## 1comea2021001 ## Source details **Canonical URL:** [1comea2021001](https://www.imf.org/-/media/files/publications/cr/2021/english/1comea2021001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1comea2021001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1comea2021001.pdf.json) --- ### Executive summary — background, shocks, and IMF/partner support - Comoros is a small, fragile island state (population: 850,000) with persistently low and shock-prone growth. - Two mutually reinforcing vicious circles identified: economic fragility (low fiscal revenue, insufficient government investment, vulnerability to shocks) and institutional fragility (governance challenges, low implementation capacity, weak judicial system). - Recent shocks: - Cyclone Kenneth (2019) and COVID-19 (two waves in 2020 and early 2021). - Reported COVID-19 infections and deaths (as of mid-August 2021): 4,035 infections, 147 deaths. - Estimated economic effects in 2020: - GDP contracted by 0.5 percent in 2020 (against pre-COVID growth projections of 4.4 percent). - Fiscal outcome: cash deficit narrowed to 0.8 percent of GDP (from 3.9 percent in 2019) thanks to higher external grants late in the year. - Reserve coverage: 9 months of imports (with 6.8 months of imports considered adequate). - Real effective exchange rate: appreciated by 1.8 percent in 2020 and depreciated by 6 percent through July 2021. - Fund and partner support: - SDR 8.9 million (50 percent of quota) under the RCF/RFI in 2020. - SDR 2.4 million in CCRT grants for debt service relief between April 2020 and October 2021. - World Bank and AfDB increased assistance; World Bank intends to provide financing for vaccination needs over 2021-23. - Vaccination status and target: - To date, 7 percent of the population have been vaccinated (primarily Sinopharm). - Authorities hope to vaccinate 35 percent of the population by end-2021 using further doses of the same vaccine; additional sources remain uncertain. ### Short-term outlook (2021) and baseline projections - Baseline projection for 2021: - Growth: 1.5 percent in 2021. - Spending: rises to 20.4 percent of GDP. - Cash deficit and domestic primary deficit: domestic primary deficit of 4 percent of GDP, partially financed by central bank credit (room increased by the SDR allocation). - External: exports begin to recover; tourism subdued; remittances decline from recent record levels; reserves coverage broadly unchanged in 2021 (projections incorporate the 2021 SDR allocation). - Box 1: 2021 SDR allocation raised Comoros’ SDR holdings by US$ 24 million (1.8 percent of GDP). The BCC will open a corresponding credit line capped at US$ 24 million; credit would come on top of other BCC credit limited to 20 percent of average fiscal revenue over the preceding three years. Authorities intend to draw on the credit line as needed in 2021 for fiscal support, including transfers to the poor, and as a fiscal buffer. ### Medium-term outlook, financing needs, and Active Policy Scenario - Medium-term baseline: recovery toward a longer-term trend growth of 3½ percent per year. - Active Policy Scenario (transformative reforms) expected macro effects: - Move GDP growth onto a higher medium and long-term trend of 4.2 percent per year. - Faster growth, lower fiscal deficits, reduced SOE and financial sector surprises, stronger FDI and exports. - Fiscal and external financing gaps expected from 2022 due to: - Postal bank (SNPSF) recapitalization. - Increased debt service from recent non-concessional borrowing, including a loan equivalent to 4.5 percent of GDP on non-concessional terms with short maturity for a hotel project. - Slow projected increase in tax revenue (by only 0.1 percent of GDP per year) limiting public investment. - Comoros assessed as having a protracted BoP problem requiring external support and a possible ECF arrangement starting in 2022. ### Detailed fiscal financing needs and sources (2021–26) — projections (percent of GDP) - Financing needs: 2021 13.1; 2022 13.8; 2023 11.6; 2024 9.9; 2025 9.4; 2026 9.4. - Overall balance excluding grants: 2021 11.8; 2022 12.5; 2023 10.1; 2024 8.0; 2025 7.9; 2026 8.0. - Amortization: 2021 0.6; 2022 0.7; 2023 1.0; 2024 1.9; 2025 1.5; 2026 1.4. - Acquisition of assets: 2021 0.7; 2022 0.6; 2023 0.5; 2024 0.0; 2025 0.0; 2026 0.0. - Financing sources: 2021 13.1; 2022 12.6; 2023 10.8; 2024 8.6; 2025 8.6; 2026 8.6. - Foreign financing: 2021 10.7; 2022 12.5; 2023 10.8; 2024 8.7; 2025 8.6; 2026 8.6. - Project grants: 2021 6.2; 2022 6.1; 2023 4.8; 2024 4.8; 2025 4.9; 2026 5.5. - Project loans: 2021 2.8; 2022 4.8; 2023 4.8; 2024 2.7; 2025 2.5; 2026 1.9. - Budget grants: 2021 1.3; 2022 1.6; 2023 1.2; 2024 1.2; 2025 1.2; 2026 1.2. - Budget loans: 2021 0.3; 2022 0.0; 2023 0.0; 2024 0.0; 2025 0.0; 2026 0.0. - Domestic financing: 2021 2.4; 2022 0.2; 2023 0.0; 2024 0.0; 2025 0.0; 2026 0.0. - Fiscal Gap: 2021 0.0; 2022 1.1; 2023 0.8; 2024 1.3; 2025 0.8; 2026 0.8. - Summary: Fiscal financing needs average 11.2 percent of GDP over 2021-26 while projected sources average 10.4 percent of GDP, implying an average fiscal financing gap of 0.8 percent of GDP; given domestic constraints this translates into an external gap of the same size. ### External financing and balance of payments (selected projections, percent of GDP) - Financing Needs: 2021 4.7; 2022 8.3; 2023 9.6; 2024 8.4; 2025 8.3; 2026 8.3. - Current Account Deficit: 2021 4.1; 2022 7.6; 2023 8.6; 2024 6.5; 2025 6.8; 2026 6.9. - Public Debt Amortization: 2021 0.6; 2022 0.7; 2023 1.0; 2024 1.9; 2025 1.5; 2026 1.4. - Change in reserves (+ = decrease): 2021 -5.0; 2022 0.2; 2023 1.9; 2024 1.9; 2025 1.2; 2026 0.8. - Additional BoP Financing Needed to Close Fiscal Gap: 2021 0.0; 2022 1.1; 2023 0.8; 2024 1.3; 2025 0.8; 2026 0.8. ### SMP objectives, design, and conditionality (July–December 2021) - SMP purposes: - Establish a track record of policy implementation towards a potential ECF arrangement. - Contain and recover from the pandemic. - Start reforms to overcome fragility and boost inclusive growth. - Program period: July–December 2021, with test dates at end-September and end-December 2021. - Conditionality: - Parsimonious structural conditionality focused on governance, revenue mobilization, public financial management, and SOE reform. - Six structural benchmarks (ambitious but achievable). - Quantitative targets include a ceiling on the fiscal deficit, a floor on social spending, and a quantitative tax revenue target tied to a structural target on tax administration. - Staff recommendation: Staff supports the request for an SMP to establish a track record for a potential UCT-quality program. ### Fiscal policy stance and targets (2021–22 and medium term) - Near-term fiscal stance (2021-22): - Provide substantial fiscal support: cash transfers to the poor of 1.1 percent of GDP in 2021. - Execute a substantial public investment program, pushing overall fiscal deficit to around 4½ per-cent of GDP. - Financing in 2021 partly from central bank credit: central bank credit will rise by US$ 8 million above limits that would apply otherwise; US$ 6 million used for cash transfers. - 2023-26: - Gradually lower the deficit to 1.3 per-cent of GDP. - Split revenue gains evenly between raising investment and accelerating fiscal consolidation. - Thereafter: - Use all gains in revenue to raise spending; allow debt burden indicators to drop to and remain below high-risk thresholds. - TMU specific 2021 fiscal parameters: - Revenue and grants projected at 16.5 percent of GDP. - Intended total spending: 20.7 percent of GDP, of which at least 1.1 percent of GDP for cash transfers to the poor. - Overall cash deficit: 4.2 percent of GDP. - Ceiling for the domestic primary fiscal deficit: 3.5 percent of GDP (quantitative target). ### Revenue mobilization — diagnosis and measures - Diagnosis: - Low fiscal revenue due to complicated tax system, de jure or de facto exemptions, and administrative challenges. - Significant tax and customs exemptions persist. - Personal income and property tax implementation very limited; corporate taxpayer registration challenges (partial use of SIGIT software; service provider “Vigor” generating its own taxpayer identification numbers). - Authorities’ intent: - Aim to raise tax revenue by 0.2 percent of GDP in 2021 and 0.3 percent of GDP every year thereafter. - Policy: remove exemptions, starting in October 2021 with the sales tax exemption for construction materials. - Administrative actions: - (i) strengthen use of SIGIT software; - (ii) end use of VIGOR in taxpayer registration and use transparent procedures to identify and register taxpayers; - (iii) strengthen large and medium taxpayers units; - (iv) enhance efforts to recover unpaid taxes. - Structural benchmark: raise number of active taxpayers by 10 percent at the large and the medium taxpayer offices and send these taxpayers requests to file tax declarations. - Feasibility note: Revenue outturn in Q1 2021 was 28.6 percent of targeted revenue; the targeted increase of 0.2 percent of GDP in 2021 described as ambitious but attainable. ### Strengthening quality of spending and public financial management (PFM) - Identified weaknesses: - Opaque relations with SOEs and limited SOE oversight (e.g., SCH performs quasi-fiscal tasks and not asked to provide audited annual accounts). - TSA: all central government transactions except foreign-financed projects transit through TSA, but extrabudgetary entities and public administrative bodies remain outside TSA. - Frequent use of exceptional payment procedures such as payment before delivery. - Unknown stock of domestic arrears due to weaknesses in cash management. - Limited fiscal reporting: authorities do not inform parliament or public about budget execution; fiscal accounting weaknesses. - Reform intentions and structural benchmarks: - Prepare a realistic supplementary budget for 2021 for parliamentary consideration starting in October. - Strengthen SOE oversight: ensure SOEs comply with tax return filing requirements; align SOE senior staff compensation with comparable civil servants. - Improve TSA functioning: adopt road map for extending TSA coverage to extrabudgetary entities, public administrative bodies, and foreign-financed projects (structural benchmark). - Address domestic arrears: commission audit of domestic arrears including cross-arrears with SOEs and avoid net accumulation of new arrears (structural benchmark). - Enhance fiscal reporting: adopt revised PFM Organic Law, Accounting and Fiscal Reporting Regulation, budget and accounting manuals; create Treasury Accounting Agency; implement SIMBA software. ### Financial sector diagnosis, SNPSF restructuring, and planned reforms - Banking system weaknesses: - Recorded NPLs at 24 percent of loans at end-2020 (preliminary), provisioned at 71 percent. - Two thirds of NPLs are due by the same 25 debtors. - Low solvency and profitability; banks' average return on equity negative or null in three of last five years. - Financial safety net underdeveloped: weak supervisory early intervention, no deposit insurance, no emergency central bank liquidity assistance, and no operational bank resolution regime. - Lack of financial infrastructure: no organized interbank market, no lending instrument, no collateral; government does not issue tradable debt; BCC limited to uniform reserve requirements as main instrument. - SNPSF recapitalization: - Estimated restructuring and recapitalization costs US$ 26.9 million (2.1 percent of GDP), with France expected to provide US$ 7.6 million through grants. - Authorities’ intended actions: - Monitor asset quality and provisioning; BCC to finalize in September 2021 a survey of impacts of 2020 maturity extensions; a Commission on NPLs set up. - Strengthen financial safety net: transition to risk-based supervision and operationalize bank resolution and emergency liquidity assistance frameworks. - Strengthen financial infrastructure: lay foundations for a government securities market. - Restructure SNPSF: pass law/decree splitting SNPSF into postal and banking activities and provide the banking entity with (i) strong governance in accordance with applicable international standards, (ii) a viable business plan adopted in consultation with IMF staff, and (iii) managers experienced in banking and credit risk management (structural benchmark). ### Debt outlook, DSA findings, and policy recommendations - Risk assessment: - Risk of external debt distress: High. - Overall risk of debt distress: High. - Deterioration from moderate risk in the 2019 DSA. - Drivers of deterioration: - Recent non-concessional borrowing with short maturities. - Inclusion of SNPSF recapitalization costs in projections. - Pandemic-related weakening in economic performance. - External public debt levels: - External public debt reached 27.0 percent of GDP at end-2020 (from 18.6 percent of GDP at end-2018) and expected to rise to 28.9 percent of GDP at end-2021. - Selected DSA projections and indicators: - Real GDP growth (percent): 2020 -0.5; 2021 1.6; 2022 3.8; 2023 3.7; 2024 3.9; 2025 4.3; 2026 4.4. - External public debt (nominal), percent of GDP: 2018 16.4; 2019 19.9; 2020 21.2; 2021 25.7; 2022 29.1; 2023 31.8; 2024 31.9; 2025 31.6; 2026 30.7. - PV of PPG external debt-to-exports ratio (selected): 2024 204.2; 2025 190.7; 2026 179.3. - PPG debt service-to-exports ratio (selected): 2024 2.9; 2025 5.2; 2026 9.6. - Contingent liabilities estimated at 8.8 percent of GDP (domestic arrears 1.8 percent of GDP; SOEs 2 percent; financial system 5 percent). - Recommended mitigating actions: - Make faster progress on domestic resource mobilization