## _cr1333

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### Executive summary — HIPC decision and completion point
- In June 2010, the Executive Boards of IDA and the IMF determined that the Union of the Comoros had met the requirements for reaching the decision point under the Enhanced HIPC Initiative.
- Amount of debt relief committed at the decision point: US$144.8 million in PV terms at the end of 2009, calculated to reduce the present value (PV) of eligible external debt to the threshold of 150 percent exports ratio at end-2009.
- Common reduction factor implied at decision point: 56.3 percent.
- IDA and IMF staff view that Comoros has fulfilled the conditions for reaching the HIPC Initiative completion point, subject to a waiver request for one missed completion point trigger in the education sector.
- Financing assurances provided by creditors representing 98.1 percent of HIPC debt relief estimated at the decision point.

### Programmatic and structural progress (PRGSP, macro stability, PFM, social sectors)
- Poverty reduction strategy
  - PRGSP (2010–2014) adopted in September 2009.
  - First one-year progress report (2010) completed in mid-2011; second year progress report (2011) submitted in October 2012.
  - Joint Staff Advisory Note (JSAN) confirms satisfactory implementation during 2011.
- Macroeconomic stability
  - Macroeconomic stability maintained via satisfactory implementation of the ECF-supported program.
  - IMF Board concluded the third ECF review and extended the ECF arrangement for Comoros to end-2013.
- Public financial management, governance, structural reforms
  - Publication of quarterly budget execution reports.
  - Completion of feasibility study for a computerized PFM system; new system scheduled operational by June 2013; installation cost estimated at US$1.5 million funded by AfDB Group.
  - Promulgation of a public procurement law (February 2012) consistent with COMESA norms.
  - Adoption of revised organic frameworks for ministries (2012 Budget Law).
  - Establishment/submission steps for external budget oversight (Section des Comptes / Chamber of Accounts).
- Social sectors
  - New schools constructed and required vaccination campaigns undertaken.
  - Education sector trigger (#11: 300,000 textbooks and 25,000 school kits) only partially implemented; waiver requested and supported by staff.

### Education and health triggers — delivery status (Triggers 9–13)
- Education (MDG 2)
  - Trigger 9 (Construct and equip 210 primary classrooms): Met. Reported construction: 205 primary school classrooms built (40 Moheli; 106 Anjouan; 59 Ngazidja). Rehabilitation: 296 classrooms rehabilitated (196 Moheli; 67 Anjouan; 33 Ngazidja). Totals as of September 2012: 236 constructed/rehabilitated in Moheli; 173 in Anjouan; 92 in Ngazidja; total 501.
  - Trigger 10 (Construct 100 separated latrines): Met. 125 separated latrines constructed and 6 rehabilitated; more than 58 fountains built inside schoolyards.
  - Trigger 11 (Provide 300,000 textbooks and 25,000 school kits): Not met; waiver requested.
    - Textbooks delivered: 39,250.
    - School kits delivered: 110,722 (target 25,000 met and exceeded).
    - Government policy shift to locally developed manuals; request for GPE grant of US$4.6 million planned.
- Health (MDGs 4 and 6)
  - Trigger 12 (Measles SIA for children 9–47 months to achieve 90-percent coverage): Met (routine coverage for cohorts 6–47 months increased from 79 percent in 2009 to 89.6 percent in December 2011). SIA (Oct 2010) achieved 84 percent for 9–47 months overall; island results: Anjouan 105 percent; Mohéli 85 percent; Ngazidja 66 percent.
  - Trigger 13 (National survey on NCD risk factors): Met. Survey conducted; report finalized September 2011; new NCD strategy adopted October 2012.

### Debt reconciliation and recommended HIPC assistance
- End-2009 nominal stock of HIPC-eligible external debt revised upward by US$5.3 million from US$286.8 million to US$292.2 million.
- PV of debt after traditional debt relief revised upward by US$1.2 million from US$257.4 million to US$258.6 million.
- Exports estimate (annual average 2007–09) revised upward from $75 million to $75.5 million.
- Upward revision of HIPC assistance at decision point from US$144.8 million to US$145.4 million (result of PV/external data revisions).
- Staff recommendation: keep HIPC assistance at decision point level of US$144.8 million (end-2009 PV terms) and maintain common reduction factor at 56.3 percent.

### Creditor participation, interim relief, and modality of delivery
- Decision point allocations (end-2009 PV terms):
  - IDA: US$44.9 million.
  - IMF: US$4.3 million (equivalent to SDR 2.9 million).
- Interim relief:
  - IDA provided US$6.3 million in end-2009 PV terms as interim relief via reduction of debt service.
  - No HIPC interim assistance from the IMF following the decision point (no principal payments due until 2014; interest obligations on concessional lending waived by the IMF through end-2012).
  - IMF HIPC relief expected at completion point via stock-of-debt operation about SDR 3 million.
- Creditor assurances and delivery status at completion point:
  - Financing assurances from creditors accounting for 98.1 percent of the PV of HIPC assistance estimated at the decision point.
  - Multilateral creditors represent 76.4 percent of PV of multilateral HIPC assistance.
  - Bilateral creditors account for 21.7 percent of PV of bilateral and commercial assistance.
  - Multilateral assistance detailed (end-2009 PV terms):
    - IDA: US$44.93; interim US$6.3; remaining via 65 percent reduction of debt service to IDA through December 2030 (annual average debt-service savings US$3.2 million from Jan 2013–Dec 2030).
    - AfDB Group: US$34.424 (covered by arrears clearance under PCCF in 2007).
    - IMF: US$4.33 (SDR 2.9 million); delivery via stock-of-debt at completion.
    - AMF: US$0.60; full delivery via cancellation of remaining debt service in 2012 and 2013.
    - OFID: US$2.01; fully delivered via concessional rescheduling.
    - BADEA: US$15.411; partial relief delivered, full relief expected at completion.
    - IFAD: US$3.22; to be delivered by cancelling debt service installments.
    - IsDB: US$5.14; moratorium on debt service until completion; expected full delivery at completion.
  - Bilateral/commercial:
    - Paris Club: US$8.16; agreed in principle on Cologne terms; Italy cancelled its claims.
    - Non-Paris Club: US$23.716 (major creditors Kuwait 14.110 and Saudi Arabia 8.76); some rescheduling agreements in 2007.
    - Commercial creditors: US$2.32; no agreement signed (three creditors as of Dec 2009).

### Topping-up assessment and end-2011 position
- End-2011 nominal stock of external debt: US$274.9 million.
  - Multilateral: US$204.6 million (74.4 percent of total).
    - IDA: 39.9 percent of total debt.
    - IMF: 5.3 percent of total debt.
    - AfDB group: 11.5 percent of total debt.
  - Paris Club: 5.5 percent of total nominal debt.
  - Non-Paris Club bilateral: 16.1 percent of total debt.
  - Commercial: 4.1 percent of total debt.
- Topping-up conclusion:
  - PV of debt-to-exports ratio at end-2011 after full delivery of HIPC assistance committed at Decision Point: 147.7 percent.
  - After full delivery of additional bilateral debt relief beyond HIPC: 141.6 percent.
  - Both figures are below HIPC threshold of 150 percent; Comoros does not qualify for topping-up.
- Breakdown of the 3.9 percentage point increase in PV debt-to-exports relative to Decision Point projection:
  - Total increase: 3.9 percentage points.
  - Due to changes in parameters: 15.6 percentage points (o/w discount rates: 17.5; exchange rates: -1.9).
  - Due to unanticipated new borrowing: -14.8 percentage points (o/w higher-than-expected disbursements: -15.9; lower concessionality: 1.1).
  - Due to changes in exports: -0.2 percentage points.
  - Other factors: 2.3 percentage points.
  - Bilateral debt relief beyond HIPC: 6.1 percentage points.
  - PV of debt-to-exports ratio (actual): 147.7.
  - PV after full delivery HIPC + bilateral beyond HIPC (actual): 141.6.

### MDRI implications and nominal relief amounts
- Upon reaching completion point, Comoros qualifies for MDRI from IDA and AfDF; no MDRI-eligible debt to the IMF.
- MDRI implications (nominal terms):
  - Stock of debt reduction: US$77.1 million (net of HIPC assistance).
  - Saves country US$83 million in debt service over 29 years.
- MDRI from IDA:
  - Reduction to IDA debt: US$46.9 million.
  - Average annual debt service savings (net of HIPC assistance) US$1.7 million between 2012 and 2041.
  - Total debt service savings from MDRI (IDA): US$50 million (SDR 33 million).
- MDRI from AfDF:
  - Reduction to AfDF debt: US$30.2 million.
  - Average annual debt service savings (net of HIPC assistance) US$1.1 million between 2012 and 2041.
  - Total debt service savings from MDRI (AfDF): US$33 million.
- IMF: no MDRI relief.

