Press Release No. 07/61

Press Release: Statement by the IMF Staff Mission at the Conclusion of a Visit to the Union of the Comoros

March 30, 2007

Mr. Andrew Gilmour, the International Monetary Fund's (IMF) mission chief for the Union of Comoros, issued the following statement today in Moroni:

"An IMF staff team visited the Union of Comoros during March 29-April 5, 2007, to review performance under the Staff Monitored Program (SMP), which ended December 2006, and to reach understandings on adjustments to the budget for 2007. These adjustments are necessary to preserve the government's medium-term economic program goals, previously agreed with the IMF in December 2006, which could be supported under the IMF's Poverty Reduction and Growth Facility (PRGF).¹ The mission met with the Minister of Finance of the Union, the Governor of the Central Bank, the Ministers of Finance of the three island governments, as well as representatives of the Union national assembly, the private sector, and the donor community.

"The Union of Comoros continues to make progress toward a program that could be supported under the PRGF. While fiscal performance under the SMP fell somewhat short of targets, the authorities have been quick to propose remedial measures to offset the expected overrun of expenditures into 2007, and to boost revenues. Such prompt actions positively reflect the implementation of new institutional arrangements to strengthen interisland coordination and fiscal discipline. Good progress has been made in the discussions on a supplementary budget for 2007, which if underpinned by additional reform measures, could bring the government's program back on track. However, risks still remain, and meeting the government's fiscal targets will require vigilance on controlling expenditures, particularly on wages and transfers to public enterprises, as well as concerted efforts to raise revenues. Here, continued adherence to the interisland revenue sharing mechanism remains critical.

"The understandings reached ad referendum between the mission and the authorities are subject to review by the IMF's management and approval by the IMF Executive Board. Board presentation of the PRGF arrangement, which would support the Union of Comoros' Interim Poverty Reduction Strategy toward reaching the Millennium Development Goals, is also contingent on reaching agreements to clear external payment arrears. The arrangement should help catalyze increased economic support from the wider international community in line with the commitments made at the donor conference in December 2005, and is a key step in moving toward debt relief under both the enhanced Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative."

¹ The PRGF is the IMF's concessional lending facility for low-income countries. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.