Public Information Notice (PIN) No. 11/17
February 2, 2011
On January 21, 2011, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Comoros.1
Background
Over the last two years, economic activity in the Union of Comoros has gained momentum despite a challenging external environment. Real GDP increased by 1.8 percent in 2009, benefiting from a gradual return to political stability and the launch of reforms to begin removing deep-seated structural impediments to economic development. Preliminary data point to a further strengthening of economic conditions in 2010, with real growth rising to 2.1 percent, underpinned by a rebound in donor-funded public investment, a pick-up in remittances-based private sector construction, and stronger activity in tourism; as well as an expansion of financial intermediation. From its peak during the food and energy crisis of 2008, inflation has eased to low single digits, hovering around 3 percent. Contributing factors include a prudent monetary policy under the Franc zone and somewhat subdued pressures on food and fuel prices. However, in the face of real appreciation of the euro-pegged Comoros franc and deteriorating terms of trade, the external current account deficit is estimated at the relatively high equivalent of 10.2 percent of GDP in 2010. Reflecting broadly satisfactory performance under IMF- and World Bank-supported reforms, Comoros reached the Highly Indebted Poor Countries (HIPC) Initiative Decision Point in July 2010.
Against this background, progress in fiscal consolidation has been slow. The domestic primary fiscal deficit stagnated at 2.6 percent of GDP in 2009, and delays in collecting taxes and implementing new fiscal measures under the IMF-supported program pushed the deficit above the program target for end-September 2010. However, corrective measures introduced late in the year and in the first quarter of 2011 should help keep the fiscal program on track. On the structural front, the authorities have completed reform strategies for key public utilities, with however limited progress in implementing related measures. To advance the public enterprise reform program, the authorities have requested a multi-year technical assistance program from the International Finance Corporation (IFC). In 2011, the government plans to issue calls for bids to enlist private sector involvement in the management of the state-owned telecommunication and petroleum-importing companies.
Economic growth is expected to rise to an annual average of 4 percent in the medium term driven by stronger activity in agriculture and fishing, inter-island transportation, and tourism. Inflation should remain subdued, consistent with Comoros’ membership in the Franc zone. By 2014, the authorities aim to bring the domestic primary fiscal balance to equilibrium, with government revenue rising to at least 15 percent of GDP. In the external sector, the HIPC Initiative Completion Point is expected to be reached in late 2012, putting external debt on a sustainable position while freeing additional resources for pro-growth and pro-poor programs. This requires close adherence to reforms under the Extended Credit Facility (ECF) and Poverty Reduction Strategy Paper. Risks to the outlook include civil service pressures for higher wages and political resistance to public enterprise reform, which could delay progress in fiscal consolidation and in implementing the structural reform agenda. Moreover, a return of political instability following the 2010 elections could hinder delivery of anticipated external resources, including Foreign Direct Investment. Also, in the absence of much-needed technical assistance, weak absorption and implementation capacity would cloud the medium-term growth prospects.
Executive Board Assessment
Executive Directors commended the Comorian authorities for their broadly satisfactory policies in a challenging political and economic environment, including the uncertain global recovery and renewed pressure on commodity prices.
Directors welcomed the improved fiscal performance in the first half of 2010, but expressed concern at slippages later in the year. They welcomed corrective steps underway and urged the authorities to implement expeditiously planned revenue and expenditure measures to strengthen the fiscal position.
Directors noted the importance of reforms to enhance the budget process, tax administration and expenditure control especially as regards the public sector wage bill, with a view to creating fiscal space for needed pro-growth and pro-poor spending.
Directors commended the authorities for their prudent debt management and efforts in reaching debt restructuring understandings with all external creditors, which are essential to addressing Comoros’ unsustainable external debt.
Directors welcomed recent progress in strengthening banking supervision and adopting the recommendations from the 2010 Safeguards Assessment. They urged the authorities to address lingering structural impediments to financial intermediation, including weaknesses in the legal framework and inadequate internal control mechanisms and reporting standards at banks.
Directors underscored that achieving a higher growth path will require far-reaching structural reforms to bolster Comoros’ competitiveness and increase the economy’s ability to intermediate remittances and aid inflows. In particular, they stressed the need to improve the business environment and the management of public utilities.
