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IMF Country Report No. 24/212
UNION OF THE COMOROS
SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR A WAIVER OF NONOBSERVANCE OF A PERFORMANCE CRITERION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE UNION OF COMOROS
July 2024
In the context of the 2024 Second Review under the Extended Credit Facility Arrangement, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 21, 2024, following discussions that ended on May 7, 2024, with the officials of the Union of the Comoros on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 7, 2024.
A Statement by the Executive Director for the Union of the Comoros.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2024 International Monetary Fund
Press Release
PR24/233
IMF Executive Board Completes the Second Review Under the Extended Credit Facility Arrangement with the Union of the Comoros
FOR IMMEDIATE RELEASE
The IMF Executive Board completed today the second review under the Extended Credit Facility Arrangement with the Union of the Comoros. Approval of the second review enables the immediate disbursement of SDR 3.56 million (about US$ 4.68 million).
Performance under Comoros’s economic reform program continues to be broadly satisfactory, and the authorities remain committed to the economic policies and reforms underpinning the ECF-supported program.
Reforms are beginning to bear fruit, with visible signs of macroeconomic stabilization. However, Comoros continues to face the challenges of a small, fragile island state which requires steadfast program implementation and continued support from international partners.
Washington, DC – June 21, 2024: The Executive Board of the International Monetary Fund (IMF) completed today the second review under the Union of the Comoros’ Extended Credit Facility (ECF) arrangement. The Executive Board’s decision allows for an immediate disbursement of SDR 3.56 million (about US$ 4.68 million). The 4-year ECF arrangement was approved on June 1, 2023, with an access of SDR 32.04 million (about US$43 million).
In completing the review, the Executive Board also approved the authorities’ request for a waiver of nonobservance of the continuous performance criterion on the non-accumulation of new external arrears, based on strong corrective actions taken by the authorities.
The Union of the Comoros’s economic reform program supported by the ECF arrangement seeks to reduce fragility and increase economic resilience by building fiscal buffers, reducing debt vulnerabilities, and strengthening the financial sector and governance. Key policy priorities under the program include: (i) mobilizing domestic revenue through reforms to strengthen tax and customs administration and streamline tax exemptions; (ii) strengthening the financial sector including through the completion of the restructuring of the state-owned postal bank SNPSF and enhancing the Central Bank’s banking supervision and resolution capacities; and (iii) strengthening governance through public financial management and anti-corruption reforms.
The authorities continue to demonstrate strong commitment to the ECF-supported program despite economic and institutional fragilities: four of five quantitative performance criteria (QPCs) were met as of end-December 2023; six of the eleven structural benchmarks (SBs) between December 2023 and May 2024 were met, while two were implemented with delays and two end-June 2024 SBs were met ahead of time.
Economic conditions have improved since the approval of the ECF-supported program. Real GDP growth is expected to remain on an upward trajectory throughout the program period, while inflation is projected to decline further in 2024 and beyond. The domestic primary balance is expected to improve, driven in part by steady improvement in domestic revenue mobilization. The external sector is stable, and gross international reserves are expected to remain above 7 months of import cover over the program period.
Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:
“The Comorian authorities have demonstrated a continued commitment to the Extended Credit Facility-supported reform program. Economic conditions have improved since the beginning of the program, but Comoros continues to face the challenges of a small, fragile island state: significant development challenges, balance of payments needs, a high risk of debt distress, vulnerabilities in the banking system, governance and corruption vulnerabilities, and exposure to climate change risks.
“Maintaining fiscal consolidation is appropriate to reduce debt sustainability risks and will be underpinned by reforms in revenue administration and tax policy as well as normalization of public investment spending. Fiscal structural reforms are also critical for improving budget transparency, cash and debt management, and the performance and efficiency of SOEs and their oversight.
“Monetary policy has contained inflation and ensured sufficient external buffers for Comoros and the stability of the peg. Continued efforts to stabilize the financial sector, including through the restructuring of the state-owned postal bank, addressing credit quality in the banking system, and strengthening banking supervision and resolution capacities are welcome.
“The authorities have made progress in anti-corruption reforms under the ECF-supported program. The recent formation of the Anti-Corruption Chamber is a key step in the implementation of the new anti-corruption law. Other reforms, including aligning the AML/CFT framework to international standards and the publication of public procurement contracts, are noteworthy. Continued governance reforms will be critical to improve the credibility of the state and increase the confidence of international donors and investors.
“The authorities are encouraged to step up implementation efforts to ensure that all program objectives are met. The Fund continues to provide close engagement and the necessary support for capacity development, effective economic surveillance, and successful program implementation. Support from international partners continues to be important for addressing the country’s large development needs and climate-related risks.”