### Post-relief debt burden, projections, and sustainability outlook
- PV of debt-to-exports:
  - 343 percent as of end-December 2009.
  - 78.9 percent at end-2012 after full delivery of HIPC, additional bilateral relief, and MDRI (scenario VI).
  - Projected to rise to 145.3 percent at end-2031 (scenario VI projection).
- PV of debt-to-GDP:
  - 33.5 percent at end-2011.
  - Average 16.7 percent in 2012–21.
  - Average 19.7 percent in 2022–31.
- PV of debt-to-revenue:
  - 207.9 percent at end-2011.
  - Average 106.6 percent in 2012–21.
  - Average 118.6 percent in 2022–31.
- Debt service-to-exports after HIPC/MDRI:
  - 0.9 percent in 2013; rises to reach 4.1 percent and averages 3.5 percent thereafter (Table A7, scenario IV).

### Sensitivity analysis, scenarios, and risks
- Macroeconomic assumptions (Box 2: 2011–32)
  - Real GDP growth projected to accelerate to 4 percent per year over the medium term.
  - Inflation projected around 3 percent per year.
  - Current account deficit (including grants) expected to converge to about 7 percent of GDP (compared to 9 percent in 2011).
  - Remittances projected to increase on average 5 percent in nominal terms over the projection period.
  - Fiscal consolidation: primary fiscal balance projected to be in surplus from 2016 onwards.
- Scenario II (Lower-exports): permanent reduction of exports by 30 percent → PV of debt breaches 150 percent of exports in 2027; debt service averages 4 percent of exports and 3.6 percent of revenue.
- Scenario III (Output shock): permanent reduction in output growth by 1.5 percentage points → PV debt-to-exports remains below 150 percent until 2031 breach; PV debt-to-revenue exceeds 200 percent in long term and approaches 250 percent toward end projection; debt service averages 3.6 percent of exports and 5.2 percent of revenue.
- Sensitivity conclusion: Comoros remains vulnerable to shocks even after substantial debt relief; alternative scenarios can breach critical thresholds (150 percent of exports; near 250 percent of revenue).

### Policy recommendations and priorities
- Maximize grant assistance and borrow only on highly concessional terms to maintain debt ratios below critical thresholds post-completion point.
- Strengthen debt management and maintain a very prudent and conservative borrowing policy in the medium and long term, especially if public expenditure prioritizes achieving the MDGs.
- Undertake further reforms to achieve higher output and export growth given a relatively small export base (including tourism).
- Strengthen capacity to evaluate potential government liabilities, implement sound macroeconomic policies, and improve the business environment to achieve and maintain sustainable debt levels.
- Continue reforms of state-owned enterprises and public finance management to lay foundation for rapid sustainable economic growth.

### Key macro-fiscal and external indicators (selected series and projections)
- Real GDP (percent): 1.8 (2009), 2.1 (2010), 2.2 (2011), 2.5 (2012), 2.5 (2013), 3.5 (2014), 4.0 (2015), 4.0 (2016), 4.0 (2017).
- Consumer price index (annual averages): 4.8 (2009), 3.9 (2010), 6.8 (2011), 5.6 (2012), 6.0 (2013), 4.3 (2014), 3.4 (2015), 3.3 (2016), 3.3 (2017), 3.1 (projection unspecified).
- Domestic primary balance (percent of GDP): -2.6 (2009), -1.6 (2010), 1.6 (2011), -1.1 (2012), 2.2 (2013), -0.9 (2014), -0.5 (2015), 0.0 (2016), 0.3 (2017), 0.6 (later projection).
- Current account balance (percent of GDP): -7.8 (2009), -5.7 (2010), -9.0 (2011), -10.4 (2012), -6.9 (2013), -6.0 (2014), -8.6 (2015), -7.7 (2016), -7.4 (2017), -6.9 (later projection).
- Gross international reserves (end period, US$ millions): 146.0 (2009), 144.2 (2010), 170.1 (2011), 158.0 (2012), 187.5 (2013), 194.5 (2014), 207.0 (2015), 223.1 (2016), 239.2 (2017), 255.9 (later projection).
- External debt, PV in percent of GDP: 46.2 (2009), 38.9 (2010), 33.1 (2011), 31.8 (2012), 10.0 (post-relief projection), 11.8, 13.1, 14.3, 15.2, 15.8 (sequence of projections).
- Selected annex table items:
  - Total nominal debt at end-2011: 274.9 (US$ million).
  - PV of debt at end-2011: 217.2 (US$ million).
  - PV of debt after enhanced HIPC relief (end-2011): 129.2 (US$ million).
  - PV after additional bilateral relief (end-2011): 123.9 (US$ million).

### Completion point recommendation and Executive Directors’ questions
- Staff recommendation: Executive Directors of IDA and the IMF approve the completion point for the Union of the Comoros under the enhanced HIPC Initiative.
- Staff recommend that HIPC assistance of US$144.8 million in PV terms be provided to Comoros.
- Questions for Directors include agreement that Comoros has reached the completion point; whether Comoros has met requirements for exceptional topping-up (staff view: no); and whether creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance.

### Debt management capacity, reforms, and implementation actions (Appendix I)
- Improvements since decision point:
  - Installation of CS-DRMS 2000+ in July 2012; entire debt database transferred.
  - Batteries installed to mitigate power cuts; DND personnel trained and demonstrated system adoption.
  - Production of end-2010 and end-2011 public debt reports within six months after year end.
  - Decree restructured DND into four offices; organic framework approved by Parliament making five DND positions permanent.
- Remaining weaknesses:
  - Lack of data sharing between cabinet, CREF, and DND.
  - No external/internal audits of debt management operations; limited capacity to independently conduct DSA.
  - Cash management basic; liquidity rationing and domestic payments arrears remain issues.
  - Limited information sharing between Project Implementation Units and DND on disbursements.
- Sequenced debt management reform plan (with World Bank, February 2012) priorities:
  - Governance: establish institutional, legal and regulatory framework for borrowing.
  - Debt management strategy and borrowing activities: strengthen analytical functions; prepare simple debt management strategy; strengthen analysis of costs/risks of new loans and rescheduling proposals; clear arrears.
  - Reduction of operational risk: strengthen loan recording/validation; data/document safety; internal organization; and staff training.

*Source: _cr1333 (IMF staff report excerpts).*

### Executive Summary ......................................................................................................

### _cr1333 - Executive Summary

### Key findings on HIPC decision and completion point
- In June 2010, the Executive Boards of IDA and the IMF determined that the Union of the Comoros had met the requirements for reaching the decision point under the Enhanced HIPC Initiative.
- The amount of debt relief committed at the decision point was US$144.8 million in PV terms at the end of 2009, calculated to reduce the present value (PV) of eligible external debt to the threshold of 150 percent exports ratio at end-2009.
- The relief implied a common reduction factor of 56.3 percent.
- IDA and IMF staff view that Comoros has fulfilled the conditions for reaching the HIPC Initiative completion point, subject to a waiver request for one missed completion point trigger in the education sector.
- So far, financing assurances have been provided by creditors representing 98.1 percent of HIPC debt relief estimated at the decision point.

### Progress on programmatic and structural requirements
- Poverty reduction strategy
  - The Poverty Reduction and Growth Strategy Paper (PRGSP, 2010–2014) was adopted in September 2009.
  - A first one-year progress report (2010) was completed in mid-2011; the second year progress report (2011) was submitted in October 2012.
  - A Joint Staff Advisory Note (JSAN) confirming satisfactory implementation during 2011 accompanies the completion point report.
- Macroeconomic stability
  - Staffs consider macroeconomic stability maintained as evidenced by satisfactory implementation of the Extended Credit Facility (ECF)-supported program.
  - The IMF Board concluded the third ECF review and extended the ECF arrangement for Comoros to end-2013.
- Public financial management, governance, and structural reforms
  - Broad progress in fiscal consolidation and macroeconomic stability.
  - Progress in improving public financial and debt management, restructuring of public utilities, and new institutional frameworks for procurement and governance.
  - Specific accomplishments include publication of quarterly budget execution reports, completion of a feasibility study for a computerized PFM system, promulgation of a public procurement law (February 2012) consistent with COMESA norms, adopting revised organic frameworks for ministries (2012 Budget Law), and establishment/submission steps for external budget oversight (Section des Comptes).
- Social sectors
  - New schools constructed and required vaccination campaigns undertaken.
  - The education sector trigger (#11) has only been partially implemented; authorities requested a waiver, which IDA and IMF staffs support.

### Debt reconciliation and recommended HIPC assistance
- As a result of the debt reconciliation exercise for the completion point, the PV of eligible external debt at end-2009 after traditional debt relief was revised upward from US$257.4 million to US$258.6 million.
- Because this adjustment is small and in line with HIPC guidelines, staffs recommend keeping the required HIPC assistance in end-2009 PV terms at the decision point level of US$144.8 million and maintaining the common reduction factor at 56.3 percent.

### Creditor participation and interim relief
- At the decision point:
  - HIPC debt relief from IDA would amount to US$44.9 million and assistance from the IMF would total US$4.3 million, in PV terms.
  - IDA provided US$6.3 million in end-2009 PV terms as interim relief in the form of a reduction of debt service.
  - There has been no HIPC interim assistance from the IMF following the decision point (no principal payments are due until 2014, and interest obligations on concessional lending to all low-income member countries have been waived by the IMF through end-2012).
  - IMF HIPC relief is expected at the completion point through a stock-of-debt operation in an amount of about SDR 3 million.

