower pace. Economic growth in 2014 is projected at 3.3 percent, adversely affected by electricity disruptions and slower-than-expected implementation of the public investment program. Inflation has remained subdued. Staffs’ baseline assumption is that real GDP growth will average around 4 percent per annum over the medium term, provided reforms are implemented.
Implementation of the 2014 budget was challenging, particularly after mid-year. While revenues were broadly on target, resources were inadequate to meet the higher-than-budgeted wage bill resulting from an increase in teacher salaries in March and previously un-budgeted expenditures, including on elections. Domestically-financed investment spending was severely constrained and temporary arrears were incurred on salaries and external debt.
The key short-term challenge is to find a better balance between available resources and expenditures so that arrears can be avoided. Spending plans need to be based on realistic expectations of the resources likely to be available. The 2015 budget is premised on this principle but the scope for domestically-financed investment is inadequate as obligatory spending on wages and salaries and debt service absorbs most of domestic revenue.
For the medium-term the key challenges are to create fiscal space for infrastructure investment and social spending, accelerate inclusive growth and employment generation, and reduce poverty. The authorities need to focus their efforts on strengthening revenue administration and public financial management to expand fiscal space and improve transparency. Weaknesses in the business environment, including inadequate infrastructure, especially in the energy sector, and difficulties in contract enforcement represent important challenges.
Approved By
David Robinson (AFR) and Robert Traa (SPR)
The mission that visited Comoros during October 20–November 4, 2014, comprised Messrs. Trines (head), Arnason, Campbell, and Jidoud (all AFR). It was assisted by Messrs. Bua (Resident Representative) and Ahamada (local economist). The mission met with President Ikililou and held discussions with Vice President and Minister of Finance Soilihi, Minister of Planning Tadjiddine, Governor of the Central Bank Chanfiou, Councilor to the President and Permanent Secretary of the Economic and Financial Reform Agency Oubeidi, and other government officials, members of parliament, representatives of the island administrations, private sector, unions, civil society, and the donor community.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
MACROECONOMIC POLICIES AND STRUCTURAL REFORMS
A. Introduction
B. Short-Term Fiscal Policy
C. Medium-Term Fiscal Reforms
D. Monetary and Exchange Rate Policy
E. Policies for Growth
F. Financial Sector Stability Assessment
OTHER ISSUES
STAFF APRRAISAL
BOX
1. Remittances and Growth Nexus
FIGURES
1. Key Indicators of the Comorian Economy
2. Cross Country Comparison
TABLES
1. Selected Economic and Financial Indicators, 2011-18
2. Balance of Payments, 2011-18
3A. Consolidated Government Financial Operations, 2011-18 (in millions of Comorian francs)
3B. Consolidated Government Financial Operations, 2011-18 (in percent of GDP)
3C. Consolidated Government Financial Operations, 2014
4. Monetary Survey, 2011-18
5. Millenium Development Goals Progress
6. Financial Soundness Indicators for the Banking Sector
ANNEXES
I. Status of 2012 Article IV Main Recommendations
II. Risk Assessment Matrix (RAM)
III. Assessing the Potential of Tax Revenues in Comoros
IV. External Balance Assessment
Front Matter Page
UNION OF THE COMOROS
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
January 13, 2015
Contents
RELATIONS WITH THE FUND
JOINT WORLD BANK-IMF WORK PROGRAM, 2014-2015
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK GROUP
STATISTICAL ISSUES APPENDIX
Front Matter Page
UNION OF THE COMOROS
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITY ANALYSIS
January 13, 2015
Approved By
David Robinson (IMF) and John Panzer (World Bank)
Prepared by the staffs of the IMF and World Bank
Based on the external LIC DSA, Comoros’ risk of debt distress is assessed as moderate rather than high, as was the case in the previous DSA update for the sixth review under the previous ECF completed in December 2013. The full inclusion of remittances in the analysis is the main reason for the improved debt sustainability outlook. Public sector domestic debt and private sector external debt are minimal in Comoros and are expected to remain so for the foreseeable future. 1
Front Matter Page
Press Release No. 15/41
FOR IMMEDIATE RELEASE
February 9, 2015
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