and accelerate GDP and exports growth. - Ensure gradual but sustained fiscal consolidation over the medium term. - Avoid contracting further non-concessional borrowing. ### Risks to the outlook, contingency planning, and program risks - Overall risk level: unusually high. - Key risks: - Potential third COVID wave depressing growth and visitor numbers. - Global pandemic resurgence undermining visitor arrivals. - Social and political tensions if government pandemic response viewed as insufficient. - New natural disasters (e.g., Karthala volcano eruption or hurricane). - Policy slippages and additional non-concessional borrowing undermining debt sustainability. - Contingency measures: - If Q3 fiscal performance suggests Q4 fiscal targets are at risk, authorities will try to withhold Q4 allocations for non-priority spending. - In case of shock, authorities could draw on central bank credit enabled by the SDR allocation and/or, if RCF requirements met, request a disbursement of up to 50 percent of quota (0.9 percent of GDP). ### Governance, transparency, AML/CFT, and statistical capacity - Governance and anti-corruption measures: - Commit to regular publication of comprehensive information on all large public procurement contracts, including beneficial ownership information. - Issue circular/guidance requiring submission to a nominated procurement agency of documentation on all large public procurement contracts along with names of awarded companies and their beneficial owner(s); prepare plan and timeline for publication on an easily accessible website (structural benchmark). - Amend the 2008 anti-corruption law to create an effective asset declaration system and an operationally independent autonomous anti-corruption agency (structural benchmark). - Central bank safeguards and AML/CFT: - BCC implemented five out of twelve recommendations from the 2020 safeguards update; six recommendations are past due. - Authorities included criminal law provisions related to AML/CFT and formally created a Financial Intelligence Unit; GIABA mutual evaluation scheduled in 2022. - Statistics: - Economic data have serious shortcomings; authorities intend to strengthen hiring at the National Statistics Institute (INSEED) and to improve national accounts and price statistics with STA support. ### SMP monitoring, structural benchmarks, and reporting - SMP monitoring: structural benchmarks (Table 1) and quantitative indicators (Table 2); first review based on targets for September 30, 2021; second review based on targets for December 31, 2021. - Selected structural benchmarks and TMU operational details (implementation dates): - Raise number of active taxpayers by 5 percent (by end-September) and 10 percent (by end-December) at both the large taxpayer office (from 258 in May) and the medium taxpayer office (from 300 in May) and send these taxpayers requests to file tax declarations. - TMU operational targets: Direction des Grandes Entreprises active taxpayers reach 271 (end-September) and 284 (end-December); Direction des Moyennes et Petites Entreprises active taxpayers reach 315 (end-September) and 330 (end-December). - Adopt a road map for extending TSA coverage to extrabudgetary entities, public administrative bodies, and foreign-financed projects (by end-December). - Prepare terms of reference and launch call for interest for an audit of domestic arrears including cross-arrears with SOEs (by end-September) and commission the audit (by end-December). - Adopt a law/decree splitting SNPSF into postal and banking activities and submit to BCC an application for approval of the new Postal Bank (by end-December). - Issue circular/guidance requiring submission of procurement documentation and beneficial ownership information and share a plan and timeline for publication on an accessible website (by end-December). - Adopt in the Council of Ministers amendments to the 2008 anti-corruption law to operationalize an asset declaration regime (by end-December). - Reporting requirements (selected periodic data and deadlines): CPI (monthly, 1 month), National accounts (annually, 9 months), Monetary statistics (monthly, 45 days), Treasury cash flows (monthly, 2 weeks), Debt service monitoring (quarterly, 1 month), Customs imports/exports (monthly, 1 month), BCC balance of payments (annually, 4 months), among others. ### Staff appraisal — key policy priorities - Two overarching SMP goals: (i) contain and recover from the pandemic by providing near-term fiscal support; (ii) overcome fragility by addressing economic and institutional components for macroeconomic stability and higher sustainable growth. - Revenue mobilization: targets ambitious but attainable with strong administrative and policy measures; near-term priority to raise tax revenue to finance investment in human and physical capital. - Quality of spending and SOE management: restructure SNPSF, ensure new bank low-risk model, strengthen SOE management, extend TSA, eliminate absentee/ghost workers, and strengthen PFM. - Financial sector: support for enhancing safety net, operationalizing bank resolution and emergency liquidity assistance, and creating a government securities market. - Governance and transparency: implement procurement publication commitments, strengthen anti-corruption framework and asset declaration system, and enhance judicial capacity. _Italic: EXECUTIVE SUMMARY, 1comea2021001 (October 4, 2021); excerpts from 1comea2021001 SMP documentation._ ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Background and fragility - Comoros is a small, fragile island state (population: 850,000) with persistently low and shock-prone growth. - The last Article IV Consultation (completed in early 2020) identified two mutually reinforcing vicious circles: - Economic fragility: low fiscal revenue, insufficient government investment in human and physical capital, and pronounced vulnerability to shocks. - Institutional fragility: governance challenges, low government implementation capacity, and a weak judicial system. - Overcoming fragility requires breaking both circles. ### Impact of COVID-19 and recent shocks - Cyclone Kenneth (2019) preceded the COVID pandemic, which struck in two waves in 2020 and early 2021. - Reported COVID-19 infections and deaths (as of mid-August 2021): 4,035 infections, 147 deaths. - Estimated economic effects in 2020: - GDP contracted by 0.5 percent in 2020 (against pre-COVID growth projections of 4.4 percent). - Consumer prices fell in the second half of 2020. - Fiscal outcome: cash deficit narrowed to 0.8 percent of GDP (from 3.9 percent in 2019) thanks to higher external grants late in the year. - External: reserve coverage of 9 months of imports (with 6.8 months of imports considered adequate); real effective exchange rate appreciated by 1.8 percent in 2020 and depreciated by 6 percent through July 2021. ### Fund and partner support - IMF support provided: - SDR 8.9 million (50 percent of quota) under the RCF/RFI in 2020. - SDR 2.4 million in CCRT grants for debt service relief between April 2020 and October 2021. - The World Bank and the AfDB have increased assistance; the World Bank intends to provide financing for vaccination needs over 2021-23. ### Short-term outlook (2021) and vaccination - Growth prospects for 2021 remain muted given slow progress in vaccinations and risk of new infection waves, including the Delta variant. - Vaccination status and target: - To date, 7 percent of the population have been vaccinated (primarily Sinopharm). - Authorities hope to vaccinate 35 percent of the population by end-2021 using further doses of the same vaccine; additional sources remain uncertain. - Baseline projection for 2021 (Baseline Scenario Table 1): - Growth: 1.5 percent in 2021 (reflecting a slow start due to the second wave and subdued visitor numbers). - Fiscal: spending rises to 20.4 percent of GDP, resulting in a cash deficit and a domestic primary deficit of 4 percent of GDP, partially financed by central bank credit (room for such credit increased by the SDR allocation). - External: exports begin to recover; tourism remains subdued; remittances decline from recent record levels; reserves coverage broadly unchanged in 2021 (projections incorporate the 2021 SDR allocation). - Box 1: The 2021 SDR allocation raised Comoros’ SDR holdings by US$ 24 million (1.8 percent of GDP). The BCC will open a corresponding credit line capped at US$ 24 million; credit would come on top of other BCC credit limited to 20 percent of average fiscal revenue over the preceding three years. Authorities intend to draw on the credit line as needed in 2021 for fiscal support, including transfers to the poor, and as a fiscal buffer. ### Medium-term outlook and structural BoP needs - Baseline further projects recovery toward a longer-term trend growth of 3½ percent per year. - Fiscal and external financing gaps are expected to appear starting in 2022, driven by: - Postal bank (SNPSF) recapitalization integrated into projections. - Increased debt service obligations from recent non-concessional borrowing, including a loan equivalent to 4.5 percent of GDP on non-concessional terms with short maturity for a hotel project. - Slow projected increase in tax revenue (by only 0.1 percent of GDP per year), resulting in low public investment. - Comoros is assessed as having a protracted BoP problem due to the need to raise investment in human and physical capital to achieve higher and more inclusive growth and convergence with more developed countries. - A potential ECF arrangement starting in 2022 could help move to a higher growth path and fill associated financing gaps; a third COVID wave could bring financing needs forward and increase their magnitude. ### Financial sector and SOE developments - Financial sector and SOE challenges have grown: - Banking system weaknesses undermine asset quality and hinder credit provision. - Authorities nationalized an ailing bank and are restructuring/recapitalizing state-owned postal bank SNPSF. - State-owned Comoros Telecom is losing market share and may require restructuring. - Risk of external debt distress has risen to “high” (Debt Sustainability Analysis): pandemic-related weakening, SNPSF recapitalization, and recent non-concessional borrowing contributed to higher debt burden indicators. ### Risks to the outlook - Overall risk level: unusually high (Annex I, Risk Assessment Matrix). - Key risks: - A potential third wave of COVID infections depressing growth through increased social distancing and reduced visitor numbers. - Global resurgence of the pandemic undermining visitor arrivals. - Social and political tensions if the population views government pandemic response as insufficient. - New natural disasters (e.g., eruption of Karthala volcano or a hurricane). ### Staff-Monitored Program (SMP): objectives, design, and conditionality - SMP purpose: - Help authorities establish a track record of policy implementation to pave the way for a potential ECF arrangement. - Help contain and recover from the pandemic. - Start reforms to overcome fragility, boost inclusive growth, and limit risks, drawing on the medium-term strategy from the 2019 Article IV consultation. - Priority policy aims to tackle economic and institutional fragility: - Economic fragility: raise fiscal revenue to support investment in human and physical capital; enhance quality of spending; improve public financial management; strengthen SOE oversight; strengthen financial sector to enable greater credit provision and limit fiscal risks; enhance resilience to natural disasters in time. - Institutional fragility: strengthen governance and reduce vulnerability to corruption, including preparing for enhanced public reporting on all large public procurement projects (including beneficial ownership information) and creating an effective asset declaration framework for senior public officials. - SMP coverage and timing: - Program period: July–December 2021, with test dates at end-September and end-December 2021. - Conditionality: parsimonious structural conditionality reflecting limited implementation capacity; focuses on governance, revenue mobilization, public financial management, and SOE reform. - Six structural benchmarks are included; structural benchmarks are characterized as ambitious but achievable. - Quantitative targets include a ceiling on the fiscal deficit (to enable fiscal support for recovery), a floor on social spending (to protect the poor), and a quantitative tax revenue target tied to a structural target on tax administration. - Staff recommendation: - Staff supports the request for an SMP. The authorities’ policy plans and commitments should help establish a track record for a potential UCT-quality program to aid recovery from the pandemic and steer the country toward macroeconomic stability and sustainable growth. *Source: EXECUTIVE SUMMARY, 1comea2021001 (October 4, 2021).