## _cr10242

## Source details

**Canonical URL:** [_cr10242](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10242.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10242.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10242.pdf.json)

---

### Executive Summary
- Recent political and economic progress:
  - Measured progress on political and economic reforms in the last two years.
  - Constitutional Court rebuked an attempt to extend President Sambi’s term on May 8, 2010; interim cabinet named May 26, 2010.
  - Economic activity subdued but growth trending up.
- Debt Relief Analysis (DRA) headline outcomes:
  - Public and publicly-guaranteed external debt (nominal) estimated at US$287 million as of end-December 2009 (including arrears).
  - After traditional debt relief, NPV of debt-to-export ratio at end-2009: 343 percent (HIPC threshold: 150 percent).
  - Total HIPC debt relief required to reduce NPV of debt-to-exports to 150 percent: US$145 million in NPV terms; common reduction factor: 56 percent.
- MDRI:
  - Upon reaching the HIPC completion point, Comoros would qualify for MDRI relief estimated at about US$52.2 million in NPV terms (IDA and AfDF). No IMF MDRI relief because Comoros had no outstanding debt to the Fund at end-2004.
- Preconditions:
  - Full PRSP adopted September 2009.
  - Satisfactory track record of policy performance under IMF- and IDA-supported programs required.
  - Understandings on completion point triggers reached and broadly supported by Executive Directors in March–April 2010.

### Debt Relief Analysis and HIPC / MDRI Assistance
- Aggregate debt stocks and arrears (end-2009):
  - Public and publicly guaranteed external debt (nominal): US$286.8 million (including arrears).
  - Corresponding NPV: US$213.1 million.
  - Stock of external arrears at end-2009: US$54.0 million (multilateral US$35.8 million; bilateral US$13.7 million; commercial US$4.5 million).
- Headline HIPC requirements:
  - NPV of debt after traditional relief at end-2009: US$257.4 million, equivalent to 343.0 percent of exports of goods and services.
  - Amount of debt relief needed to reach 150 percent of exports: US$144.8 million in end-2009 NPV terms.
  - Implied common reduction factor: 56 percent.
  - Under proportional burden sharing: multilateral creditors’ assistance US$111.2 million (NPV terms); bilateral and commercial US$33.6 million (NPV terms).
- MDRI and additional relief:
  - Preliminary MDRI estimates assuming completion point in December 2012: Total MDRI debt relief US$52.2 million in NPV terms (IDA US$29.8 million; AfDB Group US$22.4 million).
  - EIB cancellation under LDC initiative at completion point (if Comoros remains an LDC): $0.36 million in PV terms.
  - Additional Paris Club bilateral relief at completion point would cancel remaining debt, reducing PV of debt after completion point by about US$2 million.
- Impact of relief on indicators (exact outcomes reported):
  - With traditional debt relief and unconditional HIPC delivery: NPV debt-to-exports falls from 343.0 percent (end-2009) to approximately 142.7 percent by 2012.
  - With MDRI and LDC initiative relief added: NPV debt-to-exports falls to 86.5 percent in 2012; additional bilateral relief reduces NPV to 86.0 percent.
  - Long-term projection with HIPC and MDRI: NPV of debt declines to 80.2 percent of exports by 2029.
  - Debt service averages after relief: about 3.9 percent of revenues or 4.0 percent of exports during 2009–19; 3.4 percent of revenues and 4.0 percent of exports during 2020–29.

### Creditor Participation and Burden Sharing (selected exact figures)
- Total Enhanced HIPC assistance: US$144.8 million (end-2009 NPV terms).
- Multilateral share: US$111.2 million — 76.8 percent of total assistance.
  - IDA: US$45.1 million — 31.1 percent.
  - AfDB Group: US$34.6 million — 23.9 percent.
  - IMF: US$4.3 million — 2.9 percent.
  - BADEA: US$15.5 million — 10.7 percent.
  - Other multilaterals and small shares (EIB, IFAD, IsDB, OFID, AMF) as listed in source tables.
- Bilateral and commercial total: US$33.6 million — 23.2 percent.
  - Paris Club creditors: US$8.6 million — 6.0 percent.
  - Non-Paris Club creditors (Kuwait US$14.1 million; Saudi Arabia US$8.6 million; Mauritius US$0.5 million; United Arab Emirates US$0.5 million) — combined US$23.8 million — 16.4 percent.
  - Commercial creditors total: US$1.2 million — 0.8 percent (Banque Postale US$0.2 million; Cotecna US$0.4 million; Hopitaux De Paris US$0.6 million).
- Creditor commitments as of June 4, 2010:
  - IDA, IMF, AfDF, EIB, IFAD, BADEA and IsDB (representing 98 percent of multilateral creditors’ NPV exposure) indicated willingness to provide HIPC debt relief.

### Arrears Status and Clearance Mechanisms
- Arrears stock at end-2009: US$54.0 million (multilateral US$35.8 million; bilateral US$13.7 million; commercial US$4.5 million).
- Key operational points:
  - AfDB Group arrears: bulk cleared between December 2007 and April 2009 under PCCF; residual US$3.4 million to be cleared by the EC under the FSF at decision point, together with US$1.9 million owed to the EIB.
  - IsDB moratorium on debt service and payment of arrears until December 2010.
  - AMF rescheduled loan and cleared arrears in March 2008.
  - Paris Club arrears US$12.1 million at end-October 2009; to be cleared through bilateral arrangements consistent with November 2009 general rescheduling agreement.
  - Comoros has no arrears to IDA and the IMF.

### Debt Sustainability Analysis (DSA) — Key Findings and Scenarios
- Overall DSA conclusion:
  - Comoros is in debt distress and would remain so under the baseline scenario for most of the projection period.
  - Alternative scenario with full delivery of HIPC and MDRI within two years shows debt becoming manageable.
- Baseline macro assumptions (selected exact figures preserved):
  - Annual real GDP growth averages 3.8 percent over FY 2010–29.
  - CPI inflation projected to decline to about 3 percent over the longer-term horizon.
  - Remittances converge to 14.5 percent of GDP during 2013–29 (from almost 20 percent of GDP in 2009).
  - External assistance up to 2012 assumed mostly grants, averaging about 7 percent of GDP.
- Sensitivity and alternative scenarios (selected outcomes):
  - Alternative scenario 1 (lower exports): exports about 30 percent lower in dollar terms by 2027 relative to baseline.
    - Long-term NPV outcomes: NPV of debt reaches 68.6 percent of revenues by 2029; equivalent to 125.9 percent of exports and 12.1 percent of GDP by 2029.
    - Debt service averages 5.6 percent of revenues and 6.6 percent of exports during 2009–2019.
  - Alternative scenario 2 (permanently lower growth): average annual growth weakens to 1.5 percent throughout 2009–29.
    - NPV of debt reaches 121.8 percent of revenues by 2029; equivalent to 107.7 percent of exports and 18.6 percent of GDP by 2029.
    - Debt service averages 6.4 percent of revenues and 6.1 percent of exports during 2009–19.
  - Bound tests show that one standard deviation below historical average of non-debt flows in first two years raises NPV debt-to-exports to almost 300 percent.
  - A one-time 30 percent nominal depreciation causes prolonged breaches of NPV-to-GDP and NPV-to-revenue thresholds.
- DSA public sector inclusion:
  - Inclusion of domestic public debt slightly worsens indicators; public debt-to-GDP ratio and debt-to-revenue ratios decline over time in baseline but are vulnerable to shocks.

### Macroeconomic Framework, PRSP, and Medium-Term Outlook
- PRSP:
  - Full PRSP adopted September 10, 2009; forms basis of ECF-supported program and donor assistance.
  - PRSP objectives include: stabilize the economy; strengthen tourism, agriculture, and fishing; improve governance and social cohesion; improve healthcare and education; promote environmental sustainability and security.
- Medium-term growth drivers and fiscal strategy:
  - Recovery expected driven by donor-funded public works and increased FDI in tourism.
  - Programmed fiscal adjustment aims to raise revenue from just under 14 percent of GDP in 2009 to 15 percent of GDP by 2013.
  - Wage bill projected to modestly decline in relation to GDP; priority spending (health, education, infrastructure) to be secured through reallocations and higher external assistance and HIPC/MDRI relief.
- Selected medium- to long-term macro indicators (excerpted series):
  - Real GDP: 1.8 2.1 2.5 3.5 3.7 (annual percentage changes across selected years).
  - Consumer price index (annual averages): 4.8 2.6 2.9 2.8 3.0.
  - Domestic Revenue (percent of GDP): 13.9 14.3 14.2 14.5 15.9.
  - Current account balance (percent of GDP): -7.9 -8.9 -12.5 -11.8 -8.5.
  - NPV of external debt (end-year) in percent of exports of goods & services: 328 307 286 274 201.

### Completion Point Triggers, Monitoring, and Use of HIPC Savings
- Floating completion point triggers (selected requirements):
  - PRSP: satisfactory implementation for at least one year, evidenced by an Annual Progress Report to IDA and IMF.
  - Macroeconomic stability: satisfactory implementation of the ECF-supported program.
  - Public financial management and governance triggers: produce detailed quarterly budget execution reports for at least 12 months prior to completion point; adopt terms of reference and cost estimate for computerized PFM feasibility study; adopt public procurement code consistent with COMESA norms; adopt revised organic frameworks for ministries; submit draft law establishing Chamber of Accounts.
  - Structural reform triggers: adopt reform strategies for Comores Télécoms, Société Comorienne des Hydrocarbures, and MAMWE; issue calls for expressions of interest for strategic partner for at least one company.
  - Social sector triggers:
    - Education: construct and equip 210 primary school classrooms (22 on Moheli, 126 on Anjouan, 62 on Ngazidja); construct 100 separated latrines; provide 300,000 textbooks and 25,000 school kits.
    - Health: national measles vaccination campaign for children 9–47 months to achieve 90-percent coverage; national survey on risk factors for noncommunicable diseases.
  - Debt management triggers: adopt debt management software and produce detailed annual reports on external and domestic debt within six months after year end; at least one such report prior to HIPC completion point; amend décret N°03-62/PR to refocus DMO mandate.
- Monitoring arrangements:
  - IDA and IMF staffs will work together to monitor triggers: IMF leads on macroeconomic stability; IDA leads on PRSP implementation and sector triggers; joint monitoring of structural reforms and external debt management.
- Monitoring public spending and use of HIPC savings:
  - Government committed to using HIPC savings to enhance poverty-related spending, mostly health and education; HIPC-related programs included in FY2010 budget and must be included in subsequent budgets.
  - Existing budget and accounting classifications allow monitoring by administrative and economic dimensions; projects can be coded to allow expenditure tracking.
  - Procurement reform (adoption of effective procurement code) planned to strengthen transparency and competition.

