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AFRICAN DEVELOPMENT BANK GROUP
ENERGY SECTOR REFORM AND FINANCIAL GOVERNANCE
SUPPORT PROGRAMME
(PARSEGF)
UNION OF THE COMOROS
APPRAISAL REPORT
NOVEMBER 2012
OSGE DEPARTMENT
Translated Document
Appraisal Team Sector Director: Mr. Isaac Lobe Ndoumbe, Director, OSGE
Regional Director: Mr. S. KONE, Officer-In-Charge, OREB
Sector Manager: Mr. Jacob Mukete, Manager, OSGE.2
Team Leader: Mr. M. MALLBERG, Chief Macro-Economist, EAR/OSGE.2
TABLE OF CONTENTS
I. PROPOSAL ............................................................................................................................ 1
II. Country and Programme Context ........................................................................................ 2
2.1 Recent Political, Economic and Social developments, Constraints, Challenges and
Prospects .............................................................................................................................. 2
2.2 General Development Strategy and Medium-Term Reform Priorities ............................... 5
2.3. Bank Group Portfolio Situation in the Comoros ................................................................. 6
III. RATIONALE, KEY ELEMENTS OF PROGRAMME DESIGN AND SUSTAINABILITY ..................... 6
3.1 Links to the CSP, Assessment of Country Preparedness and Underlying Analytical
Elements .............................................................................................................................. 6
3.2 Collaboration and Coordination with Other Development Partners ................................... 8
3.4 Links with the Bank’s On-going Operations ....................................................................... 9
3.5 Bank Comparative Advantage and Value-added .............................................................. 10
3.6 Application of Good Practice Principles concerning Conditionality ................................ 10
3.7 Application of ADB Policy on Non-Concessional Lending ............................................. 10
IV. PROPOSED PROGRAMME AND EXPECTED RESULTS ............................................................. 10
4.1 Programme Goal and Objectives ....................................................................................... 10
4.2 Pillars, Specific Objectives and Expected Results ............................................................ 11
4.3 Financing Requirements and Financing Arrangements .................................................... 15
4.4 Programme Beneficiaries .................................................................................................. 16
4.5 Poverty and Social Impact, including Gender ................................................................... 16
4.6 Climate Change and the Environment ............................................................................... 16
V. IMPLEMENTATION, MONITORING AND EVALUATION .......................................................... 17
5.1 Implementation Arrangements .......................................................................................... 17
5.2 Monitoring and Evaluation Arrangements ........................................................................ 18
VI. LEGAL DOCUMENTS AND LEGAL AUTHORITY .................................................................... 18
6.1 Legal Document ................................................................................................................ 18
6.2 Conditions Precedent to Bank Group Intervention ........................................................... 18
6.3 Compliance with Bank Group Policies ............................................................................. 19
VII. RISK MANAGEMENT ........................................................................................................... 20
VIII. RECOMMENDATIONS .......................................................................................................... 20
Tables
Table 1: Results-based Logical Framework Matrix ix
Table 2: Key Macroeconomic Indicators 3
Table 3: Conditions for Programmatic Support Operations (PSO) 7
Table 4: Lessons Learnt from Previous Operations and Reflected in
PARSEGF Design 9
Table 5: Financial Requirements 15
Annexes Annex 1: PARSEGF Letter of Development Policy 6
Annex 2: PARSEGF Measures Matrix 3
Annex 3: IMF-Country Relations 4
Annex 4: Recent Trends of the Key Social, Macroeconomic and Financial Indicators 1
Technical Annexes (TAs)
Technical Annex 1: Comparative Socio-economic Indicators
Technical Annex 2: Consolidated Financial Operations of Government Services
Technical Annex 3: Detailed Fiduciary Risk Analysis
Technical Annex 4: Procurement System Analysis
Technical Annex 5: Summary of 2007 PEFA Notes
Technical Annex 6: Energy Sector Status
Technical Annex 7: Public Spending on Health and Education in 2009-2012
Technical Annex 8: Main Achievements in MDG Implementation
Technical Annex 9: PAREGF: Expected and Actual Achievements
Technical Annex 10: Overview of Governance, and Business Environment Indicators
Technical Annex 11: Summary of the Gender Profile in the Comoros
Technical Annex 12: Country Policy and Institutional Assessment (CPIA)
Technical Annex 13: Status of Attainment of the HIPC Completion Point
Technical Annex 14: List of Reference Documents
Technical Annex 15: Map of the Union of the Comoros
ii
CURRENCY EQUIVALENTS
(September 2012)
UA 1 = USD 1.52
UA 1 = EUR 1.21
UA 1 = KMF 593.75
FISCAL YEAR
1st January – 31st December
PROGRAMME SCHEDULE – KEY STAGES
Stages Schedule
Approval of Concept Note by OpsCom August 2012
Programme Aproval by the Board December 2012
Programme Effectiveness December 2012
Disbursement of 1st Tranche December 2012
Disbursement of 2nd Tranche June 2013
Programme Completion December 2013
iii
ACRONYMS AND ABBREVIATIONS
ADB African Development Bank
ADF African Development Fund
AGID General Authority for Taxation and Lands
APLACO External Aid Planning and Coordination Support
ARMP Public Procurement Regulatory Authority
BCC Central Bank of the Comoros
CEMAC Central African Economic and Monetary Community
CM Council of Ministers
CMP Public Procurement Code
COMESA Common Market for Eastern and Southern Africa
CPIA Country Policy and Institutional Assessment
CREF Permanent Technical Unit for Monitoring of Economic and Financial
Reforms
CSP Country Strategy Paper
DGI General Directorate of Taxation
DNCMP General Directorate for Public Procurement Control
DSA Debt Sustainability Analysis
ECF Extended Credit Facility
EDA Electricité d’Anjouan
FDI Foreign direct investment
FSF Fragile States Facility
GDP Gross Domestic Product
GPRS Growth and Poverty Reduction Strategy
GUC Government of the Union of the Comoros
HDI Human Development Index
HIPCI Heavily Indebted Poor Countries Initiative
ICBP Institutional Capacity Building Project
IHS Integrated Household Survey
IMF International Monetary Fund
KMF Comorian Franc
KWH Kilowatts/hour
LOFE Law on State Financial Operations
MA-MWE Water and Electricity Company of the Comoros
MDG Millennium Development Goals
MDRI Multilateral Debt Relief Initiative
NEP National Energy Policy
NPV
PARAF
Net present value
Financial Administrations Strengthening Support Programme
PAREGF Economic Reform and Financial Governance Support Programme
PARSEGF Energy Sector Reform and Financial Governance Support Programme
PEFA Public Expenditure and Financial Accountability
PFM Public finance management
PFM-RS Public Finance Management Reform Strategy
PSO Programmatic Support Operations
SCH Hydrocarbons Corporation of the Comoros
iv
SGEG Support to Good Economic Governance
TA Technical Annex
TAP Triennial Action Plan
TFP Technical and Financial Partners
UA Unit of Account
UNDP United Nations Development Programme
USD US Dollar
WAEMU West African Economic and Monetary Union
v
GRANT INFORMATION SHEET
BENEFICIARY INFORMATION
Donee Union of the Comoros
Executing Agency Permanent Technical Unit for Monitoring of
Economic and Financial Reforms (CREF)
Programme Title
Energy Sector Reform and Financial
Governance Support Programme
(PARSEGF)
GRANT CONDITIONS
Modalities ADF Grant with resources from the Fragile
States Facility (FSF)
Amount UA 2 million
Number of Tranches
2 tranches of UA 1 million each to be
disbursed in 2012 and 2013 respectively,
following fulfilment by the donee of the
preliminary conditions specific to each
tranche.
PARALLEL FINANCING OF THE PROGRAMME
World Bank (2012) USD 5 million
vi
PROGRAMME EXECUTIVE SUMMARY
Programme Overview Programme Title: Energy Sector Reform and Financial Governance Support Programme
(PARSEGF)
Geographical scope: National
Duration of Implementation: 2012-2013
Program Cost: UA 2 million as FSF grant
Programme Type: General budget support programme
Context and Rationale The Union of the Comoros is gradually emerging from a fragile context. Nevertheless, some
progress has been made that needs to be consolidated in order to mitigate all the aspects of this
fragility: economic, institutional and financial. Accordingly, this programme is aimed at supporting
the efforts of the Comorian Government to create the conditions for inclusive and sustainable growth
through the development of the energy sector, whose inefficiency remains the key stumbling block
for the country’s economy. PARSEGF seeks to provide reform support aimed at improving energy
sector performance and development, especially in the electricity sub-sector. This energy sector
support will be accompanied by measures to improve public finance management and thus build the
Government’s capacity to manage this sector. Moreover, PARSEGF is aligned on the Bank’s 2011-
2015 country strategy and intends to build on the achievements of the Economic Reform and
Financial Governance Support Programme (PAREGF), completed in 2010. The budget support
entailed by the proposed operation is in synergy with the World Bank support and will enable the
Government to finance the priority actions set forth in its development strategy, in order to build a
more effective energy sector, thereby creating the right conditions for sustainable diversification of
the economy. The programme also falls in line with the Heavily Indebted Poor Countries Initiative
(HIPCI). Indeed, the reforms supported by PARSEGF complement and dovetail with the HIPCI
measures. All these measures will help to consolidate the role of the State and and increase the
buoyancy of the economy – two factors crucial to the country’s gradual emergence from its
precarious context.
Programme Outputs The main expected output of the programme is the improved performance and development of the
energy sector. This will be attained by: (a) conducting and adopting an organizational and strategic
audit of the EDA; (b) finalising and adopting an organizational and strategic audit of MA-MWE; (c)
restoring the smooth functioning of the organs of State-owned electricity companies, mainly by
clarifying and specifying the roles of the various organs, establishing and operationalising the
Boards of Directors of MA-MWE, streamlining and simplifying the procedures for appointing the
managers of this company and ensuring the exercise of supervisory authority; (d) adopting and
implementing a general plan to reorganize the commercial activities of MA-MWE; (e) optimally
preparing and adopting, both in terms of form and content, an action plan for implementation of the
relevant recommendations ensuing from the organisational and strategic audits of MA-MWE and
EDA; and (f) adopting a long-term national energy policy. Furthermore, the programme will
contribute to better public finance management that will allow for improved State management of
the energy sector through: (a) effective operationalisation of AGID, which will haveexclusive
responsibility for administration of all the taxes covered by the General Tax Code; (b) capacity-
building for the Joint Taxation-Customs Brigade; (c) operationalisation of ARMP, DNCMP and the
Procurement Units of various ministries; (d) publication of tender invitations and contract award
notification on the CREF website; and (e) preparation and adoption of a targeted,simple debt
management strategy.
the Bank’s comparative
advantage and value-added
The Bank is the key stakeholder of the Comoros’ economic and financial governance reform . Since
TFP operations resumed in the Comoros in 2009, the Bank has successfully implemented PAREGF,
which enabled the country to initiate major reforms for its economic and social development, thus
helping to restorethe State’s capacity to fulfil its primary duties. Besides, the Bank’s main value-
added in this operation resides in reform support initiatives aimed at improving energy sector
performance as well as strengthening PFM. This combination will boost the development of the
energy sector whose weakness is one of the major constraints to diversification of the Comorian
economy.
Institutional development and
knowledge accumulation
The Programme will contribute to institutional development and knowledge accumulation within the
energy sector support mechanism and with regard to PFM. The lessons to be learned from
implementation of the measures adopted will help strengthen the Bank’s approach to the different
aspects of energy sector development and the modernization of public finance management.
Recommendations The Boards are invited to consider and approve the UA 2 (two) million budget support programme
in favour of the Union of the Comoros, divided into two tranches of UA 1 (one) million each for
2012 and 2013 respectively, in accordance with the conditions set out in this report.
vii
Table 1: Results-based Logical Framework Matrix
Country and Programme Title: Comoros: Energy Sector Reform and Financial Governance Support Programme (PARSEGF) Programme goal: Contribute, through energy sector development, to the creation of conditions conducive to robust economic growth that will ensure the country's
gradual emergence from its fragile situation.
Results Chain Performance Indicators
Means of
Verification Risks / Mitigative
Measures Indicators (including ISCs) Baseline Situation Target
IMP
AC
T
Impact:
Diversification of the economy and inclusive and sustainable
growth
GDP growth rate 2% in 2011 4% in 2014 and 2015
Data from the Ministry of
Finance and the
IMF
Data from the
Ministry of Finance and the
IMF
General Risks
-R1: Political instability
-R2: Vulnerability of the
economy to external shocks
Mitigative Measures
-M1: The new
institutional architecture
will help to prevent jurisdictional conflicts and
political tensions at the
helm of the State
-M2: Continuation of reforms under the
programme supported by
the ECF and other TFPs as well as promotion of
productive activities in
growth sectors such as
agriculture, fisheries and
tourism will enable the
economy to withstand with exogenous shocks.
Operational Risks
-R3: Insufficient
institutional and technical capacities for reform
implementation
-R4: Fiduciary risk
-R5: Risk of non-sustainability of reforms -R6: Risk of opposition
Mitigative measures: -M3: Many institutional
support projects supported by TFPs, including the
ICBP supported by the
ADB, the ABGE supported by the World
Bank, APLACO financed
by the EU, PARAF financed by French
Cooperation services all
seek to build the institutional capacity of
services responsible for
reform implementation.