* ### 18. During 2021-22, while the impact of the pandemic and the risk of new pandemic ### 1comea2021001 - 18. During 2021-22, while the impact of the pandemic and the risk of new pandemic ### Pandemic response and fiscal stance (2021-22) - Authorities will need to provide fiscal support while pandemic impacts and risk of new waves persist; social distancing measures may be reimposed if a new wave occurs. - As risks recede, fiscal support will lessen in priority relative to limiting debt accumulation. - Planned fiscal path summarized below (¶24). ### Transformative reforms: objectives and expected macro effects - Objectives: - Address economic fragility: raise fiscal revenue, enable higher investment in human and physical capital, enhance debt sustainability, improve quality of spending, improve public financial management, strengthen SOE oversight, strengthen the financial sector, and enhance resilience to natural disasters. - Address institutional fragility: strengthen governance, reduce vulnerability to corruption, enhance procurement reporting, and strengthen the asset declaration regime. - Expected benefits (Active Policy Scenario): - Higher growth and lower risks than baseline, particularly over medium and longer terms (referenced: Active Policy Scenario Tables 2-5B and DSA). - Increased investment moves GDP growth onto a higher medium and long-term trend of 4.2 percent per year. - Faster growth, lower fiscal deficits, reduced SOE and financial sector surprises, stronger FDI and exports contributing to external stability. ### Raising fiscal revenue: diagnosis and planned measures - Diagnosis: - Fiscal revenue remains low due to a complicated tax system, de jure or de facto exemptions, and administrative challenges. - Tax and customs exemptions: substantial de jure or de facto exemptions appear to persist. - Tax administration: personal income and property tax implementation very limited; challenges in corporate taxpayer registration (partial use of SIGIT software; service provider “Vigor” generating its own taxpayer identification numbers); challenges in tax auditing and collection. - Customs administration: significant room for improvement including full computerization; recent de facto transfer of fuel products taxation from SCH to Customs. - Authorities’ intent for revenue increases: - Aim to raise tax revenue by 0.2 percent of GDP in 2021 and 0.3 percent of GDP every year thereafter. - Tax and customs policy: remove exemptions, starting in October 2021 with the sales tax exemption for construction materials. - Tax administration actions: - (i) strengthen use of SIGIT software; - (ii) use transparent procedures to identify and register taxpayers, including ending use of VIGOR in taxpayer registration; - (iii) strengthen large and medium taxpayers units; - (iv) enhance efforts to recover unpaid taxes. - Structural benchmark: raise number of active taxpayers by 10 percent at the large and the medium taxpayer offices and send these taxpayers requests to file tax declarations. - Customs administration actions: - (i) strengthen risk management; - (ii) develop information and control systems; - (iii) finalize framework for customs procedures. - Feasibility note: - Revenue outturn in Q1 2021 was 28.6 percent of targeted revenue (possibly one-off factors). - Targeted increase of 0.2 percent of GDP in 2021 described as ambitious but attainable. ### Adopting a prudent fiscal anchor and fiscal path (¶24–26) - Fiscal anchor intent: - Balance raising investment in human and physical capital with strengthening debt sustainability. - 2021-22: - Provide substantial fiscal support: cash transfers to the poor of 1.1 percent of GDP in 2021. - Execute a substantial public investment program, pushing overall fiscal deficit to around 4½ per-cent of GDP. - 2023-26: - Balance higher spending with faster consolidation relative to the baseline; gradually lower the deficit to 1.3 per-cent of GDP. - Split gains in revenue relative to baseline evenly between raising investment and accelerating fiscal consolidation. - Thereafter: - Use all gains in revenue to raise spending; support growth and allow all debt burden indicators to drop to, and remain below, high-risk thresholds. - Financing 2021 deficit: - Partly financed through central bank credit, some provided based on the SDR allocation. - Central bank credit will rise by US$ 8 million above the limits that would apply otherwise; US$ 6 million of this will be used for the cash transfers. ### Fiscal and external financing needs and sources (Box 2, 2021–26) - Summary statement: - Comoros shows fiscal financing needs of 11.2 percent of GDP on average over 2021-26, while projected sources account for an average of 10.4 percent of GDP. - Foreign/project financing projections: - Project financing expected to account for 8.6 percent of GDP on average. - Project grants expected to account for 5.4 percent of GDP on average. - Project loan disbursements account for 3.2 percent of GDP on average. - Budget financing projected to account for 1.3 percent of GDP on average. - Budget loans disbursements include only a disbursement that already occurred in 2021. - Domestic fiscal financing: - Increase in net credit from the central bank projected to provide 0.4 percent of GDP on average, occurring in 2021-22 only (including 0.6 percent of GDP in 2021 based on SDR allocation). - Domestic borrowing constrained by legal limits on central bank borrowing, small domestic banking system, and inability to issue debt to the public. - Comparison and gap: - Average fiscal financing gap of 0.8 percent of GDP. - Given domestic constraints, fiscal gap translates to an external gap of the same size despite central bank reserves presently standing at 9 months of imports and projected to remain above the adequate level of 6.8 months of imports through 2024. - Detailed fiscal financing table (Financing needs and sources, in percent of GDP) — projections shown exactly: - Financing needs: 2021 13.1; 2022 13.8; 2023 11.6; 2024 9.9; 2025 9.4; 2026 9.4. - Overall balance excluding grants: 2021 11.8; 2022 12.5; 2023 10.1; 2024 8.0; 2025 7.9; 2026 8.0. - Amortization: 2021 0.6; 2022 0.7; 2023 1.0; 2024 1.9; 2025 1.5; 2026 1.4. - Acquisition of assets: 2021 0.7; 2022 0.6; 2023 0.5; 2024 0.0; 2025 0.0; 2026 0.0. - Financing sources: 2021 13.1; 2022 12.6; 2023 10.8; 2024 8.6; 2025 8.6; 2026 8.6. - Foreign financing: 2021 10.7; 2022 12.5; 2023 10.8; 2024 8.7; 2025 8.6; 2026 8.6. - Project grants: 2021 6.2; 2022 6.1; 2023 4.8; 2024 4.8; 2025 4.9; 2026 5.5. - Project loans: 2021 2.8; 2022 4.8; 2023 4.8; 2024 2.7; 2025 2.5; 2026 1.9. - Budget grants: 2021 1.3; 2022 1.6; 2023 1.2; 2024 1.2; 2025 1.2; 2026 1.2. - Budget loans: 2021 0.3; 2022 0.0; 2023 0.0; 2024 0.0; 2025 0.0; 2026 0.0. - Domestic financing: 2021 2.4; 2022 0.2; 2023 0.0; 2024 0.0; 2025 0.0; 2026 0.0. - Fiscal Gap: 2021 0.0; 2022 1.1; 2023 0.8; 2024 1.3; 2025 0.8; 2026 0.8. - External financing and balance of payments table (selected rows, in percent of GDP) — projections shown exactly: - Financing Needs: 2021 4.7; 2022 8.3; 2023 9.6; 2024 8.4; 2025 8.3; 2026 8.3. - Current Account Deficit: 2021 4.1; 2022 7.6; 2023 8.6; 2024 6.5; 2025 6.8; 2026 6.9. - Public Debt Amortization: 2021 0.6; 2022 0.7; 2023 1.0; 2024 1.9; 2025 1.5; 2026 1.4. - Financing Sources: 2021 4.7; 2022 8.3; 2023 9.6; 2024 8.4; 2025 8.3; 2026 8.3. - Capital Account: 2021 4.4; 2022 4.5; 2023 3.8; 2024 4.0; 2025 4.1; 2026 4.8. - Financial Account (excl. amortization): 2021 5.4; 2022 3.7; 2023 3.8; 2024 2.5; 2025 3.0; 2026 2.8. - Of which: Public Debt (excl. amortization): 2021 4.7; 2022 4.8; 2023 4.8; 2024 2.7; 2025 2.5; 2026 1.9. - Change in reserves (+ = decrease): 2021 -5.0; 2022 0.2; 2023 1.9; 2024 1.9; 2025 1.2; 2026 0.8. - Financing Gap: 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0; 2025 0.0; 2026 0.0. - Additional BoP Financing Needed to Close Fiscal Gap: 2021 0.0; 2022 1.1; 2023 0.8; 2024 1.3; 2025 0.8; 2026 0.8. ### Strengthening quality of spending and public financial management - Identified weaknesses: - Opaque relations with SOEs and limited SOE oversight (e.g., SCH performs quasi-fiscal tasks and not asked to provide audited annual accounts). - TSA: all central government transactions except foreign-financed projects transit through TSA, but extra-budgetary entities and public administrative bodies remain outside TSA. - Frequent use of exceptional payment procedures such as payment before delivery. - Unknown stock of domestic arrears due to weaknesses in cash management. - Limited fiscal reporting: authorities do not inform parliament or public about budget execution; fiscal accounting weaknesses. - Reform intentions and structural benchmarks: - Prepare a realistic supplementary budget for 2021 to be considered in parliamentary session starting in October. - Strengthen SOE oversight: ensure SOEs comply with tax return filing requirements; align SOE senior staff compensation with comparable civil servants; reform of SNPSF discussed separately. - Improve TSA functioning: adopt road map for extending TSA coverage to extrabudgetary entities, public administrative bodies, and foreign-financed projects (structural benchmark). - Address domestic arrears: commission audit of domestic arrears including cross-arrears with SOEs as step towards clearing strategy (structural benchmark); avoid net accumulation of new arrears. - Enhance fiscal reporting: adopt revised PFM Organic Law, Accounting and Fiscal Reporting Regulation, budget and accounting manuals; create Treasury Accounting Agency; implement SIMBA software. ### Strengthening the financial sector - Sector diagnosis: - Weaknesses undermine credit provision and policymaking: weak risk management, credit concentration, government arrears, judicial system weaknesses inhibiting collateral use. - Asset quality: recorded NPLs at 24 percent of loans at end-2020 (preliminary), provisioned at 71 percent. - Two thirds of NPLs are due by the same 25 debtors. - Latest NPL data may not fully reflect pandemic impact given maturity extensions for hard-hit sectors. - Low solvency and profitability; banks' average return on equity negative or null in three of last five years. - Financial safety net underdeveloped: weak supervisory early intervention, no deposit insurance, no emergency central bank liquidity assistance, and no operational bank resolution regime. - Lack of financial infrastructure: no organized interbank market, no lending instrument, no collateral; government does not issue tradable debt; BCC effectively limited to uniform reserve requirements as main instrument. - Planned restructuring of postal bank SNPSF expected to result in large fiscal costs over 2021-23: estimated restructuring and recapitalization costs US$ 26.9 million (2.1 percent of GDP), with France expected to provide US$ 7.6 million through grants. - Authorities’ intended actions: - Monitor asset quality and provisioning at banks that extended pandemic-hit loans; BCC to finalize in September 2021 a survey of impacts of 2020 maturity extensions; a Commission on NPLs set up by ministries of finance and justice and the central bank. - Strengthen financial safety net: accelerate transition to risk-based supervision and operationalize bank resolution and emergency liquidity assistance frameworks. - Strengthen financial infrastructure: lay foundations for a government securities market. - Restructure SNPSF to minimize fiscal risks: commit to passing law/decree splitting SNPSF into postal and banking activities and providing the banking entity with (i) strong governance in accordance with applicable international standards, (ii) a viable business plan adopted in consultation with IMF staff, and (iii) managers experienced in banking and credit risk management (structural benchmark). ### Strengthening resilience to natural disasters - Comoros is vulnerable to natural disasters, a growing risk. - Authorities intend to develop a natural disaster resilience strategy with three pillars: - (i) enhancing structural resilience (infrastructure and other investments); - (ii) building financial resilience (creating fiscal buffers); - (iii) boosting post-disaster resilience. ### Strengthening governance and anti-corruption measures - Macro-critical governance challenges manifest in five areas: rule of law, regulatory framework, fiscal transparency, anti-corruption efforts, and civil service management. - Recent efforts and gaps: - Rule of law: Ongoing efforts to strengthen judicial system for commercial issues, including judge training with France support and hiring additional judges; authorities report having reduced delays in court cases by half (pending details). - Anti-corruption: Adoption of a new penal code criminalizing corruption offences identified in the United Nations Convention against Corruption; anti-corruption law needs amendment to establish an effective, operationally independent and autonomous anti-corruption agency. - Implementation of governance commitments in April 2020 RCF/RFI request has been mixed: - Quarterly reporting on spending of IMF emergency financing: authorities reported to staff in early 2021. - Independent third-party audit of IMF emergency financing spending: audit is delayed; authorities committed to preparing and publishing results in coming months. - Publication of procurement documentation: July 2021 publication included limited information on IMF emergency-financing-related procurement (description of goods/services, procurement procedure, project amount, provider name) but did not include beneficial ownership information. Authorities reaffirm intention to publish comprehensive procurement information on all large procurement projects and requested IMF capacity building on beneficial ownership collection and publication. *Source: Comorian authorities, and IMF staff projections (as presented in the source content).