### Poverty, Social Indicators, and MDG Progress (selected exact figures)
- Household poverty (2004 survey): 37 percent of households (44.8 percent of individuals) live below the poverty line. Household poverty declined from 47 percent in 1995 to 37 percent in 2004.
- Key Poverty & Social Indicators–2008 (percent of total population, unless otherwise indicated):
  - Poverty (% below poverty line) 44.80
  - Young adult literacy rate (%) 71
  - Female literacy rate (%) 87
  - Gross primary enrollment 86
  - Female primary enrollment (%) 73
  - Under-five mortality (per 1,000) 71
  - Life expectancy at birth (years) 69
  - Child malnutrition (%) 23.1
  - HIV prevalence (%) 0.8
- MDG snapshot through 2007:
  - Comoros on track to achieve 4 of 12 MDGs, substantial progress on five others.
  - Examples:
    - Proportion of population below poverty line (%) 54.7 → 44.8; Target 27; Status: Progress.
    - Net primary enrollment rate (%) 63.2 → 85; Target 100; Status: On track.
    - Mortality for children under 5 (per 1,000 births) 130 → 74; Target 43.3; Status: On track.

### Debt Management Capacity (Annex I) — institutional gaps and recommendations
- Institutional arrangements:
  - Debt management shared between the Debt Management Office (DMO) and the national debt committee; DMO part of the Ministry of Finances and to work under Treasury supervision starting in 2011.
  - Minister of Finance is the only government member allowed to sign new loan agreements; national debt committee advises and coordinates.
- Staffing and systems:
  - In theory: DMO staff include director, external debt service officer, domestic debt service officer, statistician, information analyst, and accountant (minimum qualification master’s degree).
  - In practice: DMO understaffed with only two full-time and one part-time staff and no director.
  - Current data maintained in Excel until CS-DRMS2000+ installed in early 2011 with AfDB assistance.
  - DMO uses Debt-Pro for analyses.
- Publications and creditor interaction:
  - No regular official publications; publishes a table with current year debt service and prior year debt stock; communicates with creditors primarily via internet.
- Capacity gaps and recommended actions:
  - Increase staffing; provide more training; install and make use of debt management database software; produce more frequent publications on debt outlook.

### Policy Implications and Executive Decision Items
- Decision requested of Executive Directors:
  - Agree that Comoros qualifies for assistance under the HIPC Initiative and approve the decision point.
  - Note total HIPC Enhanced assistance US$144.8 million (NPV terms) and proportional burden sharing (IDA US$45 million; IMF US$4.27 million).
  - Consider IDA interim assistance between decision and completion points per guidelines.
  - Agree that floating completion point will be reached when triggers in Box 3 are met.
- Key policy implications emphasized in source:
  - Comprehensive debt relief is necessary; maintaining sustainable indebtedness requires steady implementation of growth-enhancing economic policies, fiscal prudence, and prudent debt management.
  - Need to secure external assistance heavily weighted toward grants.
  - Importance of strengthening public financial management, improving the business environment, accelerating public utilities reform, preserving donor support, and pursuing national political reconciliation.

*Prepared by the Staffs of the International Development Association and the International Monetary Fund, Decision Point Document, June 7, 2010.*

### 2010. The views expressed in this document are those of the staff team and do not necessarily reflect

### INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL MONETARY FUND  
UNION OF THE COMOROS  
Enhanced Heavily Indebted Poor Countries (HIPC) Initiative — Decision Point Document

### Executive Summary
- Recent political and economic progress:
  - Measured progress on political and economic reforms in the last two years.
  - Relations with key development partners, including the IMF, World Bank, and AfDB, and Paris Club creditors, have been regularized.
  - Economic activity subdued but growth trending up.
  - Constitutional and judicial developments: Constitutional Court rebuked an attempt to extend President Sambi’s term on May 8, 2010; interim cabinet named May 26, 2010.
- Debt Relief Analysis (DRA) outcomes:
  - Public and publicly-guaranteed external debt (nominal) estimated at US$287 million as of end-December 2009 (including arrears).
  - After traditional debt relief, NPV of debt-to-export ratio at end-2009: 343 percent (HIPC threshold: 150 percent).
  - Total HIPC debt relief required to reduce NPV of debt-to-exports to 150 percent: US$145 million in NPV terms; common reduction factor: 56 percent.
  - Sensitivity analysis indicates that under worsening economic conditions debt ratios could rise above HIPC thresholds, implying the need for continued growth-enhancing policies and prudent debt management.
- MDRI:
  - Upon reaching the HIPC completion point, Comoros would qualify for MDRI relief estimated at about US$52.2 million in NPV terms (ID A and AfDF). There is no IMF MDRI debt relief because Comoros had no outstanding debt to the Fund at end-2004.
- Preconditions and institutional requirements:
  - Comoros adopted a full PRSP in September 2009.
  - Satisfactory track record of policy performance under IMF- and IDA-supported programs required.
  - Understandings reached on completion point triggers, broadly supported by IMF and IDA Executive Directors during March 29 and April 8, 2010 discussions.

### I. Introduction
- Purpose:
  - Joint IMF–IDA assessment of Comoros’ eligibility for Enhanced HIPC Initiative assistance based on a joint DRA conducted with Comorian authorities.
- Background on process and timing:
  - Data reconciliation missions to Moroni in January and April 2010.
  - Preliminary HIPC document discussed by IMF and IDA Executive Boards on March 29 and April 8, 2010; Directors agreed Comoros is eligible and could reach decision point contingent on continued satisfactory ECF performance and agreement on completion-point triggers.
- Main updates since preliminary document:
  - Update on political and economic developments.
  - Updated macroeconomic framework.
  - More specific definitions of some floating completion point triggers in public finance, health, and education.
  - Annexes: Debt Sustainability Analysis (DSA) under the Debt Sustainability Framework for Low Income Countries and assessment of debt management capacity.

### II. Background and Eligibility for HIPC Initiative Assistance
A. Country Background and Political Developments
- Historical context:
  - Political instability since independence in 1975, including violent transfers of presidential power.
  - 2001 constitution created the Union of the Comoros with island-level presidents and parliaments; first Union president elected May 2006.
  - Crisis in June 2007 around alleged irregularities in Anjouan island presidential election (Colonel Bacar), leading to disintegration of Union-island cooperation and disruption of IMF engagement.
- Recent political progress:
  - Pro-Union authorities elected in Anjouan in the last two years.
  - Constitutional amendments increased central government authority over budget and economic management.
  - Constitutional Court decision on May 8, 2010 calling for nation-wide presidential and local elections by November 2011 and agreeing to an interim presidential mandate.
  - Interim cabinet named May 26, 2010.

B. ECF and IDA Status
- IMF support and program:
  - Comoros received EPCA and ESF-RAC support in 2008 and is currently supported under an ECF arrangement aimed at fiscal consolidation, restoring external viability, promoting financial sector soundness, strengthening governance institutions, and improving the investment climate.
- IDA engagement:
  - IDA Interim Strategy Note (ISN) for FY 2010–12 aims to help Comoros reach the enhanced HIPC completion point by 2012.
  - Comoros is an IDA-only country with nominal per capita GNI of about US$ 750 in 2009 (World Bank Atlas methodology).
  - Planned IDA instruments and activities for FY10–12 include: Services Support Project (SSP) with a cash-for-work component, an Emergency Global Crisis Response Project, a Governance Reform Support DPO (FY10) and a follow-up DPO (FY12), an Economic Governance Support TA project, a series of public expenditure notes, and analytical work on political economy of reforms.

C. Poverty and Social Issues
- Strategic inputs:
  - Comoros adopted a full PRSP in September 2009 (required for HIPC eligibility).
- Millennium Development Goals:
  - The DRA and forthcoming debt relief are intended to accelerate progress toward the MDGs (specific MDG progress indicators are included in the full document tables).

D. Recent Economic Developments and Policy Track Record
- Program performance:
  - Authorities have implemented a medium-term reform program supported by donors; satisfactory performance under IMF- and IDA-supported programs is a stated requirement for HIPC assistance and completion point triggers.

### III. Macroeconomic Framework and Poverty Reduction Strategy
A. Macroeconomic Outlook
- The document contains updated medium- to long-term macroeconomic framework and projections (selected indicators, 2009–29) that underpin the DRA and the DSA. Specific projection tables and assumptions are included in the annexes.

B. Poverty Reduction Strategy
- PRSP adoption:
  - Full PRSP adopted September 2009 and forms the basis of the ECF-supported program and donor assistance, and is central to meeting HIPC process requirements.

### IV. Debt Relief Analysis and Possible HIPC and MDRI Assistance
A. Debt Reconciliation Status
- Joint DRA conducted with authorities including data reconciliation missions in January and April 2010; annex tables present detailed creditor-by-creditor nominal stock and NPV calculations as of end-December 2009.

B. Structure of External Debt
- Nominal public and publicly-guaranteed external debt (including arrears) at end-December 2009: US$287 million.
- After traditional relief mechanisms, NPV debt-to-export ratio at end-2009: 343 percent.

C. Possible Assistance under the HIPC Initiative
- HIPC assistance required to reach 150 percent NPV-to-exports threshold:
  - US$145 million in NPV terms.
  - Common reduction factor implied: 56 percent.
- Debt relief composition and creditor burden sharing:
  - The DRA and annexes outline proportional burden-sharing and creditor-specific delivery profiles (annex tables provide creditor-level breakdowns and Paris Club participation status).

D. Possible Assistance under MDRI and Bilateral Debt Relief Beyond HIPC
- MDRI:
  - Estimated MDRI relief to IDA and AfDF: about US$52.2 million in NPV terms.
  - No IMF MDRI relief due to zero outstanding Fund debt at end-2004.
- Bilateral and arrears clearance:
  - Annexes and boxes in the document discuss external arrears clearance mechanisms and creditor-specific actions.

E. Impact of Debt Relief and Sensitivity Analysis
- Post-relief vulnerability:
  - Sensitivity analysis shows that under adverse shocks Comoros’ debt ratios could rise above HIPC thresholds even after full HIPC delivery, highlighting the importance of maintaining reforms, sustained growth-enhancing policies, and prudent debt management to preserve debt sustainability.
- Debt sustainability framework and DSA:
  - Comprehensive DSA included in annexes with external debt indicators and scenario analyses for 2009–29.

### V. Decision and Floating Completion Points
A. Triggers for the Floating Completion Point
- Preconditions for reaching completion point include:
  - Continued satisfactory performance under the ECF arrangement.
  - Agreed floating completion point triggers covering public finance, health, and education sectors; these triggers were more specifically defined relative to the preliminary document and were broadly supported by Executive Directors in March–April 2010.
- Boxes in the document detail key macroeconomic assumptions underlying the DRA and specific triggers for the floating completion point.

