Press Release No. 23/373

IMF Reaches Staff-Level Agreement on the First Review of the Extended Credit Facility and Conducts Discussions on the 2023 Article IV Consultation with the Union of the Comoros

November 1, 2023

• The Comorian authorities and IMF staff have reached a staff-level agreement on economic policies and reforms for completion of the first review under the 4-year ECF-supported program. The review once formally completed by the IMF Executive Board would release about US$4.7 million in financing.
• Expected growth in 2023 reflects an ongoing rebound in economic activity. Program performance has been generally satisfactory amidst continued challenges from the external environment. The authorities remain committed to achieving their fiscal consolidation targets, and there has been good progress on the structural reform agenda.
• Article IV consultation discussions focused on reforms to boost fiscal transparency, protect tax revenue in the context of the WTO accession and declining trade taxes, reduce the fiscal drag from state-owned enterprises, and progress towards SDGs.

Moroni: An International Monetary Fund (IMF) team, led by Ms. Suchanan Tambunlertchai, visited Moroni during October 18 – 31 to discuss economic and financial policies in the context of the first review of the program supported by the Extended Credit Facility (ECF) arrangement and the 2023 Article IV consultation. Ms. Tambunlertchai issued the following statement today:

“The authorities and the IMF team have reached a staff-level agreement on policies to complete the first review under the ECF arrangement. The agreement is subject to approval by the IMF’s Management and Executive Board. Completing the review will make available SDR 3.56 million (about US$4.7 million), bringing total disbursements under the arrangement to about $9.5 million.

“Growth is projected to reach 3 percent in 2023, reflecting a rebound in economic activity including the ongoing construction of the El Maarouf Hospital and the Galawa Hotel. Average inflation is expected to recede to 9.6 percent this year, down from 12.4 percent last year. Consistent with higher import demand and elevated import prices, the external current account deficit would widen to 6 percent of GDP in 2023. In 2024, real GDP growth is projected to rise to 3.5 percent, driven by the acceleration in the two construction projects.

“Performance under the ECF has been broadly satisfactory. Four of six quantitative performance criteria for end-June 2023 have been met. Seven out of eight structural benchmarks have been completed. The authorities are committed to taking corrective actions for the missed quantitative performance criteria on the accumulation of external arrears and the accumulation of net domestic arrears ahead of the Executive Board discussion. The remaining structural benchmark on the de jure management of the tax on petroleum products by Customs would be completed during the next Parliamentary session in April.

“The authorities maintain their steadfast commitment to medium-term fiscal consolidation supported by targeted reforms in revenue administration and public financial management. They expect the improved revenue collection in 2023 to help contain the domestic primary deficit below 2 percent of GDP. Achieving a domestic primary deficit of around 1½ percent of GDP in 2024 will require continued revenue administration and customs reforms to reduce tax evasion and leakages as well as spending control. Sustained efforts will be critical to gradually create fiscal space for much-needed investment in social development, including health, education, and infrastructure while maintaining fiscal and debt sustainability to reduce economic fragility. The authorities are committed to a prudent financing strategy, supported by grant mobilization and concessional borrowing. Public debt is expected to peak in 2026 at around 37 percent of GDP and gradually decline over the medium term, reflecting continued fiscal consolidation and a slowdown in borrowing after the completion of the large projects.

“Addressing banking sector vulnerabilities remains important to meet Comoros’ growing financing needs. Reducing non-performing loans, enhancing supervision, and strengthening regulatory frameworks would increase financial sector efficiency. With the establishment of the banking resolution unit, the Central Bank of Comoros aims to enhance its capacity to address chronically undercapitalized banks.

“Article IV discussions focused on the structural reform agenda to foster progress towards the sustainable development goals (SDGs) in health, education, and infrastructure; strengthen fiscal transparency; safeguard fiscal revenue in the context of the WTO accession and declining trade taxes; and reduce the fiscal drag from state-owned enterprises. Continued efforts to strengthen governance and reduce corruption vulnerabilities, including the implementation of the new anti-corruption law, will be key to improve the overall business climate. 

“The IMF team thanks the authorities and other counterparts for their excellent cooperation, as well as the candid and constructive discussions.”