* ### 35. The authorities intend to undertake the following actions: ### 35. The authorities intend to undertake the following actions: ### Enhancing fiscal transparency and public procurement - Commitments: - Deliver on the April 2020 commitment to regularly publish documentation on all large public procurement contracts. - Planned steps: - Issue a circular/guidance regarding the submission to a nominated procurement agency of documentation on all large public procurement contracts along with the names of awarded companies and the name(s) of their beneficial owner(s). - Prepare a plan that sets out the steps and timeline for the publication of this documentation along with the names and beneficial ownership information of awarded companies on an easily accessible website (structural benchmark). ### Lowering corruption risks and asset declarations - Legislative actions: - Submit to parliament amendments to the 2008 anti-corruption law that will: - (i) enhance preventive measures including those related to conflicts of interest and the creation of an effective asset declaration system for senior public officials in line with international best practices aimed at the collection/verification of asset declarations, the imposition of sanctions for failure and false reporting, and the provision of access to the declarations, - (ii) set out the legal framework for an operationally independent and autonomous public entity with powers to set up the country’s anti-corruption policy priorities, to manage an effective asset declarations system, to maintain a public anti-corruption complaints platform, and to strengthen investigative capacity and powers (structural benchmark). ### Other governance and transparency actions under the SMP - Areas expected to strengthen governance and transparency: - Taxpayer registration. - The Treasury Single Account. - Arrears audit. ### Development plan considerations (Box 3: The National Development Plan) - Plan overview: - The “Plan Comores Emergents” (PCE) covers the period 2020-30 and identifies five sectors with growth potential: tourism and local crafts; the ‘blue’ economy (aquaculture, coastal tourism, marine biotechnologies, and marine energy); financial and logistics services; modern agriculture; and niche manufacturing. - Project focus and financing: - Government has prioritized two projects: construction of a large hospital and of a large hotel. - Both projects have been financed by non-concessional loans. - These loans have placed the country at high risk of debt distress, and financing identified for the hospital so far appears insufficient to finish the project. - Income growth target and feasibility: - The plan aims at lifting per-capita income to US$ 4,000 by 2030 (from US$ 1,360 in 2019). - Given low growth in 2020-21, reaching the goal would now require per capita growth of more than 12 percent per year. - Recommendations for sustainable financing and investment prioritization: - Concessional official financing: Well-conceived projects backed by solid feasibility studies will have the greatest chance of success in attracting concessional financing from development partners. - Government financing: Increasing tax revenue as called for under the SMP will permit the government to increase investment spending in a sustainable manner. - Private financing: Stimulating domestic investment and attracting foreign direct investment requires broad improvements in the business environment, including provision of high-quality infrastructure, good governance, and a well-functioning judicial system. - Human capital and project design considerations: - Consider cost-effective strategies for enhancing health care and education for the entire population. - Note: Services at the hospital under construction will be fee-based and, in the absence of a national health insurance scheme, will thus likely be largely unavailable to the poor. ### Central bank safeguards, AML/CFT, and statistics - Central bank (BCC) safeguards: - The BCC is continuing efforts to implement the recommendations of the 2020 safeguards update. - The 2020 update assessment recommended reforms to strengthen central bank autonomy, financial reporting, and auditing. - The central bank has implemented five out of twelve recommendations, while six recommendations are past due, including in areas that the assessment identified as priority areas. - AML/CFT progress: - Authorities included in the criminal law provisions related to AML/CFT and formally created a Financial Intelligence Unit. - Comoros is scheduled to have its next mutual evaluation by GIABA in 2022. - The economic citizen program: authorities report providing passport renewals but are no longer accepting new citizenship requests; the program had previously given rise to governance and money laundering risks. - Economic data strengthening: - Economic data have serious shortcomings in almost all sectors, hampering economic analysis and policy design. - Authorities intend to strengthen hiring at the National Statistics Institute. ### Program modalities, duration, and support - SMP coverage and timing: - The SMP covers the period July-December 2021, with September and December test dates. - The six-month duration reflects (i) the successful implementation of an ECF-supported program in the past (2009-13), and (ii) the projected emergence of financing gaps already in 2022. - Capacity development (CD) support and technical assistance: - FAD and AFRITAC South will assist on revenue mobilization and public financial management. - LEG will provide technical assistance on governance (amending procurement legal framework for collection and publication of beneficial ownership information and creation of an asset declaration framework). - MCM will advise on postal bank restructuring and continue CD on strengthening risk-based banking sector supervision (led by AFRITAC South), operationalizing the bank restructuring and resolution regime, creating an emergency liquidity assistance framework, and creating a tradable government debt market. - STA will assist on national accounts and price statistics. - Staff will coordinate with other CD providers and engage senior Comoros officials on CD issues to a greater degree than in the past. ### Risks, contingency planning, and transition prospects - Risks: - Risks to the program are high; shocks, capacity constraints, and persistent political tensions could undermine policy implementation, including in strengthening tax revenue. - Contingency measures: - If Q3 fiscal performance suggests Q4 fiscal targets are at risk, the authorities will try to withhold Q4 allocations for non-priority spending. - In case of a shock, authorities could draw on the central bank credit made possible by the SDR allocation and/or, if the policy requirements for an RCF are met, request a disbursement of up to 50 percent of quota (0.9 percent of GDP). - Transition to an ECF: - Successful SMP implementation would allow the discussion of a potential ECF-arrangement in 2022. - Staff has developed quarterly projections (MEFP Table 2) to facilitate monitoring of policy implementation between the end of the SMP and Board consideration of the arrangement. ### Staff appraisal — key findings and policy priorities - Economic context and challenges: - Comoros is a small and fragile country that has seen a significant adverse economic and humanitarian impact from the pandemic. - The postal bank SNPSF has accumulated large losses and requires costly restructuring, while non-concessional borrowing has added substantial near-term debt service obligations. - Objectives of the SMP: - SMP is sought as a bridge to a potential ECF arrangement to help fill financing gaps and move to a higher growth path. - Two overarching goals: (i) contain and recover from the pandemic by providing fiscal support (near-term), and (ii) overcome fragility by addressing economic and institutional components to steer Comoros onto macroeconomic stability and higher sustainable growth (longer-term). - Revenue mobilization: - Authorities’ fiscal revenue targets are ambitious but attainable with strong measures. - Raising fiscal revenue may be the single most important reform to allow increased investment into human and physical capital. - Near-term measures include administrative and policy measures; relatively strong Q1 2021 outturns suggest 2021 revenue targets are within reach unless a shock undermines performance. - Medium-term will require additional administrative and policy steps and building public support by ensuring quality of spending and strengthened governance. - Quality of spending and SOE management: - Support for enhancing the quality of spending to make best use of scarce resources. - Key elements: restructure postal bank and ensure new bank adheres to a low-risk business model; strengthen management of other SOEs; eliminate absentee workers or workers without proper qualifications from the civil service payroll; extend the Treasury Single Account to extrabudgetary entities and foreign-financed projects; further strengthen public financial management. - Fiscal stance: - Near term (2021-22): expansionary fiscal stance including substantial cash transfers to the poor. - Medium term: consolidate by removing pandemic-related stimulus and raising revenue to allow debt risks to recede. - Longer term: use revenue increases to raise investment in human and physical capital for higher sustainable growth. - Financial sector and AML/CFT: - Support for plans to enhance the financial sector safety net and strengthen financial system infrastructure. - Benefits from commitments to avoid accumulating domestic arrears and to strengthen the judicial system so banks can realize pledged collateral. - Staff welcomes ongoing efforts to enhance AML/CFT. *International Monetary Fund — Selected excerpts from the Comoros SMP documentation contained in 1comea2021001* ### 53. Staff welcomes the authorities’ commitment to enhancing governance and reducing ### 1comea2021001 - 53. Staff welcomes the authorities’ commitment to enhancing governance and reducing ### Governance commitments and ongoing reforms - Staff welcomes authorities’ commitment to enhancing governance and reducing corruption risks. - Authorities have strengthened the criminal law by penalizing all forms of corruption featuring in the UN convention on corruption. - Authorities are engaged in strengthening the judicial system by training and hiring more judges. - Authorities intend to fully implement their April 2020 commitment on regular publication of comprehensive information on large procurement projects, including publication of information on beneficial owners. - They will lay the basis for such reporting through a circular. - Authorities have committed to creating an effective framework for asset declarations by senior public officials by amending the anti-corruption law. - Additional actions under the SMP (Staff-Monitored Program) are expected to strengthen governance and transparency, for example actions related to improved taxpayer registration. - The text notes that additional steps on strengthening governance will be needed in future years. ### Key fiscal and external data highlights (selected figures preserved verbatim from the source) - From 2021, includes new SDR allocation of $24 million. - Gross international reserves (end of period, In millions of U.S. dollars): - 198.4; 200.2; 182.2; 292.2; 185.3; 348.4; 350.6; 321.6; 285.8; 252.8; 219.6 - Total revenue and grants (selected percent of GDP series from the Active Policy Scenario table): - 17.8; 15.8; 19.4; 18.3; 18.4; 16.5; 16.9; 15.6; 15.8; 16.2; 17.1 - Current account (percentage of GDP, memorandum item, Active Policy Scenario): - -2.9; -3.3; -5.9; -1.7; -4.7; -4.1; -7.6; -8.6; -6.5; -6.8; -6.9 - Exports of goods and services (percentage of GDP, Active Policy Scenario): - 12.6; 12.0; 11.2; 7.3; 11.9; 8.9; 11.1; 11.1; 11.2; 11.3; 11.4 - Imports of goods and services (percentage of GDP, Active Policy Scenario): - 30.2; 29.6; 29.3; 28.4; 29.0; 30.4; 34.2; 33.9; 31.5; 31.8; 32.0 ### Policy implications and priorities - Implement transparency measures for large procurement projects: - Regular publication of comprehensive procurement information, including beneficial owners, as per the April 2020 commitment. - Issue the planned circular to establish reporting procedures. - Strengthen anti-corruption framework: - Amend the anti-corruption law to create an effective framework for asset declarations by senior public officials. - Reinforce judicial capacity: - Continue training and hiring judges to strengthen the judicial system and enforcement capacity. - Leverage SMP-linked reforms to improve governance: - Use SMP measures (including improved taxpayer registration and related actions) to enhance transparency and governance over the medium term. - Recognize need for sustained effort: - Additional governance-strengthening steps will be required in future years beyond the actions currently committed. *Sources: Comorian authorities; and IMF staff estimates and projections.* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Global Risks - Global resurgence of the Covid-19 pandemic, which requires costly containment efforts. - Relative likelihood: Medium - Time Horizon: ST, MT - Impact on Comoros: High - Policy responses: Speed up vaccination as much as possible given vaccine supply constraints, preferably with vaccines shown to be highly effective. Use of social distancing as needed. - Uncontrolled Covid-19 local outbreaks and subpar/volatile growth. Local outbreak forces new lockdowns, while policy response to cushion the economic impact is constrained. - Relative likelihood: High - Time Horizon: ST, MT - Impact on Comoros: High - Policy responses: Speed up vaccination as much as possible given vaccine supply constraints, preferably with vaccines shown to be highly effective. Use of social distancing as needed. - Sharp rise in global risk premia exposes financial and fiscal vulnerabilities, leading to higher debt service and refinancing difficulties. - Relative likelihood: Medium - Time Horizon: ST - Impact on Comoros: Low - Policy responses: Strengthen debt sustainability by raising fiscal revenue and adopting a suitable fiscal anchor. ### Domestic Risks - Policy slippages. In particular, delayed structural reforms could undermine revenue mobilization, adding pressures on the public finances. The taking up of additional non-concessional debt could quickly undermine debt sustainability. - Relative likelihood: High - Time Horizon: ST, MT - Impact on Comoros: High - Policy responses: Implement macroeconomic policies and structural reforms as described in the SMP, particularly those related to raising fiscal revenue. - Widespread social discontent and political instability. Social and political tensions erupt as pandemic-related economic support is withdrawn and the opposition continues to reject the 2018 constitution. - Relative likelihood: High - Time Horizon: ST, MT - Impact on Comoros: High - Policy responses: Provide support to the most vulnerable, including those in the smaller islands, as described in the SMP. Enhance governance, transparency, and the rule of law. - Deterioration of SOEs’ financial situation and ensuing migration of liabilities to the central government. - Relative likelihood: High - Time Horizon: ST, MT - Impact on Comoros: High - Policy responses: Improve supervision of SOEs as described in the SMP. - Natural disasters, for example eruption of the Karthala volcano, another hurricane, or drought. - Relative likelihood: Medium - Time Horizon: ST, MT - Impact on Comoros: High - Policy responses: Implement the adaptation strategy discussed in Country Report 20/198. ### Recent economic developments and outlook (MEFP summary) - 2020: Following Cyclone Kenneth (2019) and the Coronavirus pandemic, growth was close to zero and the public debt burden has risen. - Vaccinations: Vaccinations have started but vaccines obtained so far cover only 35 percent of the population. - Growth projections: - Projected growth in 2021: about 1½ percent (including limited vaccine access). - Medium-term growth: about 3½ - 4¼ percent per year. ### Government objectives and policies (MEFP highlights) A. Containing and Recovering from the Pandemic - Explore options for making additional vaccines available and accelerating administration, taking full advantage of WB financial support for vaccinations. Consider social distancing measures should a new COVID wave occur. - Fiscal support: envisage raising the fiscal deficit towards 4¼ - 4¾ percent of GDP in 2021 and 2022. As risks recede with vaccinations, consider scaling back support. B. Laying the Ground for Higher, More Inclusive, and More Robust Growth - Address economic challenges (tight fiscal resources, vulnerability to shocks) and institutional weaknesses (limited civil service capacity, weak judicial system, governance challenges), and vulnerability to climate change and natural disasters. Strengthening Fiscal Policy — Raising Fiscal Revenue - Tax administration measures: - Strengthen use of the SIGIT software. - Ensure transparent procedures to identify and register taxpayers and stop competing taxpayer registration by VIGOR by end-September 2021 at the latest. - Improve tax administration for large and medium taxpayers, including SOEs and those located outside the main island. - Intensify efforts to recover unpaid taxes. - Customs administration measures: - Complete transfer of management of fuel products taxes to customs. - Strengthen risk management. - Deploy an internal control system and develop a decision-making information system. - Finalize the draft framework instruction for customs procedures. - Assess revenue losses caused by existing de jure and de facto exemptions with partner support. - Revenue targets and expectations: - Aim to raise tax revenue by 0.2 percent of GDP in 2021 and 0.3 percent of GDP every year thereafter. - A projected decline in non-tax revenue in 2021 due to difficulties at SOEs is expected to lower overall revenue by almost 0.4 percent of GDP in 2021. - SMP conditionality on revenue mobilization: - Raise the number of active taxpayers by 5 percent (by end-September) and 10 percent (by end-December) at both the large taxpayer office (from 258 in May) and the medium taxpayer office (from 300 in May) and send all these taxpayers requests to file tax declarations (structural benchmark). - Raise fiscal revenue on a quarterly basis in line with the annual objective (quantitative targets). Adopting a Prudent Fiscal Policy Stance - Aim to bring all debt burden indicators below their high-risk thresholds before the end of the 2020s. - Commit to limiting uptake of new debt consistent with that goal; acknowledge need for fiscal consolidation from 2023 on under prudent growth projections. - Commit to avoid taking up any non-concessional borrowing during the duration of the SMP (quantitative target). - SDR use: intend to use about one third of the recent SDR allocation for fiscal spending in 2021 and preserve the rest as a buffer for liquidity shortfalls or larger shocks. 2021 fiscal stance and targets - Revenue and grants projected at 16.5 percent of GDP. - Intended total spending: 20.7 percent of GDP, of which at least 1.1 percent of GDP for cash transfers to the poor (quantitative targets). - Overall cash deficit: 4.2 percent of GDP. - Ceiling for the domestic primary fiscal deficit: 3.5 percent of GDP (quantitative targets). Strengthening the Quality of Spending - Limit unproductive spending and strengthen oversight of SOEs. Public Financial Management and SOE oversight - Adopt a supplementary budget for 2021 given likely deviations from initial budget projections. - Adopt a road map for extending coverage of the Treasury Single Account (TSA) to all transactions relating to extrabudgetary entities, public administrative bodies, and foreign-financed projects (structural benchmark for end-December). - Limit use of exceptional payment procedures by strengthening commitment controls and cash management. - Revise the budget framework law of 2012; adopt the Accounting and Fiscal Reporting Regulation and budget and accounting manuals; create a Treasury Accounting Agency; and fully implement the SIMBA software. - Clear domestic arrears and avoid external arrears: - Prepare terms of reference and launch a call for interest for an audit of domestic arrears including cross-arrears with SOEs (by end-September), and commission the audit (by end-December) as a step towards preparing a strategy for clearing them (structural benchmark). - Commit to zero net accumulation of new domestic arrears (quantitative targets). Operationalization: net accumulation of arrears in 2021 must be no higher than the net accumulation of arrears in the first half of 2021 (KMF 625 million). - Commit to avoiding accumulating external arrears (quantitative target). SOE measures - Conclude performance contracts with major SOEs to define service and financial targets. - Require SOEs to prepare certified annual balance sheets and profit and loss statements. - Seek adjustments in SOE staffing levels and compensation to align with civil service where needed. - End cross-arrears settlement between the State and SOEs, starting with state-owned oil company SCH. Monetary policy and financial sector strengthening - BCC to continue prudent monetary policy; peg of the Comorian Franc to the Euro and cooperation agreement with France anchor policy. - Banking system challenges: weak underwriting and risk management, credit risk concentration, recurring government arrears, judicial shortcomings limiting collateral realization; low profitability and solvency; some banks with liquidity tensions; lack of financial safety net and financial infrastructure (no organized market, no lending instrument, no collateral; government does not yet issue bills or bonds). - SNPSF restructuring: external audit (July) preliminary estimate of recapitalization and restructuring needs at almost US$ 26.9 million (2.1 percent of GDP). Planned restructuring will result in large fiscal costs over 2021-23. - Financial sector policy responses: - Improve operating environment for banks (lower frequency of government arrears to suppliers; strengthen judicial system to enable realization of pledged collateral). - Strengthen financial safety net: create a bank recovery and resolution framework (law adopted December 2020) and operationalize BCC’s emergency liquidity assistance function. - Strengthen financial infrastructure by establishing a government securities market. - Proceed with restructuring of SNPSF: audit assets and liabilities of banking and postal activities; adopt a law/decree splitting SNPSF into postal and banking activities; submit application to BCC for approval of new Postal Bank that includes (i) strong governance consistent with BCC requirements, (ii) a viable business plan adopted in consultation with IMF staff, and (iii) profiles of future managers with adequate expertise in banking and credit risk management (structural benchmark for end-December). Preserving External Stability - Reserves: gross reserves of 9 months of imports at end-2020 (comfortable level). Reserves expected to decline gradually. - Commit to establish a floor on net international reserves coverage corresponding to gross reserves of 6.8 months of imports (Table 2). - Will avoid measures that compound balance-of-payments difficulties and will not impose new or intensify restrictions on payments and transfers for international transactions, trade restrictions for balance-of-payments purposes, multiple currency practices, or enter into bilateral payments agreements inconsistent with Article VIII of the IMF’s Articles of Agreement. Strengthening resilience to natural disasters and climate change - Aim to: (i) strengthen structural resilience through infrastructure and other investments; (ii) build financial resilience by creating fiscal buffers; (iii) boost post-disaster resilience by contingency planning and investments to allow an effective disaster response. Implementation of pillar (i) will depend on success in raising domestic revenue and international support. Strengthening governance and reducing vulnerability to corruption - Rule of law: continue efforts to strengthen judicial system to ensure property rights and enforce contracts. - Fiscal transparency measures: publish comprehensive information on all large public procurement projects by issuing circular/guidance for submission of documentation and beneficial ownership information and prepare a plan and timeline for publication on an accessible website (structural benchmark for end-December). - Commission and publish an independent third-party audit of spending of IMF emergency financing provided under the RCF/RFI of April 2020. - Anti-corruption: strengthen asset declaration regime for high-level officials by adopting amendments to the 2008 anti-corruption law (N° 08-013/AU) to: (i) enhance preventive measures (conflicts of interest, effective asset declaration system with collection/verification, sanctions, access), and (ii) set legal framework for an operationally independent autonomous public entity to manage anti-corruption policy, asset declarations, a public complaints platform, and investigative capacity (structural benchmark). - Civil service management: address absentee and “ghost workers” and recover wages paid to them; explore strengthening hiring via competition/entrance exams; create a school of national administration; introduce performance management; avoid election-related hiring. *Source: Annex I. Risk Assessment Matrix; Letter of Intent and Attachment I. Memorandum of Economic and Financial Policies (September 2021).