I. I ntroduction
1. The Federal Islamic Republic of the Comoros (henceforth, the Comoros), situated in the Indian Ocean between Madagascar and the African continent, is comprised of three islands: Grande Comore, Anjouan, and Mohéli. 1 The population in 2000 was estimated at 568,000, of which about 55 percent live on Grand Comore, 40 percent on Anjouan, and 5 percent on Mohéli. About 70 percent of the population is involved in the agricultural sector, which consists of subsistence agriculture (including fishing) and the production of three export crops
This recent economic developments report (RED) provides background information on economic developments in the Comoros during 1997–2000. Revenue and domestic expenditure developments resulted in small overall domestic deficits over much of the period, equivalent of 0.4 percent of GDP in 1998 and declining to 0.2 percent of GDP in both 1999 and 2000. With no source of financing, domestic or external, the Anjouan authorities accumulated substantial wage arrears, estimated at about 15 months at end-2000, as well as suppliers arrears.
The dominant role of remittances in Comoros’s economy presents policymakers with important challenges and opportunities. Fiscal decentralization is a pillar of national reconciliation in Comoros. To make decentralization work better, more revenue and expenditure responsibilities could be devolved to the islands. The paper also presents statistical data on gross domestic product, indicators of tourism, consolidated government financial operations, breakdown of staffing levels, summary statement of banks, balance of payments, payment arrears and service payments, summary of the tax system, and other economic indices.
This 2004 Article IV Consultation highlights that economic developments in the Union of the Comoros during 2003 were adversely affected by the difficult relationship between the Union and island governments. The related disputes regarding competencies and resources prevented the design and implementation of coherent economic policies, brought to a virtual standstill structural reforms, and undermined confidence at home and abroad, with adverse consequences for private investment and foreign aid. As a result, the Comoros real per capita income declined for the sixth year in a row.
Since its independence in 1975, the Union of Comoros has been deeply affected by political and institutional crises. Resolution of the separatist crisis on the island of Anjouan and subsequent national consolidation has constituted a historic turning point. The government has begun a wide-ranging program of structural reforms. The external debt of Comoros remains unsustainable. The government is making efforts to speed up the implementation of reforms and obtain access to a reduction in its debt burden.
This Selected Issues paper analyzes the decentralization of government in the Union of the Comoros and its economic management functions foreseen under the constitution. The paper examines the special challenge of combining a civil service reform needed to increase the efficiency of the civil service with the decentralization of the civil service foreseen under the new constitution. It discusses developments in a number of civil service indicators that are often used to analyze the government wage bill and employment in relation to economic and fiscal objectives.
This paper reviews the Staff-Monitored Program (SMP) for the Union of the Comoros. The authorities’ program for 2005 is focused on macroeconomic stabilization. This is predicated on a consolidated budget entailing a domestic fiscal adjustment slightly above 3 percent of GDP. Monetary policy will remain circumscribed by the country’s participation in the Franc zone. Agreement in principle was reached on a SMP covering 2005. The program would support the authorities’ economic reforms and establish a track record of policy implementation that could lead to a Poverty Reduction and Growth Facility arrangement.
Political instability and weak macroeconomic management have generated negative real per capita gross domestic product growth rates, contributing to widespread poverty and a worsening of social indicators. The challenge is to attain a higher rate of growth on a sustained basis and raise the living standards of the Comorian population. Measures to improve revenue mobilization and reduce nonpriority expenditures are required. Executive Directors commend the steps taken by the authorities to improve the prudential regulations and internal controls of the central bank of Comoros.