Private investment rate (% of GDP) 9.6% of GDP in 2011
11% and 11.4% of
GDP in 2014 and
2015
Percentage of the population living below the poverty line
(%) 44.8% in 2004 27.3% in 2015
EF
EC
TS
Impact:
Energy
sector
more efficient
and
developed
Imp. 1:
Energy sector
restructured
The billing rate and bill
payment rates of MA-MWE 2011: Billing rate of
55% and bill payment
rate of 58%.
2013: Billing rate
of 70% and bill
payment rate of 80%.
Imp. 2: State’s fiscal
space is expanded to
support energy sector
development
Tax revenue/GDP ratio 10.9% of GDP in 2011 Min. 13% in 2013 % of public contracts awarded
through an open bidding
process and in accordance with the Public Procurement
Code
Information not
available Min. 70% in 2013
NPV of external debt-to-exports ratio
239% in 2011 86% max in 2013
OU
TC
OM
ES
COMPONENT I - IMPROVEMENT OF ENERGY SECTOR PERFORMANCE AND DEVELOPMENT I.1-Improvement of Energy Sector Performance and Governance
Prepare, adopt (in CM) and
implement a general plan to
reorganize MA-MWE’s commercial activities
General plan to reorganize
MA-MWE’s commercial
activities is prepared and adopted in 2012
No general plan to reorganize MA-MWE’s
commercial activities
The Plan is
prepared and adopted in 2012
and implemented
in 2013
True copy of the
plan and minutes
of the CM that adopted it.
Prepare and adopt (in CM) a
long-term national energy policy (NEP)
National Energy Policy No National Energy
Policy
The NEP is finalized and
adopted (in CM) in
2013.
Minutes of the
CM meeting
Conduct and adopt (in CM)
the organizational and strategic audit of EDA
Organisational and strategic
audit report of EDA approved in CM
No organizational and
strategic audit report of EDA
The report is finalized and
adopted (in CM) in
2013.
Minutes of the
CM meeting
Finalise and adopt (in CM) the organizational and
strategic audit of MA-MWE
Organisational and strategic
audit report of MA-MWE approved in CM
No organizational and
strategic audit of MA-MWE
The report is finalized and
adopted (in CM) in
2012.
Minutes of the
CM meeting
Prepare and adopt (in CM), under satisfactory conditions,
an action plan for
implementation of the recommendations of the
organizational and strategic
audits of MA-MWE and EDA
Action plans for
implementation of recommendations of MA-
MWE and EDA audits
No action plans
An action plan is available in 2013
Copy of action plan
Operationalise the organs of the state-owned electricity
corporations (MA-MWE and
EDA)
Text appointing the members
of the Board of Directors (BD) and minutes Board
meetings
No BD.
BD set up and operational with a
minimum of 2
meetings held in 2013
Text appointing
BD members and
meeting minutes.
viii
I.2. Consolidation of public finance management
-M4: Consolidation of
internal control through
creation of the Directorate
for Financial Control and the setting-up of the Audit
Bench for External
Control will make it possible to mitigate the
fiduciary risk.
-M5: The HIPCI process
has catalysed reform and
PARSEGF seeks to help in consolidating the
outputs of these reforms.
Debt reduction through the HIPCI, increased tax
revenue and the control of
public spending will help to mitigate this risk of
non-sustainability of
reforms. Emphasis is laid on consolidating current
reforms and on reforms
that have been designed and taken ownership of by
the authorities.
-M6: Opposition to
reforms is mitigated by
laying emphasis on transparency in order to
promote a perception of
equity in the distribution of resources between the
Union and the islands.
Improved internal coordination as well as
continuous dialogue that
is coordinated with the authorities and TFPs also
helps to mitigate this risk.
Operationalise the General
Administration for Taxation and Lands (AGID)
Decrees defining the status,
organisation, powers and fucntioning of AGID
No taxation authority that is unified,
hierarchical and
operational
Adoption of the Decree on AGID
in 2012 and
provision of financial, material
and human means
in 2013
True copy of the Decree and 1
progress report
of AGID
Build the capacity of the
Taxation-Customs Mixed
Brigade (BMID)
BMID trained and provided with equipment
BMID hardly trained and lacking equipment
BMID trained and
provided with
equipment in 2013
Copy of training reports and
record of
acceptance reports
Operationalize the Public Procurement Regulatory
Authority (ARMP), the
National Directorate for Public Procurement Control
(DNCMP) and the
Procurement Units of ministries
Appoint officials and post
staff to the ARMP and the
DNCMP; production of quarterly progress reports by
the ARMP and the DNCMP
in 2013
ARMP and DNCMP are not operational
Appoint officials
and post staff to
the ARMP and the DNCMP;
production of
quarterly progress reports by the
ARMP and the
DNCMP in 2013
True copies of 3
ARMP quarterly
reports and 3 DNCMP
quarterly progress
reports for 2013
Publish tender invitations and contract award notices on the
CREF website from January
2013
Publication of tender
invitations and contract award notices
No publication
Tender invitations and contract award
noticespublished on
the CREF website
True copy of instruction for
publication on
CREF website and screenshot of
the CREF
website
Prepare and adopt (in CM) a
targeted and simple strategy
for debt management
Targeted and simple debt
management strategy No strategy Strategy prepared
and adopted (in
CM) in 2013
True copy of the
strategy and of
minutes of the
CM meeting that
adopted it.
A
C
T
I
V
I
T
I
E
S
- Signature of grant
agreement - Opening of a special
account at the BCC
- Implementation of reforms
- Implementation reports
- Completion report
Resources
FSF: UA 2 million World Bank: USD 5 million
PROPOSAL AND RECOMMENDATION OF THE AFRICAN DEVELOPMENT BANK
BANK GROUP MANAGEMENT TO THE BOARDS OF DIRECTORS OF THE
AFRICAN DEVELOPMENT BANK AND THE AFRICAN DEVELOPMENT FUND,
CONCERNING THE AWARD OF A GRANT TO THE UNION OF THE COMOROS TO
FINANCE PARSEGF
I. PROPOSAL
1.1 Management submits the following proposal and recommendations concerning the
award, to the Union of the Comoros, of an UA 2 million grant, from the FSF Pillar I window, to
finance the Energy Sector Reform and Financial Governance Support Programme (PARSEGF)
over a period of two fiscal years (2012 to 2013). The Union of the Comoros fulfills the FSF
eligibility conditions and is consequently considered to be a fragile State. This is the second
Bank general budget support (GBS) operation in favor of the Comoros, being proposed in
response to a request from the Government of the Union of the Comoros (GUC) dated 21 August
2012. The programme appraisal was conducted in September 2012. Programme design took into
consideration the principles of good practice with respect to FSF conditionalities and operational
guidelines. This second operation seeks to support reforms aimed at improving the performance
and development of the energy sector, whose current inefficiency, especially in the electricity
sub-sector, is a major obstacle to economic expansion and diversification in the Comoros.
Furthermore, energy sector support will be accompanied by measures aimed at improving public
finance management in order to create conditions conducive to energy sector development and
also build on the achievements of the Economic Reform and Financial Governance Support
Programme (PAREGF).
1.2 PARSEGF, which is described in the Letter of Development Policy (Annex 1), is
aligned on the Growth and Poverty Reduction Strategy (GPRS) adopted in September 2009 for
the 2010-2014 period. The GPRS is the reference framework for the country’s economic
development policy. PARSEGF is also consistent with: (i) the 2011-2015 CSP; (ii) the Bank’s
2013-2022 long-term strategy; (iii) the Bank’s strategic guidelines and Governance Action Plan
(GAP) for 2008-2012; and (iv) the governance pillar of the Bank’s medium-term strategy (2008-
2012).
1.3 The programme’s development objective is to contribute, through energy sector
development, to creating conditions conducive to the robust economic growth that will ensure the
country's gradual emergence from its fragile situation. Its specific operational objective is to
improve energy sector performance and development through reforms aimed at restructuring and
consolidating energy sector governance as well as public financial management (PFM). The
expected outputs of the programme are: a more efficient energy sector creating the right
conditions for inclusive and sustainable growth that is based on equity and can ensure the
country’s gradual emergence from its current fragile situation.
2
II. Country and Programme Context
2.1 Recent Political, Economic and Social developments, Constraints, Challenges and
Prospects
2.1.1 After a decade of political upheaval fueled by the separatist aspirations of the three
islands 1of the Union of the Comoros, the country has enjoyed a period of relative political
stability over the last few years. After the last separatist crisis caused by the island of Anjouan
was resolved in 2008, the new constitution adopted in 2009 defined a precise framework for
decentralisation and autonomy for the islands. Later on, and thanks to African Union support,
presidential elections deemed free and fair were organised in December 2010.2 These elections
have brought a new president to power and ushered in relative political stability conducive to the
implementation of profound structural reforms to enable the country's gradual and sustainable
emergence from its fragile situation.
2.1.2 Despite the progress made, the Comoros remains a fragile country. Its economy is
characterized by limited diversification, a predominant public sector, a poorly developed private
sector, an inefficient energy sector and poor governance. Furthermore, despite the major
structural reforms implemented, especially in public finance management, the governance and
institutional management of the State are not strong enough to ensure the country’s sustainable
emergence from its fragile situation. The State’s weak financial capacity, which stems from
limited revenue, poor control of public spending and a high debt level, partly explains its
deficiency and inability to provide basic services, especially in the energy sector.
2.1.3 Economic growth in the Comoros has not been strong enough to generate a
substantial improvement in the people’s living standards. During the 2008-2011 period, the
Comorian economy averaged a GDP real growth rate of only 1.92%, whereas the population
growth rate remained structurally higher at 2%. In 2011, real GDP growth, of which
approximately 50% is traditionally generated by agriculture and fisheries, was estimated at 2.2%
compared to 2.1% in 2010. This very slight economic recovery stems from: (i) a good crop
season; (ii) a surge in remittances from abroad that sparked a revival in private construction; and
(iii) a surge in foreign direct investments (FDI).
2.1.4 Inflation has remained high due to an unfavourable international environment. In
spite of the discipline imposed by the Franc Zone to which the Union of the Comoros belongs,
inflation rose to 5.25% during the 2008-2011 period, due mainly to the rise in world prices of
energy products and imported food staples. In 2011 alone, inflation was estimated at 6.8%
(annual average).
1 These three islands are: Grande Comore, Anjouan and Mohéli. 2 The next elections will be held in 2016.
3
2.1.5 The public finance situation has slightly improved thanks to reforms initiated by
the GUC. Over the 2009-2011 period, public revenue (net of grants) though remaining low, grew
by 15.8% on average (13.9% of GDP in 2009, 16.1% in 2011) due mainly to better organisation
of tax administration and more efficient collaboration between taxation and customs services.
This increase, for the most part, stems from implementation of the 2010-2019 Public Finance
Management Reform Strategy (PFM-RS) and the 2010-2012 Triennial Action Plan (TAP) that
seeks to improve the transparency and efficiency of the PFM system. In 2011, the domestic
primary deficit slumped to 1.4% of GDP (net of one-off tax revenue), compared to 7% in 2010.
However, the external current account deficit expanded from 5.4% of GDP in 2010 to 9% in
2011, due to: (i) an increase in FDI-financed imports; (ii) a rise in the price of imported food and
petroleum products; and (iii) the decline in budget support from donors due to the international
financial crisis.
2.1.6 Debt sustainability analysis (DSA) shows that the Comoros is still experiencing a
debt overhang.3 End-2012 projections indicate that the net present value (NPV) of the external
debt contracted and guaranteed by the State represents 86% of goods and services exports. This
high debt level severely constrains the State's capacity to provide essential basic services and
finance social sectors as well as strategic and priority investments, even in the energy sector. In
July 2010, the Comoros reached the Decision Point of the Heavily Indebted Poor Countries
Initiative (HIPCI) which gives entitlement to initial interim debt relief of USD 48.4 million. The
country is currently moving towards complete debt relief under the HIPCI and the Multilateral
Debt Relief Initiative (MDRI). After attainment of the completion point, as expected in
December 2012 (see Technical Annex (TA) 13), debt cancellation could, in the medium term,
contribute in releasing additional resources to initiate programmes that target poverty reduction
and the social sectors.
2.1.7 Medium-term macroeconomic prospects are relatively positive. Real GDP growth
could reach 2.5% in 2012 and further rise to 3.5% in 2013 to reach 4% by 2014. Such
performance would stem from: (i) the strong performance of subsistence agriculture; (ii) a slight
increase in foreign direct
investment; and (iii) an
increase in the resumption
of technical and financial
support from the major
development partners.
Inflation (in annual
average terms) will
decline by at least one
percentage point in 2012
(6%) compared to 2011
(6.8%), owing to a drop in
3 IMF, Country Reports No. EBS/12/71, May 2012, Table 1.
Table 2: Key Macroeconomic Indicators
2011 2012 2013 2014 2015
Real GDP growth (%) 2.2 2.5 3.5 4.0 4.0
Inflation in % (annual average)
6.8 6.0 4.3 3.4 3.3
Balance of payments current account as % of GDP -9.0 -6.9 -7.3 -8.6 -7.7
Gross official reserves (in months of import cover) 6.4 7.2 7.4 7.3 7.3
Expenditure (as % of GDP) 22 25.4 25.1 25.2 25
Wage bill (% of GDP) 8.5 8.00 7.6 7.3 7.00 Revenue, including grants (% of GDP) 23.6 28.4 25.3 24.0 24.2
Tax revenue (% of GDP) 10.9 11.8 12.2 12.6 13
Official grants and loans (% of GDP) 7.5 10.2 10.9 9.2 9.0
Source: Comorian Authorities/IMF, October 2012.
