Union of the Comoros: Request for a Four-Year Arrangement Under the Extended Credit Facility-Press Release; Staff Supplement; and Statement by the Executive Director for the Union of the Comoros
Author:
International Monetary Fund. African Dept.
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Publication Date:
21 Jun 2023
eISBN:
9798400245534
Language:
English
Keywords:
Comorian authorities; reform effort; IMF emergency support; reform program; government's ability; Credit; Arrears; Global
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1. Comoros is a small, fragile island state in need of deep reforms and sustained support from development partners. The economy is based on agriculture, small commerce, and tourism, reliant on remittances and imports, and vulnerable to natural disasters. Annual growth averaged below 3 percent over the past decade. Institutional fragility manifests in weak governance and capacity. Economic fragility manifests in severe constraints on domestic resources and pronounced vulnerability to shocks. Average fiscal revenue of 10 percent of GDP is one of the lowest in the world. About 38.2 percent of the population live with less than US$3.20 a day (PPP terms). A shallow financial sector coupled with a weak judicial system limit private credit, investment, and economic diversification. President Assoumani, in office since 2016, is up for re-election in 2024.

Abstract

1. Comoros is a small, fragile island state in need of deep reforms and sustained support from development partners. The economy is based on agriculture, small commerce, and tourism, reliant on remittances and imports, and vulnerable to natural disasters. Annual growth averaged below 3 percent over the past decade. Institutional fragility manifests in weak governance and capacity. Economic fragility manifests in severe constraints on domestic resources and pronounced vulnerability to shocks. Average fiscal revenue of 10 percent of GDP is one of the lowest in the world. About 38.2 percent of the population live with less than US$3.20 a day (PPP terms). A shallow financial sector coupled with a weak judicial system limit private credit, investment, and economic diversification. President Assoumani, in office since 2016, is up for re-election in 2024.

Background

1. Comoros is a small, fragile island state in need of deep reforms and sustained support from development partners. The economy is based on agriculture, small commerce, and tourism, reliant on remittances and imports, and vulnerable to natural disasters. Annual growth averaged below 3 percent over the past decade. Institutional fragility manifests in weak governance and capacity. Economic fragility manifests in severe constraints on domestic resources and pronounced vulnerability to shocks. Average fiscal revenue of 10 percent of GDP is one of the lowest in the world. About 38.2 percent of the population live with less than US$3.20 a day (PPP terms). A shallow financial sector coupled with a weak judicial system limit private credit, investment, and economic diversification. President Assoumani, in office since 2016, is up for re-election in 2024.

2. The COVID-19 pandemic and the war in Ukraine have exacerbated already-weak macroeconomic conditions. Notwithstanding substantial aid and remittance inflows during the pandemic, economic activity stagnated in 2020–2021 and the recovery in 2022 was interrupted by spillovers from Russia’ s war in Ukraine. Inflation reached double digits in 2022, the fiscal outlook worsened, and the current account deficit widened. Comoros faces a high risk of debt distress.

3. Following the completion of the Staff-Monitored Program (SMP), the authorities have requested a financing arrangement under the Extended Credit Facility (ECF) to support their reform agenda. Priorities include securing medium-term macroeconomic stability by addressing sources of fragility and increasing resilience. The program aims to safeguard debt sustainability based on a credible fiscal consolidation plan and structural reforms aimed at mobilizing revenue, strengthen the banking sector, fight corruption, and improve public sector governance and transparency. The ECF would build on progress made during the SMP and support reforms towards higher and more inclusive growth, drawing on the authorities’ visions under the Plan Comores Emergent.

Text Figure 1.
Text Figure 1.

Daily Confirmed COVID-19 Cases and Deaths

(7-day rolling average. Limited testing and challenges in the attribution of cause and death mean the cases and deaths counts may not me accurate)

Citation: IMF Staff Country Reports 2023, 215; 10.5089/9798400245534.002.A001

Sources: Johns Hopkins University CSSE COVID-19 Data

Recent Economic Developments

4. The fallout from the war in Ukraine continues to weigh on the economy, but signs of recovery have emerged.

  • Domestic activity which had begun to pick up at the end of 2021 with the resumption of tourism and social events like the “Grands Mariages,” has been undercut by the global growth slowdown and surge in commodity prices. However, expected real GDP growth in 2022 has been revised up slightly to 2.6 percent (from 2.4 percent), reflecting still-strong remittances from the diaspora and higher-than-expected exports of cloves in the last quarter of 2022.

