Report No. 3432-COM F LILL ,i., P Y The Comoros Current Economic Situation and Prospects (In Two Volumes) Volume I May 27, 1982 Country Programs Department Eastern Africa Region FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Yearly Average Currency Unit = Comorian Franc (CF) Annual CF 1 1 US$ Average = US$ = CF 1975 0.0047 214.32 1976 0.0042 238.98 1977 0.0041 245.67 1978 0.0044 225.64 1979 0.0047 212.72 1980 0.0047 211.30 1/ FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES Metric System 1 kilometer = 0.62 mile 1 square kilometer = 0. 3861 mile 1 hectare = 2.47 acres 1 ton 1,000 kilograms 1 kilogram = 2.2046 pounds 1/ US$1 = CF 205.00 was used in this report. FOR OFFICIAL USE ONLY TITLE : COMOROS: CURRENT ECONOMIC SITUATION AND PROSPECTS COUNTRY COMOROS REGION EAST AFRICA SECTOR COUNTRY ECONOMIC REPORT TYPE CLASSIF MM/YY LANGUAGES 3432-COM CEM Restricted 05 82 English PUBDATE : 8205 ABSTRACT: : This report in two volumes is the second economic report prepared by the Bank on the Comoros Islands. Since statistical information is scarce in the Comoros, this report has attempted to provide national account estimates (Annex III, Vol. II) and a consolidation of government finances (Annex II, Vol. II). Volume I reviews all sectors of the economy, identifies major development issues and makes a number of policy recommendations. It also attempts to provide a development scenario for economy over the next five years. Based on a list of projects under consideration for external financing (Annex IV, Vol. II), itdiscusses the magnitude of government efforts necessary to mobilize domestic savings. It also projects Balance of payment projections and discusses the Comoros' needs for external assistance and the terms of such assistance. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. This report is based on the findings of an economic mission which visited The Comoros during November/December 1980. The mission consisted of: Messrs. M. Devaux, mission leader R. Rakotobe, national accounts P. Vabre, external debt and investment program Mrs. Z. Bozkurt, public finance THE COMOROS CURRENT ECONOMIC SITUATION AND PROSPECTS VOLUME I TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ....... ............ ...................... i-viii I. Introduction .............................................. 1 II. Recent Developments ....................................... 3 Recent Economic Developments .............................. 4 The External Sector ....................................... 6 Public Finances ........................................... 8 Parastatals ............................................... 14 Money and Credit .......................................... 15 Pricing Policy ............................................ 15 III. Sectoral Issues ........................................... 17 Agriculture .......... ..................................... 17 Industry ............ ...................................... 22 Tourism . .................................................. 23 Transport ........... ...................................... 24 Telecommunications and Postal Services .................... 