4
import price levels. A sustained increase in public revenue and greater discipline in spending
should lead to a reduction of the domestic primary budget deficit net of non-recurring economic
citizenship revenue4 in 2013 (-0.9% of GDP) and 2014 (-0.5% of GDP). These positive prospects
would result from more rigorous monitoring of revenue collection, the reinforcement of fiscal
and customs services as well as better control of spending. However, the increase in imports, the
limited volume of exports and the rise in external aid should inflate the external current account
deficit (including grants as well as private and official transfers) to 7.3% of GDP in 2013.
2.1.8 The Union of the Comoros’ performance in the area of governance has remained
relatively stable. All the six5 governance indicators published by the World Bank for the
Comoros are at traditionally low levels. This situation stems from the long period of political
conflicts that have weakened the State. In 2010, the country was ranked in the 1st – 34th
percentile, recording its best score in "Voice and Accountability" and its worst score in
"Government Effectiveness". In 2011, such public administration weaknesses were also reflected
in the governance score of the Bank's Country Policy and Institutional Assessment (CPIA) which
was approximately 2, with the poorest rating in "Quality of Public Administration" (see TA 12).
2.1.9 The Comorian private sector is poorly developed and faces several obstacles. The
economy is dominated by the public sector within which the country’s main strategic companies
operate. Besides, there are several obstacles to the private sector development, such as: (i) the
lack of skilled labour; (ii) statutory and administrative provisions that do not sufficiently support
the business environment; and (iii) inadequate infrastructure, especially in the energy sector, that
limits its competitiveness and contribution to economic growth. In 2010 and 2011, private
investment accounted for only 9.7% and 9.5% of GDP respectively. The country is ranked 157th
out of 183 countries in the 2012 Doing Business (DB) report (TA 10).
2.1.10 Poverty persists in the Comoros. Its Human Development Index (HDI) was only 0.433
in 2011,6 ranking the country 163
th out of 187 countries in the world. Furthermore, according to
the 2004 Integrated Household Survey (IHS), which is currently the most recent survey
conducted, poverty7 affects 44.8% of the population, especially the youth. About 30.4% of
women live below the poverty line compared to 38.6% of men. Indeed, compared to men, women
who account for 47% of the unemployed and head 40.2% of households, receive far more family
assistance, especially from the diaspora. As concerns attainment of the Millennium Development
Goals (MDGs), progress remains slow and is hampered by the lack of investments, especially in
the energy sector. As is the case for the majority of fragile countries, it is not likely that the
Comoros will achieve the MDGs by 2015 (see TA 7 and 8).
4 These earnings are revenue from a programme relating to the Law on Economic Citizenship voted by the Parliament of the Union on 27
December 2008. The law confers Comorian nationality (against payment of KMF 1 million, or approximately USD 3000) to any non-
Comorian project developer who invests in the Comoros. 5 Voice and Accountability, Political Stability, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. 6 UNDP, 2011 Human Development Report "Sustainability and Equity: A Better Future for All". 7 The poverty threshold retained in 2004 was USD 700 per capita per year, or approximately EUR 580 and KMF 285,144.
5
2.1.11 Several challenges, including energy sector development, need to be tackled to set
the Comorian economy on the path to robust, inclusive and sustainable growth. Under
GPRS 2010-2014, one of the most pressing challenges to be tackled by the Comorian economy,
apart from the need to continue with PFM system reform, is that of boosting the performance and
development of the energy sector, whose inefficiency is one of the major handicaps to economic
diversification. Indeed, the Comorian energy sector is plagued by serious shortcomings,
especially regarding electricity supply. More precisely, the two State-owned companies in the
electricity sub-sector, namely: (i) MA-MWE, which manages electricity and water in Grand
Comore and Mohéli; and (ii) the Anjouan electricity corporation (EDA) which manages
electricity in Anjouan, are unable to supply sufficient electricity to cover the needs of households
and businesses. This situation partly stems from the lack of maintenance and repair of the electric
power grid. For instance, in the capital, Moroni, electricity is available for only about 8 hours a
day. Rural areas have only approximately 5 hours of electricity every 4 days. Furthermore, the
electricity access rate is approximately 60% in Grande Comore, 50% in Anjouan and only 10% in
Mohéli. Although these rates may appear high when considered globally, they mask many
discrepancies. Indeed, access to electricity is, for the most part, reserved for the affluent segments
of the population.
2.1.12 The electricity supply problem is compounded by that of its cost. The Comoros have the
highest electricity consumption rates in the region (a KWH costs approximately USD 0.421).
This is partly due to the very high cost of petroleum products8 needed to fire the country’s
thermal power stations.9
2.1.13 Furthermore, the two State-owned corporations in the electricity sub-sector are beset by
problems relating to governance, internal management and fraud which severely undermine their
financial and institutional situation and adversely affect their performance. Consequently, this
sub-sector is in a very precarious state and unable to contribute to boosting private sector
development and diversifying the national economy, two actions that are crucial to the country’s
gradual emergence from its fragile context.
2.2 General Development Strategy and Medium-Term Reform Priorities
2.2.1 The general development framework of the Union of the Comoros is defined by the
2010-2014 GPRS. This strategy is the fruit of a long consultative and participatory process
between the Government, civil society, the private sector and donors (including the Bank). The
GPRS, which contributes to the promotion of macroeconomic and budget stability, has two major
objectives, namely: (i) robust economic growth; and (ii) a sustainable reduction of poverty and
inequality. To achieve these objectives, it focuses on six strategic pillars, namely: (i) stabilise the
economy and lay the foundation for accelerated and sustainable growth that is based on equity;
(ii) strengthen the growth bearing sectors by focusing on institutional reinforcement and
increased participation of economic operators; (iii) reinforce governance and social cohesion; (iv)
8 These costs are defined by long-term contracts to the detriment of the Comorian Government. 9 Most of the electricity produced in the Comoros comes from thermal plants powered by generating sets.
6
improve the health status of the population; (v) develop education and vocational training with a
view to building human capital; and (iv) promote environmental sustainability and national
security.
2.3 Bank Group Portfolio Situation in the Comoros
2.3.1. As at 1 September 2012, the Bank’s portfolio in the Comoros had 3 on-going
operations for a total of UA 15.87 million. In terms of commitments, the Bank’s operations in
the Comoros are 63.11% in the water and sanitation sector and 36.89% in the multi-sector
(economic and financial governance). The portfolio’s disbursement rate is 24.2% and its overall
performance score is 2.09 over 3. Furthermore, potential problem projects and at-risk
commitments represent 33.33% and 63.11% of the portfolio respectively. A portfolio
improvement plan is being implemented to address this situation (see Annex 4 of CSP 2011-
2015).
III. RATIONALE, KEY ELEMENTS OF PROGRAMME DESIGN AND SUSTAINABILITY
3.1 Links to the CSP, Assessment of Country Preparedness and Underlying Analytical
Elements
3.1.1. Links to the CSP: PARSEGF is aligned on the first three pillars of GPRS 2010-2014
cited in Paragraph 2.2.1. It is also consistent with the single 2011-2015 CSP pillar entitled
"Energy Sector Development to Boost Economic Diversification" and provides for intervention
in the electricity sub-sector through an investment project and budget support. Under this pillar,
the CSP also provides for the extension of Bank support to the GUC in its efforts to improve
economic governance, mainly through structural reform and consolidation of public finance
management.
3.1.2. The implementation of PARSEGF will contribute to attainment of the CSP objective by
supporting structural reforms relating to energy and public finance. The planned PFM reforms
will help to improve the State’s budget margins, and consequently its capacity to provide
essential basic services to the population in general and to the energy sector in particular.
3.1.3. Links to Bank Group Strategies. The proposed programme is also aligned on the
Bank's long-term strategy (2013-2022) which seeks to "improve the quality of growth through the
support provided to Africa for the achievement of more inclusive growth and to ensure its
transition to greener growth". Indeed, energy sector development targeted by this programme will
benefit the entire Comorian population and will be achieved taking into account natural resource
preservation concerns, by adopting a long-term national energy policy that also covers
environmental questions. This programme is consistent with the Governance Action Plan (GAP
2008-2012) which also focuses on public finance management. PARSEGF is also aligned on the
Bank’s Energy Sector Policy.
7
3.1.4. Assessment of Country Preparedness and Conformity to the Bank’s Safeguards
Policy. As indicated in the table below, Comoros meets the main eligibility criteria for a general
budget support operation.
Table 3: Conditions for Programmatic Support Operations (PSO)
Prerequisites Comments Government
commitment to
poverty reduction
The GUC’s commitment to sustainable poverty reduction was given concrete expression through the
adoption, in September 2009, and implementation of a growth and poverty reduction strategy for 2010-
2014. The GPRS was prepared with the active participation of all national stakeholders and in
consultation with TFPs. Its two main objectives are: (i) robust economic growth; and (ii) the reduction of
poverty and inequality. Its implementation is on-going, although the results recorded fall short of initial
estimates. It is regularly monitored by the Government using indicators that are specific to each strategic
pillar as well as periodic reviews. Macroeconomic
stability The macroeconomic situation has gradually improved since cooperation resumed with donors. With the
conclusion of a programme with the IMF in 2009, under the Extended Credit Facility (ECF), the
Government has resolutely embarked on reforms. This programme made it possible to define a viable
macroeconomic and financial framework for 2010-2012. The 3rd ECF review of June 2012 highlighted
the major structural macroeconomic improvements achieved. However, to ensure the attainment of all set
objectives, the programme was extended to December 2013. The 4th ECF review conducted in September
2012 was conclusive and should lead to the attainment of the HIPCI completion point in December 2012.
Fiduciary Risk
Assessment The 2007 PEFA Report and the IMF public finance management assessment report of November 2011
revealed a certain number of deficiencies in procurement, budget management and the internal and
external control of State transactions. To address these problems, a series of recommendations were made
and a 2010-2019 reform strategy prepared (with Bank support) and adopted. Several measures under this
strategy have been implemented, mainly with the support of the Institutional Capacity-Building Project
(ICBP) financed by the Bank; or are being implemented, as is the case of the public procurement system
reform. The latter aspect will be supported under PARSEGF. Besides, a fiduciary risk management
framework was prepared and the Bank will monitor the mitigative measures for identified risks. Political stability When the separatist crisis concerning the island of Anjouan ended in 1997, the adoption of the 2001
Constitution established an institutional framework in which each island has its own president, ministers
and parliament, with the national presidency held in turn by elected officials from each of the islands. On
account of the administrative and financial bottlenecks that this system entailed, and the numerous
jurisdictional conflicts, a constitutional referendum was organised in May 2009. This change gave rise to
a new institutional framework in which the presidency of the Union has remained rotational, but each
island is administered by a governor, assisted by a limited number of commissioners and an assembly
also comprising a limited number of councillors. After the departure of President Ahmed Sambi, a native
of the island of Anjouan, who had attempted to extend his mandate, presidential elections were organized
on 27 December 2010 with African Union support. These elections, which were deemed free and fair,
were won by Ikililou Dhoinine, a native of the island of Mohéli. Since then, the formation of the new
government has been a factor of political stabilization and emergence from fragility, although certain
inter-island conflicts persist. Harmonisation Collaboration among the donors operating in the Comoros has not yet been institutionalised through a
formal framework. The UNDP informally coordinates the action of various donors. Nevertheless, there
has been a solid partnership between donors and the Government since the establishment of the strategic
committee for the coordination of development aid in 2009.
3.1.5. Studies and Analytical Bases: Several studies conducted (see TA 14) by the
Government, the Bank and other TFPs have been factored into the design of this programme. In
the energy sector, they include: (i) the electrical power and petroleum products policy of the
Union of the Comoros (May 2012); (ii) the preliminary work on a Comoros energy sector
strategy (May 2012); and (iii) preliminary report on the organizational and strategic audit of MA-
MWE conducted with Bank assistance (September 2012). As regards public finance
management, the programme has drawn from: (i) the 2010-2019 Public Finance Management
Reform Strategy and its 2010-2012 Three- year Action Plan; (ii) the last PEFA report (2007); and
(iii) a debt management study (June 2012). Several other studies and surveys have also been
8
factored into programme design, such as: (i) a preliminary diagnosis of growth sources in the
Comoros (2010); (ii) the integrated household survey (2004); (iii) the gender profile of the Union
of the Comoros prepared by the Bank (2009); and (iv) the assessment of ADB assistance to
fragile States (2012). The main recommendations of these studies pointed to: (i) the need to
address the electricity supply constraints that hamper private investment development and
economic diversification. (ii) the need to support energy sector rehabilitation measures through
PFM reforms aimed at building the State’s capacity and increasing its fiscal space to enable it
finance reforms and strategic investments, especially in the energy sector.
3.2 Collaboration and Coordination with Other Development Partners
3.2.1 The Comoros Government collaborates actively with development partners.10
There
has been a sound partnership between donors and the Government of the Comoros since
cooperation with TFPs resumed in 2009. Presidential Decree No. 09-062/PR of 23 May 2009
provides for the setting up of a strategic committee to coordinate development aid. This organ is
operational and functions under the responsibility of the General Commissariat for Planning.