Comoros: Selected Economic Indicators (2023–26)
Comoros: Selected Economic Indicators (2023–26)
| 2023 | 2024 | 2025 | 2026 | |||
|---|---|---|---|---|---|---|
| est. | proj. | proj. | proj. | |||
| Output | ||||||
| Real GDP growth (%) | 3.0 | 3.5 | 4.0 | 4.3 | ||
| Employment | ||||||
| Unemployment (%) | n.a. | n.a. | n.a. | n.a. | ||
| Prices | ||||||
| Inflation, period average (%) | 8.5 | 3.3 | 1.7 | 2.1 | ||
| Central government finances | ||||||
| Revenue and grants (% GDP) | 16.5 | 17.6 | 15.8 | 15.9 | ||
| Expenditure (% GDP) | 17.8 | 20.4 | 18.3 | 18.4 | ||
| Fiscal balance (% GDP) | -1.2 | -2.8 | -2.6 | -2.4 | ||
| Public debt (% GDP) | 32.5 | 34.3 | 35.2 | 35.5 | ||
| Money and Credit | ||||||
| Broad Money (% change) | 8.7 | 7.0 | 6.0 | 5.5 | ||
| Credit to private sector (% change) | 12.8 | 8.3 | 5.7 | 6.5 | ||
| 3-month Treasury bill interest rate (or similar) (%) | 1.2 | 1.2 | 2.2 | 3.2 | ||
| Balance of Payments | ||||||
| Current account (% GDP) | -2.5 | -3.3 | -3.9 | -4.0 | ||
| FDI (% GDP) | 0.4 | 0.5 | 0.6 | 0.6 | ||
| Reserves (months imports) | 7.5 | 9.4 | 7.7 | 10.4 | ||
| External debt (% GDP) | 32.5 | 34.3 | 35.2 | 35.5 | ||
| Exchange rate | ||||||
| KMF/US$ (period average) | 452.0 | … | … | … | ||
Comoros: Selected Economic Indicators (2023–26)
| 2023 | 2024 | 2025 | 2026 | |||
|---|---|---|---|---|---|---|
| est. | proj. | proj. | proj. | |||
| Output | ||||||
| Real GDP growth (%) | 3.0 | 3.5 | 4.0 | 4.3 | ||
| Employment | ||||||
| Unemployment (%) | n.a. | n.a. | n.a. | n.a. | ||
| Prices | ||||||
| Inflation, period average (%) | 8.5 | 3.3 | 1.7 | 2.1 | ||
| Central government finances | ||||||
| Revenue and grants (% GDP) | 16.5 | 17.6 | 15.8 | 15.9 | ||
| Expenditure (% GDP) | 17.8 | 20.4 | 18.3 | 18.4 | ||
| Fiscal balance (% GDP) | -1.2 | -2.8 | -2.6 | -2.4 | ||
| Public debt (% GDP) | 32.5 | 34.3 | 35.2 | 35.5 | ||
| Money and Credit | ||||||
| Broad Money (% change) | 8.7 | 7.0 | 6.0 | 5.5 | ||
| Credit to private sector (% change) | 12.8 | 8.3 | 5.7 | 6.5 | ||
| 3-month Treasury bill interest rate (or similar) (%) | 1.2 | 1.2 | 2.2 | 3.2 | ||
| Balance of Payments | ||||||
| Current account (% GDP) | -2.5 | -3.3 | -3.9 | -4.0 | ||
| FDI (% GDP) | 0.4 | 0.5 | 0.6 | 0.6 | ||
| Reserves (months imports) | 7.5 | 9.4 | 7.7 | 10.4 | ||
| External debt (% GDP) | 32.5 | 34.3 | 35.2 | 35.5 | ||
| Exchange rate | ||||||
| KMF/US$ (period average) | 452.0 | … | … | … | ||
Title page
UNION OF THE COMOROS
SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR A WAIVER OF NONOBSERVANCE OF A PERFORMANCE CRITERION
June 7, 2024
EXECUTIVE SUMMARY
Context. Economic conditions have improved since the beginning of the ECF-supported program. Real GDP growth is expected to remain on an upward trajectory peaking at around 4½ percent under the program. Inflation is projected to decline further in 2024 although at a much slower pace than observed in 2023. The near completion of large public projects and the steady improvement in domestic revenue mobilization will be key driving factors for the improvement in the domestic primary balance. The external sector is stable, and gross international reserves are expected to remain above 7 months of import cover over the program period. The baseline, however, is subject to considerable uncertainty as Comoros continues to face the challenges of a small, fragile island state: significant development challenges, balance of payments needs, a high risk of debt distress, vulnerabilities in the banking system, governance and corruption vulnerabilities, and exposure to climate change risks. Tropical storms that impacted East Africa in April and May also inflicted significant damage across the country.
