Press Release No. 24/471

IMF Executive Board Completes the Third Review Under the Extended Credit Facility Arrangement with the Union of the Comoros

December 13, 2024

• The IMF Executive Board completed today the third review under the Extended Credit Facility Arrangement with the Union of the Comoros. Approval of the third review enables an immediate disbursement of SDR 3.56 million (about US$ 4.7 million).
• Program performance remains broadly on track albeit uneven, amid a political transition and a more challenging external financing environment. The authorities have reaffirmed their commitment to the reform agenda under the ECF-supported program.
• Economic conditions have remained stable despite inflationary pressures and signs of softening economic activity, and adherence to the ECF-supported program will safeguard macroeconomic stability and advance needed structural reforms while catalyzing additional financial support for the country’s large financing needs.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the third review under the Union of the Comoros’ Extended Credit Facility (ECF) arrangement. The Executive Board’s decision allows for an immediate disbursement of SDR 3.56 million (about US$ 4.7 million) bringing the total disbursements so far under the arrangement to about $18.8 million. The 4-year ECF arrangement was approved on June 1, 2023, with an access of SDR 32.04 million (about US$43 million).  

In completing the review, the Executive Board also approved the authorities’ requests for the (i) modification of the end-December quantitative performance criterion (QPC) on tax revenue to account for the weaker-than-expected economic activity this year; (ii) modification of the June 2025 QPC on the primary domestic balance, to account for the amended budget perimeter in line with good public financial management (PFM) practice, and corresponding modification of the Technical Memorandum of Understanding (TMU); and (iii) waivers of nonobservance of the QPC on tax revenue and the continuous QPC on the non-accumulation of external arrears, based on corrective actions taken by the authorities.

While there is considerable progress towards the achievement of program objectives, significant and continued effort is required to maintain the reform momentum. The authorities have reiterated their commitment to the ECF-supported program, despite the recent slow-down in reform momentum and the backdrop of economic and institutional fragilities. Three of five quantitative performance criteria (QPCs) were met as of end-June 2024 and six of the nine structural benchmarks (SBs) expected between June and October were met. Two SBs have been reformulated and four have had their dates reset. 

Comoros’s economic reform program, supported by the ECF arrangement, seeks to reduce fragility and increase economic resilience by building fiscal buffers, reducing debt vulnerabilities, and strengthening the financial sector and governance. Key policy priorities for the program remain unchanged and include: (i) mobilizing domestic revenue through reforms to strengthen tax and customs administration and streamline tax exemptions; (ii) stabilizing the financial sector, including through the completion of the restructuring of the state-owned postal bank SNPSF and enhancing the Central Bank’s banking supervision and resolution capacities; and (iii) strengthening governance through PFM and anti-corruption reforms.

Economic conditions have remained stable, albeit marked by considerable downside risks. Real GDP growth is expected to be slightly lower than previously forecast for 2024 and 2025 due to severe climate change-induced weather events and the cholera epidemic earlier this year, amid emerging signs of softening activity. Inflationary pressures are expected to ease and inflation should decline from 2025, following its persistence this year. The pace of fiscal consolidation in 2024 has been stronger than expected, mainly due to under-execution of investment spending. Fiscal consolidation is expected to continue in 2025. The external sector remains stable, and gross international reserves are projected to remain above 7 months of import cover over the program period.

Following the Executive Board’s discussion, Mr. Nigel Clarke, Deputy Managing Director, and Acting Chair, issued the following statement:

“The authorities’ efforts under the Extended Credit Facility arrangement demonstrate a continued commitment to economic stabilization and reform, despite challenges and a transition to a new administration. While the external position remains stable, with continued accumulation of foreign reserves, economic performance has softened amid inflationary pressures driven by food prices. This adds to medium-term risks for Comoros as a fragile and small developing state, exposed to global economic uncertainties, climate shocks, and institutional capacity limitations.

“Fiscal policy remains focused on medium-term consolidation, needed to preserve debt sustainability and gradually reduce the risk of debt distress, while adapting to near-term challenges. Structural reforms to modernize revenue administration, enhance budgetary practices, and strengthen cash and debt management continue. Improvements in the oversight of state-owned enterprises and external and domestic arrears clearance are also advancing, with further efforts being critical.

“The monetary policy framework rightly continues to be aimed at preserving the stability of the euro peg as a nominal anchor, while the Central Bank’s readiness to apply appropriate liquidity absorption and other operations in the case of heightened inflationary pressures is welcome. Progress in restructuring the postal bank, operationalizing the banking resolution law, and improving the Central Bank's supervision capacity will enhance financial sector resilience.

“Institutional and governance improvements remain critical as a foundation for economic activity and to enhance policy credibility for domestic and external stakeholders. Reforms such as the operationalization of the Anti-Corruption Chamber have advanced, with additional support required for capacity development and to boost public sector transparency. Strengthened public financial management and measures to better align with international standards will bolster Comoros’ engagement with development partners and investors.

“Effective program implementation remains vital for achieving macroeconomic stability and development goals. Continued engagement with the IMF—through the ECF, technical assistance, and surveillance of economic conditions—and support from the donor community are essential. This will contribute to enhancing access to resources and addressing capacity and financing constraints to meet Comorians’ needs, while ensuring progress in macroeconomic reforms.