27 Energy . .................................................... 27 Water Supply .............................................. 29 Education ........... ...................................... 30 Population and Health ..................................... 31 IV. Development Issues, Strategies .. ......................... 34 Institutional Constraints ................................. 34 Manpower ..................................... 34 Development Priorities .................................... 35 Prospects ..................................... 36 Financing of the Public Investment Program ..... .... 38 Balance of Payments ................... ............. 40 Capital Requirements . ...................................... 41 STATISTICAL TABLES GLOSSARY OF ABBREVIATIONS EEDC Comoros Power and Water CTA Central Tax Administration SNMC National Maritime Shipping in Comoros IGR General Income Tax TCA Corporate Income Tax SNH Hydrocarbons Enterprise IN National Printing Company IEC European Investment Bank & The Comorian Currency Board INE National Institute for Education CADER Support Center to Rural Development CEFADER Federal Center for Assistance to Rural Development ISFC International Standard Industrial Classification IRAT Tropical Agriculture Research Institute EEC European Economic Commission EDF European Development Fund LIST OF TEXT TABLES 1. Resource Avatlabtlttils, Uses vad Savings 2. Balance of Payments Summary 3. Government DonestLc Revenue 4. Overall Fiscal Performance 5. Sectoral Distribution of Capital Expenditires 6. Yields for Main Fooderops 7. Projected Resources Availability and Uses 8. Public Investment Program, 1979-85 9. Projected Government Budget 10. Mercliandise Imports 11. Illustrative Program for External Capital Flows COMOROS - SOCIAL INDICATORS DATA SHEET COMOROS REFERENCE GROUPS (WEIGHTED AVERAGES LAND AREA (THOUSAND Sq. KH.) - MOST RECENT ESTIMATE)- TOTAL 2.2 AGRICULTURAL 1.1 HOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA FNP PER CAPITA (US$) 90.0 160.0 220.0 238.3 794.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 22.9 44.0 51.3 70.5 707.5 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 205.0 282.0 394.0 URBAN POPULATION (PERCENT OF TOTAL) 5.1 7.7 11.0 17.5 27.7 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) O.% STATIONARY POPULATION (MILLIONS) 1.38 YEAR STATIONARY POPULATION IS REACHED 2135 POPULATION DENSITY PER SQ. KM. 93.2 128.2 179.1 27.7 55.0 PER SQ. KM. AGRICULTURAL LAND 205.0 270.0 366.7 73.7 130.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 45.0 45.3 43.7 44.8 46.0 15-64 YRS. 52.3 52.0 54.1 52.4 51.2 65 YRS. AND ABOVE 2.7 2.7 2.2 2.9 2.8 POPULATION GROWiTH RATE (PERCENT) TOTAL 3.0/c 3.2/c 3.7/c 2.6 2.8 URBAN 7.3 7.4 7.6 6.5 5.1 CRUDE BIRTH RATE (PER THOUSAND) 48.2 46.9 44.7 46.9 46.9 CRUDE DEATH RATE (PER THOUSAND) 19.3 15.8 GROSS REPRODUCTION RATE 3.1 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. USERS (PERCENT OF HMRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) .. 100.0 99.0 89.5 89.9 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 90.0 96.0 81.0 90.2 92.3 PROTEINS (GRAMS PER DAY) 36.0 39.0 33.0 52.7 52.8 OF WHICH ANIMAL AND PULSE 9.0 9.0 9.0 17.8 16.1 CHILD (AGES 1-4) MORTALITY RATE 31.6 28.7 25.4 27.3 20.2 HEALTH LIFE EXPECTANCY AT BIKTH (YEARS) 42.6 44.6 46.9 45.8 50.8 INFANT MORTALITY RATE (PER THOUSAND) .. .. ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 50.0 23.9 27.4 URBAN .. .. 53.0 55.0 74.3 RURAL .. .. 20.0 18.5 12.6 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. 50.0 26.2 URBAN .. .. .. 63.5 RURAL .. .. .. 20.3 POPULATION PER PHYSICIAN 18636.4 14842.1 .. 31911.8 13844.1 POPULATION PER NURSING PERSON 5317.0/d 2410.3 . 3674.9 2898.6 POPULATION PER HOSPITAL BED TOTAL 497.6 504.5 . . 1238.8 1028.4 URBAN .. 61.3 .. 272.8 423.0 RURAL .. 1281.7 .. 1745.2 3543.2 ADMISSIONS PER HOSPITAL BED .. 17.8 .. . HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. URBAN .. .. RURAL .. .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. URBAN .. .. RURAL .. .. .. ALCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. 20.O/e URBAN .. .. RURAL .. .. .. . * Provisional data: to be revised according to recent economic mission estimates. Page 2 TABLE 3A COMOROS - SOCIAL INDICATORS DATA SHEET CONOROS REFERENCE GROUPS (WEIGHTED AVEAGES - MOST RECENT ESTIMATE)- MDST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 14.0 33.0 85.0 56.4 73.7 MALE 23.0 46.0 99.0 70.7 96.8 FEMALE 4.0 21.0 71.0 50.1 79.0 SECONDARY: TOTAL 1.0 3.0 8.7 10.0 16.2 MALE 2.0 4.0 .. 13.6 25.3 FEMALE 0.2 1.0 .. 6.6 14.8 VOCATIONAL ENROL. (X OF SECONDARY) .. 2.0 .. 8.0 5.3 PUPIL-TEACHER RATIO PRIMARY 41.0 42.0 54.0 46.5 36.2 SECONDARY 17.0 20.0 25.0/g 25.5 23.6 ADULT LITERACY RATE (PERCENT) .. 58.4/f .. 25.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION .. .. .. 2.9 32.3 RADIO RECEIVERS PER THOUSAND POPULATION 2.4 85.1 104.7 32.8 69.0 TV RECEIVERS PER THOUSAND POPULATION .. .. .. 1.9 8.0 NEWSPAPER (-DAILY GENERAL INTEREST ) CIRCULATION PER THOUSAND POPULATION .. .. .. 2.8 20.2 CINEMA ANNUAL ATTENDANCE PER CAPITA 0.1 0.4 .. 1.2 0.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 80.6 103.3 140.0 FEMALE (PERCENT) 36.5 35.6 34.8 34.1 36.7 AGRICULTURE (PERCENT) 70.0 67.0 64.4 80.0 56.6 INDUSTRY (PERCENT) 19.0 21.0 22.8 8.6 17.5 PARTICIPATION RATE (PERCENT) TOTAL 39.3 36.6 35.5 41.7 37.2 MALE 50.6 47.7 47.1 54.3 47.1 FEMALE 28.4 25.8 24.3 29.2 27.5 ECONOMIC DEPENDENCY RATIO 1.2 1.3 1.3 1.2 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 20 PERCENT OF HOUSEHOLDS LOWEST 40 PERCENT OF HOUSEHOLDS .. .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 136.0 381.2 RURAL .. .. .. 84.5 156.2 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 99.1 334.3 RURAL .. .. .. 61.2 137.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. .. 39.7 RUHAL .. .. .. 68.8 Not available Not applicable. NOTES /a The group averages for each Indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 196L; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c Due to immigration population growth rate is higher than rate of natural increase; /d 1962; /e Percentage of population; /f 1966; /S 1973. May, 1981 Page 3I DEFINITIONS Of SOCIAL INDICATORS Notes Although the data ore dream true ..outee generaly judged the etoe suhretead retabie, It ahould at enh not-di chat they ay co ho Ine-- etloallyoapaahlcheoaee o tho lankl ofaadadla