  • Inflation (y/y) rose to 20.6 percent at end-2022 and reached a record high of 20.7 percent in January before coming down slightly to 20.0 percent in February.

  • Key SOEs incurred substantial losses in 2022, with the largest impact on the oil company SCH. More favorable rice price developments have helped stabilize the situation at the rice company ONICOR. SOEs’ losses were financed through public-guaranteed loans from commercial banks. The surge in prices prompted the government to raise administered prices1 in 2022 to contain SOEs’ losses while offering temporary subsidies and tax exemptions on certain staple goods to alleviate the cost-of-living crisis.

5. The Central Bank of Comoros (BCC) raised unremunerated reserve requirements—its main policy tool—from 10 percent to 15 percent in July 2022. Other interest rates indexed to the European interbank rates also rose, albeit with limited passthrough to the real economy. Meanwhile, credit growth was strong in 2022, driven by the higher level of financing for higher-priced imports especially by SOEs, with the share of credit to the public sector reaching 15.5 percent at end-2022 from 7 percent the year prior. After the contractions seen in 2020 and the first half of 2021, credit to the private sector grew strongly in 2022 peaking at 25 percent (y/y) in July before gradually falling towards 13 percent in January 2023.

6. SOEs’ losses weighed on fiscal revenue in 2022, but higher non-tax revenue and lower spending helped narrow the domestic primary deficit (Text Table 1). Forgone revenue from SOEs and tax exemptions were offset by higher non-tax revenue, including dividends from the central bank, lower COVID-19-related outlays, and delayed public outlays on the El Maarouf Hospital project. The elimination of “ghost workers” also helped contain the wage bill. The domestic primary deficit (excluding all foreign-supported current and capital spending and the World Bank-financed cash transfers) is thus estimated to have narrowed to 1.9 percent of GDP in 2022, although the overall fiscal deficit deteriorated as donors disbursed fewer grants and more concessional loans.2

Text Table 1.

Union of Comoros: Fiscal Developments

(In percent of GDP)

article image
Sources: Comoros Ministry of Finance; and IMF staff estimates.

From 2017, includes budgeted-for revenues and expenses related to fuel subsidies of SOEs.

7. The authorities are using the 2021 SDR allocation for budget financing. In December 2021, the BCC on-lent the previously exchanged SDRs (SDR 17.1 million, 1.4 percent of GDP) to the Treasury for use as a liquidity buffer.3 The amount has already been included in public debt.

8. The external current account deficit widened in the wake of the war in Ukraine. Preliminary data for 2022 show that imports rose by more than 16 percent (y/y) following the surge in food and oil prices and the USD appreciation. Higher imports were offset by higher exports, particularly cloves. The current account balance is projected to have deteriorated to -2.4 percent of GDP in 2022 from -0.5 percent the year prior. The REER appreciated by 3.5 percent in 2022, and staff assesses that the external position of Comoros in 2022 was in line with fundamentals and desirable policies (see Annex 1).

9. The financial sector remains vulnerable and presents substantial fiscal risks. Comoros has nine deposit-taking institutions. Total banking assets and total bank credit represent 35 and 16 percent of GDP (2021), respectively. Over two-thirds of deposit-taking institutions are in breach of solvency requirements. The NPL ratio improved noticeably in 2021 (Text Table 2), albeit stabilizing at a still-high level of 17 percent as of end-June 2022. Liquidity indicators mask large differences across banks, and the higher reserve requirements in 2022 led to breaches by some banks. Credit to SOEs increased by 63.8 percent between end-2021 and end-June 2022, while deposits of SOEs with banks decreased by 25.5 percent over the same period.

Text Table 2.

