Financial Crime World

Comoros Economic Situation: Challenges and Opportunities

Key Points

The Comoros Islands, a small island nation in East Africa, face significant economic challenges. The country is vulnerable to natural disaster risks, including tropical cyclones, sea level rise, and warmer temperatures of sea water.

  • Poverty and Low Growth Rates: Comoros struggles with poverty and low growth rates, hindering progress towards achieving the Sustainable Development Goals (SDGs).
  • Implementation of Article IV Recommendations: While some progress has been made in broadening the tax base and improving budget realism, implementation of other recommendations has been uneven.
  • Economic Recovery: Economic activity has picked up, with real GDP growing by 2.6 percent in 2022 and domestic credit growth cooling.
  • BCC Actions: The Central Bank of Comoros (BCC) has taken steps to address liquidity surpluses at larger banks and fine-tune systemwide liquidity management.
  • Tax Revenue: Tax revenue rose by 33 percent in the first half of the year, driven by significant increases in excises and taxes on goods and services.
  • SOEs: Stabilizing commodity prices have reduced losses at key State-Owned Enterprises (SOEs), although their financial situations remain worrisome.

Recommendations

To address Comoros’ economic challenges and achieve sustainable growth, we recommend:

  1. Continue to Implement Article IV Recommendations: The authorities should continue to implement the remaining recommendations, including Treasury Single Account (TSA) reform and restructuring of SOEs.
  2. Address Vulnerabilities in the Banking Sector: Structural reforms are needed to address vulnerabilities in the banking sector and reduce corruption risks.
  3. Improve Public Sector Governance and Transparency: The government should take steps to improve public sector governance and transparency, including implementation of the new anti-corruption law.

Outlook

The economic outlook for Comoros is positive, with growth expected to continue in 2023. However, the country still faces significant challenges, including poverty, low growth rates, and limited progress towards achieving the SDGs. To ensure sustainable economic growth and development, the authorities should continue to implement reforms and address vulnerabilities in the banking sector and public sector governance.