Union of the Comoros : Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Waiver of a Performance Criterion

EXECUTIVE SUMMARY Comoros is in the last year of a multi-year economic and structural adjustment program and has made significant progress in stabilizing the economy. Further progress has also been made on the structural front. The program has and continues to receive the support of a broad range of stakeholders. Macroeconomic developments are broadly as expected under the ECF arrangement. Economic growth is expected to strengthen to 3.5 percent of GDP in 2013 and average inflation is expected to be less than 3 percent. While official transfers and remittances have remained strong, international reserve holdings are expected to decline somewhat, mainly due to strong imports that more than offset a sizeable increase in exports. Performance under the ECF-supported program through end-June was broadly satisfactory. All but one of the performance criteria and all indicative targets for end- June were met. Most structural benchmarks were also met. However, fiscal performance weakened in the third quarter of 2013. Increases in capital spending, mainly on road construction in anticipation of receipts that did not materialize, caused the end- September indicative targets on net credit to the government and the domestic primary balance to be missed. However, additional fiscal measures taken subsequently should allow stabilization gains to be broadly preserved. The authorities are requesting a waiver for the non-observance of the performance criterion on net credit to the government at end-June 2013. Staff supports this request and recommends completion of the sixth and final review under the ECF arrangement