Union of Comoros: Financial Soundness Indicators for the Banking Sector, 2016–2022

(In percent)

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10. Comoros’ external and overall debt are sustainable but remain at high risk of debt distress. Three of four external debt burden indicators breach their respective thresholds under the current baseline. However, the size and duration of the breaches are limited and are expected to improve over the medium term. Additional considerations that mitigate the mechanical risk signals include the authorities’ commitment to pursuing an economic reform program supported by the ECF, and the consistently strong performance of remittances, which supports external sustainability. (See Debt Sustainability Analysis (DSA) accompanying this report.)

11. External arrears increased from US$6 million to US$7.2 million in 2022. A large part of the outstanding stock (US$5.2 million) is accounted for by the loan from the Arab Bank of Economic Development in Africa (BADEA) for which the authorities are seeking an alternate creditor.4 Of these new arrears accumulated in 2022, the authorities have paid Kuwait Fund (US$0.12 million) and the OPEC Fund for International Development (US$0.54 million). The authorities have engaged with the French Treasury to discuss an arrears clearance strategy for debt owed to Bpifrance Assurance Export which started accumulating arrears (US$0.56 million) following the DSSI expiration. Discussions are also ongoing regarding the pre-existing arrears (US$1.17 million) to Exim Bank India for a power plant project.

Outlook and Risks

12. Effects of the shocks are expected to recede in 2023, but the outlook remains uncertain. Growth is projected to rise to 3.0 percent in 2023, and 3.5 percent in 2024, driven by investment projects, including continued work on the hospital, the construction of the Galawa Hotel, and road refurbishments. Medium-term growth is projected to rise to around 4½ percent contingent on the implementation of sound macroeconomic policies and structural reforms. Inflation is expected to continue declining throughout 2023 given strong base effects in 2022 and the recent decline in commodity prices, and to remain between 2–2½ percent thereafter. Remittances are projected to decline from earlier record levels amid lower Eurozone growth, albeit remaining at a high level over the medium term reflecting the continued importance of the Comorian diaspora. Service exports recovery would continue in 2023. Imports should see strong growth in the short term in connection with the ongoing investment projects and the normalization of freight to Comoros after the pandemic-related disruptions, normalizing over the medium term in line with international price developments and project completions. Foreign reserves are projected to strengthen from the current level, reaching around 7½ months of import coverage over the medium term.

13. Risks to the outlook are broadly balanced (Annex 2). High food and fuel prices pose risks for food security and social tensions. Renewed supply chain disruptions could put additional pressure on prices, while a global slowdown and geo-economic fragmentation could reduce trade and FDI. On the upside, Comoros’ assumption of the AU presidency for this year could boost the authorities’ reform efforts and engagement with partners, while good progress under the ECF could further improve donor and private sector confidence and potentially unlock financing and economic activity beyond what is assumed in the baseline.

Program Objectives and Policies

Building on the recently completed SMP, the proposed ECF program seeks to foster economic resilience and reduce fragility by: (i) supporting a credible medium-term fiscal consolidation plan to increase fiscal space and reduce debt sustainability risks; (ii) reducing risks in the financial sector; and (iii) advancing anti-corruption and governance reforms.

A. Supporting the Recovery and Ensuring Medium-Term Macroeconomic Stability

Fiscal Consolidation

14. Given the fragile ongoing recovery, with growth remaining substantially below potential, the program envisages a temporary fiscal loosening in 2023.

  • The revised 2023 budget seeks to support growth while containing debt and inflationary pressures. It appropriately phases out one-time subsidies and tax exemptions introduced in 2022, particularly on rice imports, as prices have stabilized, reintroduces some taxes, including the long-overdue sales tax on construction material, and reduces the subsidy for electricity. Reforms in revenue administration also will continue to expand the tax base and improve compliance (see below). The budget promotes growth through higher investment spending, mostly financed on concessional terms, while containing other expenditures. The elimination of substantial ghost workers in 2022 permitted the government to raise salaries of civil servants for the first time in several years, while containing the wage bill-to-GDP ratio to below its level in 2021. The budget also strengthens social spending, although it largely relies on social transfers aid from the World Bank (WB) to mitigate the rising cost-of-living impact on the most vulnerable.

