Political tensions disrupt economic reforms - report

Political tensions in Comoros have disrupted the implementation of economic reforms, according to an International Monetary Fund (IMF) report. The central government has been at loggerheads with the leaders of the three islands of the archipelago over control of revenues and key government ministries since a power-sharing agreement was brokered by the Organisation for African Unity in February 2001. As part of a complex devolution process to end a secessionist crisis, the islands of Moheli, Anjouan and Grande Comore each have their own elected presidents and govern most of their own affairs. In addition, a federal president and parliament sit on the largest island, Grande Comore. "The adversarial relationship between these governments prevented the design and implementation of coherent economic policies and brought to a virtual standstill structural reforms that are urgently needed to strengthen the functioning of the economy," the report noted. The "political struggle" also undermined investor confidence, both at home and abroad, with negative consequences for private investment and foreign aid. "As a result, Comoros' real per capita income declined for the sixth year in a row, with no real progress made toward reducing poverty," said the IMF. The Fund has urged the government to fully implement the 2001 agreement, particularly with regard to defining how revenue will be shared, effective joint administration of the customs office, and the gradual transfer of competencies and civil service staff to the island governments. "Administratively, effective economic management procedures, based on a decentralised government, still need to be defined with sufficient clarity and installed in a cooperative spirit." After a recent visit to Comoros an IMF team called for the establishment of national institutions such as an independent revenue authority to collect shared and local taxes, a national statistics bureau, a centralised agency for payments to the civil service and a single financial institution for administering external debt. The Comoros has a total population of 630,000 with a per capita income of around US $500 per year. With an estimated 150,000 to 200,000 people of Comorian origin living abroad, the islands rely on remittances, amounting to more than US $30 million annually, as a key source of foreign exchange - some 15 percent of GDP was remitted in 2001, said the report. Remittances "play an important role in poverty reduction by meeting basic needs for food, shelter, health and education in the poorest families; the differences in the incidence of poverty between islands can to some extent be explained by differences in the volumes of remittances received, with Grand Comore receiving 91 percent of the total in 1991". In its economic outlook for 2004 the IMF forecast that the government was likely to reduce spending, and growth would be supported by a fairly stable demand accompanied by high prices for Comoros' traditional agricultural exports - vanilla, cloves and perfume oils from the ylang-ylang tree. Real GDP growth was projected at 1.8 percent for 2004, with inflation dropping to 3.5 percent.