B. Monitoring Public Spending Following Provision of HIPC Assistance
- Post-delivery monitoring:
  - The document outlines arrangements to monitor public spending and implementation of PRSP priorities following HIPC assistance, and annexes provide medium-term expenditure priorities.

### VI. Issues for Discussion
- Executive Directors are asked to consider:
  - The DRA findings that Comoros qualifies for HIPC assistance under the export window with an end-2009 NPV-to-export ratio of 343 percent.
  - The proposed amount and structure of HIPC and MDRI assistance (US$145 million HIPC NPV reduction; US$52.2 million MDRI NPV relief).
  - The specified floating completion point triggers and continued satisfactory performance under the ECF as conditions for reaching completion point.
  - The sensitivity of debt sustainability to adverse shocks and the need for continued implementation of reforms and prudent debt management.

*Prepared by the Staffs of the International Development Association and the International Monetary Fund, Decision Point Document, June 7, 2010.*

### 8.      Other donors and creditors are gradually resuming support to Comoros,

### 8.      Other donors and creditors are gradually resuming support to Comoros

### Donor and creditor support (2007–2010)
- African Development Bank (AfDB)
  - In July 2009 the Board of the AfDB approved a new Interim Country Strategy Paper (I-CSP) for 2009–10 following clearance of most of the arrears under the Post-Conflict Country Facility (PCCF) between 2007 and 2009 and the lifting of related sanctions.
  - Under the I-CSP the AfDB assists the country in: (i) improving economic management through support for institutional capacity building; and (ii) creating a better environment through improved water supply and sanitation.
- European Union (EU)
  - In early 2010, the EU extended a US$11 million budget grant under the V-Flex Facility to help cushion the effects of exogenous shocks from the global economic crisis.
  - EU budget support for 2010 is projected at USD$9 million.
- Arab League and Gulf development partners
  - In addition to France and China, several Arab League countries, including Kuwait, Saudi Arabia, and Libya, are providing budgetary and project assistance.
  - In May 2010, the Qatari authorities disbursed a grant of EUR 20 million to clear domestic arrears.

### Poverty and social issues (survey and indicators)
- Household survey results (last survey fielded in 2004)
  - 37 percent of households (44.8 percent of individuals) live below the poverty line.
  - Comparison with 1995: household poverty declined from 47 percent to 37 percent.
  - Inequalities in per capita expenditures increased substantially, likely due to variances in remittance inflows benefiting Ngazidja.
- Authorities’ assessment
  - In the absence of more recent survey data, authorities assume the incidence of poverty to have increased since 2004, given Comoros’ recent overall weak economic performance.
- Key Poverty & Social Indicators–2008 (percent of total population, unless otherwise indicated; Source: World Bank, Comoros PRSP 2009)
  - Poverty (% below poverty line) 44.80
  - Young adult literacy rate (%) 71
  - Female literacy rate (%) 87
  - Gross primary enrollment 86
  - Female primary enrollment (%) 73
  - Under-five mortality (per 1,000) 71
  - Life expectancy at birth (years) 69
  - Child malnutrition (%) 23.1
  - HIV prevalence (%) 0.8

### Progress toward Millennium Development Goals (MDGs) through 2007 (Table 1 summary)
- Overall: Comoros is on track to achieve 4 of 12 MDGs, and substantial progress has been made on five others.
- Selected MDG indicators (1990–96*; 2004–07**; Target 2015; Status)
  - Goal 1: Eradicate extreme poverty and hunger
    - Proportion of population below poverty line (%) 54.7 → 44.8; Target 27; Status: Progress
    - Malnutrition prevalence for children under 5 (%) 13.9 → 24.9; Target 7; Status: Off track
  - Goal 2: Achieve universal primary education
    - Net primary enrollment rate (%) 63.2 → 85; Target 100; Status: On track
  - Goal 3: Promote gender equality and empower women
    - Ratio of female to male primary enrollment (%) 85 → 96; Target 100; Status: On track
    - Levels of women employed in the nonagricultural sector (%) 3.1 → 13.7; Target 50; Status: Progress
    - Proportion of seats held by women in national parliament (%) - → 2.3; Target 50; Status: Off track
  - Goal 4: Reduce child mortality
    - Infant mortality rate (per 1,000 births) 86.3 → 59; Target 28.7; Status: Progress
    - Mortality for children under 5 (per 1,000 births) 130 → 74; Target 43.3; Status: On track
  - Goal 5: Improve maternal health
    - Maternal mortality (per 100,000 births) 517 → 381; Target 129; Status: Progress
    - Proportion of births assisted by qualified health workers (%) 52 → 62; Target 100; Status: Progress
  - Goal 6: Combat HIV/AIDS, malaria, and other diseases
    - Prevalence of HIV in % of population (15-49 years old) - → 0.12; Target <.025; Status: On track
  - Goal 7: Ensure environmental sustainability
    - Access to an improved water source (% of population) 92 → 85; Target 100; Status: Off track
  - Notes: * Indicates data available for the date in time period closest to 1990. ** Indicates data available for latest date in time period. Source: Comoros PRGSP, 2009.

### Recent economic developments and policy track record
- Growth, inflation, external balance (2008–2009)
  - Real GDP growth 1 percent in 2008; 1.8 percent in 2009, driven by donor-funded public works, remittances-based private sector construction, and expansion of the financial sector.
  - External current account deficit narrowed to an estimated 7.9 percent of GDP in 2009 (11.1 percent in 2008).
  - Inflation: easing pressures on food and fuel prices since 2008; inflation broadly under control.
- Fiscal and program performance
  - Macroeconomic policies under the 2008/09 EPCA- and ECF-supported programs broadly satisfactory albeit with some fiscal slippage.
  - Revenue collection generally consistent with expectations due to efforts including enhanced computerization.
  - Expenditure management: new budgetary and treasury committee introduced; severe difficulties persist in bringing the wage bill under control.
  - At end-March 2009, EPCA target for the primary domestic budget balance (0.6 percent of GDP) was met; ceiling on net domestic credit to the government was observed with a substantial margin (0.5 percent of GDP).
  - ECF performance through end-March 2010: thirteen of sixteen quantitative performance criteria and benchmarks met.
    - At end-December 2009, revenue mobilization slightly better than programmed; target on net domestic credit to the government met.
    - Domestic primary budget deficit (benchmark) was exceeded by 1.0 percentage point of GDP, reflecting spending overruns on wages and a CF 1.7 billion (0.9 percent of GDP) capital transfer to Comoros Telecoms.
    - First quarter 2010: small miss on revenue target; domestic primary fiscal deficit target met after cuts to goods and services and domestically funded investment.
- Structural reforms: broadly satisfactory
  - All but one structural indicator under EPCA were met; most structural benchmarks under ECF through end-March 2010 observed albeit with delays.
  - Government actions include:
    - Appointed a permanent secretary for the reform-monitoring committee.
    - Reestablished revenue sharing mechanism and completed comprehensive reform strategies for strengthening revenue mobilization and improving expenditure management.
    - Prepared consolidated quarterly fiscal accounts, timely communicated to Fund staff.
    - Maintained an automatic fuel price adjustment mechanism.
    - Completed an audit of domestic arrears (with EU technical support) and a related arrears clearance strategy.
    - Completed and submitted to Parliament in April 2010 new personnel frameworks for government ministries (an end-March 2010 structural benchmark).
    - Conclusively tested computerization of civil service wage management (an end-March 2010 structural benchmark).
    - Adopted an IFC-approved reform strategy for the state-owned telecommunications company; pursued consultations with the IFC on reform options for the hydro-carbon importing company, including appointing a new Board of Directors.

### Macroeconomic framework and outlook; PRGSP
- Medium-term growth drivers and assumptions
  - Government medium-term reform program anchored in the PRSP to invigorate economic growth and improve living conditions within a stable macroeconomic environment.
  - Recovery expected to be driven by accelerated donor-funded public works and increased FDI in tourism, as suspended projects are resumed.
  - Reform agenda focused on improving business environment and governance, expanding infrastructure (especially for tourism), and supporting agricultural productivity and diversification.
  - Terms of trade: rebounded in 2009 on falling import prices; expected modest improvement in medium-term despite some firming of import prices as global economy recovers.
- Fiscal strategy and projections
  - Fiscal consolidation, comprehensive debt relief, and higher foreign aid to create fiscal space for pro-growth and pro-poor spending while preserving debt sustainability and avoiding accumulation of new arrears.
  - Programmed fiscal adjustment aims to raise revenue from just under 14 percent of GDP in 2009 to 15 percent of GDP by 2013.
  - Wage bill projected to modestly decline in relation to GDP after previous uncontrolled expansion.
  - Additional priority spending (health, education, infrastructure, restructuring of state-owned banks and enterprises) to be mostly secured through domestic reallocations and efforts to raise external assistance and early achievement of HIPC and MDRI debt relief.
- Monetary and exchange rate policy
  - Governed by the exchange rate peg under the Franc Zone arrangement as the main anchor of price stability.
- Main risks to the medium-term outlook
  - Political tensions between the Union and Island authorities.
  - Slower-than-expected pace of reform implementation.
  - Uncertainties in the pace of the global economic recovery.
  - Recommended mitigation: closely adhere to reform agenda, strengthen public finance management, preserve donor support, enhance investor confidence, and pursue expeditious national political reconciliation.

### Medium- to long-term macroeconomic framework (selected indicators, 2009–29; excerpt)
- National income and prices (Annual percentage change, unless otherwise indicated)
  - Real GDP 1.8 2.1 2.5 3.5 3.7
  - GDP deflator 4.6 3.8 3.3 3.0 3.2
  - Consumer price index (annual averages) 4.8 2.6 2.9 2.8 3.0
  - Consumer price index (end period) 2.1 3.1 2.7 2.9 2.9
- Money and credit (annual percentage change)
  - Domestic credit 35.2 7.2 9.1 9.6 11.6
  - Broad money 13.5 7.5 6.5 6.5 7.4
- External sector (annual percentage change)
  - Export volume 8 1.3 18.1 1.7 2.3 2.3
  - Import volume 11.7 -0.8 -7.1 3.1 3.1
  - Terms of trade 39.4 -13.0 -3.7 1.2 3.6
- Government budget (in percent of GDP, unless otherwise indicated)
  - Domestic Revenue 13.9 14.3 14.2 14.5 15.9
  - Total grants 9.7 13.7 7.1 7.1 7.6
  - Total expenditure 23.0 23.2 23.1 22.7 23.4
  - Domestic primary balance -2.6 -1.5 -1.2 -0.5 0.4
  - Overall balance (cash basis) 0.8 -2.7 -2.2 -1.6 -0.4
- External sector (in percent of GDP)
  - Exports of goods and services 14.7 15.0 14.9 14.7 14.4
  - Imports of goods and services 48.2 50.5 47.2 46.1 40.1
  - Current account balance -7.9 -8.9 -12.5 -11.8 -8.5
  - Excl. official and private transfers -33.6 -35.9 -32.6 -31.5 -25.6
- NPV (in percent of GDP; corresponds to the case before traditional debt relief)
  - NPV In percent of GDP 46.0 41.7 40.1 38.3 27.3
  - NPV of external debt (end-year) in percent of exports of goods & services 328 307 286 274 201
  - Sources: Comorian authorities; and IMF staff estimates and projections.

