Comoros Struggles with Low Growth, Dependence on Aid

The Union of Comoros is facing significant challenges that have trapped it in a cycle of low growth and dependence on external aid. According to the International Monetary Fund (IMF), the country’s annual growth rate has averaged below 3 percent over the past decade, while more than 35 percent of its population lives in poverty.

Challenges in Achieving Sustainable Development Goals

The country’s progress towards achieving the Sustainable Development Goals (SDGs) is also unsatisfactory, with Comoros ranking last among small developing states. The estimated cost of achieving the SDGs by 2030 - 18.8 percent of GDP - underscores the exceptionally low starting point.

Natural Disaster Risks Compound Challenges

Comoros is also vulnerable to natural disaster risks, including those related to climate change. Tropical cyclones are a significant risk, and the lack of climate-adapted infrastructure and housing makes them particularly damaging. The country is also susceptible to sea level rise, warmer ocean temperatures, and volcanic activity.

Economic Challenges

The implementation of the 2020 Article IV recommendations has been uneven, with some progress made in broadening the tax base and improving budget realism. However, progress on treasury single account reforms has been limited, and banking supervision is hampered by limited resources and chronic understaffing.

Recent Economic Developments

• Real GDP estimated to have grown by 2.6 percent in 2022.
• Inflation has cooled, registering 1.0 percent (y/y) in September.
• Domestic credit growth has decelerated.
• The Central Bank of Comoros has lowered the reserve requirement ratio to address declining inflation and credit growth.

International Backing

In June 2023, the IMF approved a four-year arrangement under the Extended Credit Facility (ECF) to support economic recovery and medium-term macroeconomic stability. The World Bank also approved a $20 million Development Policy Financing for the country.

Outlook

Despite these challenges, Comoros is working to address its vulnerabilities and improve its economy. The government has taken steps to remove “ghost workers” and implement an anti-corruption law. However, the country still faces significant hurdles to achieve sustainable growth and development.

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