definit1ion and ct-tpta ueed by diff -,c cou-rle In colle-ting the data The. deto ac.nne t'""helace, useful n deae heorer of ighed,tdilato teroda, and ch.. -aeiene cer-in aj-r d offare.y.a boto- nut le The reeec rop r I the .eo countrygru uffth aujctconty a ad (5 nooo go. ue oooa h.,ihghen acrege j--ca that th, -o-oo p -Oe of he .uh ace..... roep for Capal.lrplu Ot fopota' grou tiere ''.tdl tory Not Irla-` IdefetI oo onuaoferee an ih ot nfor,cuinaa eena Sforcla ~hlogaaeeao iona ttdtnaeo, to aledo .1Th-roeaca o'olyuaUSt csar ten o LANIt AREA (rhou..a.d aqitkm !MLL'0.LaoTu yen 1 itepollto7- .otl lba. c rrl-Pplutcttl TT-1-Tta un-nsae neotTeglnduetadinad1oat.cha,an ufl dvde etye roucu e uho hl op elhd Ago-Icutura1 - tEna., f S Igr1 nsluriarau ad1 teepaanly on en.aatip antlheIn utnadIp on'eorialsotSodhatouo ton cropa, patuna,akan and hitnhan gordena on no lie faltoo; 1978 deta. hehiltut,lcccoore, SupSele c eshlhne p.artl tfo IGP PtR CAPITA US$) G NP pe aeaotlatea ocetmca ece a-da care t o cldd R.a op an 0c,c urha nulateId by ae cornrao tenhod aAnid RIaoko a A 197-9 abe) 1960, need.Snol.cnte nun penoly atfod hy aphya ,lu t.:t 1970, nod 1979 data. me~~~.decl seonotIc-n., ecloif.. etc.) oh,, cofo Ieptin inao tNttGT COSUMSNPTION PEt CAPITA - Annua loennanpoton of o __ritleegy (oneS tie..p..ura optl Iioattepno plAoraShauua Tta ltPopulation. Aid1-Tafcuad) usoJly, 1960 91975 and 19791 AdStdilt-I--. Srhen tponu-i-o (poe-n of nnnal) -RAtta of urbane tonal1 populstino, A SIuohl con ic f to.-olh cdui.h soeu ilg usn ditfereo dettneiJo-e of uch- a-oa aay afltn -oap-baltoy of date Ad t-hetlrai enal hoarde Ir j,Lodgir co orI na onh tcddt among nun 60lc, SObS 097,ad 19)9 data rh..ahe. o aatt ccl proe Ptuttetcen2000 1-:Cnetpplo prjc ln rehad on1990 her ,elpe o paccaInltrn.ed ,rIoopodceltnl Projection parmtro frllnlIy er nnna otM. the IeeaaBm ncpn ue log IIf a-ep-otanya btrrh -oines tog .i.h ooney' apee a ita Aensllee tc flan..osilt c pe--t of do- Ince.) - total nhao.__and tun. ecet oo d female life1 cepetaty -nuhtllang at 77.5 peace. The p.ta- C.n...oaldellg ntth e!Lenclllty Sc t1i.gquiaas amin focfrnllltytece saoh-oth..alIn..saseI iogdenltas of onaluchac aoducl.eeilg -aeeclnni fahIcuty ete aind so these ilee cooleaIoceI oifntle EDUCATTION and tend ity tende f., p-citinion purPose Ad icued-kv-ollment fenlnu Sec toar poenatnioe-beaten,i.. Inayr popoto to there Is no gcoah lon Prmcyato.top ,o.t ad IncaS. I5-ie -o .1 caSe -od fe-tac thbrt caeI quaS no the deah rte, adsa h g nunr c noleto l gaa t playlots ncoae fretn malaoaae ThIs is anhi-nd nely II-e fltent io prance denliess rmr.aho-1 nycs.na noma til7 oe ehl 15l tenagd h-S1 tho capiace-io Se-l of uit, no nepaduettu rate, eh.. .aoh genera elan. yera. b.e adjutedto d.....t lengths ofprimary odo-atoec Ion at aosr neotara ineet reonly. The coal..oay P'pltleesama oucleplt h untco-e ldt-sIon eono1ieo nay en..eed il 0oco ea andn h elen h nine hIrIonoitin iteppltn tr oopp are' brie or Iho- she ofiilo1Sa school age In the year 2000, and che rate of decline of f.ntilile rate to -eP.a- Secodacy achoo-me alo and tIal -~ Coo puted aaoe .sendeny tc len eduaonequloe o Sea fou pate oappeoned Proc ic _ot tioe. cear-se .t.osn populatIon ta -crhed - The year oh.I stati ..e.y prpulsaine p...oide. gen-o. nnnou.o ce stlestnia l_eru..soo. ton ptcpib attnhas ..e.nhobd u..ially of 12 no 17 yeasof age, lonteen enc casar are genen lIp Pan en. hr..