To mitigate risks to the program, Directors urged the authorities to nurture the national consensus on the importance of building on the progress achieved so far and of reaching the HIPC Initiative completion point under the ECF-supported reform agenda.
| Comoros: Selected Economic and Financial Indicators, 2008–15 |
| |
|
|
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
|
|
|
|
Prog 1st Rev. |
Rev. prog. |
Proj |
Proj |
Proj |
Proj |
Proj |
| |
(Annual percentage change, unless otherwise indicated) |
|
National income and prices |
|
|
|
|
|
|
|
|
|
|
Real GDP |
1.0 |
1.8 |
2.1 |
2.1 |
2.5 |
3.5 |
4.0 |
4.0 |
4.0 |
|
GDP deflator |
5.5 |
4.6 |
3.8 |
3.8 |
3.3 |
3.1 |
3.1 |
3.3 |
3.3 |
|
Consumer price index (annual averages) |
4.8 |
4.8 |
2.6 |
2.7 |
3.0 |
2.9 |
2.9 |
3.0 |
3.0 |
|
Consumer price index (end period) |
7.4 |
2.2 |
3.1 |
3.2 |
2.8 |
2.9 |
3.0 |
3.0 |
3.0 |
|
Money and credit |
|
|
|
|
|
|
|
|
|
|
Net foreign assets |
-6.8 |
9.7 |
9.6 |
0.3 |
1.5 |
1.2 |
1.5 |
2.2 |
4.6 |
|
Domestic credit |
41.7 |
34.9 |
7.2 |
9.7 |
15.1 |
10.5 |
10.0 |
9.9 |
10.1 |
|
Net credit to government (Treasury) |
31.2 |
13.4 |
-28.7 |
-7.8 |
17.5 |
4.3 |
2.6 |
1.5 |
-2.6 |
|
Broad money |
11.6 |
13.5 |
7.5 |
12.7 |
8.6 |
7.3 |
7.5 |
7.7 |
7.6 |
|
Velocity (GDP/end-year broad money) |
3.5 |
3.3 |
3.3 |
3.3 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
|
External sector |
|
|
|
|
|
|
|
|
|
|
Exports, f.o.b. |
-55.4 |
93.1 |
17.1 |
14.1 |
13.9 |
8.2 |
7.8 |
7.8 |
7.9 |
|
Imports, f.o.b. |
28.5 |
1.6 |
13.1 |
14.4 |
-1.4 |
6.3 |
2.3 |
5.7 |
4.0 |
|
Export volume |
-35.0 |
71.2 |
18.1 |
12.5 |
9.8 |
2.1 |
1.8 |
2.7 |
2.7 |
|
Import volume |
33.1 |
10.6 |
-0.8 |
-4.8 |
-7.0 |
4.8 |
-0.3 |
4.9 |
2.8 |
|
Terms of trade |
-40.8 |
22.8 |
-13.0 |
-15.6 |
-2.1 |
4.5 |
3.1 |
4.2 |
3.8 |
|
(in percent of GDP, unless otherwise indicated) |
|
Investment and savings |
|
|
|
|
|
|
|
|
|
|
Investment |
14.3 |
12.4 |
16.6 |
17.2 |
17.3 |
18.1 |
19.0 |
19.8 |
20.4 |
|
Public |
9.3 |
4.7 |
7.5 |
7.5 |
7.7 |
8.0 |
8.5 |
8.8 |
9.0 |
|
Private |
5.0 |
7.7 |
9.1 |
9.7 |
9.6 |
10.1 |
10.6 |
11.0 |
11.5 |
|
Gross national savings |
3.2 |
3.4 |
7.7 |
7.1 |
3.7 |
5.0 |
7.0 |
7.9 |
9.3 |
|
Public |
1.0 |
4.1 |
7.6 |
8.5 |
1.0 |
2.1 |
2.4 |
3.1 |
3.6 |
|
Private |
2.3 |
-0.7 |
0.1 |
-1.4 |
2.8 |
2.9 |
4.6 |
4.8 |
5.7 |
|
Government budget |
|
|
|
|
|
|
|
|
|
|
Domestic Revenue |
13.1 |
13.9 |
14.3 |
14.4 |
14.2 |
14.5 |
14.7 |
15.1 |
15.5 |
|
Total grants |
10.4 |
9.7 |
13.7 |
14.5 |
7.1 |
7.2 |
6.9 |
7.1 |
7.1 |
|
Total expenditure |
26.0 |
23.0 |
23.2 |
24.0 |
23.2 |
22.7 |
22.9 |
23.0 |
23.0 |
|
Current expenditure |
16.8 |
18.1 |
15.6 |
16.5 |
15.5 |
14.7 |