### Poverty Reduction Strategy Paper (PRGSP) and implementation
- PRGSP adoption and process
  - On September 10, 2009, the government of Comoros officially adopted the country’s first full Poverty Reduction Strategy Paper (Poverty Reduction and Growth Strategy Paper, PRGSP).
  - The PRGSP builds on the interim PRSP presented to IDA and IMF Boards in May 2006.
  - The PRSP preparation process was inclusive and participatory, managed by a steering committee and involving civil society, traditional and religious leaders, NGOs, development partners, sectoral working groups, and island authorities through local branches of the National Planning Commission.
- PRGSP policy agenda (ambitious objectives)
  - (i) Stabilize the economy and lay foundations for sustained and equitable growth by strengthening public finance and improving infrastructure provision.
  - (ii) Strengthen key sectors with highest growth and poverty reduction potential: tourism, agriculture and fishing.
  - (iii) Improve governance and social cohesion.
  - (iv) Improve human development outcomes, particularly healthcare and education, through better social service delivery.
  - (v) Promote environmental sustainability and civilian security.
- Implementation constraints and support
  - Challenges: paucity of domestic and external resources, capacity constraints, and aid absorption bottlenecks.
  - Potential alleviation: bilateral pledges of substantial financial assistance at a “Conference for development and investment” hosted by the Government of Qatar on March 9–10, 2010.
- Monitoring and evaluation
  - Carried out by four oversight organizations, sectoral technical groups (GTS), island-level monitoring committees (COPSED), Technical Steering Committee (PRGS-TSC) operating from the National Planning Commission, Technical Secretariat for PRGS Monitoring and Evaluation, and the Ministry of Finance’s Economic and Financial Reform Monitoring Committee (CREF).

### Debt reconciliation and structure of external debt (end-2009)
- Debt reconciliation status
  - Debt Reconciliation Analysis (DRA) based on public and publicly-guaranteed external debt disbursed and outstanding as of end-2009.
  - Reconciliation process completed jointly by the IMF, IDA and the authorities in January and April 2010.
  - All multilateral and 98.3 percent of bilateral and commercial debt were reconciled.
  - The un-reconciled 1.7 percent of bilateral and commercial debt is due to Banque Postale, representing 0.4 percent of the total debt.
- Aggregate external debt (end-2009)
  - Public and publicly guaranteed external debt (nominal) US$286.8 million (including arrears).
  - Corresponding NPV US$213.1 million.
- Creditor composition (nominal and NPV shares)
  - Multilateral creditors: nominal US$219.6 million (76.6 percent of total); arrears stock 35.8 (percent of total arrears); NPV US$163.3 million (76.6 percent of NPV); NPV of HIPC Debt Relief US$197.6 million (76.8 percent of HIPC relief).
    - World Bank: nominal US$120.4 million (42.0 percent of total); NPV US$80.1 million (37.6 percent); NPV of HIPC Debt Relief US$80.1 million (31.1 percent).
    - AfDB Group: nominal US$38.1 million (13.3 percent); arrears stock 3.4 (6.3 percent); NPV US$/27.8 million (13.0 percent); NPV of HIPC Debt Relief US$61.5 million (23.9 percent). (Technical arrears to be cleared at Decision Point by the European Commission.)
    - IMF: nominal US$10.1 million (3.5 percent); NPV US$7.6 million (3.6 percent); NPV of HIPC Debt Relief US$7.6 million (2.9 percent).
    - BADEA: nominal US$27.6 million (9.6 percent); arrears stock US$27.6 million (51.1 percent); NPV US$27.6 million (12.9 percent); NPV of HIPC Debt Relief US$27.6 million (10.7 percent).
    - Others (IsDB, IFAD, OFID, EIB, AMF): nominal US$23.5 million (8.2 percent); arrears stock US$4.8 million (9.0 percent); NPV US$20.2 million (9.5 percent); NPV of HIPC Debt Relief US$20.9 million (8.1 percent).
  - Bilateral creditors: nominal US$60.6 million (21.1 percent); arrears stock US$13.7 million (25.3 percent); NPV US$43.3 million (20.3 percent); NPV of HIPC Debt Relief US$57.6 million (22.4 percent).
    - Paris Club: nominal US$17.8 million (6.2 percent); arrears/NPV figures noted in table (does not include implementation of the November 2009 Paris Club agreement).
    - Other official bilaterals (Kuwait, Saudi Arabia, Mauritius, United Arab Emirates, etc.): nominal US$42.9 million (14.9 percent); arrears stock US$1.5 million (2.8 percent); NPV US$25.8 million (12.1 percent); NPV of HIPC Debt Relief US$42.3 million (16.4 percent). (Relief resulting from 2007 rescheduling agreements were added back to the NPV of debt stock as of end-2009.)
  - Commercial creditors: nominal US$6.6 million (2.3 percent); arrears stock US$4.5 million (8.3 percent); NPV US$6.5 million (3.0 percent); NPV of HIPC Debt Relief US$2.2 million (0.8 percent).
    - Three commercial creditors cited: Banque Postale, Cotecna, and Hopitaux de Paris; Banque Postale accounts for the unreconciled small share.
- Additional notes on debt figures
  - Table figures are based on HIPC Initiative’s methodology.
  - The relief resulting from the 2007-09 arrears clearance mechanism were added back to the NPV of debt stock as of end-2009 for certain creditors.
  - NPV of debt service calculations use fixed interest rates at end-2009; IMF’s own interest rate projections produce small differences in NPV calculations in Table A8 (HIPC delivery table).
  - Paris Club creditors, with France as the major creditor, accounted for 26.5 percent of nominal bilateral and commercial claims at end-2009 (6.2 percent of Comoros’ total external debt before the November 2009 Paris Club restructuring agreement).
  - Non-Paris Club official creditors (Kuwait, Saudi Arabia, Mauritius, United Arab Emirates) accounted for an estimated 15.0 percent of total external debt.

*Italic: Source: _cr10242 - 8.      Other donors and creditors are gradually resuming support to Comoros,* IMF staff document.

### 26.      As of end-2009, about one fifth of Comoros’ external debt was in arrears, but

### 26.      As of end-2009, about one fifth of Comoros’ external debt was in arrears, but

### Arrears status and creditor relationships
- Stock of external arrears at end-2009: US$54.0 million.
  - Owed to multilateral creditors: US$35.8 million.
  - Owed to bilateral claimants: US$13.7 million.
  - Owed to commercial creditors: US$4.5 million.
- Arrears composition and actions:
  - Arrears to BADEA made up the largest share of arrears to multilateral creditors at end-2009.
  - Bulk of AfDB Group arrears were cleared between December 2007 and April 2009 under the Post-Conflict Country Facility (PCCF); a residual amount of US$3.4 million is to be cleared by the EC under the FSF when Comoros reaches the HIPC decision point, together with an amount of US$1.9 million owed to the EIB.
  - The IsDB agreed to a moratorium on debt service and payment of arrears until December 2010.
  - The AMF rescheduled its loan on concessional terms and cleared arrears in March 2008.
  - Arrears to Paris Club members stood at US$12.1 million at end-October 2009; they will be cleared through bilateral arrangements consistent with the general rescheduling agreement of November 2009.
  - Other bilateral and commercial creditors have either agreed to defer arrears pending HIPC treatment or are in restructuring discussions with the authorities.
- Comoros has no arrears to IDA and the IMF.

### Possible assistance under the HIPC Initiative — headline estimates and burden sharing
- NPV of debt after traditional relief at end-2009: US$257.4 million, equivalent to 343.0 percent of exports of goods and services.
- Amount of debt relief needed to reach the HIPC threshold (150 percent of exports): US$144.8 million in end-2009 NPV terms.
  - Implied common reduction factor: 56 percent.
  - Under proportional burden sharing:
    - Multilateral creditors’ assistance: US$111.2 million (NPV terms).
    - Bilateral and commercial creditors’ assistance: US$33.6 million (NPV terms).
- Creditor commitments as of June 4, 2010:
  - IDA, IMF, AfDF, EIB, IFAD, BADEA and IsDB (representing 98 percent of multilateral creditors’ NPV exposure) indicated willingness to provide HIPC debt relief.
  - AMF and OFID had not yet committed; communication ongoing.

### Illustrative creditor-by-creditor scenarios and amounts
- IDA: US$45 million in NPV terms.
  - Interim relief: reduction in debt service up to a maximum of 65 percent from July 2010 to June 2030.
- IMF: US$4.27 million in NPV terms.
  - No immediate HIPC interim assistance from IMF following decision point approval.
  - No PRGT principal repayment obligations until 2014; PRGT interest obligations waived by the IMF to all low-income member countries through 2011.
  - Possible HIPC interim assistance could be considered after 2011.
- AfDB Group: US$34.6 million in NPV terms.
  - Almost covered by December 2007–April 2009 arrears clearance under PCCF; remaining technical arrears to be cleared at decision point.
- Other multilateral creditors: US$27.3 million in NPV terms.
  - Some reschedulings or arrears cancellations in 2008–2009 to be credited toward HIPC relief; bulk expected to be delivered at decision or completion points.
- Paris Club creditors: assumed to provide share of HIPC relief through a Cologne flow operation (90 percent NPV reduction) after the decision point, with remaining assistance via a stock operation at completion.
- Non-Paris Club bilaterals and commercial creditors: rescheduling agreements with Kuwait and Saudi Arabia already on terms at least as favorable as Paris Club; similar treatment assumed for remaining creditors.

### External arrears clearance (Box 1) — operational points
- Nearly one-fifth of official external debt (US$54 million) was in arrears at end-2009; most arrears have been or are expected to be cleared through concessional arrears clearance operations on terms at least comparable to Paris Club.
- AfDB Group arrears: 69 percent financed from PCCF, 1 percent by Comoros, 30 percent by bilateral donors; EC to finance remaining arrears at decision point.
- EIB arrears: to be cleared at decision point; remaining outstanding loan to be cancelled under LDC initiative at completion point if Comoros remains classified as an LDC.
- Paris Club exceptional treatment (September 2009): treated debts amounting to US$13 million; reduced by about 80 percent the payments due over 2009–12; included clause further reducing debt service if HIPC decision point is reached.

