Press Release: Statement at the end of an IMF Staff Mission to the Union of the Comoros
March 19, 2012Press Release No 12/94
March 19, 2012
A mission of the International Monetary Fund (IMF) led by Mr. Mbuyamu Matungulu visited Moroni during March 3–17, 2012 to continue discussions of performance under the country’s economic program supported by the Extended Credit Facility (ECF).1 The mission met HE Dr. Dhoinine Ikililou, President of the Union of Comoros. It held discussions with Vice-President and Finance Minister Soilihi and with other members of the Cabinet of the Union; with the Governor of the Central Bank of the Comoros; and with representatives of the private sector, civil society, and the donor community.
At the end of the mission, Mr. Matungulu, IMF mission chief for the Union of the Comoros, issued the following statement in Moroni:
“Economic activity continues gradually trending up. At over 2 percent in 2011, real GDP growth was underpinned by strong rain-fed agricultural production and sustained construction activities on the back of a pick-up in foreign direct investment (FDI) and resilient transfers from the diaspora. With international fuel and rice price pressures on the rise, inflation reached an estimated 7 percent (y-o-y) despite a good harvest and strong supply of locally-produced foodstuff. The external current account deficit increased to 9.5 percent of GDP, with investment imports accounting for a sizeable portion of the increase. Reflecting enhanced revenue mobilization and wage restraint by the new administration, the domestic primary deficit (excluding a large one-off increase in nontax receipts) was contained at 1.4 percent of GDP (1.6 percent of GDP in 2010).
“Against a backdrop of easing political tensions, stronger program ownership, and increasing donor interest, Comoros’ economic prospects are favorable notwithstanding a difficult global context. Provided that the reform efforts are intensified, real GDP growth could durably exceed the rate of population expansion in the medium-term.
“Macroeconomic and structural policies and performance have improved since the June 2011 inauguration of the new administration. Most revised fiscal targets for end-2011 were met; and the authorities have implemented several long-delayed Public Financial Management reforms, including completion of a civil service personnel census, Parliament approval of new ministry personnel frameworks and a rigorous implementation of the new computerized wage management system (GISE). In the area of public utilities, the government has intensified technical discussions with development partners on steps to enlist private sector involvement as concerns Comores Telecom and the electricity (MA-MWE) and petroleum importing (SCH) parastatals.
“The mission discussed policies to foster stronger growth and more effective poverty alleviation in the period ahead. In the fiscal area, the authorities continue closely adhering to the 2012 fiscal targets; they are strengthening the Tax Department’s Large Taxpayer Unit, and have undertaken an overhaul of the import valuation services at Customs. The mission urges an early establishment of the new General Administration of Taxes to ensure stronger inter-entity cohesion in fiscal administration. On the expenditure side, the mission stressed vigilance over wage management, and strict limitation of other spending categories within budget to prevent reoccurrence of arrears. In this context, operation of the Treasury Committee ought to be strengthened, and the GISE continuously adhered to. Also, the mission urges an early updating of the civil service payroll list consistent with the findings of the civil service personnel census. In the structural area, the focus is on completing state disengagement from Comores Telecom by end-December 2012.
“Timely implementation of the reform agenda would help move real GDP growth up to 2 ½ percent in 2012, with inflation below 5 percent, the external current account deficit at 10 ½ percent of GDP, and the domestic primary budget deficit contained at just over 1percent of GDP.
“The mission took note of encouraging progress in implementing the HIPC Initiative completion point triggers; it welcomes government commitment to expeditious execution of the still pending requirements, especially in the social sectors.
“The mission reached understandings with the authorities on a policy framework for 2012 that could form the basis for the completion of the third review under the ECF arrangement. The Executive Board of the IMF is tentatively scheduled to consider the review in mid-June. This would further facilitate progress towards the HIPC Initiative Completion Point if the pending triggers and other reforms under the ECF-supported program are adequately implemented in the coming months.
“The mission wishes to thank the authorities for their hospitality.”
1 The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.