In June 2010, the International Development Association (IDA) and the IMF agreed that Comoros had met the requirements for reaching the decision point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. As a result of the debt reconciliation exercise for the completion point, the present value of eligible external debt at end-2009 has been revised upward. Full delivery of HIPC assistance together with additional bilateral assistance beyond HIPC and Multilateral Debt Relief Initiative (MDRI) debt relief at the completion point would reduce Comoros’ external debt burden significantly.
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 review is on Comoros’ first full Poverty Reduction Strategy (CPRS). The macroeconomic developments outlined in the progress report are broadly in line with the assessment. Key policy challenges remain for the future. Progress in strengthening budget management has mixed during the report period. Despite reform momentum, which has picked up recently, the progress report correctly characterizes developments in the energy sector as falling short of expectations during 2011. Deficient transport and telecommunication infrastructures are important constraints to the development of the Comorian economy.
Five priority programs were identified to help stabilize the economy and lay the groundwork for equitable growth. The government's priority with this core strategy is to enhance macroeconomic management, government operations, and effective fiscal management to promote domestic and international trade, make the Comorian economy more competitive, guarantee a low-cost energy supply, improve basic economic infrastructures and communication services, and finally to make investments to improve access to drinking water and a more healthy environment. The PEFA report prepared in 2008 entailed a comprehensive fiscal analysis.
Despite offering a more realistic macroeconomic outlook than the I-Poverty Reduction Strategy Paper (PRSP), the baseline scenario under the full Poverty Reduction and Growth Strategy Paper (PRGSP) is overly optimistic. The authorities estimate the cost of the five-year strategy at US$1.4 billion, nearly all to be funded with assistance from donors. The PRGSP rightly notes the adverse impact of real exchange rate appreciation on external viability. The PRGSP identifies three main sectors—agriculture, fisheries, and tourism—that have the potential to generate sustained economic growth. Comoros’s development goals and reform agenda under the full PRGSP are ambitious.
A poverty profile for the Comoros has been established based on the latest poverty data (EIM 2004). The data indicate that monetary poverty is still widespread in the Comoros. For the overall country, the incidence of poverty at the household level was estimated at 36.9 percent in 2004. Three socioeconomic groups account for nearly two-thirds of national poverty: farmers' households (30.2 percent), unprotected wage earners' households (15.8 percent), and households headed by an inactive person (19.6 percent).
The Union of the Comoros’s Interim Poverty Reduction Strategy (PRGS) paper reports that the government’s macroeconomic objectives under the PRGS framework entail preserving major economic equilibria. To increase control over government spending, the government intends to reduce the relative weight of the wage bill, manage the public debt efficiently, and rationalize government outlays. Reforms are under way, with World Bank support aimed at more efficient handling of the public debt and improving the quality of services provided in the context of a rehabilitation of public finance.
This paper presents a Joint Staff Advisory Note on the Union of the Comoros’s Interim Poverty Reduction Strategy Paper (I-PRSP). The I-PRSP’s macroeconomic framework is broadly in line with the government’s objectives of improving opportunities and living conditions for the poor. It envisages higher real GDP growth, continued low inflation, higher social spending, and an ambitious medium-term public investment program. The full PRSP could develop the medium-term macroeconomic framework more fully, including by developing alternative scenarios for GDP growth and underlying sectoral performance.