Wednesday, June 12, 2024
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International Monetary Fund (IMF) Reaches Staff-Level Agreement on the Second Review of the Extended Credit Facility with the Union of the Comoros

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The Comorian authorities and IMF staff have reached a staff-level agreement on economic policies and reforms for the second review under the 4-year ECF-supported program. The review, once formally completed by the IMF Executive Board, would release SDR 3.56 million (about US$4.7 million) in financing; Program performance has been generally good against the backdrop of persistent economic and institutional fragilities. With most end-2023 quantitative objectives met and key reforms being implemented, the authorities’ efforts are beginning to bear fruit with signs of macroeconomic stability. In 2023, economic growth rebounded as expected, inflation declined, the fiscal stance improved, and the international reserve position strengthened; Comoros continues to remain vulnerable to climate-related disruptions which could derail macroeconomic gains. Recent heavy rains have been catastrophic and could put a strain on already limited resources. The authorities are encouraged to engage with international partners to mobilize support for climate adaptation investments; Ahead of the government’s new mandate starting on May 26, the authorities reaffirmed their commitment to the reform program under the ECF.

An International Monetary Fund (IMF) team, led by Ms. Suchanan Tambunlertchai, held meetings in Moroni from April 24 – May 7, to discuss progress on economic and financial policies and reforms in the context of the second review of the 4-year Extended Credit Facility (ECF)-supported program. The staff-level 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) to Comoros, bringing total disbursements under the arrangement to about $14.1 million.

Today, Ms. Tambunlertchai issued the following statement:

“Performance under the ECF-supported program has been generally good. Four out of five quantitative performance criteria at end-December 2023 were met. The ceiling on the accumulation of new external arrears was breached due to delays in debt repayments, highlighting weaknesses in liquidity management capacity. The authorities are working to ensure the clearance of all these external arrears prior to the Executive Board meeting scheduled for June. Progress on fiscal structural reforms has been commendable. Under the ECF program, the authorities met the structural benchmarks on widening the tax base in 2023, publishing the approved 2024 budget law, and improving tax administration efficiency by interconnecting customs and tax authorities’ databases. However, five structural benchmarks were not met on time, including key reforms related to the restructuring of the postal bank and the creation of the Anti-Corruption Chamber (ACC). Despite the delays, which reflect in part capacity constraints and organizational challenges, the authorities have been making progress towards the completion of the missed structural benchmarks. The selection of the ACC members was completed on May 23. 

“Economic activity in 2023 rebounded as envisaged, with real GDP growth estimated at around 3 percent, reflecting ongoing public investment projects and households’ stronger purchasing power amidst declining inflation (an annual average of 8.5 percent compared to 12.4 percent in 2022). In 2024, real GDP growth is projected to rise to 3.5 percent, driven by continuing infrastructure projects including the El Maarouf hospital, the Galawa hotel, and road construction and maintenance. Average inflation in 2024 is expected to decline to 3.3 percent. The current account deficit widened in 2023, in line with the rebound in growth. The external sector remains stable, with continued reserves accumulation at end-2023. On the fiscal front, targeted reforms in revenue administration and public financial management improved revenue collection, thus helping stabilize the domestic primary deficit at around 2 percent of GDP in 2023. Fiscal consolidation efforts are expected to continue this year, with the domestic primary deficit projected at around 1.4 percent of GDP. While financial sector vulnerabilities persist, the level of NPLs has stabilized and the authorities are advancing efforts to strengthen the supervision and regulatory frameworks.

“Climate-related vulnerabilities pose a threat to economic gains. Recent heavy rains have been catastrophic and could put a strain on already limited resources. The authorities are encouraged to engage with international partners to mobilize support for climate adaptation investments. Good performance under the ECF will safeguard macroeconomic stability, create fiscal buffers, and build resilience while catalyzing additional financial support for the country’s large financing needs. To this end, the authorities have reaffirmed their strong commitment to the reforms supported by the ECF program.

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

Distributed by APO Group on behalf of International Monetary Fund (IMF).

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