Nevertheless, collaboration among the donors operating in the country has not been
institutionalized through a formal agreement and UNDP informally coordinates the development
partners’ activities with a view to harmonizing the various interventions in the country. The TFP
focus areas can be summed up as follows: (i) governance /public finance: ADB, World Bank,
IMF and EU; (ii) transport: EU and China; (iii) social sectors: World Bank, United Nations, EU,
IsDB, France, Japan; (iv) agriculture and fisheries: France and Japan; (v) water and sanitation:
ADB and France; and (vi) energy: ADB, World Bank and EU.
3.2.2 This operation has been designed in close consultation with other TFPs. During the
formulation of PARSEGF, several donors were met with and consulted, especially: (i) the World
Bank as regards energy sector restructuring11
and PFM improvement;12
(ii) the European Union
for aspects related to energy sector reform; and (iii) the IMF on the macroeconomic framework.
PARSEGF also takes into account the reform programme implemented under the HIPCI and
which also includes PFM reforms.
3.3 Results and Lessons Learnt from Similar Operations Previously conducted
3.3.1 Lessons learnt from similar previous operations: In 2009, when collaboration resumed
between donors and the Comoros, the Bank financed a budget support operation (PAREGF) over
the 2009-2010 period. This programme, which has been completed, sought to: (i) improve PFM;
and (ii) streamline the reform implementation process. Although it yielded mixed results,13
PAREGF laid the foundation for gradual consolidation of State capacity, which PARSEGF
10 Over the last two years, the Comoros have also received financial assistance from Gulf countries like Qatar. 11 World Bank budget support, which is being prepared, will also target the energy sector. 12 The World Bank currently operates in PFM through an institutional support project titled Support to Economic Good Governance (ABGE)
and the preparation of budget support. 13 PAREGF Completion Report (ADF/BD/IF/2011/163).
9
intends to pursue. The table below presents the lessons learnt from PAREGF and the extent to
which they were factored into the design of PARSEGF.
Table 4
Lessons Learnt from Previous Operations and Reflected in PARSEGF Design Main Lessons Learnt from PAREGF Reflected in PACIRSA
The objectives of PAREGF were too ambitious and its
design did not sufficiently take into account the
timeframe for implementation of reforms.
PARSEGF objectives are targeted, realistic and take
into account the institutional capacity of the Comorian
Government, and especially that of CREF which will
monitor reform implementation. Budget support operations in fragile States are serious
dialogue mechanisms that make it possible to orient
corporate reform dynamically towards areas deemed to
be crucial to poverty reduction and the generation of
robust and inclusive growth.
PARSEGF aligns with this approach by supporting the
Government in its efforts to restructure the energy
sector and improve PFM, two crucial factors for
generating robust growth that benefits the entire
population of the Comoros. Institutional support implemented in parallel with
budget support is a powerful lever because it makes it
possible to build the technical and operational
capacities of national services responsible for reform
implementation.
The Bank’s ongoing institutional support activities
(ICBP) contribute to capacity-building for the
departments and agencies responsible for PFM
implementation under PARSEGF (all see § 3.4).
3.3.2. Progress Made under Previous Bank Support: Although several of the objectives were
not attained, PAREGF contributed to the achievement of some results that boosted PFM
transparency and efficiency. These include: (i) the preparation and adoption of a Public Finance
Reform Management Strategy and its first TAP; (ii) initiation of the public procurement code
revision process; (iii) the adoption of a decree regulating public spending; and (iv) the adoption
of a decree establishing the nomenclature for State expenditure supporting documents.
3.4 Links with the Bank’s On-going Operations
3.4.1 There is great complementarity between PARSEGF and two on-going operations.
The Bank is currently financing the ICBP, an institutional support project that is underway. This
project, started in 2009, seeks to build technical and operational capacity in the areas of revenue
collection, public procurement transparency and debt management. Several departments
responsible for these aspects, such as the General Directorate for Taxation (DGI), are also
responsible for implementing reforms adopted under the "strengthening public finance
management" pillar of PARSEGF. The success of the reforms scheduled under this programme
will help to speed up ICBP execution by contributing to the improvement of the PFM
institutional framework, a necessary condition for the country’s gradual emergence from its
fragile situation. Furthermore, the USD 20.5 million investment that is being prepared by the
Bank's Energy Department to rehabilitate the electrical power grid will benefit from reforms
supported by PARSEGF. Indeed, the improvement of the electricity sub-sector performance and
development supported by PARSEGF will help to create an environment that is reorganized and
conducive to the success of the future investment project.
10
3.5 Bank Comparative Advantage and Value-added
3.5.1 The Bank is a key actor in economic and financial governance reform in the
Comoros. Since TFP operations resumed in the Comoros in 2009, the Bank has successfully
implemented PAREGF, which enabled the country to initiate major reforms to ensure its
economic and social development, thus helping to rebuild the State’s capacity to fulfil its basic
duties. Besides, the Bank’s main value-added in this operation resides in the support to reforms
aimed at both improving energy sector performance and strengthening PFM. This combination
will contribute to the development of the energy sector whose weakness is one of the major
constraints to the diversification of the Comorian economy
3.6 Application of Good Practice Principles concerning Conditionality
3.6.1 The good practice principles on conditionality have been applied for the
Programme. PARSEGF respects the principle of ownership. Indeed, this programme has been
designed in consultation with the Government and focusses particularly on: (i) its electrical
energy and petroleum products policy; and (ii) its PFM reform strategy. Moreover, it seeks to
support the implementation of GPRS 2010-2014 which was prepared with civil society and
private sector participation. The programme design is based on consultations with stakeholders
from the energy sector, civil society and private sector organisations during meetings at
programme preparation and appraisal stages. The conditions precedent to disbursement of the
first tranche essentially relate to reforms aimed at making a substantial contribution to: (i)
improving energy sector performance and development; and (ii) consolidating PFM. In addition,
PARSEGF is aligned on the country’s budget cycle and it was announced in 2011, thus enabling
the Government to include it in its budget estimates for 2012 and 2013.
3.7 Application of the ADB Policy on Non-Concessional Lending
3.7.1 The principles governing the Bank’s policy on non-concessional debt are applied under
PARSEGF. The Union of the Comoros is only eligible for financing from the ADF window.
Besides, under the Extended Credit Facility (ECF) concluded in September 2009 with the IMF,
and which will end in 2013, no non-concessional loan may be contracted. Hence, this programme
which ends in 2013 and whose financing instrument is a grant, has taken into account the Bank's
policy on non-concessional debt, adopted in 2008 and revised in 2010, as well as IMF
requirements.
IV PROPOSED PROGRAMME AND EXPECTED RESULTS
4.1 Programme Goal and Objectives
4.1.1 The programme’s development objective is to contribute, through energy sector
restructuring and reform measures, to the creation of conditions for robust growth that can enable
the Union of the Comoros to emerge gradually from its fragile situation. Its specific objective is
to improve the governance and performance of the energy sector to make it more efficient and
able to sustain the country’s economic development. To create the conditions for attainment of
11
the specific objective, the programme also seeks to encourage the State to consolidate and step up
public finance management reforms. The reforms planned in this area will help to increase the
State’s efficiency and capacity to provide essential basic services to the population and the
business community, particularly in the energy sector.
4.2 Pillars, Specific Objectives and Expected Results
4.2.1 PARSEGF comprises a single component, namely "improvement of the
performance and development of the energy sector". This component has two pillars, namely:
(i) improvement of energy sector performance and governance; and (i) consolidation of public
finance management. The operational objective of the first pillar is to, through specific and
targeted reform measures, improve energy sector performance and governance, and build the
sector’s capacity to support the diversification and development of the economy. The idea is to
improve the management of the sector and eliminate the constraints that hamper its functioning in
order to improve electricity supply and create the conditions conducive to the development of
economic activity.
4.2.2 The objective of the second pillar is to help the Comorian Government to pursue and
step up PFM reforms, by implementing the relevant strategy adopted by the GUC for the 2010-
2019 period. The justification for this pillar is the need to ease the enormous pressure that the
electricity sub-sector exerts on public finance as a result of its poor performance and inefficiency,
which considerably constrains the fiscal space that would allow for efficient State management of
this sector. In light of the above, the PFM reforms planned under PARSEGF will make it possible
to build on the achievements of PAREGF and also create substantial fiscal space through
efficient revenue collection, greater public procurement transparency and efficiency, and better
debt management. This will make it possible to ease the pressure that the energy bill exerts on
public finance and create optimal conditions for the implementation of priority strategic
investments to improve electricity sub-sector performance. The combined energy sector and
public finance reforms should thus help to eliminate one the major obstacles plaguing the
economic environment and create the conditions for more sustainable and more inclusive
development.
Component I: Improvement of Energy Sector Performance and Development
Pillar 1: Improvement of Energy Sector Performance and Governance
4.2.3 Observations and Challenges (see TA 6): Erratic electricity supply in the Comoros is a
major source of vulnerability and a major constraint to the country’s socio-economic
development. In recent years, the situation has steadily deteriorated, mainly with severe
dysfunctioning and frequent power cuts that hamper economic activity. The situation is
particularly critical in Grand Comore and the island of Mohéli, which are supplied by MA-MWE.
For instance, in the capital, Moroni, programmed power cuts last for 6 hours a week while non-
programmed cuts are increasingly frequent. In Anjouan, which is supplied by EDA, electricity is
available for 10 hours a day, but to a relatively limited number of clients.
4.2.4 The limited supply of electricity translates into high factor costs for small and medium-
sized enterprises, the frequent shut-down of production units and considerable vulnerability for
12
most of the companies. It also increases the vulnerability of the poorest segments of the
population in terms of living conditions (health, education, food, etc.), since access to electricity
is reserved in priority for the affluent members of the population. This situation also increases the
State’s fiscal vulnerability since the electricity sub-sector represents a growing burden on public
finance. For example, in 2011 State subsidies to the electricity sub-sector, especially MA-MWE,
amounted to over KMF 7 billion (USD 18.7 million).
4.2.5 Several recent studies have confirmed that the installed capacity in the Comoros is
sufficient to cover the country’s electric power needs. For example, MA-MWE has a production
capacity of 29 MW compared to demand of 11 MW. The erratic electricity supply stems from
other factors which include: (i) the absence of a real national sector policy and strategy; (ii) poor
governance of the two State-owned electricity companies (non-functioning of the corporate
organs, the lack of supervisory control, uncoordinated appointment of main managers, and
political interference in their day-to-day management) which prevents rigorous management; (iii)
the extremely weak financial situation of the two electricity sub-sector companies which are
heavily dependent on State subsidies to stay operational and plagued by overstaffing, low billing
and collection rates due to significant fraud, and inability to secure a regular supply of gasoil for
the generator sets; (iv) lack of maintenance of equipment and obsolescence of the power grid that
has led to major technical losses. On account of these weaknesses and situations, the two
electricity sub-sector companies suffer enormous operational losses. Consequently, there is an
urgent and crucial need for short-term and long-term reforms as well as priority investments in
the sub-sector to improve its performance. This will help to eliminate the sector constraints
hampering the competitiveness of the Comorian economy and boost the value-added and jobs,
thus contributing to sustainable and inclusive economic growth.
4.2.6 Hence, the priorities are as follows: (i) restructure the electricity sub-sector and increase
the country’s electricity coverage so as to serve a greater number of people; (ii) rationalize the
operating and financial situations of sub-sector companies to make them more reliable and
efficient so that they can ultimately attract private investment; (iii) improve the governance and
management of these companies (see TA 6); and (iv) ease the high sub-sector costs that constrain
public finance. With respect to these objectives, it is particularly important, in the short term, to
reorganize the finances of MA-MWE and EDA and implement reforms to improve their
governance and the functioning of their management organs. The envisaged measures will make
it possible to improve the performance of these two companies, thereby raising the bill collection
and billing rates.
4.2.7 Recent Government Actions: The GUC, which considers the availability of electricity
as highly crucial to economic stability and the consolidation of social peace, is determined to
initiate priority reforms and investments to revive the sub-sector. In that regard, it has already
taken the following measures: (i) the institution of an anti-fraud plan at EDA in 2011; (ii) the
preparation of a study on MA-MWE rates in 2011; (iii) launching of an organizational and
strategic audit of MA-MWE; and (iv) the adoption of an electric energy and petroleum products
policy in 2012. Under this policy, the GUC has confirmed its commitment to engage in in-depth
reform of the electricity and petroleum products sub-sector by restructuring the companies
operating this sub-sector and analysing the various options that can be envisaged to ensure
13
reliable electricity supply in the long-term. However, these measures, though encouraging, are
still insufficient. The GUC is aware of the need to move beyond these measures to improve the
situation in the short term, and also achieve more sustainable results.
4.2.8 Programme Measures: To accompany the GUC in its efforts to improve electricity
sub-sector performance, PARSEGF will support the following measures: (i) conduct and
adoption of an organizational and strategic audit of the EDA; (ii) finalisation and adoption of the
organizational and strategic audit of MA-MWE; (iii) restoration of the smooth functioning of the
social organs of State-owned electricity companies, mainly by clarifying and specifying the roles
of the various organs, establishing and operationalizing the boards of directors of MA-MWE and
EDA, streamlining and simplifying the procedures for appointing the managers of these
companies; (iv) adoption and implementation of a global plan to reorganize the commercial
activities of MA-MWE, which is certainly a short-term measure, but one that is crucial to the
rapid restoration of corporation’s financial viability; (v) preparation and adoption, with
satisfactory form and content, of an action plan for the implementation of the recommendations
that will emerge from the organisational and strategic audits of MA-MWE and EDA; and (vi)
adoption of a long-term national energy policy that includes conservation of the environment.
