Comoros: The rewards of cooperation
|Publication Date||17 December 2008|
|Cite as||IRIN, Comoros: The rewards of cooperation, 17 December 2008, available at: http://www.refworld.org/docid/494b62d315.html [accessed 8 December 2016]|
JOHANNESBURG, 17 December 2008 (IRIN) -
Choked by a history of political conflict and the global food and fuel crisis, the Union of the Comoros might gain some valuable breathing space from a new International Monetary Fund (IMF) rescue package.
"Against a backdrop of persistent political instability, Comoros' growth performance has suffered, while higher food and energy costs have weakened the external position and adversely affected vulnerable groups," Takatoshi Kato, Deputy Managing Director of the IMF, said in a statement announcing the US$5.1 million bailout on 15 December.
The IMF Executive Board approved about US$3.4 million under its Exogenous Shocks Facility (ESF) and a US$1.7 million loan in Emergency Post-Conflict Assistance (EPCA).
The three-island Indian Ocean archipelago - Grande Comore, Moheli and Anjouan - is one of the poorest countries in the world: among its population of 700,000, income has been shrinking in real terms for the past 20 years, down to an average US$633 per capita in 2004. Years of instability have led to serious problems in almost all key sectors of the economy.
The fragile Union has long been caught in a downward spiral of coups and secession attempts that has plagued the island group since it gained independence from France in 1975.
"For over 30 years since independence, the economy of Comoros has stagnated," Opiah Kumah, the UN Development Programme representative in Comoros, told IRIN in an earlier interview. "In many areas it has actually regressed."
The support afforded by the IMF's EPCA facility will address the immediate post-conflict challenges of "re-establishing inter-island cooperation, initiating restoration of fiscal viability, tackling core economic distortions, and gradually putting the economy on a path of stronger and sustainable growth," the IMF statement said.
While most thought the end of the crisis on Anjouan would bring long-awaited stability and development to the country, high global food and fuel prices followed, again raising the worrying possibility of social unrest.
"There was an enormous amount of hope after the Anjouan assault," Kumah told IRIN in August 2008 during the IMF staff mission to Comoros to discuss possible EPCA support.
"The truth is that the situation may be even worse today, and that there is a general malaise across the country; the situation is severe, and we fear that if it persists, it could bring the country back to instability."
Real GDP, "constrained by widespread fuel shortages and increasing fuel prices", is projected to grow by only 0.5 percent in 2008.
The real prize
The IMF's Kato pointed out that "[Comoros'] external debt burden, including accumulated arrears, is unsustainable", so while the new funds are a welcome relief, if left alone, the country could not hold its head above water for long.
Comoros is one of the most indebted nations in the world: external debt, estimated at $265 million in 2006, is equivalent to a whopping 72 percent of GDP.
In January 2008 a US$30 million debt bailout by donors eased Comoros' payment arrears and opened the door to re-engagement with the international community, and the bigger potential prize of debt cancellation.
The IMF statement reiterated the possibility of debt relief: "If successfully implemented, the [EPCA] program could count as a track record toward the decision point for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. This could create conditions for longer-term donor re-engagement."