IMF Executive Board Completes the Second Review Under the Extended Credit Facility Arrangement with the Union of the Comoros
IMF News, June 21, 2024
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- Published: June 21, 2024
Executive action and financing
- The Executive Board completed the second review under the Union of the Comoros’ Extended Credit Facility (ECF) arrangement.
- Approval of the second review enables the immediate disbursement of SDR 3.56 million (about US$ 4.68 million).
- The 4-year ECF arrangement was approved on June 1, 2023, with an access of SDR 32.04 million (about US$43 million).
- The Executive Board approved the authorities’ request for a waiver of nonobservance of the continuous performance criterion on the non-accumulation of new external arrears, based on strong corrective actions taken by the authorities.
Program objectives and key policy priorities
- Program goals:
- Reduce fragility and increase economic resilience.
- Build fiscal buffers and reduce debt vulnerabilities.
- Strengthen the financial sector and governance.
- Key policy priorities under the program:
- Mobilizing domestic revenue through reforms to strengthen tax and customs administration and streamline tax exemptions.
- Strengthening the financial sector, including completion of the restructuring of the state-owned postal bank SNPSF and enhancing the Central Bank’s banking supervision and resolution capacities.
- Strengthening governance through public financial management and anti-corruption reforms.
Implementation progress and program performance
- Performance highlights:
- Four of five quantitative performance criteria (QPCs) were met as of end-December 2023.
- Six of the eleven structural benchmarks (SBs) between December 2023 and May 2024 were met; two were implemented with delays; two end-June 2024 SBs were met ahead of time.
- The authorities continue to demonstrate strong commitment to the ECF-supported program despite economic and institutional fragilities.
- Reforms are beginning to bear fruit, with visible signs of macroeconomic stabilization.
- Challenges noted: small, fragile island state vulnerabilities requiring steadfast program implementation and continued international support.
Macroeconomic outlook and risks
- Short- and medium-term outlook:
- Real GDP growth is expected to remain on an upward trajectory throughout the program period.
- Inflation is projected to decline further in 2024 and beyond.
- The domestic primary balance is expected to improve, driven in part by steady improvement in domestic revenue mobilization.
- The external sector is stable; gross international reserves are expected to remain above 7 months of import cover over the program period.
- Risks and vulnerabilities:
- Significant development challenges and balance of payments needs.
- High risk of debt distress.
- Vulnerabilities in the banking system.
- Governance and corruption vulnerabilities.
- Exposure to climate change risks.
- Policy recommendations emphasized by Mr. Kenji Okamura, Deputy Managing Director and Acting Chair:
- Maintain fiscal consolidation to reduce debt sustainability risks, underpinned by reforms in revenue administration and tax policy as well as normalization of public investment spending.
- Implement fiscal structural reforms to improve budget transparency, cash and debt management, and the performance and efficiency of SOEs and their oversight.
- Continue monetary policy efforts that have contained inflation and ensured sufficient external buffers and peg stability.
- Continue efforts to stabilize the financial sector, including restructuring the state-owned postal bank, addressing credit quality in the banking system, and strengthening banking supervision and resolution capacities.
- Continue governance and anti‑corruption reforms; note the recent formation of the Anti-Corruption Chamber and progress on aligning the AML/CFT framework and publishing public procurement contracts.
- Step up implementation efforts to ensure all program objectives are met; the IMF will provide close engagement, capacity development, economic surveillance, and program support. Support from international partners remains important.
Selected Economic Indicators (2023-26)
- Output
- Real GDP growth (%): 2023: 3.0; 2024: 3.5; 2025: 4.0; 2026: 4.3
- Employment
- Unemployment (%): 2023: n.a.
- Prices
- Inflation, period average (%): 2023: 8.5; 2024: 3.3; 2025: 1.7; 2026: 2.1
- Central government finances
- Revenue and grants (% GDP): 2023: 16.5; 2024: 17.6; 2025: 15.8; 2026: 15.9
- Expenditure (% GDP): 2023: 17.8; 2024: 20.4; 2025: 18.3; 2026: 18.4
- Fiscal balance (% GDP): 2023: -1.2; 2024: -2.8; 2025: -2.6; 2026: -2.4
- Public debt (% GDP): 2023: 32.5; 2024: 34.3; 2025: 35.2; 2026: 35.5
- Money and Credit
- Broad Money (% change): 2023: 8.7; 2024: 7.0; 2025: 6.0; 2026: 5.5
- Credit to private sector (% change): 2023: 12.8; 2024: 8.3; 2025: 5.7; 2026: 6.5
- 3-month Treasury bill interest rate (or similar) (%): 2023: 1.2; 2024: 2.2; 2025: 3.2
- Balance of Payments
- Current account (% GDP): 2023: -2.5; 2024: -3.3; 2025: -3.9; 2026: -4.0
- FDI (% GDP): 2023: 0.4; 2024: 0.5; 2025: 0.6
- Reserves (months imports): 2023: 7.5; 2024: 9.4; 2025: 7.7; 2026: 10.4
- External debt (% GDP): 2023: (not provided)
- Exchange rate
- KMF/US$ (period average): 2023: 452.0; 2024: …
Source: IMF Executive Board press release on the completion of the second review under the Extended Credit Facility Arrangement with the Union of the Comoros (Press Release No. 24/233).