### Topping-up consideration and end-2011 assessment
- IDA and IMF staffs conclude that Comoros does not qualify for topping-up under the Enhanced HIPC Initiative based on end-2011 debt data.
- After full delivery of HIPC assistance committed at the decision point and additional bilateral debt relief beyond the HIPC Initiative, the PV of debt-to-exports ratio at end-2011 would decline to 141.6 percent, below the HIPC threshold of 150 percent.

### MDRI implications and nominal relief amounts
- Upon reaching the completion point under the enhanced HIPC Initiative, Comoros will qualify for additional debt relief under the Multilateral Debt Relief Initiative (MDRI).
- MDRI implications:
  - Debt relief under the MDRI would imply a stock of debt reduction of US$77.1 million (net of HIPC assistance) in nominal terms.
  - This would save the country US$83 million in debt service over a period of 29 years.
  - The additional relief would be provided via debt stock reductions at the completion point by IDA (US$46.9 million) and the African Development Fund (AfDF) (US$30.2 million), with no MDRI assistance from the IMF.

### Post-relief debt burden and sustainability outlook
- Full delivery of HIPC assistance together with additional bilateral assistance beyond HIPC and MDRI debt relief at the completion point would reduce Comoros’ external debt burden significantly:
  - The PV of debt-to-exports ratio would decline from 343 percent as of end-December 2009 to 78.9 percent at end-2012.
  - The PV of debt-to-GDP ratio would decline from 33.5 percent at end-2011 to an average of 16.8 percent in 2012–21.
- Sensitivity and risk
  - Sensitivity analysis shows the country remains vulnerable to shocks to exports and GDP.
  - The LIC-DSA shows a slight improvement in Comoros’s risk of debt distress from “in debt distress” to “at high risk of debt distress” rating.

### Recommendation to Executive Directors
- Staffs recommend that the Executive Directors of IDA and the IMF approve the completion point for the Union of the Comoros under the enhanced HIPC Initiative.

*Source: _cr1333 - Executive Summary.*

### 2012. Training has been provided to relevant

### _cr1333 - 2012. Training has been provided to relevant

### Structural reform
- Officially adopt reform strategies to strengthen management of Comores Télécoms (telecommunications), Société Comorienne des Hydrocarbures (SCH, oil import and storage), and the Water and Electricity Company (MAMWE (electricity)); and issue calls for expressions of interest to identify a strategic partner for at least one of the three companies.
- Assessment:
  - Met. Authorities are implementing an IFC-approved restructuring strategy for Comores Télécoms.
  - The government’s energy strategy approved by the Cabinet in August 2012 outlines the reform agenda for MAMWE and SCH.
  - A call for expressions of interest for the privatization of Comores Télécoms was launched in November 2012.
  - A call for expressions of interest in the management of MAMWE was issued in September 2012.

### Education: Strengthen efforts towards achieving MDG 2
- Construct and equip 210 primary school classrooms following agreed standards (22 on Moheli, 126 on Anjouan, and 62 on Ngazidja).
  - Met. 501 classrooms have been built or rehabilitated since 2010 (236 on Moheli, 173 on Anjouan, and 92 on Ngazidja).
- Construct 100 separated latrines for improved hygiene and promotion of girls' participation.
  - Met. In total, 125 separated latrines were constructed.
- Provide 300,000 textbooks and 25,000 school kits (including basic school supplies) for vulnerable children.
  - Not met. Waiver requested. A total of 39,250 textbooks and 110,722 school kits were delivered.
  - In 2012, Government adopted new policy on schools textbooks and manuals. Donors working on education support the new policy as it efficiently focuses on improving learning quality.

### Health: Strengthen efforts towards achieving MDGs 4 and 6
- Conduct a national measles vaccination campaign for children 9–47 months to achieve 90-percent coverage nationwide.
  - Met. The 90 percent measles vaccination rate has been achieved for the MDG-relevant cohorts of 6–47 month old infants.
  - A report on the 2010 Supplemental Immunization Activities (SIA) Campaign confirmed that 84 percent of children from 9–47 months were covered by the SIA.
  - Together with routine vaccination programs, coverage of measles vaccination for the larger cohort (6–47 months) increased from 79 percent in 2009 to 89.6 percent in December 2011.
- Carry out a national survey on risk factors for non-communicable diseases (NCD) to guide development of a national strategy.
  - Met. The survey was conducted and the report on survey results was finalized in September 2011.
  - The survey informed the development of the new NCD strategy adopted in October 2012.

### Debt management
- Improve public debt management systems, particularly adopting effective debt management software.
  - Met. Performing debt management software (CS-DRMS 2000+) was installed in July 2012 and the entire debt database has been transferred.
  - The National Debt Directorate (DND) personnel have received extensive training and have demonstrated that they have adopted the system.
- Produce detailed annual reports on external and domestic debt no later than six months after year end, including data on existing stocks, new loans, and debt service due and paid. At least one such report should be available prior to Comoros reaching the HIPC completion point.
  - Met. The DND produced the public debt reports for 2010 and 2011 within the required deadlines of end of June 2011 and 2012, respectively; with contents as agreed in the trigger. These reports were sent to government institutions and development partners.
- Amend the 2003 decree (décret N°03-62/PR) establishing the debt management office to refocus its mandate and activities, consistent with the office's capacity limitations.
  - Met. A new decree and associated arrêté have restructured the DND into four offices with well-defined functions, in accordance with good practice.
  - The capacity of the DND's personnel has improved since the HIPC decision point, both in terms of number and quality of (trained) staff.

### Poverty Reduction Strategy Paper (PRGSP)
- Trigger 1: Satisfactory implementation for at least one year of the full PRSP, evidenced by an Annual Progress Report (APR) submitted by the government to IDA and the IMF.
  - Staffs consider this trigger to have been met. The authorities submitted two APRs covering the first and second years of implementation of the PRSP.
  - The Poverty Reduction and Growth Strategy Paper (PRGSP) was officially adopted by the Government of the Union of the Comoros on September 10, 2009, covering the period 2010-2014.
  - PRGSP core strategy pillars: (i) stabilize the economy and lay the groundwork for strong equitable growth; (ii) strengthen key sectors by focusing on institution-building and ensuring a broader role for the private sector; (iii) strengthen governance and social cohesion; (iv) improve the health status of the general public; (v) promote education and vocational training with the aim of developing human capital; and (vi) promote environmental sustainability and civilian security.
  - Staffs note mixed progress in 2010 and more satisfactory implementation in 2011, including improved macroeconomic and fiscal performance and progress on structural reforms.

### Macroeconomic Stability
- Trigger 2: Maintenance of macroeconomic stability as evidenced by satisfactory implementation of the ECF-supported program.
  - Staffs consider this trigger to have been met. A three-year ECF arrangement was approved in September 2009.
  - Program performance: Broadly satisfactory despite temporary slippages in early 2011 related to a public sector pay raise in October 2010, lower-than-programmed tax collection, and delays in structural reforms.
  - New administration (from June 2011) adopted measures to strengthen domestic revenue mobilization and reversed the October 2010 public wage increase.
  - Structural actions: civil service census; new ministry personnel frameworks; roadmap for privatization of Comores Télécoms with World Bank technical assistance.
  - Outcome: Nearly all program performance targets for end-December 2011 were met, permitting conclusion in June 2012 of the third ECF review and extension of the ECF arrangement to end-2013.
- Recent macroeconomic developments and outlook:
  - Real GDP growth increased by nearly two percentage points since 2009, reaching an estimated 2.2 percent in 2011.
  - Main growth drivers: agriculture, some pickup in FDI from the Gulf Region, donor support, and remittances.
  - Structural external current account deficit averaging 34 percent of GDP between 2009 and 2012 (excluding official and private transfers).
  - Inflationary pressures broadly contained due to Comoros’ membership in the Franc Zone.
- Fiscal performance:
  - Domestic primary budget deficit is projected to decline to 0.9 percent of GDP (a surplus of 2.2 percent of GDP, including exceptional revenue under the Economic Citizenship Program, ECP) in 2012 (2.6 percent of GDP in 2009).
  - Revenue-enhancing actions: leadership changes in fiscal agencies; expansion of the Large Tax Payer Unit (SFE) to 530 taxpayers by mid-2012; implementation and adherence to ASYCUDA++; shift from specific to ad valorem taxation of imports at Customs.
  - Non tax-revenue under the ECP averaged 3 percent of GDP in 2011-12.
  - Expenditure controls: use of payroll management software (GISE) and civil service census; adherence to spending limits facilitated by Budget and Treasury Committees established in 2009.
- Monetary and debt management:
  - Government borrowing from the banking system within statutory limits.
  - Broad money stabilized in 2012 after expansion.
  - Reserve requirement ratio brought to 20 percent (from 25 percent) in 2012.
  - Central Bank strengthened banking supervision capacity with IMF and Banque de France technical assistance.
  - Comorian banking system generally sound and resident financial institutions observe most prudential ratios.
  - Government continues to seek grants and highly concessional loans.