### Possible assistance under MDRI and additional bilateral relief
- MDRI eligibility:
  - Comoros would qualify for MDRI debt relief from IDA and the AfDF; no IMF-eligible debt for MDRI relief.
  - MDRI would cover outstanding debt disbursed prior to end-December 2003 (IDA) and end-December 2004 (AfDF) and still outstanding at institutions’ implementation dates.
- Preliminary MDRI estimates assuming completion point in December 2012:
  - Total MDRI debt relief: US$52.2 million in NPV terms.
    - IDA contribution: US$29.8 million.
    - AfDB Group contribution: US$22.4 million.
- EIB cancellation under LDC initiative at completion point (if Comoros remains an LDC): $0.36 million in PV terms.
- Additional Paris Club bilateral relief at completion point would cancel remaining debt, reducing PV of debt after completion point by about US$2 million.

### Impact of debt relief, projections, and debt-service metrics
- With traditional debt relief and unconditional HIPC delivery:
  - NPV of debt-to-exports ratio falls from 343.0 percent (end-2009) to approximately 142.7 percent by 2012.
- With MDRI and LDC initiative relief added:
  - NPV of debt-to-exports falls to 86.5 percent in 2012.
  - Additional bilateral relief reduces NPV to 86.0 percent.
- Long-term projection with HIPC and MDRI:
  - NPV of debt declines to 80.2 percent of exports of goods and services by 2029.
  - Debt service averages:
    - About 3.9 percent of revenues or 4.0 percent of exports during 2009–19.
    - 3.4 percent of revenues and 4.0 percent of exports during 2020–29.

### Sensitivity and alternative scenarios
- The analysis underscores high vulnerability of Comoros’ debt-servicing capacity to external and growth shocks and to the composition/terms of external assistance (assumed largely grants and very concessional borrowing in the DRA).
- Alternative scenario 1 (lower exports):
  - Exports assumed about 30 percent lower in dollar terms by 2027 relative to baseline.
  - NPV of debt would decline over the long term, reaching 68.6 percent of revenues by 2029.
    - Equivalent to 125.9 percent of exports of goods and services and 12.1 percent of GDP by 2029.
  - Debt service would average 5.6 percent of revenues and 6.6 percent of exports during 2009–2019.
- Alternative scenario 2 (permanently lower growth):
  - Average annual growth weakens from 3.8 percent to 1.5 percent throughout 2009–29.
  - NPV of debt would decline over the long term, reaching 121.8 percent of revenues by 2029.
    - Equivalent to 107.7 percent of exports of goods and services and 18.6 percent of GDP by 2029.
  - Debt service would average 6.4 percent of revenues and 6.1 percent of exports during 2009–19.
- Policy implications emphasized:
  - Importance of sustained domestic reform to develop exportable production and services, notably tourism.
  - Need to secure external assistance heavily weighted toward grants.
  - Small export base constrains medium- and long-term debt-servicing capacity, especially if public expenditure prioritizes MDGs.

### Key macroeconomic assumptions underlying the DRA (Box 2)
- Annual real GDP growth: averages 3.8 percent over the projection period (FY 2010–29).
- CPI inflation: projected to decline from 7.4 percent in 2008 to about 3 percent over the longer-term horizon.
- Real exchange rate and terms of trade: modest appreciation in 2008–09, then broadly stable; terms of trade recover from 2008 deterioration and moderately improve thereafter.
- Remittances: on average converge to the historical norm of 14.5 percent of GDP during 2013–29, from almost 20 percent of GDP in 2009.
- External current account deficit (excluding official grants): projected to narrow from an annual average of 11 percent of GDP during 2010–16 to about 7 percent of GDP thereafter.
- Exports: goods exports grow slower than nominal GDP; nonfactor services exports (tourism) grow faster than nominal GDP; goods and nonfactor services exports projected to remain broadly stable in relation to GDP.
- Government balance: primary balance projected to improve from a deficit of 2.6 percent of GDP in 2009 and to move into surplus beginning in 2015.
- External assistance and concessionality:
  - Up to 2012 external assistance assumed mostly grants, averaging about 7 percent of GDP.
  - Over 2012–29 further assistance mostly grants and concessional; loans from non-IDA/IMF/AfDB sources assumed under IDA terms (grant element 50 percent) until 2015, then grant element projected to decline to 30 percent.
- Domestic borrowing: scenario assumes no new medium- to long-term domestic borrowing beyond central bank short-term cash advances to the treasury.

### Triggers for the floating completion point (summary of requirements)
- PRSP: satisfactory implementation for at least one year, evidenced by an Annual Progress Report to IDA and IMF.
- Macroeconomic stability: maintained as evidenced by satisfactory implementation of the ECF-supported program.
- Public financial management and governance triggers (selected):
  - Produce detailed quarterly budget execution reports for at least 12 months prior to completion point.
  - Adopt terms of reference for feasibility study for a comprehensive computerized public financial management system with cost estimate and timetable.
  - Adopt by law a public procurement code consistent with COMESA norms and develop implementing regulations; successfully implement prior to completion point.
  - Adopt revised organic frameworks (organigram and staffing plans) for all ministries consistent with 2009 constitutional amendments.
  - Government approval and submission to Parliament of draft law establishing the Chamber of Accounts.
- Structural reform triggers:
  - Officially adopt reform strategies to strengthen management of Comores Télécoms, Société Comorienne des Hydrocarbures, and MAMWE; issue calls for expressions of interest to identify a strategic partner for at least one company.
- Social sector triggers (selected):
  - Education: construct and equip 210 primary school classrooms (22 on Moheli, 126 on Anjouan, 62 on Ngazidja); construct 100 separated latrines; provide 300,000 textbooks and 25,000 school kits.
  - Health: conduct national measles vaccination campaign for children 9–47 months to achieve 90-percent coverage; carry out national survey on risk factors for noncommunicable diseases.
- Debt management triggers:
  - Improve public debt management systems, including adopting effective debt management software.
  - Produce detailed annual reports on external and domestic debt within six months after year end; at least one such report prior to HIPC completion point.
  - Amend décret N°03-62/PR establishing the debt management office to refocus its mandate consistent with capacity limitations.

*Italic source: IMF staff report content unit _cr10242 - 26.      As of end-2009, about one fifth of Comoros’ external debt was in arrears, but*

### 39.      IDA and IMF staffs will work together to monitor the completion point triggers,

### _cr10242 - 39.      IDA and IMF staffs will work together to monitor the completion point triggers,

### Monitoring completion point triggers
- IDA and IMF staffs will work together to monitor the completion point triggers, with each institution leading on areas of primary competence, while also incorporating contributions of staff from the other institution.
- IMF staff will take the lead in monitoring macroeconomic stability.
- IDA staff will focus on progress in the implementation of the PRSP and on sector-related triggers, including those pertaining to PFM and service delivery, and to tracking of pro-poor expenditures financed with HIPC Initiative assistance.
- IDA and IMF staffs will jointly monitor structural reforms and progress in improving external debt management.

### Monitoring public spending following provision of HIPC assistance
- The government is committed to ensuring that assistance under the HIPC Initiative is used to enhance poverty related spending.
- Securing the effective use of debt relief assistance for poverty reduction and the capacity to implement and monitor a shift in the composition of expenditure toward poverty-related objectives is a key element of the HIPC Initiative.
- The authorities will continue efforts to strengthen the programming, management and control of public expenditures, and to improve service delivery in key sectors.
- Technical assistance from IDA, IMF, AfDB and other donors is greatly needed; it will be important to establish adequate budget management capacity.

### Budget classification and expenditure tracking
- Comoros does not have a budget classification by program or a fully functional budget classification, but mechanisms exist to monitor use of HIPC resources.
- Existing budget and accounting classifications allow monitoring following two dimensions:
  - (i) administrative (ministries and islands authorities) including development projects; and
  - (ii) economic (expenditure types).
- The budget is presented in the annexes of the budget law following a functional classification with broad categories (such as education and health), which is prepared using estimates from the administrative classification.
- In the absence of a program budget, projects can be individually coded within the administrative classification to allow recording and reporting on project expenditures.
- Monitoring of HIPC-related resource use prior to the completion point will occur at the entity (e.g., ministries, public institutions, and executing agencies) and project levels.
- Entities, already coded in the budget classification, will be identified according to their core mandate in relation to poverty reduction; the same process will identify projects contributing to poverty reduction as defined in the PRSP.
- A key challenge is to put in place mechanisms to record expenditures according to their destinations to allow monitoring of both budget allocations and expenditures for identified entities and projects.

### Use of HIPC-related savings and procurement reform
- The government intends to use HIPC related savings to fund activities identified in the PRSP.
- Resources from HIPC Initiative assistance would mostly be allocated to health and education; other areas, such as major infrastructure programs, would be financed with resources from other external resources.
- The poverty-related programs and projects to be financed with interim assistance support have been included in the FY2010 budget and would need to be included in subsequent budgets.
- The planned introduction of an effective procurement code will strengthen and modernize the public procurement system, promoting transparency and competition in line with international best practices.

### Medium-Term Expenditure Priorities (Box 4)
- Education
  - Increase primary and secondary school completion rates.
  - Reduce illiteracy prevalence.
- Health
  - Increase health personnel and financial means available to major health facilities.
  - Improve availability of drugs, other materials, and vaccines, with a view to reducing prevalence of major endemic diseases: tuberculosis, malaria as well as improving mother and child health.
- Agriculture and food security
  - Expand income generating activities at the community level, including those that increase food production and/or facilitate the supply of food products to markets and the population.
  - Expand availability of quality services to producers—advice, agricultural education and training, and research and development for improving the supply of agricultural inputs.
- Infrastructure
  - Expand supply of, and hence access to, electricity and telephone, through expeditious reform of public utilities.
  - Expand and improve port and road infrastructure.

*IMF/World Bank staff document.*

### 44.      This paper assesses whether Comoros qualifies for assistance under the

### This paper assesses whether Comoros qualifies for assistance under the Enhanced HIPC Initiative

### Qualification and decision point
- Executive Directors are asked to decide:
  - Do Directors agree that Comoros qualifies for assistance under the HIPC Initiative and do they approve the decision point?

### Amount and delivery of assistance
- Total amount of assistance under the Enhanced HIPC Initiative (to reduce NPV of debt to the threshold of 150 percent of exports of goods and services):
  - US$144.8 million in NPV terms.
- Proportional burden sharing of the US$144.8 million (NPV terms):
  - IDA: US$45 million in NPV terms.
  - IMF: US$4.27 million in NPV terms.
- Interim assistance:
  - Do Directors agree that IDA should provide interim assistance between the decision and completion points, in line with existing guidelines?