  • On an exceptional basis, the budget includes KMF 5.3 billion (about $11.4 million) for estimated spending related to Comoros’ AU presidency; the authorities have allocated KMF 1 billion in resources for the AU budget and committed to financing the remaining amount via aid from development partners.5

  • In line with the above policies, domestic primary spending (excluding all foreign-supported current and capital spending) would expand from 11.2 percent of GDP in 2022 to 12.1 percent in 2023. Revenue would remain almost flat at 9.7 percent of GDP, as revenue gains from tax administration and policy reforms will be offset by lower revenue from SOEs. The domestic primary deficit is thus projected to widen from 1.9 percent of GDP in 2022 to 2.4 percent in 2023. The overall deficit would increase from 3.6 percent of GDP to 4.9 percent, reflecting also expected higher project loans from development partners.

15. The program seeks to protect the vulnerable population via targeted transfers. The social safety net project (Projet de Filets Sociaux de Sécurité), funded by the WB, is responsible for direct cash transfers to the most vulnerable. Similar to the SMP, the ECF sets a floor on these cash transfers (IT) equivalent to about ½ percent of GDP annually to ensure timely disbursements of social assistance. The authorities will coordinate closely with the WB the scheduled disbursements and make appropriate provisions in advance if needed to ensure a minimum annual social assistance in case of expected delays in WB disbursements, while noting that this may require reallocation from other expenditure items. In an effort to further strengthen the social safety net, the government has made provisions (0.13 percent of GDP) to cover health insurance costs for the most vulnerable and raised its contributions to the pension fund. The authorities are also considering raising the retirement age of civil servants as a potential first step to gradually return the currently imbalanced pension fund to a sustainable financial position.

16. Fiscal consolidation would start in 2024 to alleviate debt sustainability risks and reduce financing needs over time. The consolidation will be built on: (i) a steady increase in tax revenue of at least 0.3 percent of GDP per year (QPC) through comprehensive structural reforms in tax policy and tax and customs administration; (ii) the paring back of transfers and subsidies introduced in 2021–22 to mitigate the effects of the recent shocks; and (iii) reducing investment spending to pre-pandemic levels once already committed spending is phased out. These strategies are expected to reduce the domestic primary deficit by 2.4 percent of GDP over 2024–27. The envisaged fiscal path strikes a balance between enabling growth and lowering debt risks, anchored on the reduction of debt burden indicators below their high-risk thresholds by 2028. A faster consolidation could risk undermining growth or fueling social discontent, and thereby weakening sustainability.

17. A pricing strategy is needed to address SOEs’ losses, with a more comprehensive strategy to improve SOEs’ medium-term performance needed. The 2022 increase in administered prices brought prices of fuel and ordinary rice broadly in line with current costs, stemming losses at SCH and ONICOR. On the other hand, despite a 50 percent increase, electricity tariffs remain over 50 percent below costs, reflecting the high inefficiency in electricity production and distribution.6 The authorities intend to maintain tariffs on oil products and rice at the current levels even if international prices decline to return SCH and ONICOR to profitability and enable their debt repayment. The authorities also recognize the need to raise tariffs in a timely fashion in the event of another surge in global prices (MEFP ¶4). They are considering liberalizing the importation of ordinary rice, with the WB supporting the process, as part of the WTO accession. They will examine closely if there is margin to increase electricity tariffs on some segments of the clientele without unduly affecting the economy, although electricity prices are already very high relative to other countries in the region. The introduction of automatic price mechanisms for oil, rice, and electricity would be premature at this time given the government’s limited capacity. But such mechanisms along with strategies to improve SOEs’ financial performance and governance could be explored later on in the program.

Fiscal Structural Reform

18. Revenue mobilization, with IMF technical assistance (TA), will be a key pillar of the reform agenda supported by the ECF. The authorities rightly intend to further strengthen revenue administration and embark on tax policy reforms, making full use of continued IMF’s support in capacity development.