4.2.9 Expected Outcomes: The implementation of PARSEGF-supported reforms should
contribute to the following results: (i) MA-MWE's billing rate rises from 55% for 2011 to 70% in
2013; (ii) MA-MWE's bill collection rate rises from 58% for 2011 to 80% in 2013.
Implementation of the recommendations of the organizational and strategic audits, whose
preparation and adoption are supported by the programme, should ultimately result in: (i) the
recasting and updating of legislative and regulatory instruments governing the electricity sub-
sector and the restructuring of companies in that sub-sector; and (ii) modification of system of
supervision of sub-sector companies, the effective conduct of such supervision and modernisation
of the sub-sector's governance. It is equally expected that under this plan, the GUC will be able to
determine the strategic orientations concerning the sub-sector companies and institutions.
Pillar 2: Consolidation of Public Finance Management
4.2.10 Under this pillar, PARSEGF will support reforms aimed at consolidating public finance
management in order to create fiscal space that can enable the State to better fulfil its obligations,
especially within the energy sector. Hence, the supported reforms have three objectives, namely:
(i) increased internal revenue collection; (ii) greater efficiency and transparency in public
procurement; and (iii) improved debt management.
Observations and Challenges
4.2.11 Electricity sub-sector subsidies represent almost 10% of the State’s operating budget.
While encouraging the Comorian Government to implement reforms in order to gradually restore
the financial autonomy of electricity sub-sector companies and reduce their excessive dependence
on the State, there is need to carry on with efforts aimed at boosting revenue collection capacity,
promoting greater transparency and efficiency in public procurements and ensuring better debt
management. This will enable the State to not only consolidate the progress made in public
14
finance management under PAREGF, but also to be able to address the requirements of
restructuring, revival and development of the electricity sub-sector.
4.2.12 The efforts made by the Government in recent years have led to an increase in domestic
revenue levels from 13.9% of GDP in 2009 to 16.1% in 2011. The sustained positive customs and
non-tax receipts under the economic citizenship programme constitute one of the factors that
account for the improvement in public revenue from 2009 to 2011. However, compared to the
Seychelles and Cape Verde, over the same period, the volume of public revenue in the Comoros
remains low at 14.5% of GDP, compared to 35% and 22% respectively for these two countries.
The factors that account for this low public revenue level in 2009-2011 are many and partly relate
to the institutional and technical weakness of financial administrations and a low tax compliance
rate.
4.2.13 As regards public procurement, the new Public Procurements Code (CMP), promulgated
in February 2012 to promote transparency in State transactions and expenditure control, is not yet
operational because of delays in setting up ARMP, the DNCMP and the various procurement
units of the different ministries. As concerns debt management, the likely achievement of full
debt relief under the HIPCI and MDRI at the end of 2012 will favourably impact external debt.
Nevertheless, the Comoros’ debt level will remain close (86% of GDP) to the 100% threshold, in
terms of the NPV of external debt-to-exports ratio.
Recent Government Actions
4.2.14 In a bid to increase revenue while rationalizing and modernizing the tax legislation, the
GUC embarked on a series of major reforms concerning taxation services, with the adoption, in
2009, of the 2010-2019 Public Finance Management Reform Strategy. The measures taken by the
Government within this framework include: (i) the adoption of a new General Tax Code and a
taxpayers’ charter; (ii) the application of an ad valorem tax by the Customs Services from 2011;
and (iii) the unification of taxation services through the establishment of the General Authority
for Taxation and Lands (AGID). However, AGID, which is an essential pillar in the
reinforcement of taxation administration, is still not yet operational because of delays in
constituting its Board of Directors.
4.2.15 Cognizant of the need to create fiscal space to so as to sustain growth, the GUC took a
certain number of measures under PFM-RS to improve on public procurement efficiency and
transparency as well as debt management. These are: (i) the adoption of the law on the new
Public Procurements Code on 4 February 2010 along with the various enabling decrees; and (ii)
the installation of debt management software at the Debt Department. However, these measures
are paltry compared to the significant challenges posed.
Programme Measures
4.2.16 As concerns domestic revenue collection, the programme firstly targets the effective
operationalization of AGID which will be exclusively responsible for the administration of all
taxes covered by the General Tax Code. This measure will help to enhance the transparency of
the revenue chain and strengthen compliance with revenue allocation rules. In the same domain,
PARSEGF also seeks to build the capacity of the Joint Taxation-Customs Brigade set up in 2009.
15
4.2.17 Secondly, the programme will support GUC efforts to raise public procurement
efficiency and transparency through the following measures: (i) operationalization of ARMP,
DNCMP and the Procurement Units of various ministries; and (ii) publication of tender
invitations and contract award notices on the CREF website. Regarding debt management, in
order to maintain a prudent borrowing policy, the programme supports the preparation and
adoption of a targeted and simple debt management strategy.
Expected Results
4.2.18 An improved public revenue level is the primary result targeted by all the measures
supported by the programme under this pillar. Hence, the programme projects an increase of over
two percentage points in the tax ratio from 2011 (10.9% of GDP) to 2013 (13% of GDP). The
programme will also entail an improvement in public procurement efficiency and transparency.
Indeed, PARSEGF envisions a minimum of 70% of public contracts awarded through an open
bidding process and in accordance with the public procurement code. As regards the
improvement of debt management, PARSEGF will specifically help to improve the net present
value of the debt-to-exports ratio from 239% in 2011 to 86% in 2013. Together, these results will
enable the State to avoid cash-flow problems, but also fulfil its essential duties without any
difficulties, bolster its legitimacy and guarantee gradual emergence from its fragile situation.
4.2.19 The improvement of PFM is also expected to have a positive effect on the energy
sector. The improvement of revenue collection and of public procurement transparency and
efficiency as well as debt management will enable the State to create fiscal space for energy
sector investments. Furthermore, the implementation of public procurement reforms will have a
positive impact on the energy sector since the State-owned companies in the sector will have to
apply the new public procurements code and thus benefit from the resulting expenditure savings.
4.3 Financing Requirements and Financing Arrangements
4.3.1 The current budget support operation is an
integral part of the external financing sources that
should contribute to the financing of the deficit (net
of grants) for 2012 and 2013, which stands at 7.9%
and 11.5% of GDP respectively. The overall
budgetary balance (cash basis, including grants)
should be at equilibrium during these two years.
Indeed, the State’s net financial requirement will be
fully covered by support from partners in the Gulf, as
well as the IMF, ADB and World Bank. In the event
of a shortfall in revenue or grants, the Government
intends to take appropriate offsetting measures that
include: (i) the deceleration of expenditure on staple
goods and services and capital goods; and (ii) more
vigorous recovery of tax arrears.
Table 5: Financial Requirements
2012 2013
% of GDP
Total revenue and grants 28.4 25.3
Total own revenue (net of grants) 18.2 14.5
Tax revenue 11.8 12.2
Non-tax revenue 6.4 2.3
Grants 10.2 10.9
Total expenditure and net loans 25.6 25.1
Current expenditure 17.1 16.6
Capital expenditure and net loans 8.5 8.6
Deficit (commitment basis, net of grants) -7.4 -10.6
Net variation in arrears -0.5 -0.9
Deficit (cash basis) -7.9 -11.5
Total financing 7.9 11.5
Domestic financing 1.1 1.4
Net external financing 6.8 10.1
Amortization -1.2 -1.0
Budget support (in grants) 1.1 1
Project support/ other grants and transfers 6.9 9.1
Financing Gap (-)/Excess (+) 0.0 0.0
Source: Government of the Comoros and IMF Report
16
4.4 Programme Beneficiaries
4.4.1 The people of the Comoros will be the primary beneficiaries of the programme. The
direct beneficiaries will be the Comoros population, in general, which will experience an
improvement in living conditions thanks to the improved functioning of the energy sector.
Furthermore, through PARSEGF, the people of the Comoros will benefit from a more transparent
PFM system and an improved supply of social services to the poorest segments of the population.
For private sector stakeholders in particular, better management of the energy sector will make it
possible to conduct activities in accordance with the norms. The other beneficiaries of the
programme will be: (i) the two State-owned electricity sub-sector companies which will
experience an improvement in performance; and (ii) government services which will benefit from
technical and operational capacity-building.
4.5 Poverty and Social Impact, including Gender
4.5.1 The PARSEGF Reforms will create conditions conducive to sustainable poverty
reduction and an improvement of living conditions for the people of the Comoros. Indeed, the
majority of health centres today do not have the resources to procure individual power generators
and consequently cannot operate regularly and adequately. This situation adversely affects their
capacity to sterilize equipment, handle night deliveries and store vaccines. Hence, greater access
to electricity will help to improve the quality of services provided in the health centres.
Furthermore, coupled with increased domestic revenue collection and more cautious debt
management, better control of public procurement could lead to increased revenue for the GUC
and raise social sector allocations, which still remain low. Hence, although there are no gender-
specific reforms under PARSEGF, this programme is expected to have a positive social impact
on gender, particularly on the education of girls in rural areas as well as improved healthcare for
mothers (see TA 7, 8 and 11).
4.6 Climate Change and the Environment
4.6.1 Recent studies14
have shown that the Comoros is very vulnerable to climate change. For
example, the country is exposed to the growing number of cyclones whose violence is aggravated
by rising ocean levels, droughts and floods. Climate change has an impact on health, food
security, economic activity, water resources and infrastructure. The PARSEGF intervention
pillars do not in any way contribute to climate deterioration. On the contrary, an efficient energy
sector that addresses environmental concerns will help the people to cope with the negative
effects of climate change. Besides, better PFM will provide the GUC with the financial means to
combat natural disasters more efficiently. PARSEGF has been classified under category III, in
accordance with the Bank’s environmental and social impact assessment.
14 Indian Ocean Commission: Report on Vulnerability to Climate Change: Qualitative Assessment, March 2011.
17
V. IMPLEMENTATION, MONITORING AND EVALUATION
5.1 Implementation Arrangements
5.1.1 Institutional Framework of Implementation: Donor-supported reform programmes
are managed on a daily basis by the Permanent Unit for Monitoring of Economic and Financial
Reforms (CREF) within the Union of the Comoros Vice-Presidency responsible for Finance.
This unit, which managed PAREGF, is currently monitoring the IMF’s ECF programme and will
ensure successful execution of budget support financed by the World Bank this year. With
respect to PARSEGF, this Unit will be specifically responsible for coordinating technical
work/studies with the administrative entities responsible for reform implementation, and transmit
implementation reports to the Bank, following their approval by the competent authorities.
5.1.2 Disbursements: The proposed programme will be financed with a grant of UA 2 million
from ADF XII resources under Pillar I of the FSF. It will be implemented over 2012 and 2013.
The grant will be disbursed in two tranches of UA 1 million each in 2012 and UA 1 million in
2013, respectively, in accordance with the budget estimates agreed upon with the GUC and the
IMF. Disbursement of these tranches will be conditional on fulfilment of the preliminary
conditions presented in Paragraph 6.2. A special account will be opened at the Central Bank of
the Comoros (BCC) as was done under PAREGF. This account will be used solely to receive
grant resources. Furthermore, the Vice-Presidency in charge of Finance shall transmit to the Bank
written confirmation attesting the receipt of funds in the special account. Later on, grant
resources will be transferred from this special account to the general Treasury account opened in
the BCC. In accordance with the agreement signed between the BCC and the State, the BCC shall
charge no fees for this operation. The exchange rate applied will be the rate applicable on the date
of fund transfer.
5.1.3 Procurement: The grant shall be awarded as general budget support. The fiduciary risk
management framework was prepared during the mission and the Bank will monitor the
implementation of mitigative measures for these risks (see TA 4). Hence, it appears that the new
legislative and regulatory framework is generally consistent with the international standards and
best practices relating to procurement. However, there is still need to supplement c this regulatory
framework, operationalize the institutional system and build the capacities of parties in the
procurement chain. These are indeed measures whose implementation is scheduled under
PARSEGF which will support public procurement reform.
5.1.4 Financial Management and Audit: The modalities for financial management and the
auditing of PARSEGF resource application were assessed to determine the financial risk and the
ensuing analysis is presented in TA 3. PARSEGF resources will be used within the public
expenditure circuit and in accordance with national regulations governing public finance. The
Vice-Presidency in charge of Finance will be responsible for the administrative, financial and
accounting management of PARSEGF resources. The external audit of the expenditure of these
funds will be part of the external control exercised by the Audit Bench of the Supreme Court and
through the study of budget execution reports and budget review draft laws for FY2012 and
FY2013, which will be produced within the periods specified under the relevant national
18
regulations. The results of the audit conducted by the Audit Bench will be transmitted to the
Bank. Furthermore, (i) an audit of financial flows will be conducted annually by an independent
firm according to terms of reference approved by the Bank; and (ii) missions will be conducted
by the Bank department responsible for fiduciary risk, to assist the GUC in hedging financial
management risks.
5.2 Monitoring and Evaluation Arrangements
5.2.1 CREF will conduct daily monitoring-evaluation of PARSEGF following the matrix of
measures which constitutes the performance assessment framework of the programme. CREF has
already implemented PAREGF, and therefore has the requisite capacity to provide the
coordination necessary for successful implementation of the programme. Furthermore,
coordination with other donors operating in the areas of energy and public finance management,
namely the World Bank and the IMF, will also be ensured through regular exchanges on reform
implementation, close consultations and joint supervision.