- Selected indicators (excerpt from Text Table 1, 2009–17 projections):
  - Real GDP: 1.8 (2009), 2.1 (2010), 2.2 (2011), 2.5 (2012), 2.5 (2013), 3.5 (2014), 4.0 (2015), 4.0 (2016), 4.0 (2017)
  - Consumer price index (annual averages): 4.8 (2009), 3.9 (2010), 6.8 (2011), 5.6 (2012), 6.0 (2013), 4.3 (2014), 3.4 (2015), 3.3 (2016), 3.3 (2017), 3.1 (projection unspecified)
  - Domestic primary balance: -2.6 (2009), -1.6 (2010), 1.6 (2011), -1.1 (2012), 2.2 (2013), -0.9 (2014), -0.5 (2015), 0.0 (2016), 0.3 (2017), 0.6 (later projection)
  - Current account balance: -7.8 (2009), -5.7 (2010), -9.0 (2011), -10.4 (2012), -6.9 (2013), -6.0 (2014), -8.6 (2015), -7.7 (2016), -7.4 (2017), -6.9 (later projection)
  - Gross international reserves (end of period, in millions of U.S. dollars): 146.0 (2009), 144.2 (2010), 170.1 (2011), 158.0 (2012), 187.5 (2013), 194.5 (2014), 207.0 (2015), 223.1 (2016), 239.2 (2017), 255.9 (later projection)
  - External debt, PV in percent of GDP: 46.2 (2009), 38.9 (2010), 33.1 (2011), 31.8 (2012), 10.0 (post-relief projection), 11.8, 13.1, 14.3, 15.2, 15.8 (sequence of projections)

### Public Financial Management and Governance
- Trigger 3: Regularly produce detailed quarterly budget execution reports for a period of at least 12 months prior to reaching the completion point.
  - Staffs consider this trigger to have been met. Launched in Q4 2011, budget execution reports continue; four reports issued to date providing detailed accounts of revenues, expenditures and debt accumulation during the quarter.
  - Authorities adhere to a zero-ceiling rule on accumulation of external debt service arrears, except for 0.02 percent of GDP at end-2010; started observing the same rule regarding domestic payments arrears in January 2012.
- Trigger 4: Adopt terms of reference for a feasibility study for a comprehensive computerized public financial management system, including cost estimate and timetable.
  - Staffs consider this trigger to have been met. At end-September 2012, government with World Bank support completed the feasibility study.
  - New system scheduled to become operational by June 2013; installation estimated to cost US$1.5 million, entirely funded by the AfDB Group.
  - System will permit real-time data-sharing among public financial administrations and ensure traceability of all revenue collected and payments orders issued; will complement ASYCUDA++ and payroll management software.
- Trigger 5: Adopt by law a public procurement code consistent with relevant COMESA norms and develop implementing regulations; and successfully implement the new code prior to HIPC completion point.
  - Staffs consider this trigger to have been met. Public Procurement Law passed by the National Assembly on December 29, 2011 and promulgated by decree in February 2012 (Law No.11/-27/AU and Decree No. 12-027/PR).
  - Decree No. 12-131/PR (May 31, 2012) operationalizes the Law by creating the Procurement Regulation Authority (ARMP), its Board, Permanent Secretariat, and the National Directorate of Public Procurement (DNCMP).
  - Timeline of appointments and operational steps in 2012:
    - September 15, 2012: President issued decree appointing four public sector representatives for the ARMP Board (Decree No. 12-182/PR).
    - July 14, 2012: Chamber of Civil Society Organizations (MOSC) appointed two civil society representatives to the ARMP Board.
    - August 17, 2012: Confederation of Chambers of Commerce, Industries and Agriculture (UCCIA) appointed four private sector representatives to the ARMP Board.
    - October 8, 2012: ARMP Board elected its President and Vice-President for a three-year mandate.
    - October 4, 2012: DNCMP established by an arrêté issued by the Vice-President in Charge of Finance.
    - October 13, 2012: President appointed the Director of the DNCMP by decree.
    - October 2 and October 13, 2012: Position of Permanent Secretary of the ARMP was advertised and the recruited candidate was appointed by Presidential decree.

*Italicized source: Extracted from _cr1333 - 2012. Training has been provided to relevant*

### 15. The Public Procurement Reform Steering Committee (CCSRSPM), has recently

### _cr1333 - 15. The Public Procurement Reform Steering Committee (CCSRSPM), has recently

### Public procurement reform and Entities Tender Committees (CGMP)
- The CCSRPM, acting as ARMP (Article 71 of decree 12-131/PR), on September 7, 2012 issued instructions for the creation of Entities Tender Committees (Cellule de Gestion des Marchés Publics - CGMP) within each department or institution/public enterprises for which the law is applicable.
- The CGMP will use the COMESA set of standard bidding documents, properly customized for use in Comoros. This set of bidding documents has been finalized and issued by ARMP.
- Implementation of CGMPs has been completed for all required 23 institutions.
- Staffs believe the new and robust public procurement system addresses effectively the lack of a formal public procurement system in Comoros.
- Outcome: establishment of a public procurement regulatory and oversight body and the institutions required to fully implement the Public Procurement Code.
- Near-term implementation: before end-2012, some CGMPs will launch tenders following the new provisions.

*Trigger 6: Adopt a revised set of organic frameworks (organigram and staffing plans), consistent with the 2009 constitutional amendments, for all ministries.*

### Organic frameworks and civil service reforms (Trigger 6)
- Staffs consider this trigger to have been met.
- In December 2011, Parliament adopted the law establishing budgeted ministry positions broken down by grade and administrative entities, consistent with the 2009 constitution for all ministries.
- Objective: streamline and achieve a leaner, more effective, and financially viable public administration over the medium term.
- Implementation timing: launch rescheduled from July 2011 to early January 2013 due to upstream challenges, especially the matching of budgeted job positions with mandated skill requirements.
- Complementary measures:
  - Rigorous adherence to a new payroll management software.
  - A comprehensive census of government employees conducted with assistance from the World Bank.

*Trigger 7: Government approval and submission to Parliament of a draft law establishing the constitutionally mandated Chamber of Accounts for external control of budget operations*

### Chamber of Accounts (Trigger 7)
- Staffs consider this trigger to have been met.
- The Chamber of Accounts has been established, and its president and core staff appointed.
- Mandate: verify the accuracy and reliability of revenues and expenditures as reported in the public accounts, to insure appropriate use of financial resources under central and local administration bodies.
- Scope: audits the books of public institutions managing taxpayer money or benefiting from guarantees from the government, or any legal entity governed by public law.

### Structural reforms of state-owned enterprises (Trigger 8)
- Staffs consider this trigger to have been met.
- Government updated and approved reform strategies for three SOEs in August 2012: Comores Télécoms (CT), Société Comorienne des Hydrocarbures (SCH), and MAMWE (electricity).
- Expected outcome: significant improvements in company and sector performance over the medium term, contributing to economic competitiveness and growth.

Comores Télécoms (CT)
- Strategic option: outright privatization chosen in 2009 and confirmed in 2012.
- IFC contracted in May 2012 to assist the government in carrying out the transaction.
- Authorities clarified parameters: a new foreign private investor would operate as strategic partner holding 51 percent of the company’s shares.
- Timeline and actions:
  - October 2012: approval of a social plan for the company.
  - Early November 2012: government issued a call for expressions of interest from potential investors.
  - Government aims to enlist a strategic partner of international repute in management in 2013.
  - Plans to open the sector to competition via issuance of a second mobile license and to improve connectivity by seeking investment in submarine cable infrastructure under terms of open access and private participation.

MAMWE (electricity)
- Reform strategy (August 2012) calls for new investments in electricity generation and distribution.
- Identified root causes: poor management and weak revenue collection performance; estimated that only about a third of the value of electricity billed is collected from customers.
- Restoring financial viability viewed as a precondition for sustainability.
- Government issued in late September a call for expression of interest to enlist a strategic partner of international repute in the management of MAMWE.

Société Comorienne des Hydrocarbures (SCH)
- Reform strategy calls for continued full government ownership and substantial management improvements.
- World Bank analysis: limited private sector interest given SCH’s narrow potential profit margins.
- Constraints: (i) serious financial and operational difficulties facing MAMWE—its main customer; (ii) safety hazards and risks from gasoline storage facilities located in the center of Moroni.
- Government program: restructure SCH into a fully-fledged commercial company over time, operate under a proper regulatory framework for pricing, address safety concerns, and overhaul operations to enhance efficiency.

### Education sector — MDG 2 (Triggers 9–11)

Trigger 9: Construct and equip 210 primary school classrooms (22 on Moheli, 126 on Anjouan, and 62 on Ngazidja)
- Staffs consider this trigger to have been met.
- Reported construction: 205 primary school classrooms built, distributed as follows:
  - 40 in Moheli
  - 106 in Anjouan
  - 59 in Ngazidja (Grande Comore)
- Rehabilitation due to deteriorated buildings:
  - 296 primary school classrooms rehabilitated, among which 196 in Moheli, 67 in Anjouan and 33 in Ngazidja.
- Totals as of September 2012:
  - 236 constructed and rehabilitated classrooms in Moheli
  - 173 in Anjouan
  - 92 in Ngazidja
  - Totaling 501 constructed and rehabilitated classrooms.
- All newly built and rehabilitated classrooms are equipped with school furniture.
- Compliance: school constructions and rehabilitations comply with the pupil teacher ratio and a new government school construction strategy (to be formally adopted early in 2013).
- Impact on access: Primary enrollment increased by about 17 percent during the 2010–11 school year (compared with less than 4 percent in previous years).
- Gross Enrollment Rate at primary level increased from 103.3 percent to 107.9 percent between 2009 and 2011.