  • Key objectives on tax administration include: (i) continuing to raise the number of active taxpayers and strengthening compliance; (ii) broadening the use of the SIGIT software and disseminating the tax fiscal code; (iii) aligning tax administration on SOEs with other taxpayers; and (iv) recovering unpaid taxes. To advance tax administration reforms and implement measures already identified by IMF TA, presidential decrees will be issued, as prior actions (PAs) for the ECF arrangement, to reorganize the tax administration function Administration Générale des Impôts et des Domaines (AGID) into a tax management unit dedicated to core tax issues (Direction Générale des Impôts, DGI) and a unit charged with non-fiscal land affairs (Direction Nationale des Affaires Foncières et Domaniales, DNAFD).

  • On customs administration, planned measures include: (i) completing the de jure transfer of the management of fuel products taxes to the customs administration after already having completed the transfer de facto; (ii) strengthening risk management, including by focusing inspection efforts on shipments with the highest compliance risks; (iii) deploying an internal control system and developing a decision-making information system; (iv) improving coordination between customs and the tax administration; and (v) finalizing the regulations needed to implement the customs code.

  • Tax policy reforms will need to play a larger role in domestic revenue mobilization. The recent retraction of the sales tax exemption for construction materials is a welcome start. The authorities plan to establish a tax policy unit at the Ministry of Finance to spearhead tax policy related reforms, including a tax expenditure assessment to identify avenues for streamlining exemptions.

19. The authorities need to accelerate efforts to improve public financial management and strengthen oversight of SOEs. Progress in implementing the roadmap for extending the coverage of the TSA adopted under the SMP has been slow. A number of prerequisite reforms before coverage can be extended, e.g., establishing the central accounting agency, consolidating the TSA, and improving cash management capacity, remain incomplete. Progress in this area will likely require further technical assistance. The Ministry of Finance has limited oversight of SOEs’ performances despite their substantial fiscal contingent liabilities risk. The authorities intend to strengthen SOE oversight by amending the law on SOEs and creating an oversight unit, ensuring SOE tax compliance, and aligning SOE wage compensation with that of the civil service. As a first step, the authorities have committed to strengthening data reporting by SOEs and to providing annual SOE financial data for program monitoring.

20. The authorities aim to complete the audit of domestic arrears by end-2023. While the audit of domestic arrears was commissioned under the SMP, delays in data sharing and incomplete information have stalled progress. The completion of this audit exercise (structural benchmark, SB) is a critical first step for quantifying the problem in order to articulate a domestic arrears clearance strategy.

Financing and Debt

21. Comoros requires grants and highly concessional borrowings to finance its development. The contracting of non-concessional loans to finance the construction of the Galawa Hotel and the El Maarouf hospital, while intended to address infrastructure gaps in the tourism and health care sectors, respectively, has contributed to the increased financing needs in the period ahead and led to the country’s high risk of debt distress rating. Under the program, therefore, it is expected that the authorities will not contract any new non-concessional debt (continuous QPC). Per the Debt Limits Policy, the program will also monitor concessional borrowing via a memo item given Comoros’ limited capacity to monitor debt in real time.7 (See borrowing plan in the DSA accompanying this report.)

22. The authorities are committed to the non-accumulation of new external arrears and net new domestic arrears. The program includes the standard QPCs on the non-accumulation of new external arrears and net new domestic arrears. The authorities are putting in place credible plans to clear existing arrears (¶11).

Monetary Policy and Operations

23. The authorities should proceed cautiously in further tightening monetary policy. Comoros operates in a fixed exchange rate regime. Recent and expected price increases in Comoros reflect mainly supply-side factors (higher import prices). Monetary policy tightening in advanced economies is likely to have only modest spillovers to Comoros given its limited integration into global capital markets. Increases in unremunerated reserve requirements will have limited transmission given the high concentration of liquidity in the banking system, while potentially straining liquidity in weak banks. Credit growth has also been trending down. Against this background, the authorities should consider further tightening only in case of second-round impacts of higher import prices or large outflows of reserves.

24. The BCC should continue their efforts to develop and strengthen the monetary policy toolkit. With support from the IMF’s Monetary and Capital Markets Department, the authorities are gradually developing the interbank market and an interest rate corridor system which would allow the use of interest rate policy to affect the real economy. The authorities recognize, however, that these efforts would need to be accompanied by financial sector reforms, as weak banks have been a key impediment to the development of the interbank market.