VI. LEGAL DOCUMENTS AND LEGAL AUTHORITY
6.1 Legal Document
6.1.1 The legal document to be used for this programme is the Grant Agreement. The parties
to this agreement are the ADF and the Republic of the Union of the Comoros.
6.2 Conditions Precedent to Bank Group Intervention
6.2.1 Grant Effectiveness: The Grant Protocol will become effective on its date of signature
by the Republic of the Union of the Comoros and the ADF.
6.2.2 Conditions precedent to disbursement of the two tranches: Maintenance of a stable
macroeconomic framework as determined by IMF assessments and analyses.
6.2.3 Conditions precedent to disbursement of the first tranche of UA 1 million: Disbursement of the first tranche will be subject to fulfilment of the following preliminary
conditions:
Condition 1: Provide evidence of the opening of a special foreign exchange
account at the Central Bank of the Comoros, exclusively to receive the grant
resources for PARSEGF. Evidence Required: The original letter from the Central
Bank of the Comoros containing the account information;
Condition 2: Provide evidence that the general plan for reorganization of the
commercial activities of MA-MWE has been adopted by the Council of Ministers.
Evidence Required: Letter transmitting the true copy of the general plan for
reorganization of the commercial activities of MA-MWE and the true copy of the
minutes of the Council of Ministers meeting adopting the said plan;
19
Condition 3: Provide evidence of the operationalization of the corporate organs of
MA-MWE . Evidence Required: True copy of the texts appointing the Board
members of MA-MWE;
Condition 4: Provide evidence of the operationalization of the Public Procurement
Regulatory Agency (ARMP) and the National Directorate for Public Procurement
Control (DNCMP). Evidence Required: True copies of the texts appointing the
Managers of the Public Procurement Regulatory Agency (ARMP) and the
National Directorate for Public Procurement Control (DNCMP).
6.2.4 Conditions precedent to disbursement of the second tranche of UA 1 million: Disbursement of the second tranche will be subject to fulfilment of the following preliminary
conditions:
Condition 1: Provide evidence of the adoption of the National Energy Policy by
the Council of Ministers. Evidence Required: True copy of the National Energy
Policy adopted by the Council of Ministers and true copy of the Council of
Ministers' minutes on adoption of the said National Energy Policy.
Condition 2: Provide evidence of the publication of tender invitations and public
contract award notices on the CREF website from 1 January 2013 to 30 April
2013. Evidence Required: True copy of instruction by the competent authority
concerning publication on CREF website and CREF website screenshots showing
visible posting of public contract awards for the period from 1 January 2013 to 30
April 2013.
6.3 Compliance with Bank Group Policies
6.3.1 This programme is in conformity with the applicable policies and guidelines, in
particular: (i) Bank policy on programmatic support operations; (ii) 2011-2015 Country Strategy
Paper of the Union of the Comoros; (iii) the Bank Group’s Strategy on Enhanced Engagement in
Fragile States; and (iv) FSF Operational Guidelines.
20
VII. RISK MANAGEMENT
Risks Level of probability Mitigative Measures
Political instability Moderate
The new institutional architecture that emerged from the 2009
referendum law, with Governors rather than Presidents heading the
islands, will make it possible to avoid jurisdictional conflicts and
political tension at the helm of State. Continuous dialogue between the
authorities and TFPs, including the African Union, will continue to
play an important role in ensuring political stability.
Insufficient institutional and
technical capacity to successfully
implement the reforms set out in the
Programme.
Moderate
Many institutional support projects supported by TFPs, including the
ICBP supported by the ADB, the ABGE supported by the World Bank
and APLACO financed by the EU are aimed at building the
institutional capacity of departments and agencies responsible for
reform implementation. Vulnerability of the Comorian
economy to external shocks considering the narrow domestic
market, limited diversification of the
production base and, consequently, a
limited range of exports for the
international market.
Moderate
Continuation of reforms within the framework of the programme
supported by the ECF and other TFPs as well as promotion of
productive activities in growth sectors such as agriculture, fisheries
and tourism will enable the economy to cope with exogenous shocks.
Risk of non-sustainability of
reforms Moderate
The HIPCI process has been catalytic in bringing about reforms and
PARSEGF seeks to help consolidate these achievements. Debt
reduction through the HIPCI, increased tax revenue and the control of
public procurement will help to mitigate this risk of non-sustainability
of reforms.
Risk of opposition to reforms Moderate
Opposition to reforms is mitigated by the emphasis laid on
transparency, in order to promote the perception of equitable resource
distribution between the Union and the islands. Improved internal
coordination as well as continuous and coordinated dialogue between
the authorities and TFPs helps to mitigate this risk.
Fiduciary risk for the project High
The institutional support currently being implemented, PARSEGF, of
the IMF’s ECF and the World Bank budget support back up reforms
aimed at mitigating fiduciary risk, including the reinforcement of
internal control through the establishment of the General Directorate
for Financial control and the setting-up of the Audit Bench to improve
external control. Operationalization of the new public procurements
code will make it possible to improve public procurement
transparency. The operationalization of the new Law on State
Financial operations (LOFE) will also help to improve fiduciary
management in the country.
VIII. RECOMMENDATIONS
8.1 In light of the foregoing, it is recommended that the Board of Directors approve a grant
on FSF resources in the amount of UA 2 million, awarded to the Republic of the Union of the
Comoros to finance the implementation of the said programme, subject to the conditions set out
in this report.
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PARSEGF Letter of Development Policy
UNION OF THE COMOROS:
---------------------------------
VICE-PRESIDENCY, IN CHARGE OF THE MINISTRY
OF FINANCE, ECONOMY, BUDGET,
INVESTMENT AND EXTERNAL TRADE
AND IN CHARGE OF PRIVATISATION
-----------------------------------
The Vice President
No. 12- /VP-MFEBICEP/CAB Moroni,
To
Dr. Donald KABERUKA
President of the African Development Bank (ADB)
Tunis
Subject : Letter of Development Policy
Mr. President,
1. After the decade-long political and institutional crisis that led to a significant reduction
of in per capita income, the deterioration of basic social services, the decline in access to
electricity and a net reduction in institutional capacity, the Union of the Comoros found peace
again following the end of the rebellion on the island of Anjouan in 2008, the effective
restoration of State authority on the island and the resumption of cooperation among the islands.
This new-found peace has made it possible to renew relations with the international financial
community and thus create the conditions for continued implementation of the Development
Programme based on the Growth and Poverty Reduction Strategy finalised in 2009 at the end of a
participatory process. This programme, which today constitutes the reference framework for
economic and social development in the Comoros, covers the 2010-2014 period. It focuses on 6
(six) strategic pillars that include: (i) stabilising the economy and laying the foundation for
accelerated and sustainable growth based on equity (Pillar 1); (ii) strengthening growth sectors by
laying emphasis on institutional building and increased participation of private economic
operators (Pillar 2); and (iii) reinforcing governance and social cohesion (Pillar 3).
2. This Letter of Development Policy sums up the progress made by the Comoros in
economic and social development in recent years within the framework of the Government
programme. It then describes the reform policies that the Government intends to pursue in the
medium term. The measures and objectives of the programme are consistent with the 2010-2014
Growth and Poverty Reduction Strategy Paper (GPRSP 2010-2014). Through this letter, the
Government of the Union of the Comoros is requesting the Bank’s assistance to support the
implementation of its Electricity and Petroleum Products Policy adopted in May 2012; its 2010-
2019 Ten-year Public Finance Management Reform Strategy (DSR-GFP, 2010-2019); and, above
all, its 2010-2012 Priority Action Plan (PAP 2010-2012), to reduce poverty in accordance with
GPRS 2010-2014.
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I. RECENT ECONOMIC AND SOCIAL TRENDS
1.1 After suffering the structural effects of the political and institutional crisis, economic
activity in the Union of the Comoros is evolving in a fairly positive context, despite a difficult
international environment characterised by the public debt crisis. The real GDP growth rate was
2.2% in 2011, compared to 2.1% in 2010 and is projected to rise to 2.5% in 2012 and 3.5% in
2013. Despite the rise in the price of food and energy products, compounded by the rise in the
value of the dollar, the average annual inflation rate was estimated at 6.8% in 2011, compared to
3.9% in 2010. On a year-on-year basis, the increase is considerably less pronounced, with a price
index variation of +1.6% between December 2010 and December 2011.
1.2. To lay the foundation for sustainable economic growth and mitigate the devastating
effects of the difficult economic situation on the purchasing power of households as well as the
impact of the spike in world food and energy prices, the Government is pushing on with its
commitment to implement the reforms scheduled in the Extended Credit Facility (ECF)
Programme concluded with the International Monetary Fund and under the Heavily Indebted
Poor Countries Initiative (HIPCI) whose completion point should be attained in December 2012.
A review of the ECF Programme in June 2012 recognised the efforts deployed by the
Government to consolidate the budget and boost structural reforms through the following actions:
(i) cancellation of the excessive salary increase granted in 2010; (ii) stricter monitoring of the
settlement of domestic payments arrears and external debt servicing payments, mainly by
reinforcing joint monitoring of the debt service payment schedule by the Directorate for the
Treasury, the Public Debt Directorate of the Ministry of Finance, and the Central Bank of the
Comoros. This review noted that there was better economic growth in 2011 compared to 2010
that was sustained by solid agricultural production and a gradual resumption of foreign direct
investments (FDI).
A. Macroeconomic and Financial Framework
1.3. Growth: The Comorian economy, primarily based on cash-crop farming focused on only
3 products (vanilla, cloves, ylang-ylang) registered an average growth rate of 2.3% over the last
three years, which is an improvement over the previous 2006-2008 period when the estimated
average rate was approximately 1%. This slight improvement in economic performance stems
from: (i) an abundant harvest; (ii) domestic demand sustained by an increase in external
resources, mainly remittances from abroad; (iii) a steady rise in credits to the private sector; (iv)
the gradual resumption of foreign direct investments (FDI); and (v) the containment of inflation
at approximately 3% on average.
1.4. With respect to public finance, the execution of State financial operations in 2011 was
characterised by an improvement in the main budget balances thanks to a rise in domestic
(mainly non-tax) revenue which skyrocketed by 75.4%, despite an increase in primary current
expenditure. On account of the strong performance in customs revenue due to the rise in the value
of imports, tax revenue increased by 4.8% in 2011 compared to 2010, recording KMF 23.5
billion compared to 22.4 billion, with the tax burden maintained at 11.4% of GDP.
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1.5. With regard to monetary aspects, the monetary expansion observed in recent years
continued in 2011 at a less sustained growth rate of 9.6% compared to 19.4% in 2010. This
expansion is mainly attributable to the increase in net external assets (+16.1%), since domestic
credit grew by only 4.2% after a surge of 17.6% in 2010.
After the sharp increase of 17.6% registered in 2010, domestic credit grew by only 4.3%, thus
placing the outstanding debt at KMF 45.5 billion in December 2011, compared to KMF 43.7
billion in December 2010. Credits to the economy fuelled this growth, raising the amount to
KMF 39.8 billion compared to KMF 38 billion in December 2010.
1.6 With respect to external accounts, the current account deficit deteriorated, expanding to
14.1% of GDP in 2011 compared to 9.8% in 2010. This trend resulted mainly from the widening
of the trade deficit (KMF 68.1 billion in 2011 against KMF 60.3 billion in 2010), that could not
be offset by the increased surplus in current transfers over the same period (+2.9%). The value of
exports grew by 16% to KMF 8.9 billion in 2011, compared to KMF 7.7 billion in 2010. This
trend was driven essentially by clove exports which enjoyed sustained external demand and good
export prices. The value of imports grew by 13% compared to 2010. This increase mainly
concerned food products, building materials and petroleum products.
1.7. Lastly, the external public debt stock, (including arrears) stood at KMF 93.646 billion at
the end of December 2011, compared to KMF 98.409 billion in December 2010, representing an
8% decline compared to the end of 2011. This decrease reflects the relief obtained from external
creditors under the HIPC Initiative as well as efforts initiated by the Government to ensure timely
settlement of current and future debt servicing payments.
B. Structural Context
1.8. The success of the reforms initiated, especially those scheduled under the programme
with the IMF, calls for continuation of the efforts deployed to ensure respect of the budget
balance. Hence, the role of the Budget Committee must be maintained to guarantee more efficient
monitoring of budget execution. A national debt committee was set up to improve public debt
programming and management. The Economic and Financial Reforms Unit (CREF) coordinates
and monitors public finance management reforms and serves as the budget committee secretariat.
The institutional framework set up to ensure more rational public finance management has
currently made it possible to achieve better results in terms of revenue and expenditure control.
This has led to regular payment of civil servant salaries using the GISE software.
C. Social Context
1.9. The social context in the Comoros remains characterised by the prevalence of urban and
rural poverty. Indeed, for the various islands, the population living below the poverty threshold,
evaluated at KMF 285,144 KMF per capita and per year, stood at 38.4% in Anjouan, 37.8% in
Mohéli and 35.3% in Grande Comores in 2004. Monetary policy is higher in rural areas (41.1%
of inhabitants) than in urban areas (26.7%) according to the 2004 Integrated Household Survey.
