Press Release No. 10/252

IMF Executive Board Completes First Review under Comoros’ ECF Arrangement and Approves US$2.3 Million Disbursement

June 21, 2010

The Executive Board of the International Monetary Fund (IMF) today completed its first review of the Comoros’ economic performance under a program supported by the Extended Credit Facility (ECF). Completion of the first review allows the disbursement of an amount equivalent to SDR 1.5575 million (about US$2.30 million), bringing total disbursements under the arrangement to SDR 5.785 million (about US$8.54 million).

The Executive Board also agreed, in principle, that Comoros has taken the steps necessary to reach its decision point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. This decision on Comoros’ decision point under the enhanced HIPC Initiative is contingent upon the Executive Board of the World Bank also deciding Comoros has reached the decision point under the enhanced HIPC Initiative. A press release will be published following the discussion of Comoros’ eligibility for the decision point by the Executive Board of the World Bank scheduled on June 29, 2010.

Comoros’ three-year ECF arrangement was approved in September 2009 in an amount equivalent to SDR 13.57 million (about US$20.03 million; see Press Release No. 09/315).

Following the Executive Board’s discussion on the Comoros, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:

“Performance under the ECF-supported program has been broadly satisfactory. Economic activity is trending up, and Comoros has met the conditions for reaching the enhanced HIPC Initiative decision point.

In the period ahead, it will be critically important to continue to strengthen public finances by increasing revenue mobilization and better aligning spending with available government resources. This requires steadfast implementation of the revenue and expenditure measures under the revised 2010 budget, and the reduction of the wage bill to levels compatible with medium-term budget viability. To this end, the authorities have submitted to Parliament streamlined personnel frameworks for government ministries. Efforts are also ongoing to promote good governance and transparency.

Comoros’ external debt is unsustainable. The authorities are endeavoring to complete bilateral debt relief agreements on terms consistent with the understandings reached with Paris Club creditors in November 2009. They remain committed to prudent debt management and to preserving close contacts with donors and creditors, to secure long-term debt sustainability.

The structural reform agenda aims to raise economic growth and accelerate poverty alleviation. A key priority is to restructure public utility companies aimed at ensuring a reliable and competitive supply of energy and telecommunications services. In the expanding financial sector, the authorities are implementing their bank supervision agenda, as well as the recommendations from the recently completed safeguards assessment.

Strict adherence to the reform agenda and preservation of political stability will be crucial for the program’s success. These are especially important in view of persistently weak institutional capacity, recurrent inter-island tensions, and vulnerabilities to external shocks.”