Trigger 10: Construct 100 separated latrines for improved hygiene and promotion of girls' participation
- Staffs consider this trigger to have been met.
- Deliverables:
  - 125 separated latrines constructed and 6 rehabilitated.
  - More than 58 fountains built inside schoolyards.
- Policy: new school construction strategy requires separated latrines for boys and girls and establishes guidelines for fountains.
- Outcome: girls’ enrollment increased by 10 percent between 2008 and 2012; gender parity index improved from 0.85 in 2008 to 0.95 in 2011.
- Note: gender disparity among islands persists, with participation of girls in Anjouan at 0.92.

Trigger 11: Provide 300,000 textbooks and 25,000 school kits
- Staffs consider this trigger not met and support the authorities’ request of a waiver.
- Textbooks:
  - Commitment: 300,000 textbooks to achieve three books per pupil.
  - Actual distribution: a total of 39,250 textbooks to public primary schools.
  - Effect: due to double shift classes, these textbooks effectively meet part of the textbook needs of an additional 80,000 students (out of a total student population of about 115,000), still below the 300,000 target.
  - Rationale for shortfall: shift in government strategy to focus on improving learning outcomes, teacher quality, and development of curriculum and learning material better adapted to local context.
- Learning quality context:
  - Pupil/classroom ratio equal to 32.
  - Repetition rate at primary in 2011: 26 percent versus about 15 percent average for Sub Saharan Africa.
  - PASEC 2009 scores: 33.3 in Mathematics and French for Comoros versus 38.7 for comparator countries.
  - Conclusion: imported textbooks had limited impact; priority now on locally developed manuals and teacher training.
- New policy and financing:
  - Bulk of school manuals and textbooks to be developed locally with funding and technical assistance from development partners and local experts.
  - Sector plan target: one manual per child by 2015, along with teacher training.
  - Authorities submitting a request for funding under the Global Partnership for Education for a grant in the amount of US$4.6 million.
  - Formal endorsement of interim sector plan planned for mid-December 2012; submission of the request to the GPE secretariat for March 2013.
  - Authorities committed to increasing the share of education recurrent spending in total recurrent spending from 20 percent in 2010 to 23 percent in 2015, implying a real increase of the recurrent budget for education of 5 percent per annum.
- School kits:
  - Target: 25,000 school kits met.
  - Deliverable: in collaboration with UNICEF, 110,722 school kits distributed to primary school children.
  - Explanation: distribution exceeded target due to response to natural disasters in 2010 and 2012.
  - Policy: ongoing provision of school kits to address recurrent vulnerability to natural disasters.

### Health sector — MDGs 4 and 6 (Triggers 12–13)

Trigger 12: National measles vaccination campaign for children 9–47 months to achieve 90-percent coverage nationwide
- Staffs consider this trigger to have been met.
- Routine coverage measure: measles vaccination for cohorts age 6–47 months increased from 79 percent in 2009 to 89.6 percent in December 2011.
- Supplemental Immunization Activities (SIA) conducted in October 2010 targeting children 9–47 months, aiming for 95-percent coverage nationwide.
- SIA results for 9–47 month age group: achieved 84 percent coverage overall.
  - By island:
    - Anjouan: 105- percent coverage
    - Mohéli: 85 percent
    - Ngazidja: 66 percent
  - District-level: coverage exceeded 90 percent in 8 out of 17 districts; Grande Comore districts ranged between 61 percent and 77 percent.
- Planned follow-up: donor-supported new SIA campaign mobilized for April 2013.
- Recommendation: to significantly reduce measles mortality risks, country must either introduce a second dose campaign or routinely continue delivering wide-ranging immunization services.
- Benchmark: GIVS recommends measles immunization coverage of at least 90 percent at national level and at least 80 percent in each health district.

Trigger 13: National survey on risk factors for non communicable diseases (NCDs)
- Staffs consider this trigger to have been met.
- Action: Ministry of Health conducted the national survey on risk factors for NCDs in 2011.
- Outcome: report finalized in September 2011 and made public; survey allowed development of evidence based policy and a strategic plan to prevent NCDs among adults 25 to 64 years old.
- Methodology: national descriptive transversal survey conducted under WHO risk factors surveillance (STEPS) methodology.

*Italic: IMF staff report content as presented in the source document.*

### 35. The NCD survey allowed the Ministry of Health to prepare and adopt in

### _cr1333 - 35. The NCD survey allowed the Ministry of Health to prepare and adopt in

### Noncommunicable diseases (NCDs) — survey and strategy
- The NCD survey results for 2011 show that risk factors such as cholesterol, overweight, physical inactivity, smoking, low consumption of fruits and vegetables constitute a public health problem in the Union of the Comoros.
- The NCD survey allowed the Ministry of Health to prepare and adopt in October 2012 the new strategy for the prevention and fight against NCDs.
- The WHO provided technical support for the development of the new national strategy.

### Debt management — triggers and implementation
- Trigger 14: Improve public debt management systems, particularly adopting effective debt management software.
  - Staffs consider this trigger to have been met.
  - Prior to the decision point all data was stored in separate Excel files.
  - With financial support from the AfDB Group, CS-DRMS 2000+ was installed in July 2012, and the entire database has been transferred.
  - Batteries were installed to mitigate frequent power cuts, allowing the National Debt Directorate (DND) to avoid data loss and continue working without interruption throughout the day.
  - The DND received extensive training on operating the system and analyzing the debt portfolio from a consulting firm.
  - The DND demonstrated adoption of the system during the Bank-Fund debt data reconciliation mission.

- Trigger 15: Produce detailed annual reports on external and domestic debt no later than six months after year end, including data on existing stocks, new loans, and debt service due and paid. At least one such report should be available prior to Comoros reaching the HIPC completion point.
  - Staffs consider this trigger to have been met.
  - The DND produced end-2010 and end-2011 public debt reports before the end of June 2011 and 2012, respectively.
  - The reports cover: level and composition of existing external debt, debt service due and paid, situation of technical arrears, and rescheduling agreements.
  - There were no new loans or debt disbursements during the interim period.
  - Reports also discuss domestic salary and suppliers arrears, even though these arrears do not constitute conventional domestic debt.
  - The DND sent these reports to government institutions and partners.

- Trigger 16: Amend the 2003 decree (décret N°03-62/PR) establishing the debt management office to refocus its mandate and activities, consistent with the office’s capacity limitations.
  - Staffs consider this trigger to have been met.
  - A recently approved decree restructured the DND into four offices: office for financing mobilization (front office), office for research and analysis (middle office), office for financial operations, and office for database management (back office).
  - Arrêté clarified the DND’s role in monitoring and analyzing debt sustainability, loan rescheduling proposals, and risks in the debt portfolio.
  - DND capacity improvements:
    - At the decision point there were only two staff; currently there are five agents, some contractors and several interns.
    - An organic framework approved by Parliament made these five positions permanent.
    - DND staff received training including Debt Management Performance Assessment (DeMPA), Debt Sustainability Analysis (DSA), portfolio risk analysis, and debt reporting.
  - Authorities approved a debt management reform plan with World Bank assistance in 2012, based on a DeMPA evaluation in 2011.

### Updated debt relief and debt sustainability analysis — data reconciliation (decision point revisions)
- End-2009 nominal stock of HIPC-eligible external debt revised upward by US$5.3 million from US$286.8 million to US$292.2 million.
- PV of debt after traditional debt relief revised upward by US$1.2 million from US$257.4 million to US$258.6 million.
- Most increase attributable to revisions in the PV of debt owed to commercial and bilateral creditors.
- Detailed revisions by creditor type at end-2009:
  - Multilateral creditors: PV increased by US$0.08 million to US$197.7 million.
  - Paris Club creditors: PV revised downward from US$15.3 million to US$14.5 million (mainly due to information from Italy).
  - Other official bilateral creditors: PV increased from US$42.3 million to US$42.4 million (mainly due to Saudi Arabia).
  - Commercial creditors: PV doubled from US$2.2 million to US$4.1 million (mainly due to Banque Postale).
- Estimates of exports of goods and services used to evaluate HIPC assistance at the decision point revised upward from an annual average of $75 million for 2007–09 to $75.5 million.

### Revision of HIPC assistance at decision point and creditor participation
- Upward revisions to PV of debt and exports data resulted in an upward revision of HIPC assistance at decision from US$144.8 million to US$145.4 million.
- Staffs do not recommend revising Enhanced HIPC assistance at the completion point; it will remain US$144.8 million.
- At completion point, Comoros received financing assurances from creditors accounting for 98.1 percent of the PV of HIPC assistance estimated at the decision point.
  - Multilateral creditors represent 76.4 percent of the PV of multilateral HIPC assistance.
  - Bilateral creditors account for 21.7 percent of the PV of bilateral and commercial assistance.
  - Several multilateral creditors and all Paris Club creditors have provided interim assistance.
  - Authorities are working to reach agreements with remaining creditors.