* ### 22. The Central Bank intends to implement key recommendations of the latest IMF ### 22. The Central Bank intends to implement key recommendations of the latest IMF safeguards assessment update ### Safeguards assessment and central bank measures - 2020 update assessment findings: - Internal audit operations are limited. - Financial reporting practices should be strengthened, including by adopting International Financial Reporting Standards. - It would be desirable to amend the legal framework to enhance the central bank’s autonomy. - Authorities’ intentions: - The Central Bank intends to implement key recommendations of the latest IMF safeguards assessment update. ### AML/CFT reforms - Government commitments and recent actions: - Strengthen AML/CFT measures in line with GIABA recommendations. - Enhance capacity and financial independence of the financial intelligence unit; the President has signed a decree specifying the unit’s mission. - The National Assembly has adopted, and the President has promulgated, a revised penal code reflecting amendments necessary to respond to GIABA’s recommendations. - Provisions remain to be made for the asset freeze procedure. - Next steps: - Preparation of an AML/CFT action plan. - Preparations for the upcoming GIABA mutual evaluation in 2022. ### Statistical capacity and INSEED - Government recognition and commitments: - Comoros’ economic data have serious shortcomings in almost all sectors that hamper economic analysis and policy formulation and implementation. - The government is committed to ensuring that INSEED will have sufficient human and capital resources to collect timely price data and to continue its updating of the national accounts. ### Program monitoring: overview and timetable - IMF staff monitoring: - The SMP will be monitored using structural benchmarks (Table 1) and quantitative indicators (Table 2). - First review based on targets for September 30, 2021. - Second review based on targets for December 31, 2021. ### Structural benchmarks (selected, with purposes and implementation dates) - Raise the number of active taxpayers by 5 percent (by end-September) and 10 percent (by end-December) at both: - the large taxpayer office (from 258 in May) and - the medium and small taxpayer office (from 300 in May), - and sending all these taxpayers requests to file tax declarations. - Purpose: Boost tax revenue to enable greater investment in human and physical capital and safeguard debt sustainability. - Implementation dates: September 30 and December 31, 2021. - Adopt a road map for extending the coverage of the Treasury Single Account (TSA) to all transactions relating to extrabudgetary entities, public administrative bodies, and foreign-financed projects. - Purpose: Enhance PFM by strengthening expenditure control and transparency. - Implementation date: December 31, 2021. - Prepare terms of reference and launch a call for interest for an audit of domestic arrears including cross-arrears with SOEs (by end-September), and commission the audit (by end-December). - Purpose: Enhance PFM by strengthening budget execution and transparency; improve business climate. - Implementation dates: September 30 and December 31, 2021. - Adopt a law/decree splitting SNPSF into postal and banking activities; submit to the Central Bank (BCC) an application for approval of the new Postal Bank that enshrines: - (i) strong governance in line with applicable international standards and BCC requirements, - (ii) a viable business plan adopted in consultation with IMF staff, and - (iii) profiles of future managers with adequate management expertise and experience in banking and credit risk management. - Purpose: Enhance the management of SOEs and reduce unnecessary drains on the budget. - Implementation date: December 31, 2021. - Issue a circular/guidance requiring submission to a nominated procurement agency of documentation on all large public procurement contracts along with names of awarded companies and their beneficial owner(s); prepare a plan and timeline for publication on an easily accessible website. - Purpose: Improve good governance and safeguard public resources. - Implementation date: December 31, 2021. - Adopt in the Council of Ministers amendments to the 2008 anti-corruption law (N° 08-013/AU) to: - (i) enhance preventive measures including conflicts of interest and creation of an effective asset declaration system for senior public officials; and - (ii) set out legal framework for creating an operationally independent and autonomous public entity with powers to set anti-corruption policy priorities, manage asset declarations, maintain a public complaints platform, and ensure investigative capacity and powers. - Purpose: Operationalize asset declaration regime for senior officials to lower corruption risks. - Implementation date: December 31, 2021. ### TMU: structural benchmark operational details (selected) - Taxpayers benchmark considered met if: - Direction des Grandes Entreprises active taxpayers reach 271 and have been sent requests to file tax declarations at end-September; - Direction des Grandes Entreprises active taxpayers reach 284 and have been sent requests to file tax declarations at end-December; - Direction des Moyennes et Petites Entreprises active taxpayers reach 315 and have been sent requests to file tax declarations at end-September; - Direction des Moyennes et Petites Entreprises active taxpayers reach 330 and have been sent requests to file tax declarations at end-December. - Active taxpayers defined as taxpayers that exhibit economic activity. - TSA benchmark considered met if, by end-December, authorities share with staff a plan setting out difficulties of extending TSA coverage to extrabudgetary entities, public administrative bodies, and foreign-financed projects. - Domestic arrears audit benchmark considered met if: - By end-September authorities prepared terms of reference and launched a call for interest for an audit of domestic arrears including cross-arrears with SOEs; and - By end-December commissioned the audit from a well-established reputable firm. - The audit will validate outstanding invoices and establish the stock of outstanding arrears, including government arrears to SOEs, SOE arrears to the government, and arrears between SOEs. - SNPSF restructuring benchmark considered met if, by end-December, authorities have: - Adopted a law or issued a decree splitting SNPSF into postal and banking activities; and - Submitted to BCC an application for approval of the new Postal Bank that enshrines (i)–(iii) above. - Governance will be considered strong if it meets the Basel Committee on Banking Supervision’s Guidelines on Corporate Governance Principles for Banks of July 2015. - Managers considered experienced if they meet conditions imposed by the BCC on bank managers. - Public procurement reporting benchmark considered met if, by end-December, authorities have: - Issued circular/guidance on submission to a nominated procurement agency of documentation on all large public procurement contracts along with names of awarded companies and beneficial owner(s); and - Shared with Fund staff a plan setting out steps and timeline for publication of documentation and beneficial ownership information on an easily accessible website. - Required documentation includes signed public procurement contracts, identification of the mode of tender and selection criteria. - Large public procurement projects defined as projects amounting to KMF 10 million or more. ### Key definitions, computation methods, and parameter values from the TMU - Program exchange rate (average rate projected in 2021 as of end August): - 411.91 KMF per U.S. dollar - 491.97 KMF per euro - 591.38 KMF per SDR - 549.22 KMF per AfDB Accounting Unit - Government definition: refers to the government of the Union of the Comoros; excludes local governments, the BCC, and any public entity with independent legal status, including state-owned enterprises. - Government domestic revenue: - Comprises all tax and non-tax revenue of government as reported in TOFE. - Revenue assessed on a cash basis but includes imputed tax revenue on salaries of civil servants and administrative housing and imputed tax revenue equivalent to amounts withheld by SCH to provide fuel for government consumption and to recover the subsidy on supply of fuel for SONELEC. - To avoid measurement difficulties, total imputed tax revenue in 2021 is fixed at KMF 3,739 billion and 4,985 billion at end-September and end-December, respectively, the realizations in 2020. - Revenue includes recovered tax arrears but excludes outstanding tax arrears. - Proceeds from grants, loans, and asset sales do not count as revenue. - Government domestically financed expenditure: - Comprises all government spending including spending financed by grants, budget support loans, non-concessional loans, and World Bank financing for strengthening the social safety net. - Excludes expenditure financed by other project-specific external grants or concessional loans. - Recapitalization and restructuring costs of SOEs, such as the SNPSF, are excluded from expenditure and recorded as acquisition of assets under financing (“below the line”). - Spending assessed on a payment-order basis but includes spending executed before payment authorization and not yet regularized. - Domestic primary fiscal balance: domestic revenue less domestically financed expenditure, excluding interest payments. - Net international reserves (NIR) of the BCC (program-monitoring definition): - Short-term (original maturities of one year or less), tradable foreign assets of the BCC minus short-term external liabilities, and liabilities to the IMF. - Excludes pledged or encumbered external assets, securities with market value differing by over 20 percent from original issue price (these assessed at market value), banks’ deposits related to capital or licensing requirements, and banks’ reserves denominated in foreign currency. - When calculating NIR, all values converted to actual mid-point market exchange rates prevailing at the test date. - Debt definition: as in paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements (Decision No. 15688 of Dec. 5, 2014). - Concessionality: - A debt is concessional if it includes a grant element of at least 35 percent, and non-concessional otherwise. - Grant element computed as difference between nominal value and net present value, expressed as percentage of nominal value. - Net present value calculated by discounting future debt service payments using a 5 percent discount rate. - Arrears definitions: - Domestic (external) payment arrears defined as invoices unpaid within 90 days from payment order clearance, contractual obligations unpaid at stipulated times, confirmed tax credits unpaid within 90 days from payment order, or wages/salaries due in a given month but unpaid on the 30th day of the following month. - Arrears exclude debt service forgiven or rescheduled. - Social cash transfers: cash transfers supporting vulnerable households with direct effect on reducing poverty, including those financed by international development partners. ### Quantitative targets, adjusters, and fiscal parameters - Quantitative targets assessed cumulatively from beginning of calendar year unless stated otherwise. - Adjusters account for unexpected developments in budget grants and loans and World Bank support for social safety net project. - Floor on tax revenue: - Tax portion of government revenue as described above. - Provision that imputed revenue in 2021 will be assumed to equal KMF 3,739 through end-September and KMF 4,985 million through end-December, equal to the outturn in 2020. - The sought-after increase in revenue in 2021 (0.2 percent of GDP relative to 2020 outturns) will have to be realized entirely in the cash portion of revenue. - Projected budget support grants and loans (in millions KMF, cumulative from beginning of calendar year): - Budget support grants Sept. 2021 / Dec. 2021: - World Bank: 0 / 0 - AfDB**: 2,389 / 2,389 - France: 1,476 / 1,968 - Saudi Arabia: 0 / 2,500 - Budget support loans: - AfDB**: 1,730 / 1,730 - **Full amount of the financial support has already been disbursed - Ceiling on the domestic primary fiscal deficit: - Will not be adjusted for unexpected changes in budget grants and loans. - Will be adjusted upward by any amount of domestic revenue above expectations to ensure any excess revenue is used to reduce financing needs. - Reference domestic revenue projections: KMF 30,664 and 47,175 in September and December 2021, respectively. - Floor on net international reserves of the BCC: - Will not be adjusted for unexpected changes in budget grants and loans. - Authorities would not need to add to reserves any excess in budget grants and loans. - Ceilings on domestic (external) arrears: - Apply to net accumulation of domestic (external) arrears in the second half of 2021 (gross accumulation minus clearance of arrears). - Domestic arrears accumulated in 2021 through end-June are estimated at KMF 1,779.3. - Clearance of domestic arrears outstanding prior to 2021 is estimated at KMF 1,154.6 million as of end-June 2021. - External arrears at end-May stood at USD 6 million; external arrears at end-June 2021 will be estimated as soon as possible. - Floors on social cash transfers: - Will not be adjusted for unexpected changes in the WB grants for the social safety net project or budget support grants and loans. - Authorities would not need to raise these transfers if external support exceeds expectations, nor reduce these transfers if external support falls short. *Source: 1comea2021001 - 22. (PDF chapter/section content provided above)* ### 22. The ceiling on the contracting or guaranteeing of new non-concessional debt by the ### 1comea2021001 - 22. The ceiling on the contracting or guaranteeing of new non-concessional debt by the ### Debt ceiling definition and exclusions - The ceiling on the contracting or guaranteeing of new non-concessional debt by the government or the BCC will be assessed continuously and excludes IMF credit. - Excluded operations: - Normal short-term import and supplier credits (e.g., revolving credit lines) because they are self-liquidating (sales of imports are used to repay the debt). - Debt being rescheduled or restructured to the extent such non-concessional debt is used for debt management operations that improve the overall public debt profile. - A debt is considered contracted on the signature date of the contract. ### Reporting requirements (Periodic Data Required for the SMP) - Authorities will report information and data in the form mutually agreed with the reporting agency and at the frequencies and deadlines shown. Authorities will transmit promptly any data revisions and consult Fund staff on information not specifically addressed in the TMU. - Selected reporting obligations (agency — data — frequency — deadline): - INSEED — Consumer Price Index — Monthly — 1 month - INSEED — National accounts, including GDP deflator (historical data and projections) — Annually — 9 months - INSEED/BCC — Economic bulletin / note, including data in Excel file — Quarterly — 3 months - SONELEC/INSEED/BCC — Electricity production and consumption — Quarterly — 1 mois - BCC — Monetary statistics, government net position, BCC accounts and consolidated accounts of other depository corporations, and reserve position — Monthly — 45 days - CREF — Tofe (including a file detailing social spending: education, health, support for the most vulnerable) — Quarterly — 2 months - Tresor — Treasury cash flows — Monthly — 2 weeks - Debt Service — Monitoring of public debt (contracted debt, disbursed debt, interest payments, principal repayment) by external creditor and by domestic financial institution — Quarterly — 1 month - Debt Service — External debt arrears — Monthly — 1 month - Debt Service — Debt arrears with domestic financial institutions — Monthly — 1 month - Debt Service — Debt bulletin — Quarterly — 3 months - Customs — Imports in detail (volume, value and corresponding revenue for each tax and duty) — Monthly — 1 month - Customs — Exports in detail (volume, value and corresponding revenue for each tax and duty) — Monthly — 1 month - CGP/CREF — Monitoring of projects by donor, specifying terms of project financing and nature — Quarterly — 45 days - BCC — Imports including all petroleum products (volume, value) — Quarterly — 2 months - BCC — Exports (volume, value) — Quarterly — 2 months - BCC — Formal remittances — Quarterly — 1 month - BCC — Informal remittances — Annually — 4 months - BCC/National Tourist Office — Number of visitors — Annually — 3 months - BCC — Balance of payments — Annually — 4 months - BCC/Banking supervision — Financial soundness indicators of the banking system — Quarterly — 1 month - BCC/Banking supervision — Monitoring reports of SNPSF, BDC and BFC — Quarterly — 1 month ### Debt Sustainability Analysis — headline findings and recommendations - Joint Bank-Fund Debt Sustainability Analysis results: - Risk of external debt distress: High - Overall risk of debt distress: High - Granularity in the risk rating: Sustainable - Application of judgement: No - Change in risk assessment: - Deterioration from a finding of moderate risk in the DSA prepared for the 2019 Article IV consultation. - Main drivers: higher debt service obligations, recent large non-concessional loan with short maturity, integration of expected postal bank recapitalization costs into macroeconomic projections, and pandemic-related weakening in economic performance. - Mitigating actions recommended: - Make faster progress on domestic resource mobilization and accelerate GDP and exports growth. - Ensure gradual but sustained fiscal consolidation over the medium term. - Avoid contracting further non-concessional borrowing. ### Public debt coverage and contingent liabilities - Coverage of external debt effectively comprises the entire public sector (central government, central bank borrowing on behalf of government — believed to be zero — and government-guaranteed debt of SOEs — believed to be zero). - Subnational governments cannot take up external debt on their own; SOEs cannot access external debt market without a government guarantee. - Domestic debt information limited to central government debt to domestic commercial banks; government does not issue tradable debt securities. No information available on domestic debt incurred by SOEs. - Contingent liabilities estimated at 8.8 percent of GDP, composed of: - Domestic arrears (unaudited estimates) set to 1.8 percent of GDP. - Contingent liabilities created by SOEs set to the default level of 2 percent of GDP. - Contingent liabilities from the financial system set to the default of 5 percent of GDP. - Notes: - Authorities intend to commission an audit of domestic arrears by end-September 2021; staff will include results in the next DSA. - Contingent liability for SOEs (2 percent) includes potential unknown domestic debt and other possible future restructuring costs. - The recent SDR allocation is currently not part of the DSA; it is recorded on the central bank’s balance sheet and placed at an account at the French Treasury. ### Recent debt developments and structure - External public debt levels: - External public debt reached 27.0 percent of GDP at end-2020 (from 18.6 percent of GDP at end-2018) and is expected to rise to 28.9 percent of GDP at end-2021. - Significant loans taken in recent years: - 2018: USD 29.5 million (2.5 percent of 2018 GDP) from a commercial bank (Eastern and Southern African Trade and Development Bank) for a hospital project; repayable over 10 years; no grant element. - 2019: USD 82 million (6.9 percent of 2019 GDP) from the Export-Import Bank of China to modernize equipment at Comoros Telecom; repayable over 25 years; grant element of 35.8 percent. - 2020: USD 54.9 million (4.5 percent of 2020 GDP) through a contract with a foreign construction company to build a hotel; repayable over 6½ years; grant element of 7 percent. - This 2020 loan breached a ceiling on non-concessional borrowing agreed with the World Bank; remedial actions agreed under the WB’s Sustainable Development Finance Policy, including avoiding any further contracting of non-concessional debt. - Debt structure at end-2020: - Disbursed debt owed to official bilateral creditors: 65 percent of public external debt. - Debt to multilateral creditors: 14 percent. - Debt to regional lenders: 21 percent. - Share of non-concessional debt: 13 percent of external debt at end-2020 and expected to grow as non-concessional loans are disbursed. - Domestic debt: 0.9 percent of GDP at end-2020. - DSSI participation: - Debt service payments and arrears totaling an estimated USD 3.9 million (0.3 percent of GDP) were rescheduled/regularized under the G20’s Debt Service Suspension Initiative. - Participating creditors include: Compagnie Française d'Assurance pour le Commerce Extérieur; EXIMBANK India; the Kuwait Fund; and the Saudi Fund for Development. - External arrears at end-May 2021: - USD 4.7 million (0.4 percent of GDP) to BADEA. - USD 0.8 million (0.1 percent of GDP) to EXIMBANK India. - USD 0.5 million (0.04 percent of GDP) to the OPEC Fund for International Development. - Authorities remain in discussions with BADEA and EXIMBANK India on debt rescheduling; intentions regarding OPEC Fund arrears not communicated to staff. ### Macroeconomic assumptions underpinning the DSA (policy scenario) - Context: This DSA accompanies a request for an IMF Staff-Monitored Program (SMP) and builds on a scenario of improved policy implementation (quicker progress in fiscal revenue mobilization, higher rates of investment, moderately higher long-term growth) while reflecting COVID-19 and recent substantial non-concessional borrowing. - Key assumptions and projections: - Real sector: - Assume Comoros vaccinates 35 percent of the population in 2021 and makes further progress in 2022. - Growth expected to reach 1.6 percent in 2021 and 3.8 percent in 2022. - Growth thereafter rises towards long-term potential of 4.2 percent. - Staff revised potential growth down by 0.3 percentage points (from 4.5 percent) to reflect likely impact of natural disasters. - Fiscal sector: - 2021-22: fiscal expansion due to recovery support and ongoing investment projects. - 2023-26: fiscal consolidation; thereafter stable fiscal deficit of 1.3 percent of GDP. - Consolidation achieved mainly through revenue mobilization and phasing out pandemic-related fiscal support. - Projections include a fiscal financing gap starting in 2022 reflecting postal bank recapitalization funding shortfall, increased debt service from recent non-concessional borrowing, and cautious budget support assumptions. - Staff-Monitored Program calls for tax revenue gains of 0.2 percent of GDP in 2021 and 0.3 percent of GDP every year thereafter (measures include abolishing the sales tax exemption for construction materials planned for October 2021, registration of additional taxpayers, and transfer of fuel products taxation from SCH to customs). - External sector: - Exports projected to recover to pre-pandemic levels over 2021-22; tourism likely subdued in 2021. - Imports expected to recover and be spurred by substantial public spending. - Remittances expected to return to pre-pandemic levels. - Current account projected to weaken gradually due to sustained import growth and increased interest payments. - Despite initially comfortable reserves coverage, the fiscal financing gap translates into an external financing gap of the same size; government requires support from the Fund and others to fill the fiscal gap. - Domestic borrowing: - Staff assumes increase in net credit from the central bank of a cumulative 2.6 percent of GDP in 2021-22. - No further domestic borrowing envisaged thereafter. - External borrowing: - Undisbursed parts of already contracted loans assumed to be disbursed in line with authorities’ plans. - IDA financing projected at US$ 48 million in 2021, declining to US$ 27 million in 2026, and remaining stable during 2026-2041. - Staff assumes remaining fiscal gap will be filled with borrowing on close to concessional terms (ECF terms with a 34 percent grant element), reflecting Comoros’ commitment to avoid non-concessional borrowing going forward. - Average external loan financing from 2021-2031: US$ 59 million (including an average fiscal financing gap of US$ 15 million), compared to US$ 56 million from the previous DSA. - Average grant element of new borrowing: 43.4 percent. - Selected macroeconomic assumption table (2019 Article IV DSA-Baseline vs 2021 SMP DSA - Policy Scenario; key rows shown): - GDP Growth Rate (percent): 2019-2025: 3.5; 2021 SMP DSA - Policy Scenario: 3.8; 2029: 3.8; 2039: 3.0; 2020-2026: 4.2; 2030: 4.2; 2041: 4.2 - Inflation, end of period (percent): 2.2 / 2.0 / 2.0 / 1.2 / 2.0 / 2.0 - Government Revenues and Grants (percent of GDP): 9.3 / 9.9 / 10.4 / 9.6 / 11.6 / 15.1 - Overall Fiscal Balance (percent of GDP): -2.3 / -2.2 / -2.4 / -2.2 / -1.4 / -1.2 - FDI (percent of GDP): 0.7 / 1.1 / 1.2 / 0.4 / 1.2 / 1.5 - Current Account Deficit (Percent of GDP): -4.2 / -3.5 / -3.0 / -5.7 / -7.3 / -6.9 - Export of Goods and Services (annual percentage growth): 5.1 / 6.0 / 6.3 / 6.1 / 7.4 / 7.8 - Import of Goods and Services (annual percentage growth): 5.2 / 6.0 / 5.7 / 5.5 / 6.8 / 6.5 - Investment (percent of GDP): 17.2 / 15.1 / 14.9 / 16.1 / 17.1 / 17.7 - Net Current transfers (percent of GDP): 13.4 / 12.9 / 13.0 / 14.9 / 13.3 / 13.2 *Source: 1comea2021001 - 22. The ceiling on the contracting or guaranteeing of new non-concessional debt by the* ### 46.1 percent of the previous DSA due to the take up of additional non-concessional loans (e.g., the ### 1comea2021001 - 46.1 percent of the previous DSA due to the take up of additional non-concessional loans (e.g., the ### Realism of Macroeconomic Projections - Realism tools do not flag any lack of realism of macroeconomic projections (Figures 3 and 4). - The 3-year fiscal adjustment is smaller than in most historical Fund-supported programs. - The difference between projected GDP growth in 2022 and growth that would be projected by standard fiscal-growth multipliers can be explained by the fact that the year 2022 should see an at least partial recovery from the pandemic. - The projected contribution of government investment/capital over the medium term is in line with historical experience. ### Country Classification and Stress Test Determination - Comoros is assessed to have medium debt carrying capacity, unchanged from before (Text Table 4), with a Composite Indicator (CI) of 2.9 based on April 2021 WEO projections and the 2019 Country Policy and Institutional Assessment (CPIA) rating. - Relevant thresholds indicating high risk (applicable to public and publicly guaranteed external debt): - PV of debt-to-GDP ratio: 40 percent - PV of debt-to-exports ratio: 180 percent - Debt service-to-exports ratio: 15 percent - Debt service-to-revenue ratio: 18 percent - Standardized stress tests use default settings. - Comoros qualifies for the natural disaster stress test given exposure and vulnerability to natural disaster shocks (e.g., eruption of the Karthala volcano or hurricane landfall). - Because the average annual impact of natural disasters is already factored into GDP growth projections, the size of the shock is reduced to 9.7 percent of GDP (from the default value of 10 percent of GDP). ### External Debt Sustainability (Key Findings) - Three out of four external debt burden indicators breach their respective thresholds under the macroeconomic assumptions underlying the SMP request (Figure 1): - The debt-to-exports indicator crosses the threshold in 2021 and again during 2023-25. - The debt service-to-exports indicator breaches during 2024-27. - The debt service-to-revenue indicator breaches over 2024-25. - Key drivers of deterioration: - Recent taking up of large non-concessional loan with a short maturity. - Integration of expected postal bank recapitalization costs into underlying macroeconomic projections. - Pandemic-related weakening in economic performance. - Structural risks: - Low level of fiscal revenue. - Narrow base of exports. - Staff assessment: - Risk of external debt distress: high (deterioration from moderate risk in the 2019 DSA). - No country-specific elements identified to change the mechanical “high risk” assessment resulting from threshold breaches. ### Postal Bank Recapitalization - The authorities estimate the postal bank (SNPSF) recapitalization cost at US$ 26.9 million. - This cost is included in the fiscal framework underlying the SMP as a change in the net acquisition of assets. ### Stress Tests and Shocks - Stress tests and alternative scenarios demonstrate Comoros’ vulnerability to shocks. - Most extreme shocks by indicator: - PV of debt-to-GDP, PV of debt-to-exports, and debt service-to-exports ratios: exports shock is the most extreme. - Debt service-to-revenue ratio: one-time depreciation is the most extreme shock. ### Total Public Debt Sustainability - Overall public debt is projected to remain well below its indicative benchmark under both the macroeconomic assumptions underlying the SMP request and stress tests (Figure 2), reflecting the only very limited domestic borrowing. - The PV of total public debt-to-GDP ratio increases gradually but remains well below the benchmark. - Most extreme shocks: - PV of debt-to-GDP and PV of debt-to-revenue ratios: exports shock is the most extreme. - Debt service-to-revenue ratio: depreciation is the most extreme shock. ### Risk Assessment and Vulnerabilities (Summary) - Comoros’ risk of external debt distress and overall risk of debt distress are assessed as high. - Staff assesses that debt remains sustainable given the only limited size and duration of the breaches. - Projections and vulnerabilities: - All debt burden indicators are projected to remain or fall below their respective thresholds during the ten-year projection horizon. - Vulnerabilities to the DSA projections remain significant given the possibility of a more prolonged/intensified pandemic, social and political unrest, or further natural disasters. *Source: 1comea2021001 (IMF chapter/section).