B. Restructuring the SNPSF and Stabilizing the Financial Sector

25. The key challenges are to address NPLs and improve banks’ financial positions and governance to support growth through more efficient credit allocation. The financial sector strategy will rely on two main pillars: (i) complete the restructuring of the systemic SNPSF; and (ii) ensure that other weak banks can be recapitalized or resolved during the course of the program.

26. The program will support the implementation of the SNPSF restructuring strategy elaborated under the SMP. The authorities’ objective is to support the newly created bank— Banque Postale des Comores (BPC)—with a strong governance and risk-management framework, which would promote financial inclusion while minimizing fiscal contingent liabilities. The key next steps for the reform are:

  • Issuance by the government of debt instruments to provide BPC with sufficient assets to request a banking license (PA). These debt instruments would be redeemed for cash according to the agreed schedule over 2023–25 (see MEFP ¶15), fully capitalizing BPC by end-2025. The capitalization will be assisted by grants from the AFD and France, leaving about KMF 4.9 billion that need to be covered by the government.

  • Appointment of a managing director at BPC (SB) who will work with the board of directors (appointed in October 2022) to operationalize the bank according to the business plan developed under the SMP, with the management team given a performance contract that ensures operations free from political interference.

  • Submission to the BCC of an application for BPC’s banking license which would specify a business plan consistent with that developed under the SMP, a management team with adequate management expertise and experience in banking and credit risk management, and a capital injection plan that would fully capitalize BPC in cash by end-2025 (see MEFP ¶15) (SB).

  • Issuance by the BCC of a banking license which complies with the above conditions (SB). The BCC should also withdraw the SNPSF’s banking license. A sunset clause (3 years) will apply to the winding down of the SNPSF’s banking assets (MEFP ¶15).

  • Implementation of the business plan for BPC, which was developed under the SMP and envisages three phases, with incremental increases in credit operations as the bank strengthens its managerial and operational capacity (see MEFP ¶15).

27. The authorities are determined to take steps to stabilize the banking sector.

  • Addressing the NPL overhang is crucial to foster sustainable credit growth and improve the financial situation of banks. The Commission on NPLs, which delivered significant results in 2020–2021 (¶9 and 1st bullet of MEFP ¶15), will resume its quarterly meetings and submit regular reports to the President. The BCC will provide technical support to the Commission.

  • Stepping up oversight and resolution capacity. In 2022, the BCC completed onsite inspections in four major deposit-taking institutions to assess the quality of credit portfolios following the lifting of Covid-19 regulatory forbearance measures. In 2023, the BCC will prioritize onsite inspections of anti-money laundering procedures due to an FATF regional assessment this year. The onsite inspections on credit portfolios in the remaining banks will be carried out by end-June 2024 (SB). The BCC will establish a resolution unit, separate from the supervision department and which would report separately to the board (SB), as a first step towards updating the bank resolution framework for parliamentary submission (SB). IMF TA in 2022 pointed out several issues that warrant legislative adjustments to the 2020 resolution law, including solidifying the power to liquidate an entity in default, introducing a resolution funding mechanism, and establishing a depositor preference. The emergency liquidity function of the central bank remains to be created.

  • Resolving unviable banks. In 2020, the BCC placed under administration two loss-making commercial banks, which they consider systemic, and which have continued to accumulate losses. The authorities have recently agreed with a foreign banking group on the purchase the good assets and liabilities of one of the banks. Losses will be imposed upon the previous shareholder and the fiscal costs have been assessed. The government will recapitalize the bank and retain a minority stake. The authorities now intend to apply the same approach to the second bank. Over the medium term, once the resolution and crisis management framework is in place, the BCC will require time-bound recapitalization plans for commercial banks in breach of capital adequacy requirements (SB), and ultimately the resolution of banks that are insolvent or unviable. The BCC will also address the situation of two microfinance institutions in breach of capital adequacy requirements.

C. Strengthening Governance and Reducing Vulnerability to Corruption

28. The authorities aim to advance governance, transparency, and anti-corruption reforms building on reforms started under the SMP.

