Financial Crime World

Comoros Economic Update: Challenges and Progress

Economic Situation

The report on the economic situation of Comoros highlights key challenges and progress made by the island nation in East Africa.

Challenges

  • Poverty, slow economic growth, and vulnerability to natural disasters are significant development challenges facing Comoros.
  • The country’s economy is susceptible to external shocks due to its dependence on a few primary commodities.

Economic Recovery

  • Economic activity has picked up in 2022, with real GDP growing by 2.6% driven by domestic activity rebounding from the pandemic.
  • This growth indicates a positive trend towards economic recovery.

Monetary and Fiscal Developments

  • Inflation: Inflation has declined from 20.6% in December 2022 to 1.0% in September 2023, amid normalizing commodity prices.
  • Credit Growth: Domestic credit growth has decelerated from 29.8% in January to 15.4% in September, with growth in credit to the private sector also slowing down.
  • Monetary Policy: The Central Bank of Comoros (BCC) lowered the reserve requirement ratio from 15% to 12.5% in October to address liquidity pressure on smaller banks and fine-tune system-wide liquidity management.

Fiscal Performance

  • Tax Revenue: Tax revenue rose by 33% in the first half of the year, driven by significant increases in excises and taxes on goods and services.
  • SOEs: Key state-owned enterprises (SOEs) have seen reduced losses due to stabilizing commodity prices, but their financial situations remain worrisome.

External Sector

  • International Reserves: International reserves declined in the first half of the year due to increased imports, with remittances also falling by 7%.
  • IMF Engagement: Comoros has its first financing engagement with the IMF in 10 years through a four-year arrangement under the Extended Credit Facility (ECF), aimed at supporting economic recovery and securing medium-term macroeconomic stability.

Conclusion

The report highlights both challenges faced by Comoros and progress made in recent times, including economic recovery and improved tax revenue. However, ongoing vulnerabilities and structural issues require sustained efforts to address them.