- Multilateral creditor commitments and disbursements:
  - Total revised multilateral assistance: US$111.1 million in end-2009 PV terms (76.4 percent of total HIPC assistance).
  - Creditors representing 26 percent of total HIPC assistance have fully delivered their share; creditors representing 42.2 percent have granted partial relief during the interim period.
  - Specific multilaterals:
    - IDA: Debt relief US$44.9 million in PV terms at decision point; US$6.3 million provided as interim relief in end-2009 PV terms. At completion point, remaining relief via 65 percent reduction of Comoros’s debt service to IDA through December 2030, equivalent to annual average debt-service savings of US$3.2 million from January 2013–December 2030.
    - IMF: Assistance US$4.3 million in end-2009 PV terms (equivalent to SDR 2.9 million). No HIPC interim assistance from the IMF; IMF will deliver total assistance at completion point through a stock-of-debt operation in an amount of about SDR 3 million.
    - AfDB Group: HIPC debt relief US$34.4 million in PV terms, covered entirely by arrears clearance under the PCCF in 2007.
    - OFID: Full delivery US$2.0 million through concessional rescheduling.
    - AMF: Full delivery US$0.6 million through cancellation of remaining debt service in 2012 and 2013.
    - EU: HIPC relief US$0.8 million in PV terms; interim measures frozen arrears and payment of debt service during interim period; assumed to provide remaining relief at completion point.
    - BADEA: HIPC relief US$15.4 million; partly delivered by concessional rescheduling; expected to offer full relief upon completion point.
    - IFAD: HIPC relief US$3.2 million to be delivered by cancelling debt service installments until full relief reached.
    - Islamic Development Bank: Moratorium on debt service until completion point; informally intends to fully deliver US$5.1 million at completion point.

- Bilateral and commercial creditors:
  - Paris Club: Agreed in principle to provide their share of enhanced HIPC assistance of US$8.6 million in end-2009 PV terms. Interim assistance provided through flow treatments on Cologne terms (August 13, 2010). Italy has cancelled its claims.
  - Non-Paris Club bilateral creditors: Assumed to provide relief on HIPC-eligible debt on terms comparable to Paris Club. PV of such relief in end-2009 terms estimated at US$23.7 million. Major non-Paris Club creditors: Kuwait (9.1 percent of nominal HIPC-eligible debt), Saudi Arabia (5.0 percent). Rescheduling agreements reached in 2007 with Saudi Arabia and the Kuwait Fund.
  - Commercial creditors: As of December 2009, commercial debt US$12.5 million held by three creditors (Banque Postale, Cotecna, Hôpitaux de Paris). Cotecna had a claim of US$2.1 million as of end-December 2009 and threatened litigation.

### Considerations for exceptional topping-up assistance
- Debt relief analysis updated using loan-by-loan data, exchange rates and discount rates as of end-2011.
- End-2011 nominal stock of external debt: US$274.9 million.
  - Multilateral creditors: US$204.6 million or 74.4 percent of total debt.
    - IDA: 39.9 percent of total debt.
    - IMF: 5.3 percent of total debt.
    - AfDB group: 11.5 percent of total debt.
  - Paris Club creditors: 5.5 percent of total outstanding nominal debt at end-2011 (main creditor France).
  - Non-Paris Club bilateral creditors: 16.1 percent of total debt (main creditors Kuwait and Saudi Arabia).
  - Commercial creditors: 4.1 percent of total debt.

- Comoros does not qualify for topping-up.
  - PV of debt-to-exports ratio at end-2011 after full delivery of HIPC assistance committed at Decision Point: 147.7 percent.
  - PV of debt-to-exports ratio after full delivery of additional bilateral debt relief beyond the HIPC Initiative: 141.6 percent.
  - Both figures are below the HIPC threshold of 150 percent.
  - The debt-to-exports ratio after full delivery of HIPC assistance is above the end-2011 projection at the Decision Point of 143.8 percent by 3.9 percentage points.
  - Breakdown of the 3.9 percentage point increase in PV of debt-to-exports ratio (Text Table 2):
    - Total increase: 3.9 percentage points (100 percent of total increase).
    - Due to changes in parameters: 15.6 percentage points (398 percent of total increase).
      - o/w due to changes in discount rates: 17.5 percentage points (446 percent).
      - o/w due to changes in exchange rates: -1.9 percentage points (-48 percent).
    - Due to unanticipated new borrowing: -14.8 percentage points (-378 percent).
      - o/w due to higher than expected disbursements: -15.9 percentage points (-405 percent).
      - o/w due to lower concessionality of the loans: 1.1 percentage points (27 percent).
    - Due to changes in exports: -0.2 percentage points (-5 percent).
    - Due to changes in HIPC relief: 0.00 percentage points.
    - Other factors: 2.3 percentage points (84 percent).
    - Bilateral debt relief beyond HIPC: 6.1 percentage points.
    - PV of debt-to-exports ratio (actual): 147.7.
    - PV of debt-to-exports ratio after full delivery of HIPC assistance and bilateral debt relief beyond HIPC (actual): 141.6.

### Creditor participation in the Multilateral Debt Relief Initiative (MDRI)
- Contingent on agreement by the IMF and IDA Executive Directors that Comoros has reached the HIPC completion point, Comoros would qualify for MDRI relief from IDA and the AfDF. There is no MDRI-eligible debt to the IMF.
- MDRI implications:
  - Stock of debt reduction of US$77.1 million (net of HIPC assistance) in nominal terms.
  - Saves the country US$83 million in debt service over a period of 29 years.

- MDRI from IDA:
  - IDA would provide MDRI relief by cancelling debt disbursed before December 31, 2003 and still outstanding on December 31, 2012 after full HIPC assistance.
  - Reduction to Comoros’s IDA debt: US$46.9 million.
  - MDRI debt cancellation from IDA would save average annual debt service (net of HIPC assistance) of US$1.7 million between 2012 and 2041.
  - Total debt service savings from MDRI (IDA) would amount to US$50 million (SDR 33 million).

- MDRI from AfDF:
  - AfDF would cancel loans disbursed before December 31, 2004 and still outstanding on December 31, 2012 after full HIPC assistance.
  - Reduction to Comoros’s AfDF debt: US$30.2 million.
  - MDRI debt cancellation from AfDF would save average annual debt service (net of HIPC assistance) of US$1.1 million between 2012 and 2041.
  - Total debt service savings from MDRI (AfDF) would amount to US$33 million.

- IMF: Comoros did not have MDRI-eligible credit at the decision point and will not receive MDRI debt relief from the IMF.

_Italic: _cr1333 - 35. The NCD survey allowed the Ministry of Health to prepare and adopt in_

### 46. The future external debt position for Comoros is heavily influenced by the

### _cr1333 - 46. The future external debt position for Comoros is heavily influenced by the

### Macroeconomic assumptions (Box 2: 2011–32)
- Real GDP growth is projected to accelerate to 4 percent per year over the medium term driven by macroeconomic stability, infrastructure improvements (electricity and intra-island transport), stronger agricultural and tourism performance, and improvements in the business climate.
- Inflation is projected to remain stable at around 3 percent per year under the Franc Zone arrangement.
- The current account deficit (including official grants) is expected to converge to about 7 percent of GDP over the projection period (compared to 9 percent in 2011).
- Imports of goods are projected to revert to long-run historical averages; exports of goods are projected to grow in line with real GDP.
- Remittances are projected to increase on average 5 percent in nominal terms over the projection period (down from an annual of 6 percent in 2010/2012).
- Fiscal consolidation: the primary fiscal balance is projected to be in surplus from 2016 onwards.
- External financing is initially assumed mostly on grant terms, with less concessional loan financing gradually picking up.

### Impact of debt relief and projected debt indicators
- After full delivery at the completion point of HIPC Initiative assistance and additional bilateral assistance beyond HIPC and MDRI, external public debt would be considerably reduced and external debt indicators would improve.
- Key projected movements in PV of debt-to-exports:
  - 342.6 percent as of end-December 2009 (baseline reference).
  - 143.5 percent by 2012 after traditional debt relief and unconditional HIPC Initiative assistance.
  - 78.9 percent in 2012 under full delivery of MDRI plus additional bilateral relief (scenario VI).
  - Projected to rise to 145.3 percent at end-2031 (scenario VI projection).
- PV of debt-to-GDP:
  - 33.5 percent at end-2011.
  - Average of 16.7 percent in 2012–21.
  - Average of 19.7 percent in 2022–31.
- PV of debt-to-revenue:
  - 207.9 percent at end-2011.
  - Average of 106.6 percent in 2012-21.
  - Average of 118.6 percent in 2022-31.

### Debt service projections
- Debt service-to-exports ratio after HIPC Initiative assistance and additional assistance beyond HIPC and MDRI:
  - 0.9 percent in 2013.
  - Gradually increases to reach 4.1 percent and stays at an average of 3.5 percent thereafter over the projection period (Table A7, scenario IV).
- Under sensitivity scenarios (see below), debt service averages vary (see sensitivity bullets for exact averages).