Although these statistics are dated, they provide insight into the poverty situation when
interpreted against the overall socioeconomic condition of the people. This trend does not portend
any significant change and most of the social indicators will remain at a generally low level.
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However, several measures have been taken all over the national territory to improve the health
status of the people, increase access to education and promote national cohesion. Hence, the
proportion of malaria cases to general consultations dropped from 50% in 2004 to 36% in 2011.
Despite the high morbidity rate, the mortality rate is significantly lower thanks to available and
free treatment for simple malaria cases and the mass malaria treatment campaign organised in
Mohéli between 2008 and 2010. The pre-school enrolment ratio was evaluated at 16% in 2011,
representing a significant increase of 10.9 points within one year (5.1% in 2010). The national
primary school completion rate rose by five points in 2011 (62%) compared to 2010 (57%).
II. THE GOVERNMENT’S 2010-2013 REFORM PROGRAMME
A. Preamble
2.1. Within the framework of the 2010-2014 Growth and Poverty Reduction Strategy (GPRS
2010-2014), the Government opted for a development model based on a mixed approach that
targets sectors with a high concentration of poor, in order to generate a direct and rapid increase
in their incomes, as well as medium-term development of new growth sectors whose benefits can
be redistributed through equitable and incentive-driven taxation and public spending.
2.2. The results of the preliminary diagnosis of growth sources in the Comoros conducted in
2010 with Bank support are consistent with the development model recommended in GPRS
2010-2014. This diagnosis showed that economic and social development in the Comoros is
conditional on: (i) an improvement in the performance and development of the electricity sub-
sector; (ii) rapid revival of investments in the key sectors and sub-sectors of agriculture, fisheries
and tourism as well as greater diversification of the economy (processing of agricultural and
fishery products); (iii) reduction of the weight of the State within the economy and promotion of
private initiative; and (iv) improvement of governance, better management of the economy and
allocation of available resources. These four complementary objectives are directly or indirectly
targeted in the context of the new 2011-2015 country strategy prepared by the Bank in
consultation with the Comorian Government. The sole pillar under this strategy is development
of the energy sector to support economic diversification.
2.3. Hence, the Energy Sector Reform and Financial Governance Support Programme
(PARSEGF) seeks to support reforms aimed at improving energy sector performance and
development, especially in the electricity sub-sector. This energy sector support will be
accompanied by measures that seek to improve public finance management and thus build the
State’s capacity to manage this sector.
B. Improvement of Energy Sector Performance and Development
2.4. PARSEGF’s sole component entitled "improving the performance and development of the
energy sector" is subdivided into two pillars, namely: (i) improving energy sector performance
and governance; and (ii) strengthening public finance management. The operational objective of
the first pillar is to use specific and targeted reform measures to improve energy sector
performance and governance, and thus build the sector’s capacity to support the diversification
and development of the economy. The objective of the second pillar is to help the Comorian
Government to continue with and expand PFM reforms, by implementing the relevant strategy
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adopted by the GUC for the 2010-2019 period. The rationale for this pillar is the enormous
pressure that the electricity sub-sector exerts on public finance as a result of its poor performance
and inefficiency. This significantly limits the space that the State could have to ensure efficient
public finance management.
B1. Pillar 1: Improvement of Energy Sector Performance and Governance
2.4. To revive the energy sector and eliminate the major constraint resulting from
dysfunctions within this sector and which undermine the competitiveness of the Comorian
economy, the following priority challenges remain to be addressed: (i) profoundly restructure the
sector; (ii) expand the country’s electricity coverage; (iii) reduce the national energy bill; (iv)
streamline the financial situation of sector companies; and (v) strengthen sector governance.
2.6. To address these challenges, PARSEGF seeks to improve electricity sub-sector
performance through the following measures: (i) conduct of the organizational and strategic audit
of the EDA; (ii) finalisation of the organizational and strategic audit of MA-MWE; (iii)
restoration of the smooth functioning of the organs of the public electricity corporations,
especially by clarifying and specifying the roles of the various organs, establishing and
operationalizing the boards of directors of MA-MWE and EDA, as well as streamlining and
simplifying the procedures for appointing the managers of these companies; (iv) adoption and
implementation of a global plan to reorganize the commercial activities of MA-MWE which is
certainly a short-term measure, but one that is crucial to MA-MWE’s rapid return to financial
viability; (v) optimal preparation and adoption, in terms of form and content, of an action plan for
implementation of the relevant recommendations that will ensue from the organisational and
strategic audits of MA-MWE and EDA; and (vi) adoption of a long-term national energy policy.
2.7. The implementation of PARSEGF-supported reforms should contribute to the following
results: (i) MA-MWE's billing rate is expected to rise from 55% in 2011 to 70% in 2013; and (ii)
MA-MWE's bill collection rate will rise from 58% in 2011 to 80% in 2013. Implementation of
the recommendations of organizational and strategic audits, whose preparation and adoption are
supported by the programme, should ultimately result in: (i) the review and update of legislative
and regulatory instruments governing the electricity sub-sector and restructuring of companies in
that sub-sector; (ii) revision of the format for supervision of sub-sector companies, effective
conduct of such supervision and modernisation of the sub-sector's governance.
B2. Pillar 2: Consolidation of Public Finance Management
2.8. While implementing the necessary reforms that will gradually remedy the electricity
sub-sector situation and reduce its excessive dependence on the State, there is a fundamental need
to support efforts aimed at boosting revenue collection capacity, increasing public procurement
transparency and efficiency and promoting better debt management. This will enable the State to
consolidate the progress made in public finance management under PAREGF and give it greater
capacity to address the restructuring, recovery and development requirements of the electricity
sub-sector.
2.9. As concerns domestic revenue collection, the programme firstly targets the effective
operationalization of the General Authority for Taxation and Lands (AGID) which will be
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exclusively responsible for administration of taxes covered by the General Tax Code. This
measure will enhance the transparency of the revenue chain and strengthen compliance with
revenue allocation rules. In the same vein, PARSEGF seeks to build the capacity of the Joint
Taxation-Customs Brigade set up in 2009.
2.10. Secondly, in order to support Government efforts to improve public procurement efficiency
and transparency, the programme targets the following measures: (i) operationalization of the
Public Procurement Regulatory Authority (ARMP), the National Directorate for Public
Procurement Control (DNCMP) and the Procurement Units of the various ministries; and (ii)
publication of tender invitations and contract award announcements on CREF’s website. As
concerns debt management, the programme supports the preparation and adoption of a targeted
and simple debt management strategy so as to maintain a prudent borrowing policy.
2.11. In terms of results, the programme projects an increase of over two percentage points in
the tax ratio from 2011(10.9% of GDP) to 2013 (13% of GDP). The programme will also bring
about an improvement in public procurement efficiency and transparency. Indeed, PARSEGF
envisages a minimum of 70% of public contracts awarded through a bidding process that is open
and in accordance with the public procurement code. As regards debt management, PARSEGF
will specifically help to improve the net present value of the debt-to-exports ratio from 239% in
2011 to 86% in 2013. Together, these results will enable the State to avoid cash-flow problems,
while fulfilling its essential duties without any difficulties, and consolidate its legitimacy and
guarantee its gradual emergence from its fragile situation.
2.12. The improvement of PFM is also expected to have a positive effect on the energy sector.
The improvement in revenue collection, greater public procurement transparency and efficiency
and better debt management will enable the State to create the space needed for energy sector
investments.
III. MONITORING OF THE REFORM PROGRAMME
3.1 PARSEGF will be managed by the Vice-Presidency in charge of the Ministry of Finance
and monitored on a daily basis by the Permanent Economic and Financial Reform Monitoring
Unit (CREF). This institutional framework will be facilitated by a mechanism set up to
coordinate development assistance and whose on-going operationalization will be supported
through the establishment in the very near future of an electronic platform. This aid coordination
mechanism will be composed of: (i) a strategic committee which is the Council of Ministers,
expanded to represent all the partners and chaired by the Head of State, and which meets once a
year; (ii) a technical committee whose membership comprises all the Secretaries-General of key
ministries, chaired by the Secretary-General of the Government; and (iii) sector technical groups
chaired by the secretaries-general of the ministries concerned.
Please accept, Mr. President, the assurances of my highest consideration.
MOHAMED ALI SOILIH
Annex 2
Page 1/3
PARSEGF Measures Matrix
OBJECTIVES 2012 MEASURES 2013 MEASURES TARGETED OUTPUT
INDICATORS
KEY IMPACT
INDICATORS DATA SOURCE
COMPONENT I - IMPROVEMENT OF ENERGY SECTOR PERFORMANCE AND DEVELOPMENT
PILLAR 1:
IMPROVEMENT OF
ENERGY SECTOR
PERFORMANCE
AND GOVERNANCE
1.1. Finalise the National
Energy Policy
2.1. Adopt the national
energy policy at the Council
of Ministers
The national energy policy
is finalized and adopted by
the Council of Ministers
Billing rate of MA-
MWE
2011 benchmark:
55%
2013 target: 70%
Bill payment rate of
MA-MWE
2011 benchmark:
58%
2013 target: 80%
Letter from the MFEBICE
transmitting a true copy of the
minutes of the CM meeting
adopting the national energy
policy
1.2. Conduct and adopt the
organizational and
strategic audit of MA-
MWE and EDA
2.2. Prepare an action plan
based on recommendations
of the organizational and
strategic audit of MA-MWE
and EDA, and have it
adopted by the CM.
Implement the said action
plan
The organizational and
strategic audit of MA-
MWE and EDA is
prepared and an action
plan is adopted by the CM
and implemented.
Letters from the MFEBICE
transmitting a true copy of the
audit reports of MA-MWE and
EDA and the implementation
reports of the said audits
1.3. Prepare and adopt (in
CM) a general plan for the
reorganization of the
commercial activities of
MA-MWE
2.3. Implement the general
plan for the reorganization
of MA-MWE’s commercial
activities
The general plan for the
reorganization of MA-
MWE’s commercial
activities
is adopted and
implemented
Letters from MFEBICE
transmitting a true copy of the
general plan for reorganization
of MA-MWE’s commercial
activities;
Letters from MFEBICE
transmitting true copies of two
monitoring and implementation
reports of the general plan for the
reorganisation of MA-MWE’s
commercial services;
1.4. Appoint members to
the Board of Directors of
MA-MWE
2.4. Operationalize the
Board of Directors of MA-
MWE
Text appointing members
to the Board of Directors
(BD) and meeting minutes
of the said Boards
The Board of
Directors is
established and
operational as
evident in the
holding of regular
meetings.
Letter from MFEBICE
transmitting a true copy of the
decision appointing Board
members and minutes of two
meetings held in 2013.
Annex 2
Page 2/3
OBJECTIVES 2012 MEASURES 2013 MEASURES TARGETED OUTPUT
INDICATORS
KEY IMPACT
INDICATORS DATA SOURCE
PILLAR 2:
CONSOLIDATION
OF PUBLIC
FINANCE
MANAGEMENT
1.5. Promulgate the
Presidential Decree
defining the organisation,
powers and functioning of
the General Authority for
Taxation and Lands
Presidential Decree
defining the organisation,
powers and functioning of
AGID promulgated
Tax revenue- to-
GDP ratio
2011 benchmark:
10.9 % of GDP.
2013 target: 13 % of
GDP.
PEFA PI-13: (2007
benchmark: D+,
2013 target: C+)
PEFA PI-14: (2007
benchmark: D+,
2013 target: C+)
PEFA PI-15: (2007
benchmark: D, 2013
target: B)
Letter from the Ministry of
Finance, Economy, Budget,
Investment and External Trade in
charge of Privatisation
(MFEBICE) transmitting the true
copy of the Presidential Decree
defining the organisation,
powers and functioning of
AGID.
1.6. Sign Ministerial Order
to implement Presidential
Decrees defining the
organisation, powers,
functioning and status of
AGID
2.5. Operationalize the
General Authority for
Taxation and Lands (AGID)
Ministerial Order to
implement Presidential
Decrees defining the
organisation, powers,
functioning and status of
AGID is signed;
Minutes of three
consecutive meetings of
the AGID Board of
Directors
Letter from MFEBICE
transmitting a true copy of a
Ministerial Order to implement
the Presidential Decrees defining
the organisation, powers,
functioning and status of AGID
Transmission of minutes of three
consecutive meetings of the
AGID Board of Directors
2.6. Revise and ensure
adoption of the customs
tariff code by the CM
Customs tariff code
revised and adopted by
CM
Letter from MFEBICE
transmitting a true copy of the
revised customs tariff code and
minutes of its adoption meeting.
2.7. Build the capacity of the
Joint Taxation-Customs
Brigade (BMID)
Taxation-Customs Joint
Brigade trained and
provided with new IT
equipment
Letter from MFEBICE
transmitting true copies of
training reports and acceptance
reports for the IT equipment.
