- The International Monetary Fund (IMF) has approved a three-year, US$21.5 million arrangement under the Poverty Reduction and Growth Facility (PRGF) for the Union of the Comoros to support the authorities’ economic programme aimed at promoting sustained strong growth to achieve deeper gains in poverty alleviation and faster progress towards the Millennium Development Goals (MDGs).
The decision will enable the Comoros to immediately draw the equivalent of about $6.70 million from the IMF.
At the conclusion of the Executive Board’s discussion, Takatoshi Kato, Deputy Managing Director and Acting Chair, said: “Comoros’ performance under the EPCA-supported programme was satisfactory, despite the difficult domestic and external circumstances. The authorities’ have recently adopted a medium-term reform agenda aimed at boosting private-sector led growth to enhance the effectiveness of their poverty reduction strategy. In this context, the government has introduced far-reaching institutional reforms that should, inter alia, strengthen cohesion in budget management and economic policy making."
He further noted that Comoros’ reform agenda seeks to consolidate recent gains in macroeconomic stability and promote the development of a business-friendly economic environment, which would create jobs and reduce poverty, adding that an important focus will be on strengthening the fiscal position through implementation of strong revenue measures and better control of the wage bill.
"In this context, the authorities are adhering to the inter-island revenue-sharing mechanism; and Parliament has approved a stability-oriented supplementary budget for 2009 that is consistent with the fiscal programme. Achieving the 2009 fiscal targets will provide confidence regarding government determination to improve public expenditure management and put the budget on a sustainable path," he said.
Mr Kato said in order to strengthen debt sustainability, the authorities will limit their fiscal deficits to levels that can be covered by identified external assistance, mostly in form of grants, adding the government will also ensure steadfast implementation of reforms, which is essential to securing HIPC and MDRI debt relief.
He also noted that the Comoros, with support from donors, will be finalising reform strategies for the state-owned companies, while also maintaining a flexible-pricing mechanism for fuel products to make energy supply more reliable.
"Efforts to enhance the efficiency of the public administration and set optimal staffing levels for the civil service will also feature prominently in the structural reform agenda. Other reforms seek to streamline business licensing requirements, enhance investor protection, strengthen the judiciary, and promote financial intermediation and financial sector soundness,” added Mr Kato.
According to the IMF, despite disturbances pertaining to a difficult domestic and international context, real GDP growth for Comoros is estimated at an average 1 percent in 2008-09, one-half percentage point more than in 2007. The economy is benefiting from strong food production stimulated by favourable weather and relatively sustained construction and public works activity backed by donor support and financial inflows from migrants.
Comoros inflation rose to 7.4 percent year-on-year in 2008, owing to the high cost of fuel and transportation, but it has fallen sharply and should drop to 2.3 percent in 2009, reflecting reduced pressures on oil and food prices, the IMF noted.
On the fiscal front, government revenues have registered a modest upturn, reaching the equivalent of 13.5 percent of GDP as an annual average since 2008. At the same time, personnel expenditures are increasingly better controlled, although they continue to weigh heavily on the budget. The deficit on the domestic primary budget balance should narrow to 1.6 percent of GDP in 2009, compared to 2.7 percent in 2008.
The external current account deficit, including transfers, has risen to an average 9.7 percent of GDP in 2008-09, compared to 6.7 percent of GDP in 2007. Export growth is subdued given persistently low world prices for Comoros’ export commodities; while imports, including construction materials and used vehicles, supported by transfers of funds from emigrants (equivalent to 25 percent of GDP in 2008), remain robust, according to the IMF.
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