### Sensitivity analysis: scenarios and outcomes
- Scenario I (baseline): reference for comparisons.
- Lower-exports scenario (scenario II):
  - Permanent reduction of exports of goods and services by 30 percent (in dollar terms) relative to baseline.
  - PV of debt grows and breaches the HIPC threshold of 150 percent of exports in 2027.
  - Debt service averages 4 percent of exports and 3.6 percent of revenue over the projection period.
- Output shock scenario (scenario III):
  - Permanent reduction in output growth by 1.5 percentage points compared to baseline over the projection period.
  - PV of debt-to-exports remains below 150 percent for almost all the projection period, breaching it only in 2031.
  - PV of debt-to-revenue exceeds 200 percent in the long term and is close to 250 percent toward the end of the projection period.
  - Debt service averages 3.6 percent of exports and 5.2 percent of revenue during the projection period.
- Sensitivity analysis conclusion:
  - Comoros remains vulnerable to shocks even after substantial debt relief.
  - Debt indicators deteriorate under alternative scenarios, breaching critical thresholds (150 percent of exports; near 250 percent of revenue) in some cases.

### HIPC/MDRI delivery, reconciliation, and DSA classification
- Debt reconciliation resulted in a slight upward revision of HIPC-eligible external debt in PV terms at end-2009, but the HIPC debt relief amount required to reduce PV of debt to 150 percent of exports on the basis of end-December 2009 was maintained at $144.8 million, with a common reduction factor of 56.3 percent.
- Assurances of participation in the enhanced HIPC Initiative were received from creditors representing 98 percent of the PV of HIPC debt relief estimated at the decision point.
- Based on end-2011 debt data, IDA and IMF staffs view that Comoros does not qualify for topping-up under the Enhanced HIPC Initiative.
- After full delivery of HIPC assistance committed at the decision point and additional bilateral debt relief beyond HIPC, the PV of debt-to-exports ratio at end-2011 would decline to 141.6 percent (below the HIPC threshold of 150 percent).
- With full delivery of HIPC debt relief, additional bilateral assistance beyond HIPC, and MDRI, Comoros would move to a "high risk of external debt distress" ranking under the LIC-DSA, having been assessed as "in debt distress" in the 2010 and June 2012 LIC-DSAs.
- The recurrence of external shocks, policy slippages, or resumption of non-concessional borrowing could reemerge unsustainable debt dynamics.

### Policy recommendations and priorities
- Maximize grant assistance and borrow only on highly concessional terms to maintain debt ratios below critical thresholds post-completion point.
- Strengthen debt management and maintain a very prudent and conservative borrowing policy in the medium and long term, especially if public expenditure prioritizes achieving the MDGs.
- Undertake further reforms to achieve higher output and export growth given a relatively small export base (including tourism).
- Strengthen capacity to evaluate potential government liabilities, implement sound macroeconomic policies, and improve the business environment to achieve and maintain sustainable debt levels.

*Source: IMF staff analysis in the provided document excerpt.*

### 57. The Executive Directors may wish to consider the following questions:

### _cr1333 - 57. The Executive Directors may wish to consider the following questions:

### Completion point decision
- Do Directors agree that Comoros has reached the completion point under the Enhanced HIPC Initiative?

### Amount of HIPC assistance (staff recommendation)
- Staff recommend that HIPC assistance of US$144.8 million in PV terms be provided to Comoros.
- Table A11 indicates Total debt relief in NPV Terms (US$ million): Total 144.8 representing 100 percent of the assistance.

### Topping-up assessment
- Do the Directors agree that Comoros has not met the requirements for exceptional topping-up at the completion point?

### Creditor participation and delivery modalities
- Do Directors agree that Comoros’ creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to Comoros?
- Summary of creditor participation from Table A11 (Debt Relief in NPV Terms, US$ million; Satisfactory Reply to Participate in Initiative; Modalities to Deliver Debt Relief):
  - World Bank (IDA): 44.93; Yes; IDA has given a 65 percent nominal debt service reduction from July 2010 until completion point. The remaining HIPC relief will be given after completion point through continued debt service reduction until 2030.
  - AfDB Group: 34.424; Yes; HIPC debt relief from the AfDB Group was given entirely by the December 2007 to April 2009 arrears clearance operations under the PCCF.
  - IMF: 4.33; Yes; The IMF will deliver total assistance under the HIPC Initiative at completion point through a stock-of-debt operation in an amount of about SDR 3 million.
  - Arab Monetary Fund: 0.60; Yes; The AMF has fully delivered its share through a cancellation of remaining debt service in 2012 and 2013, having earlier rescheduled and cancelled debt service in 2008.
  - BADEA: 15.411; Yes; BADEA has delivered partial debt relief through a concessional rescheduling, and is expected to give full relief after completion point.
  - European Union: 0.81; Yes; Debt relief from the EU has consisted of the freezing of existing arrears, and the payment of debt service during the interim period. At the completion point, it is assumed that the EU will provide the rest of HIPC debt relief.
  - IFAD: 3.22; Yes; HIPC relief from IFAD will be delivered after completion point by debt service installments until full relief has been reached.
  - IsDB: 5.14; Yes; The IsDB has granted a moratorium on debt service payments until the completion point, and is expected to deliver full relief after completion point.
  - OFID: 2.01; Yes; OFID has fully delivered its share of HIPC relief through a concessional rescheduling.
  - Total multilateral: 110.776 (US$ million)
  - Paris Club creditors: 8.16; Yes; Paris Club creditors will provide relief based on Cologne terms. Italy has already cancelled all claims.
  - Non-Paris Club creditors: 23.716 (US$ million)
    - Mauritius: 0.40; No; No agreement has been signed.
    - Kuwait: 14.110; Yes; Partial relief via rescheduling agreement signed in 2007.
    - Saudi Arabia: 8.76; Yes; Partial relief via rescheduling agreement signed in 2007.
    - United Arab Emirates: 0.50; Yes; In Oct 2012, United Arab Emirates transferred their claims to a non-refundable grant.
  - Commercial creditors: 2.32; No; No agreement has been signed.
  - Total bilateral and commercial: 34.124 (US$ million)
  - Grand total: 144.8 (US$ million); 100 percent of Total Assistance

### Key related debt metrics at completion (selected items appearing in the annex tables)
- PV of debt-to-exports ratio at end-2011 used for assessment (text notes that "The PV of debt-to-exports ratio after unconditional delivery of enhanced HIPC and additional bilateral beyond HIPC assistance is the base for assessing whether topping-up assistance is warranted. The ratio at end-2011 also appears in text Table 2.")
- Table A3 (Nominal and PV of External Debt outstanding at End-December 2011):
  - Total nominal debt: 274.9 (US$ million)
  - PV of debt: 217.2 (US$ million) (Percent of total 100.0)
  - PV of debt after enhanced HIPC relief: 129.2 (US$ million)
  - PV of debt after additional bilateral relief: 123.9 (US$ million)
- Table A5 (External Debt Service projections, selected annual averages and ratios):
  - II. After enhanced HIPC assistance — Debt service-to-exports ratio (2012–21 annual average): 5.8; 2022–31 annual average: 5.0
  - Reduction in debt service as a result of HIPC Initiative assistance (2012–21 annual average): 0.2; 2022–31 annual average: 4.5
- Table A6 (Present Value of External Debt, selected projections):
  - I. After traditional debt-relief mechanisms — PV of total debt 2011: 204.6; 2012–21 average: 243.6; 2022–31 average: 375.3
  - II. After conditional delivery of enhanced HIPC assistance — PV of total debt 2011: 189.1; 2012–21 average: 187.1; 2022–31 average: 362.6
  - III. After unconditional delivery of enhanced HIPC assistance — PV of total debt 2011: 129.2; 2012–21 average: 187.1; 2022–31 average: 362.7
- Table A7 (Key External Debt Indicators, selected series under different scenarios):
  - V. After conditional delivery of enhanced HIPC and MDRI assistance and bilateral beyond HIPC assistance — PV of debt-to-exports ratio (2011): 210.4; 2012–21 average: 101.1; 2022–31 average: 128.4
  - Memorandum items: GDP (in millions of U.S. dollars) 2011: 610.9; Exports of goods and services (3-year mvg. avg.) 2011: 87.5; Government revenue 2011: 98.4

*Source: _cr1333 - 57. The Executive Directors may wish to consider the following questions (IMF staff report content reproduced).*

### APPENDIX I: DEBT MANAGEMENT CAPACITY

### APPENDIX I: DEBT MANAGEMENT CAPACITY

### Overview
- Debt management in the Comoros has improved since the decision point, mainly in the areas covered by the Completion Point triggers: debt recording system and hardware, debt reports, organizational structure and staff capacity.
- Many weaknesses remain, as observed by a Debt Management Performance Assessment (DeMPA) mission sent by the World Bank in February 2011.

### Governance and strategy
- Main weakness: lack of data sharing between the cabinet, the Economic and Financial Reforms Unit (CREF), and the National Debt Directorate (DND).
- No external or internal audits of debt management operations.
- No evaluation of debt management operations to Parliament.

### Coordination with macroeconomic policies
- Neither the DND nor the Technical Committee of the National Public Debt Committee (CNDP) has the capacity to independently conduct a debt sustainability analysis (DSA) to calculate the impact of a new loan.
- No frequent information sharing with the central bank on transactions affecting liquidity in the system.

