IMF Executive Board Completes the First Review Under the Extended Credit Facility Arrangement and Concludes the 2023 Article IV Consultation with the Union of the Comoros

IMF News, December 15, 2023

Source details

Canonical URL: IMF Executive Board Completes the First Review Under the Extended Credit Facility Arrangement and Concludes the 2023 Article IV Consultation with the Union of the Comoros

The Executive Board completed the first review under the Extended Credit Facility (ECF) arrangement for the Union of the Comoros.
Approval of the first review enables the immediate disbursement of SDR 3.56 million (about US$4.77 million).
The 4-year ECF arrangement was approved on June 1, 2023, with access of SDR 32.04 million (about US$43 million).
The Executive Board approved the authorities’ request for a waiver for nonobservance of:
- the end-June 2023 performance criterion on the ceiling on the accumulation of new domestic payments arrears; and
- the continuous performance criterion on the ceiling on new external arrears.

Overall aims:
- Reduce fragility and increase economic resilience by building fiscal buffers, reducing debt vulnerabilities, and strengthening the financial sector and governance.
Key policy priorities under the ECF-supported program:
- Mobilize domestic revenue supported by reforms to strengthen tax and customs administration and streamline tax exemptions.
- Complete the restructuring of the state-owned postal bank SNPSF and enhance the Central Bank’s banking supervision and resolution capacities.
- Strengthen governance through public financial management and anti-corruption reforms.

Program performance:
- The authorities’ commitment to the ECF-supported program remains strong and program performance has been satisfactory.
- Seven of eight structural benchmarks (SBs) were met as of end-October 2023.
- Four of six quantitative performance criteria (QPCs) for end-June 2023 were observed.
Fiscal and debt stance:
- Continued fiscal consolidation and improved domestic revenue mobilization are emphasized to gradually reduce financing needs and create fiscal space for social and investment spending.
- Important measures highlighted: prioritize improvements in the budget process, address external arrears, complete the audit exercise on domestic arrears, and improve performance and oversight of state-owned enterprises.

Signs of recovery:
- Visible recovery supported by a rebound in tourism and ongoing public investment projects.
- Inflation has declined in line with normalization in international oil and food prices.
Near-term pressures:
- The current account deficit is projected to deteriorate over the short term due to strong import demand and elevated international fuel and food prices.
- International reserves remain adequate.
Key vulnerabilities and risks:
- Elevated global uncertainty, fragile domestic context, dependence on imports, remittances, and foreign aid, and capacity constraints leave the economy highly vulnerable to external shocks.
- High risk of debt distress noted by Directors.

Monetary policy and exchange rate:
- The fixed exchange rate regime has provided an effective anchor and ensured sufficient external buffers.
- Monetary policy should maintain focus on safeguarding the peg and ensure price stability.
- Strengthening the monetary policy toolkit is encouraged.
Financial sector:
- Strengthen banking supervision, address high NPLs, and proceed cautiously to complete the restructuring of the systemic postal bank.
- Implement the banking resolution framework and upgrade prudential regulations in line with international standards.
- Align the AML/CFT framework with international standards to support greater transparency.
Governance and anti-corruption:
- Implement the anti-corruption law adopted in June; the law has strengthened frameworks for asset declaration and the Anti-Corruption Chamber.
- Over the medium term, reforms to enhance public sector governance and transparency are recommended to improve the business environment and attract private investment.
Capacity development:
- Continued capacity development support from the Fund and development partners is critical, including strengthening statistical capacity for effective economic surveillance and policy analysis and implementation.

Executive Directors agreed with the thrust of the staff appraisal and welcomed broadly satisfactory program performance and authorities’ commitment.
Directors’ emphases:
- Continued strong policy implementation is essential.
- Further fiscal consolidation recommended to build fiscal buffers and secure debt sustainability.
- Fiscal reforms needed in revenue administration and tax policy, budget execution and reporting, and cash management.
- Enhance performance and oversight of state-owned enterprises and accelerate efforts to address existing arrears; develop a sound debt monitoring system to avoid new arrears.
- Progress on Sustainable Development Goals requires prioritization of social and infrastructure spending.
- Improve banking supervision, address high NPLs, implement banking resolution framework, and upgrade prudential regulations.
- Strengthen AML/CFT framework effectiveness and transparency.
- Progress on implementing the anti-corruption law and establishing the Anti-Corruption Chamber is called for.
- Note vulnerability to climate change and welcome authorities’ commitment to prioritize adaptation and mitigation efforts.
- Improve data collection and dissemination to enable better policymaking.

Output
- Real GDP growth (%): 2021: 2.0; 2022: 2.6; 2023 est.: 3.0; 2024 proj.: 3.5
Employment
- Unemployment (%): 2021: n.a.; 2022: ; 2023: ; 2024:
Prices
- Inflation, period average (%): 2021: 0.0; 2022: 12.4; 2023 est.: 9.2; 2024 proj.: 2.2
Central government finances
- Revenue and grants (% GDP): 2021: 17.1; 2022: 14.3; 2023 est.: 17.4; 2024 proj.: 17.2
- Expenditure (% GDP): 2021: 20.0; 2022: 18.3; 2023 est.: 21.8; 2024 proj.: 20.5
- Fiscal balance (% GDP): 2021: -2.8; 2022: -3.6; 2023 est.: -4.4; 2024 proj.: -3.3
- Public debt (% GDP): 2021: 25.6; 2022: 27.5; 2023 est.: 32.6; 2024 proj.: 34.8
Money and Credit
- Broad Money (% change): 2021: 20.1; 2022: 8.0; 2023 est.: 7.3; 2024 proj.:
- Credit to private sector (% change): 2021: 9.7; 2022: 15.0; 2023 est.: 9.6; 2024 proj.: 6.8
- 3-month Treasury bill interest rate (or similar) (%): 2021: 1.2; 2022: ; 2023 est.: ; 2024 proj.:
Balance of Payments
- Current account (% GDP): 2021: -0.3; 2022: -0.5; 2023 est.: -5.8; 2024 proj.: -5.7
- FDI (% GDP): 2021: 0.3; 2022: 0.4; 2023 est.: 0.5; 2024 proj.:
- Reserves (months imports): 2021: 8.2; 2022: 6.6; 2023 est.: 6.9; 2024 proj.: 7.7
- External debt (% GDP): 2021: 25.4; 2022: 27.3; 2023 est.: 32.4; 2024 proj.: 34.6
Exchange rate
- KMF/US$ (period average): 2021: 415.7; 2022: 466.8; 2023 est.: …

IMF Press Release No. 23/457, December 15, 2023.