14.5 |
14.3 |
14.0 |
|
Domestic primary balance |
-2.8 |
-2.6 |
-1.5 |
-1.6 |
-1.3 |
-0.5 |
-0.4 |
0.0 |
0.4 |
|
Change in arrears |
0.2 |
0.2 |
-7.6 |
-7.8 |
-0.4 |
-0.5 |
-0.8 |
-0.9 |
-0.8 |
|
External interest |
0.1 |
-0.1 |
-2.2 |
-2.4 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Domestic |
0.0 |
0.4 |
-5.4 |
-5.4 |
-0.4 |
-0.5 |
-0.8 |
-0.9 |
-0.8 |
|
Overall balance (cash basis) |
-2.3 |
0.8 |
-2.7 |
-3.0 |
-2.2 |
-1.5 |
-2.2 |
-1.7 |
-1.2 |
|
Excluding grants |
-12.8 |
-8.9 |
-16.4 |
-17.4 |
-9.4 |
-8.7 |
-9.0 |
-8.8 |
-8.3 |
|
Financing |
2.4 |
-0.7 |
-0.6 |
0.9 |
0.0 |
-0.7 |
-0.7 |
-0.9 |
-1.0 |
|
Foreign (net) |
1.2 |
-1.3 |
0.8 |
1.3 |
-0.7 |
-0.9 |
-0.8 |
-1.0 |
-0.9 |
|
Domestic (net) |
1.1 |
0.6 |
-1.4 |
-0.4 |
0.7 |
0.2 |
0.1 |
0.1 |
-0.1 |
|
Financing gap 1/ |
0.0 |
0.0 |
3.3 |
2.1 |
2.2 |
2.2 |
2.9 |
2.6 |
2.2 |
|
External sector |
|
|
|
|
|
|
|
|
|
|
Exports of goods and services |
14.0 |
13.2 |
15.0 |
13.2 |
13.7 |
14.0 |
14.0 |
14.3 |
14.5 |
|
Imports of goods and services |
48.4 |
47.9 |
50.5 |
50.8 |
47.6 |
47.4 |
45.3 |
44.6 |
43.2 |
|
Current account balance |
-11.1 |
-9.0 |
-8.9 |
-10.2 |
-13.6 |
-13.1 |
-12.0 |
-11.9 |
-11.1 |
|
Excl. official and private transfers |
-34.3 |
-34.7 |
-35.9 |
-38.1 |
-34.2 |
-33.6 |
-31.4 |
-30.4 |
-28.7 |
|
External debt, NPV in percent of GDP 2/ |
37.4 |
46.2 |
41.8 |
41.8 |
40.2 |
38.4 |
36.5 |
34.5 |
32.5 |
|
External debt, NPV in percent of exports of goods & services |
267 |
330 |
308 |
308 |
286 |
275 |
266 |
255 |
242 |
|
External debt service (in percent of exports of goods and services) |
12.2 |
14.3 |
19.5 |
19.5 |
9.7 |
9.1 |
7.8 |
8.3 |
10.3 |
|
Overall balance of payments (in millions of U.S. dollars) |
-15.9 |
30.1 |
-6.0 |
-13.7 |
-11.8 |
-12.3 |
-16.6 |
-15.2 |
-10.8 |
|
Official grants and loans (percent of GDP) |
11.1 |
9.7 |
13.9 |
14.9 |
7.3 |
7.4 |
7.1 |
7.3 |
7.3 |
|
Gross international reserves (end of period) |
|
|
|
|
|
|
|
|
|
|
In millions of U.S. dollars |
110.4 |
153.1 |
153.3 |
137.5 |
139.3 |
139.8 |
140.6 |
141.5 |
144.1 |
|
In months of imports of goods & services |
5.1 |
7.1 |
6.5 |
6.1 |
6.3 |
6.0 |
5.9 |
5.7 |
5.6 |
|
Real effective exchange rate (2000=100) |
122.3 |
122.6 |
... |
... |
... |
... |
... |
... |
... |
|
Exchange rate CF/US$ (period average) |
334.3 |
353.2 |
360.7 |
383.2 |
... |
... |
... |
... |
... |
|
Memorandum items: |
|
|
|
|
|
|
|
|
|
|
GDP (nominal, in billions of CF) |
178.0 |
189.6 |
201.0 |
201.0 |
212.7 |
226.8 |
243.3 |
261.4 |
280.8 |
| |
|
Sources: Comorian authorities; and IMF staff estimates and projections.
1/ The program financing gap for 2010–12 will be covered by grants and ECF financing.