1.7. Operationalize the
Public procurement
Regulatory Authority
(ARMP), the National
Directorate for Public
Procurement Control
(DNCMP) and the Public
Procurement Units
(CGMP)
2.8. Publish tender
invitations and contract
award announcements on
CREF's website from 1
January 2013
Appointment of officials
and deployment of staff to
ARMP, DNCMP and the
CGMPs of the ministries
and State-owned
companies; Regular
preparation of quarterly
progress reports by ARMP
and DNCMP in 2013
Publication of tender
PEFA: PI-19
(2007 benchmark:
D+; 2013 target: C+)
ARMP and DNCMP
officials and CGMP
staff are appointed
and the ARMP and
DNCMP are
operational
Letters from MFEBICE
transmitting true copies of
Presidential Decrees to appoint
ARMP and DNCMP officials;
Letters from MFEBICE
transmitting true copies of orders
to deploy staff to ARMP and
DNCMP; Letters from
MFEBICE providing
information on the deployment
of staff members from the
Annex 2
Page 3/3
OBJECTIVES 2012 MEASURES 2013 MEASURES TARGETED OUTPUT
INDICATORS
KEY IMPACT
INDICATORS DATA SOURCE
invitations and contract
award announcements on
the CREF website
tender invitations and
contract award
announcements are
published on CREF's
website from 1
January 2013
CGMPs of the Ministries and
State-owned enterprises; Letters
from MFEBICE transmitting
true copies of 3 quarterly reports
of the ARMP and 3 quarterly
progress reports of the DNCMP
for 2013
1.8. Produce detailed
annual report on the
domestic and external
debt, including data on the
existing stock, new loans
as well as outstanding and
settled debt service
payments for 2011.
2.9. Produce detailed annual
report on the domestic and
external debt, including data
on the existing stock, new
loans as well as outstanding
and settled debt service
payments for 2011.
Annual reports on the
public debt
NPV of the external
debt-to-exports ratio
2011 benchmark:
239%
2013 target: 86%
Transmit copies of the annual
public debt reports for 2011 and
2012
1.9. Adopt the decree and
the effective establishment
of the new Treasury
administration, including:
(i) the appointment of the
General Director of the
Treasury and Public
Accounting; (ii) appoint of
the Paymaster General of
the Union; and (iii)
appointment of paymasters
for the various islands.
Decree adopted Transmit true copies of the
decree
2.10. Prepare and adopt (in
CM) a targeted and simple
strategy for debt
management
The targeted debt
management strategy
Transmit a copy of the strategy
and minutes of the CM meeting
that adopted it.
Annex 3
Page 1/4
Statement on IMF-Country Relations
IMF Executive Board Concludes Third Review Under the Extended Credit Facility
Arrangement for the Union of the Comoros; Approves Extension of the Arrangement and
US$2.37 Million Disbursement
Press Release No. 12/230, June 15, 2012
The Executive Board of the International Monetary Fund (IMF) today completed the third review
of the Union of the Comoros’ economic performance under the program supported by the
Extended Credit Facility (ECF). In completing the review, the Board approved a waiver for the
nonobservance of a performance criterion on reduction of domestic arrears and the modification
of this performance criterion. The Executive Board also approved an extension of the
arrangement through December 31, 2013, and a rephasing of the remaining disbursements.
The completion of the review will enable an immediate disbursement of SDR 1.56 million
(equivalent to US$2.37 million). The Union of the Comoros’ ECF arrangement was approved in
September 2009 in an amount equivalent to SDR 13.57 million (about US$20.63 million; see
Press Release No. 09/315).
Following the Executive Board discussion on the Union of the Comoros, Mr. Naoyuki Shinohara,
Deputy Managing Director and Acting Chair, issued the following statement:
“Comoros’ overall performance under the ECF-supported program has significantly
improved since late 2011. Against the backdrop of a favorable political environment,
and enhanced donor support, the authorities have initiated corrective measures to put
their ECF-supported program back on track and are committed to prudent
macroeconomic policies and structural reforms. All these efforts are necessary to
promote sustained strong growth, facilitate progress towards long-term debt
sustainability, and reduce poverty.
“Achievement of the government’s fiscal objectives, including creating the fiscal space
needed for pro-poor and pro-growth spending, will require strengthening domestic
revenue collection and observing expenditure restraint. In this context, it will be
important to enhance the efficiency of tax and customs administration, and expand the
tax base. Efforts should also continue towards avoiding accumulation of new payments
arrears.
“Prudent debt management policies remain essential to address Comoros’ unsustainable
debt situation. Further progress towards reaching understandings on debt restructuring
with all external creditors and implementing the HIPC Initiative Completion Point
triggers will therefore be important.
“On the structural front, the authorities have stepped up technical consultations with
development partners on the reform of public financial management and the
Annex 3
Page 2/4
restructuring of public utilities. In the financial sector, the authorities are reinforcing
banking oversight and strengthening the central bank’s internal control mechanisms, all
of which are essential to ensure continued sound expansion of financial intermediation.
“In light of the more supportive policy environment, an extension of the ECF
arrangement to end-2013 would provide the needed additional time for addressing
delays in the implementation of reforms, so as to strengthen economic competitiveness
and enhance the effectiveness of the authorities’ poverty reduction strategy,” Mr.
Shinohara added.
Statement at the Conclusion of an IMF Staff Mission to the Comoros
Press Release No. 12/386 of 9 October 2012
An International Monetary Fund (IMF) staff mission visited the Union of Comoros from
September 22 to October 6, 2012, to conduct discussions on the Article IV Consultation for 2012,
the fourth review of performance under the Extended Credit Facility (ECF) program1, and to
finalize preparations for reaching the Heavily Indebted Poor Country (HIPC) initiative
completion point. The mission met with HE Dr. Ikililou Dhoinine, the President of the Union;
and held discussions with the Vice-President and Finance Minister; the Governor of the Central
Bank of the Comoros; the Head of the Planning Commission; as well as representatives of the
press and private sector, civil society, and the donor community.
At the conclusion of the mission, Mr. Mbuyamu Matungulu, the IMF mission chief for the Union
of the Comoros, issued the following statement today in Moroni:
“Macroeconomic developments are broadly favorable in 2012. Real GDP growth is
projected to strengthen further to 2.5 percent, mainly driven by activity in construction
and public works, as well as in food crop agriculture. The economy continues benefiting
from sustained donor support, foreign direct investment, and resilient remittances.
Despite increased price pressure in mid-year following floods that destroyed part of the
domestic food harvest, end-year inflation should be contained at 5 percent, thanks to
relatively stable world energy and food prices. Notwithstanding a moderate deterioration
in the terms of trade, the external current account deficit is projected to significantly
narrow to 6.9 percent of GDP in 2012 from 9 percent of GDP in 2011, reflecting a surge
in public transfers, including under the economic citizenship program. As a result, gross
international reserves will likely increase to a comfortable level equivalent to 7.2 months
of imports.
“Progress in budget consolidation continues, with the authorities poised to exceed their
2012 revenue target, and the wage bill under tighter control following the 2011 census of
the civil service. Excluding a windfall in economic citizenship receipts, estimated at 3.1
percent of GDP, the domestic primary budget deficit is projected to narrow to 0.9
percent of GDP in 2012, compared with a program objective of 1.1 percent of GDP and
an outturn of 1.4 percent of GDP in 2011.
“Implementation of the structural reform agenda was broadly satisfactory. All but one
of the structural benchmarks for the period through end-September were observed. In
particular, parliament approved legislation on a new, functionally better integrated,
Annex 3
Page 3/4
General Administration of Taxes; and the government cleaned up the civil service
payroll list consistent with the findings of the 2011 census. Also, with technical
assistance from the World Bank and African Development Bank, the government
finalized a feasibility study on the establishment of an integrated computerized public
finance information management system. However, the implementation of new and
leaner civil service personnel frameworks recently approved by parliament, which was
set to begin at end-September, was postponed to early 2013 as the authorities address
various related technical challenges
“With technical assistance from the World Bank and IFC, the government has updated
its reform strategies for the public utilities. Consistent with these, they have issued a call
for bids to enlist external expertise in the management of the power company (MA-
MWE); and approved a social plan for Comores Telecom. This clears the way for the
long-awaited issuance of a call for bids from potential investors. In the financial sector,
the authorities are soon to finalize the restructuring of Comoros Development Bank into
a full-fledged private commercial banking institution. Efforts to reform the state-owned
National Postal and Financial Services Company (SNPSF) are focused on preparing a
strategy to separate the postal and banking functions, with the latter being ceded to a
significant foreign partner.
“Reflecting on-going reforms in public financial management and in the financial and
public utility sectors, medium-term macroeconomic prospects are favorable. In the fiscal
area, the reforms are helping to consolidate the viability of public finances and to create
room for increased expenditures in infrastructure and other poverty reducing areas;
improvements in public utility efficiency would strengthen the business and investment
environment, setting the economy on a course of sustained strong growth. The
government expressed its determination to fast-track these reforms, aiming in 2013 to
secure effective private sector involvement in the management of Comores Telecom and
to bring about substantive changes in the management of MA-MWE and the state-
owned oil-import company (SCH).
“Assuming continued rigorous implementation of the reform agenda, real GDP growth
could accelerate to 3 ½ percent in 2013, and the primary fiscal deficit could be contained
at 0.9 percent of GDP; with government revenue at about 15 percent of GDP. Risks to
the outlook include a further weakening of global economic conditions and delays in
implementing the agreed macroeconomic and structural reforms.
“In collaboration with World Bank staff, the mission reviewed progress in implementing
the HIPC Initiative completion point triggers. These include policy measures to advance
macroeconomic stability; improve public financial management and governance;
strengthen health and education; support growth; and improve debt management.
Broadly satisfactory performance would be achieved when the call for bids from
potential Comores Telecom investors is issued in the coming weeks. This would
facilitate reaching to the HIPC Initiative completion point and permit full delivery of
related debt relief from creditors.
“The mission reached broad agreement ad referendum with the authorities on an
economic program for 2013 that could form the basis for completing the fourth review
under the Extended Credit Facility (ECF) arrangement, and permit Comoros to reach the
Annex 3
Page 4/4
HIPC completion point. The agreement will be reviewed by IMF management, before
being presented to the IMF Executive Board for consideration.
“The mission is grateful for the very open and frank discussions with the authorities of
Comoros, and for their hospitality.”
1The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility
(PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by
providing a higher level of access to financing, more concessional terms, enhanced flexibility in
program design, and more focused, streamlined conditionality. Financing under the ECF
currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10
years. The Fund reviews the level of interest rates for all concessional facilities every two years.
Annex 4
Page 1/1
Recent Trends in the Key Social, Macroeconomic and Financial Indicators
1990 2011 *
Area ( '000 Km²) 30 323 98 461
Total Population (millions) 0,4 0,8 1 044,3 5 733,7
Population growth (annual %) 2,4 2,6 2,3 1,3
Life expectancy at birth, total (years) 55,6 61,1 57,7 77,7
Mortality rate, infant (per 1,000 live births) 91,9 65,8 76,0 44,7
Physicians per 100,000 People 11,3 15,0 57,8 112,0
Births attended by skilled health staff (% of total) ... 61,8 53,7 65,3
Immunization, measles (% of children ages 12-23 months) 87,0 72,0 78,5 84,3
School enrollment, primary (% gross) 85,8 104,3 101,4 107,8
Ratio of girls to boys in primary education (%) 70,1 92,0 88,6 ...
Literacy rate, adult total (% of people ages 15 and above) ... 74,9 67,0 80,3
Access to Safe Water (% of Population) 87,0 95,0 65,7 86,3
Access to Sanitation (% of Population) 17,0 36,0 39,8 56,1
Human Develop. (HDI) (0 to 1) ... 0,4 0,5 ...
Human Poverty Index (% of Population) ... 20,4 33,9 ...
Economy 2000 2009 2010 2011
GNI per capita, Atlas method (current US$) 380 740 750 ...
GDP (current Million US$) 202 525 531 633
GDP growth (annual %) 1,7 1,1 2,0 2,0
Per capita GDP growth (annual %) -0,9 -1,5 -0,6 -0,5
Gross Domestic Investment (% of GDP) 10,1 13,8 13,8 13,8
Inflation (annual %) 5,9 4,8 3,8 1,9
Budget surplus/deficit (% of GDP) ... 0,6 7,2 -0,1
Trade, External Debt & Financial Flows 2000 2009 2010 2011
Export Growth, volume (%) -2,6 54,8 16,9 3,3
Import Growth, volume (%) 2,8 10,9 2,1 0,1
Terms of Trade (% change from previous year) 58,8 53,8 -1,8 -7,0
Trade Balance ( mn US$) -30 -151 -158 -200
Trade balance (% of GDP) -14,7 -28,7 -29,8 -31,6
Current Account ( mn US$) 0 -39 -46 -49
Current Account (% of GDP) -0,2 -7,4 -8,7 -7,7
Debt Service (% of Exports) 4,7 10,5 11,7 10,4
External Debt (% of GDP) 90,3 52,5 49,6 42,9
Net Total Inflows ( mn US$) -2 44 70 ...
Net Total Official Development Assistance (mn US$) 19 50 67 ...
Foreign Direct Investment Inflows (mn US$) 0 9 9 ...
External reserves (in month of imports) 6,0 4,5 4,0 ...
Private Sector Development & Infrastructure 2000 2009 2010 2011
Time required to start a business (days) ... 24 24 24
Investor Protection Index (0-10) ... 4 4 4
Main Telephone Lines (per 1000 people) 12,0 43,0 28,6 ...
Mobile Cellular Subscribers (per 1000 people) 0,0 171,3 224,9 ...
Internet users (000) 2,7 33,9 48,0 ...
Roads, paved (% of total roads) 76,5 ... ... ...
Railways, goods transported (million ton-km) ... ... ... ...
* Most recent year Last Update: May 2012
Comoros - Development Indicators
Developing
countries
Source: ADB Statistics Department, based on various national and international sources
ComorosAfricaSocial Indicators
2
Comoros