Press Release No. 15/432

Press Release: Statement by the IMF Mission at the end of a visit to the Union of the Comoros

September 23, 2015

A mission from the International Monetary Fund (IMF) led by Harry Trines visited Moroni from September 14-23 to review developments during the first half of 2015 and continue discussions on a possible program that could be supported under the IMF’s Rapid Credit Facility (RCF) as well as a staff-monitored program (SMP).

At the conclusion of the mission, Mr. Trines, issued the following statement:

“The economic situation in Comoros continues to be difficult. The crisis in the electricity sector and the slower-than-expected implementation of the public investment program (PIP) have adversely affected economic activity and tax revenue. Unbudgeted increases in the wage bill and the exhausted Economic Citizenship program’s (ECP) deposits have limited the government’s scope to finance itself domestically. Therefore, the government has been falling ever further behind with the payment of public sector wages and salaries since late 2014.

“The mission projects that economic growth will be only about 1 percent in 2015, well below the estimated population growth rate. Overall inflation appears to have remained moderate, at around 2 percent on an annual basis, despite the substantial appreciation of the dollar against the euro. However, this is difficult to substantiate as the consumer price index has not been updated on the basis of actual price data since November 2014. Moreover, the appreciation of the dollar has led to intensified pressures on the balance of payments due to the high dependence on and limited substitutability of imports. As a result, international reserves have declined.

“There has been some progress on putting in place structural reforms to improve the overall situation, and the recently installed electricity generators will provide some immediate relief although the crisis in the energy sector is far from being resolved. Against this background, the IMF mission projects that real GDP growth rate will accelerate to slightly above 2 percent in 2016.

“The mission reviewed previously agreed structural reforms, mostly in the areas of revenue administration (RA) and public financial management (PFM), and found that progress has been satisfactory. Most notable is the establishment of the single treasury account (STA) on September 1. This account, through which all government revenue and expenditure will flow, should play an important role in strengthening budget execution and cash management, as well as greatly improve the transparency of government fiscal operations.

“The mission also discussed with the authorities a supplementary budget for 2015 and a framework for the 2016 budget that could form the basis for an SMP for the period September 2015 to December 2016. The primary objective of the 2015 supplementary budget is to eliminate all wage and salary arrears by the end-of the year. The authorities identified revenue measures that, along with a disbursement under the RCF for 25 percent of quota (SDR 2.225 million, about €3 million), would make this objective attainable. But this will require a forceful effort from the authorities to collect revenue, notably from the state-owned enterprises in the form of profit taxes and dividends. The mission will continue discussions with the authorities on the issue of revenue collection in the coming weeks to ensure that progress is being made in a timely fashion. Further to the confirmation that identified revenue measures have been implemented and subject to IMF management approval, the RCF disbursement is expected to be submitted to the Executive Board of the IMF for its consideration in late November.

“The mission met with His Excellency Dr. Ikililou Dhoinine, President of the Union, Vice President and Minister of Finance Mohamed Ali Soilihi, Minister of Planning Alfeine Soifiat Tadjiddine, Governor of the Central Bank and other government and central bank officials as well as donor representatives.

“The mission wishes to thank the authorities for their excellent cooperation and hospitality.”