2/ External debt ratios before traditional debt-relief. 2008 debt data not comparable, as it does not account for the full stock of debt. |
| Comoros: Selected Economic and Financial Indicators, 2008–15 |
| |
|
|
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
|
|
|
|
Prog 1st Rev. |
Rev. prog. |
Proj |
Proj |
Proj |
Proj |
Proj |
| |
(Annual percentage change, unless otherwise indicated) |
|
National income and prices |
|
|
|
|
|
|
|
|
|
|
Real GDP |
1.0 |
1.8 |
2.1 |
2.1 |
2.5 |
3.5 |
4.0 |
4.0 |
4.0 |
|
GDP deflator |
5.5 |
4.6 |
3.8 |
3.8 |
3.3 |
3.1 |
3.1 |
3.3 |
3.3 |
|
Consumer price index (annual averages) |
4.8 |
4.8 |
2.6 |
2.7 |
3.0 |
2.9 |
2.9 |
3.0 |
3.0 |
|
Consumer price index (end period) |
7.4 |
2.2 |
3.1 |
3.2 |
2.8 |
2.9 |
3.0 |
3.0 |
3.0 |
|
Money and credit |
|
|
|
|
|
|
|
|
|
|
Net foreign assets |
-6.8 |
9.7 |
9.6 |
0.3 |
1.5 |
1.2 |
1.5 |
2.2 |
4.6 |
|
Domestic credit |
41.7 |
34.9 |
7.2 |
9.7 |
15.1 |
10.5 |
10.0 |
9.9 |
10.1 |
|
Net credit to government (Treasury) |
31.2 |
13.4 |
-28.7 |
-7.8 |
17.5 |
4.3 |
2.6 |
1.5 |
-2.6 |
|
Broad money |
11.6 |
13.5 |
7.5 |
12.7 |
8.6 |
7.3 |
7.5 |
7.7 |
7.6 |
|
Velocity (GDP/end-year broad money) |
3.5 |
3.3 |
3.3 |
3.3 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
|
External sector |
|
|
|
|
|
|
|
|
|
|
Exports, f.o.b. |
-55.4 |
93.1 |
17.1 |
14.1 |
13.9 |
8.2 |
7.8 |
7.8 |
7.9 |
|
Imports, f.o.b. |
28.5 |
1.6 |
13.1 |
14.4 |
-1.4 |
6.3 |
2.3 |
5.7 |
4.0 |
|
Export volume |
-35.0 |
71.2 |
18.1 |
12.5 |
9.8 |
2.1 |
1.8 |
2.7 |
2.7 |
|
Import volume |
33.1 |
10.6 |
-0.8 |
-4.8 |
-7.0 |
4.8 |
-0.3 |
4.9 |
2.8 |
|
Terms of trade |
-40.8 |
22.8 |
-13.0 |
-15.6 |
-2.1 |
4.5 |
3.1 |
4.2 |
3.8 |
|
(in percent of GDP, unless otherwise indicated) |
|
Investment and savings |
|
|
|
|
|
|
|
|
|
|
Investment |
14.3 |
12.4 |
16.6 |
17.2 |
17.3 |
18.1 |
19.0 |
19.8 |
20.4 |
|
Public |
9.3 |
4.7 |
7.5 |
7.5 |
7.7 |
8.0 |
8.5 |
8.8 |
9.0 |
|
Private |
5.0 |
7.7 |
9.1 |
9.7 |
9.6 |
10.1 |
10.6 |
11.0 |
11.5 |
|
Gross national savings |
3.2 |
3.4 |
7.7 |
7.1 |
3.7 |
5.0 |
7.0 |
7.9 |
9.3 |
|
Public |
1.0 |
4.1 |
7.6 |
8.5 |
1.0 |
2.1 |
2.4 |
3.1 |
3.6 |
|
Private |
2.3 |
-0.7 |
0.1 |
-1.4 |
2.8 |
2.9 |
4.6 |
4.8 |
5.7 |
|
Government budget |
|
|
|
|
|
|
|
|
|
|
Domestic Revenue |
13.1 |
13.9 |
14.3 |
14.4 |
14.2 |
14.5 |
14.7 |
15.1 |
15.5 |
|
Total grants |
10.4 |
9.7 |
13.7 |
14.5 |
7.1 |
7.2 |
6.9 |
7.1 |
7.1 |
|
Total expenditure |
26.0 |
23.0 |
23.2 |
24.0 |
23.2 |
22.7 |
22.9 |
23.0 |
23.0 |
|
Current expenditure |
16.8 |
18.1 |
15.6 |
16.5 |
15.5 |
14.7 |
14.5 |
14.3 |
14.0 |
|
Domestic primary balance |
-2.8 |
-2.6 |
-1.5 |
-1.6 |
-1.3 |
-0.5 |
-0.4 |
0.0 |
0.4 |
|
Change in arrears |
0.2 |
0.2 |
-7.6 |