### Floating completion point and conditionality
- Directors are asked:
  - Do Directors agree that the HIPC floating completion point will be reached when the triggers in Box 3 have been met?
- Debt relief delivery rules:
  - Debt relief will be provided unconditionally only when the completion point triggers have been met and satisfactory assurances of other creditors’ participation under the enhanced HIPC Initiative for Comoros have been received.

### Composition of external debt (end-2009, nominal stock: US$287 million)
- Creditor group shares (nominal stock figure and charted shares shown in the source):
  - World Bank: 42% (nominal stock US$287 million figure)
  - AfDB Group: 13%
  - IMF: 4%
  - Other Multilateral: 18%
  - Other Official Bilateral: 15%
  - Paris Club: 6%
  - Commercial: 2%
- Potential costs of the HIPC Initiative by creditor (NPV shares stated in source):
  - World Bank: 31%
  - AfDB Group: 24%
  - IMF: 3%
  - Other Multilateral: 19%
  - Other Official Bilateral: 16%
  - Paris Club: 6%
  - Commercial: 1%
- Total Estimated HIPC Enhanced Assistance: US$144.8 million, end-2009 NPV terms.

### Debt stock and NPV by creditor groups (as of December 31, 2009)
- Total nominal debt stock: US$286.8 million; arrears stock: US$54.0 million.
- Total NPV of debt (end-2009): US$213.1 million; NPV of debt (base adjusted): US$257.4 million (percent of total: 100.0).
- Major creditor NPV shares (selected figures from Table A2):
  - Multilateral total NPV of debt: US$163.3 million (76.6 percent of total nominal; NPV of debt 76.8 percent in adjusted column US$197.6 million).
  - World Bank NPV of debt: US$80.1 million (37.6 percent of total nominal; adjusted NPV US$80.1 million / 31.1 percent).
  - AfDB Group nominal: US$38.1 million (13.3 percent); NPV of debt: US$27.8 million (13.0 percent); adjusted NPV US$61.5 million / 23.9 percent.
  - IMF nominal: US$10.1 million (3.5 percent); NPV of debt: US$7.6 million (3.6 percent); adjusted NPV US$7.6 million / 2.9 percent.
  - BADEA nominal: US$27.6 million (9.6 percent); arrears stock: US$27.6 million (51.1 percent of arrears); NPV US$27.6 million / 12.9 percent.
  - Bilateral and commercial nominal: US$67.2 million (23.4 percent); NPV of debt US$49.8 million (23.4 percent); adjusted NPV US$59.8 million / 23.2 percent.
  - Paris Club nominal: US$17.8 million (6.2 percent); NPV US$8/17.5 million (presentation in source).

### External debt sustainability projections and scenarios (2009–29)
- Figure 2 and accompanying notes show projected indicators under multiple delivery assumptions:
  - Baseline and counterfactual series plotted for NPV of debt to exports (percent of exports) and Debt service to exports (percent of exports) for 2009–2029.
  - Footnotes:
    - 1/ Assumes full delivery of estimated HIPC initiative debt relief from July 2010.
    - 2/ Assumes HIPC and MDRI delivery at completion point.
- Sensitivity analysis (Figure 3 and Table A6) after unconditional delivery of enhanced HIPC assistance presents:
  - Baseline, lower export level, and permanently lower growth scenarios for NPV of debt to exports and Debt service to exports over 2009–2029.
  - Sensitivity assumptions:
    - Lower export level scenario: assumes a lower export level of 30 percent.
    - Permanently lower growth scenario: assumes a lower growth of 1.5 percent.

### Key debt service and indicator aggregates (selected exact figures preserved)
- Debt service patterns (Table A3, selected annual totals and averages; in US$ millions):
  - Total debt service before traditional debt relief (2010–2019 average): listed row shows series with annual values (e.g., 2010: 17.2, 2011: 9.0, 2012: 8.9, … 2019: 15.4). (See Table A3 for full year-by-year values.)
  - Debt service to exports ratio before traditional debt relief (selected): 19.5 (2009), 9.7 (2010), 9.1 (2011), 7.8 (2012), … 10.1 (2019), average 6.8 (2020-2029).
  - After traditional debt relief (2010–2019 averages and series): Totals and component breakdowns provided in Table A3 (e.g., Tot al row for after traditional debt relief starts with 51.1, 8.2, 8.9, …).
  - After HIPC assistance (Tot al row): example annual totals include 6.0, 4.4, 4.7, 4.8, 5.6, 10.7, 11.4, 16.8, 7.0, 12.5.
  - Debt service to exports ratio after HIPC assistance: 6.8, 4.8, 4.8, 4.7, 5.1, 7.0, 5.2, 5.4, 5.9, 5.4 (series in Table A3).
  - Reduction in debt service as a result of HIPC Initiative assistance (annual series shown; totals and averages in Table A3).
- NPV of external debt (Table A4, selected rows; in US$ millions):
  - I. Before traditional debt-relief: NPV of total debt 2009: 247.4; 2010: 246.1; 2011: 250.2; … 2029: 301.1. NPV of outstanding debt 2009: 247.4; 2010: 236.6; … 2029: 173.1.
  - IV. After unconditional delivery of enhanced HIPC assistance: NPV of total debt 2009: 112.6; 2010: 118.6; 2011: 125.6; … 2029: 213.9. NPV of outstanding debt 2009: 112.6; 2010: 109.0; … 2029: 85.8.
  - V. After conditional delivery of enhanced HIPC and MDRI assistance: NPV of total debt 2009: 196.8; 2010: 199.6; … 2029: 180.8.
  - NPV of new borrowing series: 0.0, 9.5, 16.6, 23.9, 30.8, 38.1, 71.8, 118.1, 187.8, 37.5, 128.1 (as in table).
- External debt indicators (Table A5, selected exact ratios):
  - I. Before traditional debt-relief (selected): NPV of debt-to-GDP ratio 2009: 46.2; 2010: 41.8; 2011: 40.2; … 2029: 15.5. NPV of debt-to-exports ratio 2009: 329.7; 2010: 308.0; … 2029: 114.0.
  - IV. After unconditional delivery of enhanced HIPC assistance (selected): NPV of debt-to-GDP ratio 2009: 21.0; 2010: 20.1; … 2029: 12.1. NPV of debt-to-exports ratio 2009: 150.0; 2010: 148.4; … 2029: 88.5.
  - V. After conditional delivery of enhanced HIPC and MDRI assistance (selected): NPV of debt-to-GDP ratio 2009: 36.8; 2010: 33.9; … 2029: 10.9. NPV of debt-to-exports ratio 2009: 262.2; 2010: 249.8; … 2029: 80.2.

### Creditor participation and modalities (summary of Table A9)
- Breakdown of total HIPC assistance (US$144.8 million) by creditor (NPV terms) and percent of total assistance:
  - IDA: US$45.1 million — 31.1 percent of total assistance.
    - Interim assistance will be delivered through reduction in debt service; reduction started from July 2010 on all debt outstanding and disbursed at end-2009.
  - AfDB Group: US$34.6 million — 23.9 percent.
    - AfDB Group has provided nearly all its required debt relief via arrears clearance under the Post-Conflict Country Facility between 2007 and 2009; including arrears clearance at the decision point by the European Commission, the AfDB Group have fully delivered its HIPC relief.
  - IMF: US$4.3 million — 2.9 percent.
    - No principal payments until 2014; interest payments waived through 2011; part of HIPC relief applied to interest payment in 2012; possible interim assistance consideration after 2011.
  - BADEA: US$15.5 million — 10.7 percent (assumed after completion point via concessional rescheduling).
  - OFID: US$2.0 million — 1.4 percent (assumed after completion point via concessional rescheduling).
  - EIB: US$0.8 million — 0.5 percent (arrears up to decision point cancelled by a budget support operation; remaining debt cancelled at completion under LDC Initiative if Comoros remains classified as an LDC).
  - AMF: US$0.6 million — 0.4 percent (assumed after decision point via concessional rescheduling).
  - IsDB: US$5.1 million — 3.5 percent (assumed after completion point via concessional rescheduling).
  - IFAD: US$3.2 million — 2.2 percent (assumed after completion point via cancellation of debt service).
  - Total multilateral: US$111.2 million — 76.8 percent.
  - Paris Club Creditors: US$8.6 million — 6.0 percent.
    - Interim assistance will be delivered through a Cologne flow during the interim period.
  - Non-Paris Club creditors and bilateral/commercial totals:
    - Non-Paris Club creditors total: US$23.8 million — 16.4 percent (includes Kuwait US$14.1 million / 9.8 percent; Saudi Arabia US$8.6 million / 6.0 percent; Mauritius US$0.5 million / 0.3 percent; United Arab Emirates US$0.5 million / 0.4 percent).
    - Commercial creditors total: US$1.2 million — 0.8 percent (Banque Postale US$0.2 million; Cotecna US$0.4 million; Hopitaux De Paris US$0.6 million).
  - Total bilateral and commercial: US$33.6 million — 23.2 percent.
  - TOTAL: US$144.8 million — 100.0 percent.

### Possible delivery of World Bank Group and IMF assistance (selected figures)
- World Bank Group possible delivery under Enhanced HIPC Initiative (Table A7, selected rows; in US$ millions):
  - Debt service before HIPC assistance to IDA (2010–2019 sample): 2010: 3.8; 2011: 4.1; 2012: 4.2; … 2018: 5.3; cumulative debt service before HIPC assistance over 2012–2023: 59.9; 2010–2044 cumulative: 133.
  - Debt service after HIPC assistance (IDA): 2010: 2.6; 2011: 1.4; 2012: 1.5; … 2018: 1.8; cumulative after HIPC assistance over 2012–2023: 20.9; 2010–2044 cumulative: 67.
  - Savings on debt service to IDA (annual series and cumulative): 2010: 1.2; 2011: 2.7; 2012: 2.8; cumulative 2012–2023: 39.0; 2010–2044: 66.
- IMF possible delivery under Enhanced HIPC Initiative (Table A8, selected figures; in US$ millions):
  - Total IMF assistance under the enhanced HIPC Initiative: US$4.270 million in NPV terms (calculated on the basis of data available at the decision point, excluding interest earned on Comoros' Umbrella account and on committed but undisbursed amounts as described in footnote 6).
  - Delivery schedule and flow assumptions:
    - Interim assistance: deposits into member's Umbrella Account projected; example entries include interim assistance of 0.03 in 2011 and other flows per Table A8.
    - Completion point assistance: completion point disbursement lines and completion point assistance numbers shown (e.g., Completion point assistance 4.2; Completion point interest 0.27).
    - Post-MDRI considerations: Comoros does not have MDRI-eligible credit outstanding to the IMF.
  - Share of debt service due on IMF obligations covered by HIPC assistance (in percent) shown annually in Table A8 (e.g., 2012: 63.9 percent; 2013: 54.9 percent; etc.).