  • The authorities will adopt the draft anti-corruption law that is aligned with the SMP objectives (SB). The draft law enhances preventive measures against corruption, strengthens the rules related to conflicts of interest, and improves the asset declaration system for senior public officials. While the draft law provides for access to the declarations, the criminalization of publication of asset declarations remains a concern. The law also provides for the creation of an operationally independent Anti-Corruption Chamber with the mandate to set up and coordinate the implementation of the country’s anti-corruption policy priorities (SB).

  • The collection for publication of information on public procurement projects including beneficial ownership information, in line with the circular and roadmap published in December 2021, has been slow. The authorities have started to publish information for COVID-19-related contracts on the BCC website while a permanent website dedicated to public procurement contracts is being developed.

  • The audit of spending financed by IMF emergency support in 2020 is being conducted by the Court of Auditors and the authorities intend to publish the full audit report by June 2023 (SB).

29. Efforts to strengthen AML/CFT are ongoing, although progress has been slow. Comoros’ AML/CFT framework is expected to undergo an assessment by the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) this year, with onsite visit scheduled for July 2023.

Program Modalities

30. The authorities have requested a 4-year ECF with access of SDR 32.04 million (180 percent of quota) to support their reform program. The arrangement would support recovery from the pandemic and the food and fuel price shocks while addressing protracted balance of payments needs through policies required to improve the fiscal position, safeguard public debt sustainability, reduce poverty and economic fragility, and foster more inclusive growth. As illustrated by the macroeconomic projections in the second review of the SMP, without the ECF arrangement, medium-term international reserves would decline to well-below adequate levels. The proposed access would be used for budget support, covering about a quarter of the external financing needs, with 9 equal disbursements over 4 years (Table 7). The BCC and the Ministry of Finance will sign a memorandum of understanding on the respective responsibilities for timely servicing of the obligations to the Fund.

Table 1.

Union of Comoros: Selected Economic and Financial Indicators, 2020–28

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From 2017, includes budgeted-for revenues and expenses related to fuel subsidies of SOEs.

Domestic revenues minus current primary expenditures and domestically financed capital expenditures, excluding the World Bank-financed spending to combat the COVID epidemic and the cost of restructuring SNPSF.

For 2022–23, includes unmet financing needs for restructuring SNPSF

From 2015, net private official transfers include estimates made by the Central Bank of Comoros of debit items other than wire transfers.

In percent of government revenue

End of period. From 2021, includes new SDR allocation of $24 million.

Coverage of debt: The central government, the central bank and government-guaranteed debt. Definition of external debt is Residency-based.

Table 2a.

Union of Comoros: Consolidated Government Financial Operations, 2020–28

(In millions of Comorian Francs)

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Sources: Comoros Ministry of Finance; and IMF staff estimates.

From 2017, includes budgeted-for revenues and expenses related to fuel subsidies of SOEs.

Include World Bank cash transfers spending to households.

Domestic revenues minus current primary expenditures and domestically financed capital expenditures, excluding the World Bank-financed spending to combat the COVID epidemic and the cost of restructuring SNPSF.

For 2022–23, includes unmet financing needs for restructuring SNPSF.

Table 2b.

Union of Comoros: Consolidated Government Financial Operations, 2020–28

(In percent of GDP)

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Sources: Comoros Ministry of Finance; and IMF staff estimates.

From 2017, includes budgeted-for revenues and expenses related to fuel subsidies of SOEs.

Include World Bank cash transfers spending to households.

Domestic revenues minus current primary expenditures and domestically financed capital expenditures, excluding the World Bank-financed spending to combat the COVID epidemic and the cost of restructuring SNPSF.

For 2022–23, includes unmet financing needs for restructuring SNPSF.

Table 3.

Union of Comoros: Monetary Survey, 2020- 28

(In millions of Comorians Francs, unless otherwise indicated)

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Sources: Central Bank of Comoros; and IMF staff estimates and projections.

From 2021, includes new SDR allocation of $24 million.

Table 4a.

Union of Comoros: Balance of Payments, 2020–28

(In millions of Comorian Francs, unless otherwise indicated)

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Sources: Comorian authorities; and IMF staff estimates and projections.

From 2015, net private official transfers include estimates made by the Central Bank of Comoros of debit items other than wire transfers.

From 2021, includes new SDR allocation of $24 million.