-7.8 |
-0.4 |
-0.5 |
-0.8 |
-0.9 |
-0.8 |
|
External interest |
0.1 |
-0.1 |
-2.2 |
-2.4 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Domestic |
0.0 |
0.4 |
-5.4 |
-5.4 |
-0.4 |
-0.5 |
-0.8 |
-0.9 |
-0.8 |
|
Overall balance (cash basis) |
-2.3 |
0.8 |
-2.7 |
-3.0 |
-2.2 |
-1.5 |
-2.2 |
-1.7 |
-1.2 |
|
Excluding grants |
-12.8 |
-8.9 |
-16.4 |
-17.4 |
-9.4 |
-8.7 |
-9.0 |
-8.8 |
-8.3 |
|
Financing |
2.4 |
-0.7 |
-0.6 |
0.9 |
0.0 |
-0.7 |
-0.7 |
-0.9 |
-1.0 |
|
Foreign (net) |
1.2 |
-1.3 |
0.8 |
1.3 |
-0.7 |
-0.9 |
-0.8 |
-1.0 |
-0.9 |
|
Domestic (net) |
1.1 |
0.6 |
-1.4 |
-0.4 |
0.7 |
0.2 |
0.1 |
0.1 |
-0.1 |
|
Financing gap 1/ |
0.0 |
0.0 |
3.3 |
2.1 |
2.2 |
2.2 |
2.9 |
2.6 |
2.2 |
|
External sector |
|
|
|
|
|
|
|
|
|
|
Exports of goods and services |
14.0 |
13.2 |
15.0 |
13.2 |
13.7 |
14.0 |
14.0 |
14.3 |
14.5 |
|
Imports of goods and services |
48.4 |
47.9 |
50.5 |
50.8 |
47.6 |
47.4 |
45.3 |
44.6 |
43.2 |
|
Current account balance |
-11.1 |
-9.0 |
-8.9 |
-10.2 |
-13.6 |
-13.1 |
-12.0 |
-11.9 |
-11.1 |
|
Excl. official and private transfers |
-34.3 |
-34.7 |
-35.9 |
-38.1 |
-34.2 |
-33.6 |
-31.4 |
-30.4 |
-28.7 |
|
External debt, NPV in percent of GDP 2/ |
37.4 |
46.2 |
41.8 |
41.8 |
40.2 |
38.4 |
36.5 |
34.5 |
32.5 |
|
External debt, NPV in percent of exports of goods & services |
267 |
330 |
308 |
308 |
286 |
275 |
266 |
255 |
242 |
|
External debt service (in percent of exports of goods and services) |
12.2 |
14.3 |
19.5 |
19.5 |
9.7 |
9.1 |
7.8 |
8.3 |
10.3 |
|
Overall balance of payments (in millions of U.S. dollars) |
-15.9 |
30.1 |
-6.0 |
-13.7 |
-11.8 |
-12.3 |
-16.6 |
-15.2 |
-10.8 |
|
Official grants and loans (percent of GDP) |
11.1 |
9.7 |
13.9 |
14.9 |
7.3 |
7.4 |
7.1 |
7.3 |
7.3 |
|
Gross international reserves (end of period) |
|
|
|
|
|
|
|
|
|
|
In millions of U.S. dollars |
110.4 |
153.1 |
153.3 |
137.5 |
139.3 |
139.8 |
140.6 |
141.5 |
144.1 |
|
In months of imports of goods & services |
5.1 |
7.1 |
6.5 |
6.1 |
6.3 |
6.0 |
5.9 |
5.7 |
5.6 |
|
Real effective exchange rate (2000=100) |
122.3 |
122.6 |
... |
... |
... |
... |
... |
... |
... |
|
Exchange rate CF/US$ (period average) |
334.3 |
353.2 |
360.7 |
383.2 |
... |
... |
... |
... |
... |
|
Memorandum items: |
|
|
|
|
|
|
|
|
|
|
GDP (nominal, in billions of CF) |
178.0 |
189.6 |
201.0 |
201.0 |
212.7 |
226.8 |
243.3 |
261.4 |
280.8 |
| |
|
Sources: Comorian authorities; and IMF staff estimates and projections.
1/ The program financing gap for 2010–12 will be covered by grants and ECF financing.
2/ External debt ratios before traditional debt-relief. 2008 debt data not comparable, as it does not account for the full stock of debt. |
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
|
