Press Release No. 10/162

Press Release: Statement at the Conclusion of an IMF Staff Mission to Comoros

April 20, 2010

An International Monetary Fund (IMF) staff mission led by Mr. Mbuyamu Matungulu visited

the Union of Comoros during April 6-20, 2010 to conduct discussions for the first review of performance under the Extended Credit Facility (ECF) program¹ and finalize preparations for reaching the Heavily Indebted Poor Country (HIPC) initiative Decision Point. The mission met with Mr. Ahmed Abdallah Mohamed Sambi, the President of the Union and Mr. Bourhane Hamidou, Speaker of Parliament. The mission held discussions with the Vice-President and Finance Minister and other members of the Cabinet of the Union; the Governors of the three island entities; the Deputy Governor of the Central Bank of the Comoros; as well as representatives of civil society and the donor community.

At the conclusion of the mission, Mr. Matungulu, IMF Mission Chief for the Comoros, issued the following statement today in Moroni:

“Macroeconomic developments were encouraging in 2009. Economic growth is estimated to have slightly increased to 1.8 percent, from 1 percent in 2008, reflecting the effects of an uptick in donor support and foreign direct investment in banking; and resilient remittances. Inflation remained broadly under control, owing to a fall in world energy and food prices. A strengthening of the terms of trade and significant external budget assistance helped narrow the external current account deficit to 7.9 percent of GDP in 2009 from 11.3 percent of GDP in 2008. Gross international reserves rose to the equivalent of 7.1 months of imports, driven by assistance from development partners and the general and special allocations of special drawing rights (SDRs) from the IMF to member countries.

“The authorities slightly exceeded their 2009 revenue target. However, progress in budget consolidation was frustrated by overruns on current spending, including personnel outlays, as the authorities continued experiencing difficulties in managing the wage bill. The domestic primary budget deficit stagnated at 2.6 percent of GDP close to the level in 2008, compared with a program objective of 1.6 percent of GDP.

“Several measures under the structural reform agenda were implemented, albeit with major delays in some cases. All but one structural indicators were met. In particular, the government has yet to agree with the International Finance Corporation on the reform options for the telecommunications and hydro-carbon importing companies, an
end-September 2009 structural benchmark.

“Short-term prospects point to a further strengthening of economic activity in 2010, with real GDP growth likely to reach 2 percent. The mission reviewed budget prospects and encouraged the authorities to ensure close adherence to their 2010 budgetary framework, consistent with the government’s medium-term macroeconomic objectives under the ECF, and which would permit expenditure aimed at poverty reduction to continue to grow.

“Medium-term macroeconomic prospects are favorable, provided efforts at fiscal consolidation are resumed and the structural reform agenda is expedited, with a focus on the restructuring of public utilities and on measures to better control wage payments. Improvements in public utility efficiency would help strengthen the business and investment environment, while better management of the public wage bill would create room for other expenditures, notably infrastructure and other poverty reducing spending. The mission welcomes the recent submission to Parliament of new civil service personnel frameworks that are compatible with medium-term budget viability and the government’s stated intention to begin operating the recently installed computer system for wage management without further delay. The mission urges the authorities to expedite planned reforms of the state-owned telecommunications and petroleum importing companies.

“In collaboration with World Bank staff, the mission reached understandings with the authorities on HIPC completion point triggers. These include policy measures to advance macroeconomic stability; improve public financial management and governance; strengthen health and education; support growth; and improve debt management. Timely observance would contribute to early access to comprehensive debt relief under the HIPC Initiative.

“The mission reached broad agreement with the authorities on an economic program for 2010 that could form the basis for completing the first review under the ECF arrangement. The mission looks forward to early Cabinet approval of agreed reforms, which would allow prompt consideration of the review by the IMF Executive Board.

“The mission is grateful for the very open and frank discussions with the authorities of Comoros, and for their hospitality.”

¹ The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.