### Borrowing activities, arrears, and domestic market access
- Borrowing activity is low; the country will rely mostly on grants and highly concessional loans with well-known conditions in the next few years.
- The authorities must conduct several loan rescheduling negotiations that require coordination within the Ministry of Finance and analytical capacity to evaluate rescheduling conditions.
- The authorities have not yet adopted a strategy to clear domestic payments arrears; clearing arrears is necessary to rebuild reputation to eventually make (limited) use of the domestic financial market.

### Cash management
- Cash management is done only at a very basic level, leading to liquidity rationing and the accumulation of substantial domestic payments arrears.

### Operational risk, recording, and reporting
- Installation of a new debt recording system has led to improvements:
  - Establishment of a unique database for external debt.
  - Audit trails to track which agents made certain changes.
  - Future capabilities: different levels of access by function and systematic back-ups (currently only ad-hoc).
- Recording and reporting improved: the new database contained all loans and could be considered up-to-date and exhaustive at the time of the HIPC debt data reconciliation.
- Main remaining weakness: limited information sharing between Project Implementation Units within technical ministries and the DND on loan disbursements, making it difficult to precisely estimate future debt service payments.

### Completion point opportunity and recommended actions
- HIPC and MDRI debt relief at the completion point will significantly reduce the stock of external debt and provides a clean slate for the country.
- A reduced debt burden may lead to a gradual easing of limits on less concessional financing; recommended that Comoros continue steps to improve debt management to be prepared for this new era.

### Sequenced debt management reform plan (prepared with World Bank, February 2012)
- The plan is intended to maintain reform momentum after the completion point until 2014 and focuses on three main areas:
  - Governance:
    - Ensure the right institutional, legal and regulatory framework for borrowing activities at political and technical levels.
  - Debt management strategy and borrowing activities:
    - Strengthen analytical functions of the DND.
    - Prepare a simple debt management strategy to guide future borrowing decisions.
    - Strengthen analysis of costs and risks of new external loans and loan rescheduling proposals.
    - Solve the problem of arrears to restore the state’s credibility.
  - Reduction of operational risk:
    - Strengthen recording and validation of new loans in the new debt management system.
    - Improve safety of data and documents.
    - Improve internal organization of the DND.
    - Develop a training plan to improve staff technical capacity.

*Source: APPENDIX I: DEBT MANAGEMENT CAPACITY, _cr1333 - APPENDIX I: DEBT MANAGEMENT CAPACITY*

### 14.      Achieving the HIPC Initiative completion point has improved the external debt

### 14.      Achieving the HIPC Initiative completion point has improved the external debt

### Outlook and key judgment
- Achieving the HIPC Initiative completion point has improved the external debt outlook.
- The inclusion of Comoros’ domestic debt in the analysis reinforces the conclusions of the external DSA and stresses the risks to debt prospects.
- It is essential that the authorities continue current efforts to strengthen public finance management, including debt management, reform state-owned enterprises, and improve the investment climate so as to lay the foundation for rapid sustainable economic growth.

### Major quantitative indicators and projections (selected series as reported)
- PV of external debt (series): 33.1 9.7 11.8 13.1 14.3 15.2 15.8 16.9 21.6
  - (reported in table as: "PV of external debt 4/......33.19.711.813.114.315.215.816.921.6")
- PV of PPG external debt (series): 33.1 9.7 11.8 13.1 14.3 15.2 15.8 16.9 21.6
  - (reported as identical to PV of external debt: "PV of PPG external debt......33.19.711.813.114.315.215.816.921.6")
- Debt service-to-exports ratio (series): 10.5 11.4 10.0 4.7 0.3 1.2 2.1 2.6 2.8 3.4 3.7
  - (reported as: "Debt service-to-exports ratio (in percent)10.511.410.04.70.31.22.12.62.83.43.7")
- PPG debt service-to-revenue ratio (series): 11.0 12.5 12.4 5.2 0.4 1.4 2.4 3.0 3.2 3.6 3.7
  - (reported as: "PPG debt service-to-revenue ratio (in percent)11.012.512.45.20.41.42.43.03.23.63.7")
- Non-interest current account deficit (series): 7.4 5.3 8.7 6.0 3.0 6.7 6.0 8.5 7.6 7.3 6.8 3.9 2.8 3.8
  - (reported as: "Non-interest current account deficit7.45.38.76.03.06.76.08.57.67.36.83.92.83.8")
- PV of public sector debt (series): 35.6 12.7 14.7 15.9 17.1 17.8 18.4 19.6 24.4
  - (reported as: "PV of public sector debt......35.612.714.715.917.117.818.419.624.4")
- Public sector debt (percent of GDP series): 57.2 51.6 44.6 20.3 22.8 24.6 26.3 27.4 28.1 29.4 34.8
  - (reported as: "Public sector debt 1/57.251.644.620.322.824.626.327.428.129.434.8")
- Gross financing need (series): 3.0 -3.4 5.0 3.4 2.0 3.8 3.6 3.3 2.9 2.8 3.1
  - (reported as: "Gross financing need 2/3.0-3.45.03.42.03.83.63.32.92.83.1")

### Key macroeconomic assumptions (selected)
- Real GDP growth (series): 1.8 2.1 2.2 1.9 1.4 2.5 3.5 4.0 4.0 4.0 4.0 3.7 4.3 5.0 4.5
  - (reported as: "Real GDP growth (in percent)1.82.12.21.91.42.53.54.04.04.04.03.74.35.04.5")
- GDP deflator in US dollar terms (change, series): -1.0 -0.6 9.8 8.9 8.3 -4.1 -1.7 2.9 2.8 2.9 2.8 1.0 3.3 3.3 3.2
  - (reported as: "GDP deflator in US dollar terms (change in percent)-1.0-0.69.88.98.3-4.1-1.72.92.82.92.81.03.33.33.2")
- Effective interest rate (percent series): 0.5 0.8 0.8 0.5 0.2 0.4 0.2 0.3 0.4 0.4 0.5 0.4 0.6 0.8 0.7
  - (reported as: "Effective interest rate (percent) 5/0.50.80.80.50.20.40.20.30.40.40.50.40.60.80.7")
- Grant-equivalent financing (in percent of GDP series): 10.9 12.0 10.5 10.4 10.3 10.1 10.0 10.3 10.1
  - (reported as: "Grant-equivalent financing (in percent of GDP) 8/.........10.912.010.510.410.310.110.010.310.1")
- Government revenues (excluding grants, percent of GDP series): 13.9 14.3 13.1 15.1 14.5 14.8 15.2 15.4 15.6 16.1 15.9 16.4
  - (reported as: "Government revenues (excluding grants, in percent of GDP)13.914.313.115.114.514.815.215.415.616.115.916.4")

### Stress tests and sensitivity analysis (high-level)
- Figures identify the most extreme stress test (the test yielding the highest ratio in 2022) for each indicator:
  - Figure footnotes indicate the most extreme shock corresponds to:
    - in figure b: a Non-debt flows shock;
    - in figure c: a Non-debt flows shock;
    - in figure d: a Non-debt flows shock;
    - in figure e: a Terms shock;
    - in figure f: a One-time depreciation shock.
- Table 1b scenarios summarized:
  - A1. Key variables at their historical averages in 2012-2032.
  - A2. New public sector loans on less favorable terms in 2012-2032.
  - A3. Average reduction of 30 percent in remittances over the period 2013-2032.
  - Bound tests include shocks to real GDP growth, export value growth, US dollar GDP deflator, net non-debt creating flows, combined shocks, and a one-time 30 percent nominal depreciation in 2013.
- Example indicator outcomes under stress (selected):
  - PV of debt-to-GDP ratio (baseline): 50
  - PV of debt-to-GDP ratio under A2 (less favorable financing): 50  (table entries indicate sensitivity across scenarios; see original for full matrices)
  - Debt service-to-revenue ratio (baseline): 30 (and scenario ranges shown in Table 2b)
  - Memorandum item: Grant element assumed on residual financing = 36 (applies to stress scenarios except A2)

### Identified debt-creating flows and dynamics (selected)
- Change in external debt (series): -9.6 -5.1 -7.2 -25.0 2.8 1.8 1.8 1.3 0.7 0.1 0.8
  - (reported as: "Change in external debt-9.6-5.1-7.2-25.02.81.81.81.30.70.10.8")
- Identified net debt-creating flows (series): 4.7 3.4 -0.1 3.0 2.6 5.2 4.4 4.2 3.8 1.7 1.0
  - (reported as: "Identified net debt-creating flows 4.73.4-0.13.02.65.24.44.23.81.71.0")
- Endogenous debt dynamics contributions (selected):
  - Contribution from nominal interest rate: 0.3 0.4 0.3 0.2 0.0 0.1 0.1 0.1 0.1 0.2 0.2
  - Contribution from real GDP growth: -1.1 -1.1 -1.0 -1.1 -0.6 -0.7 -0.8 -0.9 -0.9 -1.1 -1.4
  - (reported as part of "Endogenous debt dynamics 2/..." sequences)

### Policy recommendations (as stated)
- Continue current efforts to strengthen public finance management, including debt management.
- Reform state-owned enterprises.
- Improve the investment climate to lay the foundation for rapid sustainable economic growth.

*Sources: Country authorities; and staff estimates and projections.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr1333.pdf_