* ### 17. Mitigating risks to public debt requires several policy actions: (i) making faster progress on ### 1comea2021001 - 17. Mitigating risks to public debt requires several policy actions: (i) making faster progress on ### Policy actions to mitigate public debt risks - Recommended actions (from source text): - (i) making faster progress on domestic resource mobilization and accelerating GDP and exports growth; - (ii) ensuring gradual but sustained fiscal consolidation over the medium term; - (iii) avoiding the contracting of any further non-concessional borrowing. ### External debt dynamics and projections (selected indicators) - External debt (nominal), in percent of GDP: - 2018: 16.4 - 2019: 19.9 - 2020: 21.2 - 2021: 25.7 - 2022: 29.1 - 2023: 31.8 - 2024: 31.9 - 2025: 31.6 - 2026: 30.7 - 2031: 28.4 - 2041: 25.3 - 2050 (mem.): 17.5? (table continues to 29.7 row — preserve only presented years) - Change in external debt (percent of GDP): - 2018: 1.1 - 2019: 3.5 - 2020: 1.3 - 2021: 4.5 - 2022: 3.3 - 2023: 2.7 - 2024: 0.1 - 2025: -0.3 - 2026: -0.9 - 2031: -0.4 - 2041: -0.2 - Identified net debt-creating flows (percent of GDP): - 2018: 1.0 - 2019: 2.8 - 2020: 1.2 - 2021: 3.6 - 2022: 6.4 - 2023: 7.2 - 2024: 4.8 - 2025: 4.8 - 2026: 4.8 - 2031: 5.2 - 2041: 4.6 - 2050 (mem.): 1.6 - Non-interest current account deficit (percent of GDP): - 2018: 2.8 - 2019: 3.1 - 2020: 1.5 - 2021: 4.0 - 2022: 7.3 - 2023: 8.2 - 2024: 6.1 - 2025: 6.4 - 2026: 6.6 - 2031: 7.4 - 2041: 6.9 - 2050 (mem.): 2.8 - Exports and imports (percent of GDP): - Exports (selected): 2018: 12.6; 2019: 12.0; 2020: 7.3; 2021: 8.9; 2022: 11.1; 2023: 11.1; 2024: 11.2; 2025: 11.3; 2026: 11.4; 2031: 12.0; 2041: 13.6 - Imports (selected): 2018: 30.2; 2019: 29.6; 2020: 28.4; 2021: 30.4; 2022: 34.2; 2023: 33.9; 2024: 31.5; 2025: 31.8; 2026: 32.0; 2031: 33.0; 2041: 33.7 - Net current transfers (negative = inflow), percent of GDP: - 2018: -14.1 - 2019: -14.0 - 2020: -18.7 - 2021: -16.4 - 2022: -14.7 - 2023: -13.7 - 2024: -13.5 - 2025: -13.5 - 2026: -13.5 - 2031: -13.4 - 2041: -13.3 - 2050 (mem.): -15.6 (selected year in table) - Residual (percent of GDP): - 2018: 0.0 - 2019: 0.7 - 2020: 0.1 - 2021: 1.0 - 2022: -3.1 - 2023: -4.4 - 2024: -4.7 - 2025: -5.1 - 2026: -5.7 - 2031: -5.6 - 2041: -4.9 - 2050 (mem.): -2.4 - Sustainability indicators: - PV of PPG external debt-to-GDP ratio (selected projections): 2024: 15.0; 2025: 17.0; 2026: 19.8; 2027: 21.7; 2028: 21.1; 2029: 20.5; 2030: 19.7; 2031: 18.4; 2041: 17.2 - PV of PPG external debt-to-exports ratio (selected): 2024: 204.2; 2025: 190.7; 2026: 179.3; 2027: 196.6; 2028: 189.1; 2029: 181.7; 2030: 172.9; 2031: 153.9; 2041: 125.8 - PPG debt service-to-exports ratio (selected): 2024: 2.9; 2025: 5.2; 2026: 9.6; 2027: 8.5; 2028: 9.5; 2029: 12.6; 2030: 21.0; 2031: 16.7; 2041: 15.4 - PPG debt service-to-revenue ratio (selected): 2024: 3.3; 2025: 6.4; 2026: 7.6; 2027: 8.5; 2028: 11.4; 2029: 14.7; 2030: 23.9; 2031: 18.6; 2041: 16.8 - Gross external financing need (Million of U.S. dollars), selected years: - 2018: 31.7 - 2019: 40.0 - 2020: 26.0 - 2021: 57.3 - 2022: 110.4 - 2023: 133.3 - 2024: 122.0 - 2025: 126.1 - 2026: 134.1 - 2031: 178.8 - 2041: 306.7 ### Key macroeconomic assumptions (selected) - Real GDP growth (percent): - 2018: 3.6 - 2019: 1.8 - 2020: -0.5 - 2021: 1.6 - 2022: 3.8 - 2023: 3.7 - 2024: 3.9 - 2025: 4.3 - 2026: 4.4 - 2031: 4.2 - 2041: 2.8 - 2050 (mem.): 3.9 - GDP deflator in US dollar terms (change in percent): - 2018: 5.6 - 2019: -1.0 - 2020: 2.9 - 2021: 3.7 - 2022: 2.5 - 2023: 2.9 - 2024: 2.8 - 2025: 2.8 - 2026: 2.8 - 2031: 2.0 - 2041: 2.0 - 2050 (mem.): 0.4 - Effective interest rate (percent): - 2018: 0.3 - 2019: 1.2 - 2020: 1.1 - 2021: 0.8 - 2022: 1.3 - 2023: 1.4 - 2024: 1.4 - 2025: 1.2 - 2026: 1.1 - 2031: 0.8 - 2041: 0.8 - 2050 (mem.): 0.6 - Growth of exports of G&S (US dollar terms, in percent): - 2018: 16.1 - 2019: -4.6 - 2020: -37.4 - 2021: 28.5 - 2022: 31.8 - 2023: 6.7 - 2024: 7.8 - 2025: 8.3 - 2026: 8.6 - 2031: 7.5 - 2041: 7.8 - 2050 (mem.): 2.5 - Growth of imports of G&S (US dollar terms, in percent): - 2018: 16.6 - 2019: -1.1 - 2020: -1.8 - 2021: 12.8 - 2022: 19.5 - 2023: 5.8 - 2024: -0.9 - 2025: 8.3 - 2026: 8.2 - 2031: 6.7 - 2041: 6.5 - 2050 (mem.): 2.9 - Grant element of new public sector borrowing (in percent), selected projections: - 2024: 39.6 - 2025: 31.3 - 2026: 35.4 - 2027: 48.6 - 2028: 50.2 - 2029: 46.5 - 2030: 43.9 - 2031: 37.8 - 2041: 43.4 (table shows ellipses and gaps for some years) ### Fiscal and aid parameters (selected) - Government revenues (excluding grants, percent of GDP): - 2018: 11.2 - 2019: 9.6 - 2020: 9.3 - 2021: 8.9 - 2022: 9.2 - 2023: 9.5 - 2024: 9.8 - 2025: 10.1 - 2026: 10.4 - 2031: 11.9 - 2041: 15.1 - (additional values: 11.0, 10.4 in table) - Aid flows (Million of US dollars), selected: - 2018: 2.5 - 2019: 5.1 - 2020: 27.2 - 2021: 40.0 - 2022: 45.8 - 2023: 48.3 - 2024: 49.5 - 2025: 50.8 - 2026: 48.0 - 2031: 55.7 - 2041: 80.1 - Grant-equivalent financing (in percent of GDP), selected: - 2024: 3.2 - 2025: 3.4 - 2026: 3.2 - 2027: 3.1 - 2028: 2.9 - 2029: 2.5 - 2030: 2.2 - 2031: 2.1 - 2041: 2.7 - Nominal GDP (Million of US dollars), selected: - 2018: 1,179 - 2019: 1,188 - 2020: 1,216 - 2021: 1,281 - 2022: 1,363 - 2023: 1,453 - 2024: 1,551 - 2025: 1,664 - 2026: 1,786 - 2031: 2,423 - 2041: 4,458 - Nominal dollar GDP growth (percent): - 2018: 9.5 - 2019: 0.8 - 2020: 2.4 - 2021: 5.3 - 2022: 6.4 - 2023: 6.6 - 2024: 6.7 - 2025: 7.3 - 2026: 7.3 - 2031: 6.3 - 2041: 6.5 ### Public sector debt (selected indicators from Public DSA) - Public sector debt, percent of GDP: - 2018: 16.7 - 2019: 20.7 - 2020: 22.1 - 2021: 26.4 - 2022: 29.8 - 2023: 32.5 - 2024: 32.5 - 2025: 32.2 - 2026: 31.3 - 2031: 28.8 - 2041: 25.5 - 2050 (mem.): 17.9 - Change in public sector debt (percent of GDP): - 2018: 0.9 - 2019: 4.0 - 2020: 1.5 - 2021: 4.3 - 2022: 3.3 - 2023: 2.7 - 2024: 0.0 - 2025: -0.3 - 2026: -0.9 - 2031: -0.4 - 2041: -0.3 - Identified debt-creating flows (percent of GDP): - 2018: 7.7 - 2019: 9.1 - 2020: 5.7 - 2021: 9.6 - 2022: 9.6 - 2023: 7.3 - 2024: 5.0 - 2025: 4.7 - 2026: 4.8 - 2031: 5.2 - 2041: 5.7 - 2050 (mem.): 3.8 - Primary deficit (percent of GDP): - 2018: 7.8 - 2019: 9.5 - 2020: 7.3 - 2021: 10.2 - 2022: 10.6 - 2023: 8.4 - 2024: 6.4 - 2025: 6.4 - 2026: 6.3 - 2031: 6.4 - 2041: 6.7 - 2050 (mem.): 6.6 and 4.5 (table entries) - Revenue and grants (percent of GDP): - 2018: 11.4 - 2019: 10.0 - 2020: 11.5 - 2021: 10.2 - 2022: 10.8 - 2023: 10.7 - 2024: 11.0 - 2025: 11.3 - 2026: 11.6 - 2031: 13.1 - 2041: 16.3 - 2050 (mem.): 12.2 and 11.7 (table entries) - Primary (noninterest) expenditure (percent of GDP), selected: - 2018: 19.2 - 2019: 19.5 - 2020: 18.8 - 2021: 20.5 - 2022: 21.4 - 2023: 19.1 - 2024: 17.4 - 2025: 17.6 - 2026: 18.1 - 2031: 19.8 - 2041: 22.9 - 2050 (mem.): 16.8 and 19.1 (table entries) - Automatic debt dynamics and contributions (percent of GDP), selected: - Automatic debt dynamics 2018: -0.1; 2019: -0.4; 2020: -1.6; 2021: -0.6; 2022: -1.0; 2023: -1.1; 2024: -1.4; 2025: -1.6; 2026: -1.6; 2031: -1.5; 2041: -1.0 - Contribution from interest rate/growth differential (2018: -0.5; 2019: 0.0; 2020: 0.2; 2021: -0.6; 2022: -1.0; 2023: -1.1; 2024: -1.4; 2025: -1.6; 2026: -1.6; 2031: -1.5; 2041: -1.0) - Residual (percent of GDP), selected: - 2018: -6.8 - 2019: -5.1 - 2020: -4.3 - 2021: -5.3 - 2022: -6.2 - 2023: -4.6 - 2024: -5.0 - 2025: -5.1 - 2026: -5.8 - 2031: -5.7 - 2041: -5.9 - 2050 (mem.): -4.5 and -5.5 (table entries) - Sustainability indicators (public DSA): - PV of public debt-to-GDP ratio (selected): 2024: 15.0; 2025: 17.8; 2026: 20.4; 2027: 22.3; 2028: 21.6; 2029: 21.0; 2030: 20.2; 2031: 18.8; 2041: 17.3 - PV of public debt-to-revenue and grants ratio (selected): 2024: 130.2; 2025: 173.7; 2026: 188.9; 2027: 207.8; 2028: 196.5; 2029: 185.3; 2030: 173.5; 2031: 143.4; 2041: 106.4 - Debt service-to-revenue and grants ratio (selected): 2024: 4.5; 2025: 1.4; 2026: 4.9; 2027: 10.1; 2028: 10.2; 2029: 13.4; 2030: 21.7; 2031: 17.0; 2041: 15.4 - Gross financing need (percent of GDP) (selected): 2018: 8.3; 2019: 9.6; 2020: 7.8; 2021: 11.3; 2022: 11.7; 2023: 9.9; 2024: 8.8; 2025: 8.2; 2026: 8.2; 2031: 8.0; 2041: 8.1 ### Stress tests, sensitivity analysis, and scenarios (high-level) - Figure and table summaries indicate multiple stress scenarios and sensitivity tests for 2021–2031, including: - Alternative scenarios, bound tests (Real GDP growth, Primary balance, Exports, Other flows, Depreciation, Combination), and tailored tests (Combined contingent liabilities, Natural disaster). - Table 3 and Table 4 present projected indicator outcomes (PV of debt-to-GDP ratio, PV of debt-to-exports ratio, debt service-to-exports ratio, debt service-to-revenue ratio, etc.) under baseline and shock scenarios for 2021–2031. - Selected sensitivity outcomes (examples from tables): - PV of debt-to-GDP ratio (baseline and alternative): 2021 baseline: 17; 2022 baseline: 20; 2023 baseline: 22; 2024 baseline: 22; A1 (historical averages) for 2024: 15; B1 (Real GDP growth shock) for 2024: 21; C2 (Natural disaster) for 2024: 27. - Debt service-to-revenue ratio (baseline and shocks): baseline 2024: 10; A1 2024: 10; B1 2024: 14; C2 2024: 14. - PV of debt-to-exports ratio and debt service-to-exports ratio show breaches of thresholds under some shocks (bold values in tables indicate breaches of thresholds). - Stress test assumptions note: - All additional financing needs generated by shocks under the stress tests are assumed to be covered by PPG external medium and long-term debt in the external DSA. - Default terms of marginal debt are based on baseline 10-year projections. ### Drivers of debt dynamics and realism tools (visual summaries) - Figures illustrate contributions to changes in gross nominal PPG external debt and gross nominal public debt from: - Debt-creating flows, residuals, price and exchange rate changes, real GDP growth, nominal interest rate, current account and FDI, primary deficit, and other debt-creating flows. - Realism tools note: - A significant difference between ‘Prev. DSA’ and ‘Curr. DSA’ lines in the ‘Public and Private Investment Rates’ chart is due to a calculation error in the previous DSA where foreign financed public investment was erroneously included in private investment. - Bars refer to annual projected fiscal adjustment and lines show possible real GDP growth paths under different fiscal multipliers. _Italic: Sources: Country authorities; and staff estimates and projections._ ### 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the ### 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on the vertical axis. ### 3-Year Adjustment in Primary Balance (Percentage points of GDP) - Title: "3-Year Adjustment in Primary Balance (Percentage points of GDP)" - Horizontal axis: "The size of 3-year adjustment from program inception" - Vertical axis: "percent of sample" - Distribution / Projected 3-year adjustment: - "3-year PB adjustment greater than 2.5 percentage points of GDP in approx. top quartile" - Horizontal scale values shown (In percentage points of GDP): - -4.5, -4.0, -3.5, -3.0, -2.5, -2.0, -1.5, -1.0, -0.5, 0.0, 0.5, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5, 4.0, 4.5, 5.0, 5.5, 6.0, 6.5, 7.0, 7.5, 8.0, more ### Time series context and comparison (years and scenarios) - Year labels present on charts: - 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022 - Secondary time series (In percentage points of GDP) shows: - Baseline - Multiplier = 0.2 - Multiplier = 0.4 - Multiplier = 0.6 - Multiplier = 0.8 - Additional multi-year series with larger vertical scale (values shown along axis): - 0, 2, 4, 6, 8, 10, 12, 14, 16, 18, 20, 22, 24, 26, 28, 30 - Multi-year labels: - 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026 - Series categories: - Historical - Projected (Prev. DSA) - Projected (Curr. DSA) - Small tick or annotation values appearing in the figure: - 0, 1, 1, 2, 2, 3, 3, 4, 4 ### Key observations evident from the figure content - The distribution of 3-year primary balance adjustments spans from -4.5 to "more" (beyond 8.0) percentage points of GDP. - Top quartile of the sample corresponds to 3-year primary balance adjustments greater than 2.5 percentage points of GDP. - Projections are shown under multiple multiplier assumptions: 0.2, 0.4, 0.6, 0.8, alongside a Baseline. - A separate projection horizon extends through 2026 and distinguishes Historical, Projected (Prev. DSA), and Projected (Curr. DSA). *Source: 1comea2021001 - 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on the vertical axis.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1comea2021001.pdf_