### Discount and exchange rate assumptions (Table A1; end-December 2009)
- Discount rates (percent per annum) and exchange rates (currency per U.S. dollar) at end-December 2009 (selected exact figures from Table A1):
  - Comorian Franc: Discount Rate 4.31; Exchange Rate 0.00341.50 (as shown in table formatting in source).
  - Swiss Franc: Discount Rate 2.85; Exchange Rate 0.971.03.
  - Euro: Discount Rate 4.31; Exchange Rate 1.440.69.
  - U.S. Dollar: Discount Rate 4.09; Exchange Rate 1.001.00.
- Memorandum item:
  - Paris Club cutoff date: June 20, 1999.

*Sources: Comorian authorities; Fund and World Bank staff estimates and projections.*

### Annex I. Comoros: Debt Management Capacity

### _cr10242 - Annex I. Comoros: Debt Management Capacity

### Institutional arrangements for debt management
- Debt management is shared between the debt management office (DMO) and the national debt committee.
- The DMO is part of the Ministry of Finances and will work under the Treasury supervision starting in 2011 according to the new organic law.
- DMO mission and responsibilities:
  - Define the government policy for debt accumulation and servicing.
  - Manage public debt, debt of state-owned enterprises and publicly guaranteed debt.
  - Prepare analytical reports for the Minister of Finance and the Budget.
  - Make debt service projections, prepare invoices and send them to the treasury, which authorizes the central bank to transfer amounts of debt service due to creditors.
- National debt committee mission:
  - Ensure coordination of debt policy and management of public debt with fiscal and monetary policy.
  - Execute the debt management strategy.
  - The minister of finance is the only government member allowed to sign new loan agreements; the national committee gives advice only.
- Coordination with international institutions on debt issues is shared with CREF (Cellule des Réformes Économiques et Financières), which:
  - Coordinates implementation and monitoring of economic and financial reforms.
  - Negotiates programs with the IMF, collects, compiles and analyzes economic, financial and fiscal data.
- The DMO coordinates debt and debt rescheduling activities with the IMF, World Bank, Paris Club and bilateral creditors.

### Staffing, organization, and systems
- In theory, the DMO consists of:
  - a director, an officer for external debt service, an officer for domestic debt service, a statistician, an information analyst and an accountant.
  - Minimum qualification of staff is a master’s degree.
- In practice, the DMO is understaffed with:
  - only two full-time and one part-time staff and no director.
- Current data, software and projections:
  - Loan disbursement projections are currently generated by the National Planning Commission.
  - The DMO expects to generate loan disbursement projections when the debt management software, CS-DRMS2000+, is installed in early 2011 with assistance by the AfDB.
  - Until then, data on the debt stock and debt projections will continue to be kept in an Excel spreadsheet file.
- The DMO uses Debt-Pro for analyzing debt and for creating debt sustainability and debt relief simulations.
- The DMO is a member of a debt management capacity building project by the BCEAO/BEAC, which receives assistance from Pôle Dette in areas including:
  - building a strategy for debt reduction, a financial strategy, financial programming, and putting in place a legal framework in line with international standards.

### Publications, communications, and creditor interaction
- The DMO has no regular official publications.
- It publishes a table with debt service of the current year and the debt stock of the previous year.
- The DMO frequently informs the Vice-President and Finance Minister of developments in the debt stock and sporadically publishes articles on debt in the written press.
- The DMO communicates with creditors primarily via internet.

### Capacity gaps and recommendations
- Current limitations:
  - Lack of debt management capacity in staffing, training, and software has made the DMO not proactive in debt management.
  - Analytical capacity needs reinforcement, especially when beginning the HIPC Initiative process.
- Possible improvements (noted in the source):
  - Make more use of debt management database software; government plans installation with AfDB support.
  - Increase number of staff.
  - Provide more training for staff.
  - Produce more frequent publications on the country’s debt outlook.

---

### Annex II. Joint IMF/World Bank Debt Sustainability Analysis 2010 — summary

### Overall assessment and scenarios
- Conclusion: Comoros is in debt distress and would remain so under the baseline scenario for most of the projection period.
- Alternative scenario (illustrative): assumes hypothetical access to HIPC decision point in mid-2010 and HIPC completion point and MDRI debt relief within the next two years; under this scenario, debt would become manageable.
- The DSA is based on the Debt Sustainability Framework (DSF) for Low-Income Countries and compares projected debt-burden indicators against policy-dependent indicative thresholds.
- Comoros is classified as a “weak performer” based on the World Bank’s CPIA average score for 2006-2008; corresponding indicative thresholds referenced:
  - NPV of debt-to-GDP ratio: 30 percent
  - NPV of debt-to-exports ratio: 100 percent
  - NPV of debt-to-revenue ratio: 200 percent
  - debt service-to-exports ratio: 15 percent
  - debt service-to-revenue ratio: 25 percent

### Baseline macroeconomic assumptions (high-level)
- Growth and outlook:
  - GDP growth is assumed to accelerate further to around 4 percent in the long run.
  - Upward revision for 2010-12 reflects better 2009 outcome when credit to the private sector expanded significantly following entry of two new banks and aggressive bank lending.
- Inflation and prices:
  - Inflation fell to 2.1 percent in 2009 (y-o-y).
  - Long-term projection of 3 percent annual change in the CPI.
- Fiscal policy:
  - Domestic primary deficit projected at 1.5 percent of GDP in 2010 (2.6 percent of GDP in 2009).
  - Fiscal consolidation expected to continue, allowing achievement of a positive primary fiscal balance by 2015.
- External sector:
  - Current account (including official grants) would gradually converge to about -4.6 percent of GDP by 2030 (-7.9 percent of GDP in 2009).
  - Goods imports projected to revert to long-run historical averages (20-25 percent of GDP).
  - Exports of goods projected to grow in volume in line with real GDP; decline in relation to nominal GDP due to stagnating prices.
  - Nonfactor services exports (tourism) growth rate would slightly exceed that of nominal GDP.
  - Remittances projected to remain robust.
  - Official capital transfers (investment grants) will continue to be an important external financing source.
- The baseline takes account of recent arrears clearance operations and Paris Club debt relief (November 2009) together with assumed relief on comparable terms by other official bilateral and commercial creditors, and interim IMF and IDA HIPC assistance starting in mid-2010 up to end-2012.
- Consistent with DSF guidelines, the baseline does not include delivery of HIPC, MDRI and bilateral or multilateral beyond-HIPC assistance (these are modeled in an alternative scenario).

### External debt sustainability findings
- Under the baseline scenario:
  - The NPV of debt-to-exports ratio breaches the indicative threshold during the projections period.
  - Ratios of NPV of debt-to-GDP and NPV of debt-to-revenue remain close to or slightly above respective thresholds in the medium term and steadily decline thereafter.
  - Debt service ratios are below the indicative thresholds and remain so throughout the projection horizon.
- Drivers of improvement relative to previous DSA:
  - Improved macroeconomic performance, arrears clearance operations, HIPC initiative interim debt relief, Paris Club relief, and assumed relief by other creditors.
  - About 80 percent of the difference in the NPV of debt-to-exports ratios (relative to prior assessments) is due to the debt numerator; remaining 20 percent attributable to different export values in the denominator.
- Sensitivity (bound) tests indicate significant vulnerabilities:
  - In scenario assuming one standard deviation below historical average of non-debt flows (including FDI and current transfers) in first two years, the NPV of debt-to-exports ratio increases to almost 300 percent and stays significantly above the indicative threshold for the rest of the projection period.
  - In scenario assuming a one-time 30 percent nominal depreciation of the national currency, the NPV of debt-to-GDP and NPV of debt-to-revenue ratios breach corresponding thresholds for a prolonged period.
  - Shocks have a lesser effect on debt service ratios owing in part to high degree of concessionality of new loans.
  - Historical scenario (using recent 7-year averages) implies more pronounced improvement in initial years, largely due to lower current account deficit in earlier years versus 2009 and medium-term projections.
- Alternative country-specific scenario (additional delivery of debt relief at completion point):
  - Marked improvement in external debt outlook.
  - NPV of debt-to-exports ratio still exceeds the 100 percent indicative threshold but the debt burden is at a much more manageable level compared to the baseline.
  - Ratios of NPV of debt to GDP and to revenue fall comfortably below respective thresholds and remain in sustainable ranges.
  - Underscores importance of HIPC Initiative and MDRI for external debt sustainability.

### Public sector debt sustainability findings
- Inclusion of domestic public debt:
  - Debt burden indicators deteriorate only slightly when domestic public debt is included.
  - In the baseline, debt-to-GDP ratio and debt-to-revenue ratio steadily decline over time, driven largely by external public debt dynamics.
- Sensitivity:
  - Public debt dynamics are vulnerable to adverse shocks.
  - Lower long-run economic growth would have a noticeable effect on key debt burden ratios.
  - When historical averages are used for GDP growth and the primary budget balance, debt indicators deteriorate markedly.
  - Confirms need for stronger growth and steady fiscal consolidation as outlined in the ECF-supported program.

### DSA conclusion
- The low-income country DSA shows Comoros is in debt distress and is likely to remain so under the baseline scenario for a prolonged time period.
- Full delivery of HIPC debt relief and MDRI will significantly improve the country’s external debt situation.
- These conclusions are consistent with results from the 2009 DSA update.

*Source: Annex I and Annex II, _cr10242 - Annex I. Comoros: Debt Management Capacity (Joint IMF/World Bank DSA 2010).*

### 14.  Alternative scenarios and stress tests highlight the vulnerability of Comoros to

### _cr10242 - 14.  Alternative scenarios and stress tests highlight the vulnerability of Comoros to

### Main finding
- Comprehensive debt relief is necessary, and maintaining sustainable levels of indebtedness would require steady implementation of growth-enhancing economic policies, including fiscal prudence, as well as prudent debt management, as evidenced by the results from the public DSA.

### Debt sustainability indicators and stress-test results (high-level)
- Most extreme stress tests are those yielding the highest ratio in 2020; specific most-extreme tests identified:
  - Figure b: One-time depreciation shock.
  - Figure c: Non-debt flows shock.
  - Figure d: One-time depreciation shock.
  - Figure e: Non-debt flows shock.
  - Figure f: One-time depreciation shock.
- Key indicator snapshots (selected series shown in charts and tables for 2010-2030):
  - Debt accumulation, PV of debt-to-GDP ratio, PV of debt-to-exports ratio, PV of debt-to-revenue ratio, debt service-to-exports ratio, debt service-to-revenue ratio are tracked under baseline, historical scenario, and most extreme shock lines.