Program performance. Program implementation for the second review has been broadly satisfactory despite severe economic and institutional fragilities. The authorities met four of five quantitative performance criteria (QPCs) as of end-December 2023. Due partly to persistent liquidity management weaknesses, the continuous QPC on non-accumulation of new external arrears and the indicative target (IT) on non-accumulation of net domestic arrears were again missed. The IT on social spending was also missed. As corrective actions, the authorities have (i) made full repayments of all newly accumulated external arrears during 2023 and thus far in 2024, except for the loans to BADEA and Exim India that are under discussion with creditors; (ii) begun constructing a centralized debt database using a pre-existing but unutilized debt management software; and (iii) committed to submitting to the IMF team monthly debt reports produced from this software starting in September 2024 (proposed structural benchmark, SB). Progress on fiscal structural reforms has been satisfactory, but key SBs on the state-owned postal bank SNPSF and the Anti-Corruption Chamber (ACC) were missed. Six of the eleven SBs between December and May were met while two end-June SBs were met ahead of time.
Policy discussions. Discussions focused on (i) supporting the authorities’ fiscal consolidation efforts to create fiscal space to address the country’s poverty and development needs and reduce debt sustainability risks, underpinned by fiscal structural reforms aimed at domestic revenue mobilization, (ii) strengthening the financial sector including reducing non-performing loans (NPLs) and completing the restructuring of the SNPSF, and (iii) advancing governance reforms to improve public financial management (PFM) and further reduce corruption vulnerabilities. Proposed new SBs aim at extending progress in domestic revenue mobilization, accelerating PFM reforms, continuing to stabilize the financial sector, and enhancing governance. In light of the delayed launch of the new postal bank BPC, it is proposed to postpone the SB on the provision of supervisory reports on the compliance of BPC’s operations with Phase 1 of the business plan to start on January 31, 2025, instead of July 31, 2024. It is also proposed that the missed SB on the strategy for domestic arrears clearance (due in March 2024) be reset to September 2024.
Staff views. In view of the broadly satisfactory program performance so far and renewed commitments going forward, staff supports the completion of the second review under the ECF. Staff also supports the request for a waiver for the non-observance of the continuous QPC on the non-accumulation of external arrears based on the corrective actions taken by the authorities.
Approved By
Costas Christou (AFR) and S. Jay Peiris (SPR)
Discussions were held during April 15–19, 2024, in Washington, D.C. and during April 24–May 7, 2024, in Moroni. The staff team comprised Suchanan Tambunlertchai (head), Guy Dabi Gab-Leyba, Barima Kwame Gyesaw, Mehdi El-Herradi (all AFR), Anthony Ramarozatovo (FAD), Anna Belianska (MCM), Ibrahim Ahamada (local economist), and Rima Turk (Resident Representative, Moroni Office). Ms. Yahya (OEDAF) also participated in the meetings. The mission met with His Excellency President Azali, Minister of Finance Chanfiou, Central Bank Governor Imani, Secretary General of the Government Bandar, other senior officials, development partners, and representatives of the private sector. J. Fernando Morán Arce, Gina Juhee Kang, and Ignacio Gutiérrez (all AFR) assisted in the preparation of this report.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
PROGRAM PERFORMANCE
POLICY DISCUSSIONS
A. Fiscal Policy
B. Monetary Policy and Operations
C. Financial Sector Stabilization
D. Structural Reforms to Strengthen Institutions and Reduce Fragility
PROGRAM ISSUES
STAFF APPRAISAL
TABLES
1. Proposed New Structural Benchmarks, 2024–25
2. Status of Structural Benchmarks, 2023–24
3. Selected Economic and Financial Indicators, 2022–29
4a. Consolidated Government Financial Operations, 2022–29 (In Millions of Comorian Francs)
4b. Consolidated Government Financial Operations, 2022–29 (In Percent of GDP)
5. Monetary Survey, 2022–29
6a. Balance of Payments, 2022–29 (In Millions of Comorian Francs)
6b. Balance of Payments, 2022–29 (In Millions of USD)
6c. Balance of Payments, 2022–29 (In percent of GDP)
7. Indicators of Capacity to Repay the Fund, 2023–38
8. External Financing Needs and Sources, 2024–28
9. Schedule of Disbursements, 2023–27
ANNEXES
I. Poverty Reduction and Growth
II. Risk Assessment Matrix
III. Capacity Development Strategy
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