### Key quantitative baseline projections and dynamics (selected exact values from DSA tables)
- External debt (nominal) series (selected): 57.6, 54.2, 51.3, 45.0, 45.5, 45.5, 44.8, 43.8, 42.4, 33.2, 21.1 (periods aligned to table rows).
- Change in external debt (selected): -12.2, -3.3, -2.9, -6.4, 0.5, 0.0, -0.6, -1.0, -1.4, -1.6, -1.0.
- Identified net debt-creating flows (selected): -4.7, 3.1, 4.8, 1.6, 7.3, 6.2, 5.0, 4.9, 4.7, 4.2, 3.5.
- Non-interest current account deficit (selected): 5.9, 10.5, 7.5, 4.4, 3.6, 5.2, 10.7, 10.0, 8.8, 8.5, 8.2, 6.3, 4.4, 5.8.
- Net current transfers (negative = inflow) (selected): -19.9, -23.3, -25.7, -17.3, 4.5, -27.0, -20.1, -19.7, -19.2, -18.7, -18.2, -16.0, -12.1, -14.8.
- Endogenous debt dynamics (selected): -8.9, -6.6, -0.1, -0.7, -0.8, -1.2, -1.3, -1.3, -1.3, -1.0, -0.6.
  - Contribution from nominal interest rate (selected): 0.4, 0.5, 0.4, 0.3, 0.2, 0.3, 0.4, 0.4, 0.4, 0.3, 0.2.
  - Contribution from real GDP growth (selected): -0.3, -0.5, -1.0, -1.1, -1.1, -1.5, -1.7, -1.7, -1.6, -1.3, -0.8.
- PV of external debt (selected): 36.9, 29.5, 30.2, 30.4, 29.9, 29.1, 28.1, 22.0, 14.9 (period alignment follows table).
- PV of debt in percent of exports (selected): 260.4, 202.8, 209.8, 213.9, 213.5, 209.5, 203.7, 160.4, 106.0.
- PV of PPG external debt (in percent of government revenues) (selected): 265.2, 199.2, 207.0, 200.8, 206.5, 193.1, 182.0, 125.6, 75.1.
- Debt service-to-exports ratio (in percent) (selected): 12.0, 13.3, 10.7, 7.5, 5.4, 7.3, 10.4, 11.9, 12.7, 9.4, 7.4.
- PPG debt service-to-revenue ratio (in percent) (selected): 13.3, 13.6, 10.9, 7.4, 5.3, 6.8, 10.1, 11.0, 11.4, 7.4, 5.2.
- Total gross financing need (Billions of U.S. dollars) (selected): 0.0, 0.1, 0.0, 0.0, 0.1, 0.1, 0.1, 0.1, 0.1, 0.1.
- Non-interest current account deficit that stabilizes debt ratio (selected): 18.1, 13.9, 10.4, 11.6, 10.2, 10.0, 9.4, 9.5, 9.6, 7.9, 5.3.

### Key macroeconomic assumptions (selected exact values)
- Real GDP growth (in percent) series (selected): 0.5, 1.0, 1.8, 2.0, 1.5, 2.1, 2.5, 3.5, 4.0, 4.0, 4.0, 3.3, 4.0, 4.0, 4.0.
- GDP deflator in US dollar terms (change in percent) (selected): 14.8, 12.9, -0.8, 7.5, 10.0, 1.9, 2.2, 2.4, 2.5, 2.8, 2.8, 2.4, 3.0, 3.0, 3.0.
- Effective interest rate (percent) (selected): 0.6, 1.0, 0.7, 1.0, 0.2, 0.7, 0.6, 0.7, 0.9, 0.9, 0.9, 0.8, 0.8, 1.0, 0.9.
- Growth of exports of G&S (US dollar terms, in percent) (selected): 20.8, 8.3, 6.7, 10.9, 11.9, 6.7, 3.6, 4.8, 5.1, 5.9, 6.0, 5.3, 7.7, 7.5, 7.2.
- Growth of imports of G&S (US dollar terms, in percent) (selected): 23.4, 33.2, 0.7, 13.9, 14.1, 9.0, -2.1, 3.5, 3.3, 4.9, 4.9, 3.9, 5.0, 5.5, 5.1.
- Grant element of new public sector borrowing (in percent) (selected): 44.6, 43.9, 44.3, 47.3, 47.3, 47.1, 45.7, 41.9, 33.1, 38.5 (table shows series with ellipses for some periods).
- Government revenues (excluding grants, in percent of GDP) (selected): 12.7, 13.1, 13.9, 14.8, 14.6, 15.2, 14.5, 15.1, 15.4, 17.5, 19.9, 18.1.
- Grant-equivalent financing (in percent of GDP) (selected): 15.0, 8.2, 8.0, 8.7, 8.5, 8.5, 6.6, 5.5, 6.4.
- Memorandum: Nominal GDP (Billions of US dollars) series (selected): 0.5, 0.5, 0.5, 0.6, 0.6, 0.6, 0.7, 0.7, 0.8, 1.1, 2.1.
- PV of PPG external debt (in Billions of US dollars) (selected): 0.2, 0.2, 0.2, 0.2, 0.2, 0.2, 0.2, 0.2, 0.3.
- PV of PPG external debt (in percent of exports) (selected): 260.4, 202.8, 209.8, 213.9, 213.5, 209.5, 203.7, 160.4, 106.0.

### Sensitivity and scenario analysis (selected exact outcomes)
- Alternative scenarios and bound tests produce wide variation in PV of debt ratios and debt-service metrics across 2010-2030. Representative scenario values (from Table 1b and Table 2b):
  - PV of debt-to-GDP ratio (baseline and alternative scenarios): baseline and multiple scenario series include numbers such as 29, 30, 30, 29, 24, 16, 17, 18 in the tables (specific rows correspond to PV-to-GDP under different scenarios and years).
  - PV of debt-to-revenue ratio, PV of debt-to-exports ratio, debt service-to-revenue ratio, and debt service-to-exports ratio similarly show substantial sensitivity across scenarios A1, A2, A3 and bound tests B1–B6 (tables present extensive scenario-by-year numeric grids).
- Table 1b sensitivity notes (exact definitions preserved):
  - 1/ Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.
  - 2/ Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.
  - 3/ Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).
  - 4/ Includes official and private transfers and FDI.
  - 5/ Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.
  - 6/ Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

### Public sector debt baseline dynamics (selected exact values)
- Public sector debt (percent of GDP) (selected): 60.9, 57.3, 54.1, 47.7, 48.2, 48.2, 47.5, 46.4, 45.0, 36.0, 24.1.
- Change in public sector debt (selected): -12.3, -3.6, -3.1, -6.5, 0.5, 0.0, -0.7, -1.1, -1.4, -1.6, -1.0.
- Revenues and grants (selected, percent of GDP): 20.3, 23.5, 23.6, 28.0, 21.3, 21.7, 21.7, 22.1, 22.6, 23.4, 25.0.
- Grants (selected, percent of GDP): 7.6, 10.4, 9.7, 13.2, 6.7, 6.5, 7.2, 7.1, 7.2, 5.9, 5.1.
- PV of public sector debt (selected): 3.3, 3.1, 39.7, 32.2, 32.9, 33.1, 32.6, 31.7, 30.6, 24.8, 18.0.
- Gross financing need (selected): 5.8, 6.2, 3.0, -1.9, 4.6, 4.2, 4.8, 4.7, 4.5, 3.5, 2.6.
- PV of public sector debt-to-revenue and grants ratio (in percent) (selected): 16.5, 13.0, 168.2, 114.8, 154.4, 152.9, 150.1, 143.1, 135.5, 105.7, 72.0.
- Primary deficit that stabilizes the debt-to-GDP ratio (selected): 14.0, 5.6, 2.2, 1.2, 1.0, 0.8, 1.7, 1.7, 1.8, 1.3, -0.3.

### Alternative scenarios and bound tests (high-level enumeration)
- Alternative scenarios considered (Table listings):
  - A1. Key variables at their historical averages in 2010-2030.
  - A2. New public sector loans on less favorable terms in 2010-2030.
  - A3. Alternative Scenario: With HIPC/MDRI.
- Bound tests considered (Table listings):
  - B1. Real GDP growth at historical average minus one standard deviation in 2011-2012.
  - B2. Export value growth at historical average minus one standard deviation in 2011-2012.
  - B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012.
  - B4. Net non-debt creating flows at historical average minus one standard deviation in 2011-2012.
  - B5. Combination of B1–B4 using one-half standard deviation shocks.
  - B6. One-time 30 percent nominal depreciation relative to the baseline in 2011.

### Policy implications and conditionality for debt relief (from IMF/World Bank press release)
- IMF and World Bank decisions:
  - Comoros has reached its decision point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
  - Determined step toward receiving US$144.8 million in net present value (NPV) terms in debt relief.
  - IDA Executive Board approved interim assistance to cover part of Comoros’ debt service to the institution.
  - Comoros becomes the 36th country to reach its decision point.
  - HIPC debt relief from IDA will total US$45.1 million and from the IMF US$4.3 million, both in NPV terms.
  - There will be no IMF MDRI debt relief as Comoros had no outstanding debt to the Fund at end-2004.
- Conditions and commitments to reach completion point:
  - Maintain macroeconomic stability as measured under the IMF’s Extended Credit Facility arrangement (formerly the Poverty Reduction and Growth Facility).
  - Implement a poverty reduction strategy comprising key pro-growth and pro-poor structural and social measures.
  - Improve public financial management, public expenditure policy, external debt management.
- Quotes preserved exactly:
  - Mbuyamu Matungulu: “In the last two years, Comoros has made progress on political and economic reforms. Despite challenging circumstances, performance under IMF-supported programs has been broadly satisfactory. Growth is trending up, and the Comorian authorities are endeavoring to strengthen macroeconomic stability by putting public finances on a firmer footing and improving public financial management. Looking ahead, fiscal discipline and the acceleration of public utilities reform, continued concessional donor support, the full delivery of HIPC and MDRI debt relief, and sound debt management will be critical for achieving medium-term macroeconomic and debt sustainability and putting the economy on a path of sustained growth and faster poverty reduction."
  - Johannes Zutt: "Debt relief will enable the Government better to implement the economic reforms that are needed to support sustainable growth in Comoros. It will also free up resources to provide health care, education and other essential services to improve the livelihoods of Comorians, especially the poor."

*Sources: Country authorities; and staff estimates and projections; Press Release No. 10/266, June 29, 2010.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10242.pdf_