- Aid-pear populat ion pen que kilo.enet )lSS henesese) of Vo --Ina enrneeo I nerc-n of aennodeep .- cos I onl 'otlI on nta,l ar,19A5 197 and 5979 datalnide te-hoJnel`i, Idac..r.. e rgrr hlic upenata idepend- Pecan A' agicituna-1 land - Coapotrd a b ton ton sg,nultu...I lend a-ey se0dpnerte fscnayls nsin only. 59h01. 1970 sod 1970 data Ppltahr ratio - -ota .ad aeoondacc - T. 1 a nudeots e-told In Population na Steant...e (Pennant ) -Childre ft-lA years). seeking-age (19- plimany and s-nsdsry Se-ci dinided by .uahens of machere In the Al years), sod reied(AS Years and onc) a poageof aid-yuan popu- csensepntditg len.ds Sa n,1960. 1970,dsA17 ea.Aueltrc nat ben-ett - Literan adults )able en1 ead so~d cclie.) Parlaio I,oot-h AneR,pnel-roa Arnnua growth rates of totl1 otd- apeacgcof tota adult pspnlst - aged IS yers nns yer populan lon tor 1950-A0, 1960-70 sod 1970-_79 Populanine Onoth R-t )neeeenc - unban- Anra g.. roeth rates of unbee popa- CONiSUMPTION Cant.. eta io 191-ho. 1960-70, aod 1970-79. PeceeCare lyon etohsad rnoatl)-Pesarcaecipiemno Cnd itRt pan tho-sed) - Ana IIe births pen tho.....rd ef aid-percnyetn.le.hn gtynan.aaueatlsolere t populanior, 19h6, 1910, sod 1979 don al li tarp _etnce.:h.eit trade Deeth Pane free thousan.d) - Actual deaths pao eho.....de of id-yser rai(gpeen 0r thoen naltoS-All nypam n.I.nenelcra far -edno popultion 19A, 190, ad 1979 dasa. hrsouee 1aea puhltn pe1thebooson ofppSnin,ecae.n Crest prornoun Re at-Anenge nuohan of daughter a enmt atl baee Ie liaensdneo-lc... to n Inniead In_yarsnie regletnellor of .edta eliiley I.s.e. a.slip ft to-year loegaa soding In 19t0. 1970, and 1979. oteeneenihdltnlg Peetly Plaools-Anaptnna, Annual )nha...s.ds) -An ..s. nuahba of ....eplots TVR.eecIosr le er thb.u..nd nnlto)-TV eenr fee bnasdcaat to of hte-enrldyeote cedeaiposf ...n aml plnieg Peogne ... geaa public pot theceend pouain cidf dIsedT aellcr Paaile Plen..ng-fUer- (preto atedoon ene of of marrIed Iren_otiessdi yaaru hpnreo analo o T atele I c ta oaeof child-bes.lng geg (15-al y....e) oho aes blent-ente... dhle..e...e.. a ciclat -ion Y_ thousan d penule.,i..S - Sh.a. the an-rge eec- aSi acnrd eactIn ease age grouP clt of "daily ganrlitru teeapr,fdleed sI, per lodies pabltoation d--otd prImarIly enreording eea os I siniae F05D ANso NUTRITION no be "daily0 it it eppesna at least Fou tlacacIuerk Inde. of Pood Prod-ielo per CanIne (19L9-71-1101 - tedam of penc .p ins aen-I CIeaAnulAtedeeprCateer eri d - tie nuhnof Proda-tlon of sit,food no-odili-a Praduliee sacla.d as ace d end teed and tinkees eald during the year. IncluPdIng edalelen. en drms-tn inema Is ton clee.dacYear as Coemdl leaone primary goads (e.g . ...gar..a aed mabil. cunis lesteod of augsr)ehlch ac edible and an..eaitnutrlena e. -ntasd tea rer esela.ded) Aggregate prodncrion of each c..untep Is e eLABOR FORCE Pa_na enege pId.tet prtpe eta htab. 1961-6, 191., and 1919 dsra. Te-a Lebar Pores fehe.....dul - tnEna.. les11 sitiepren.lelde Pa.tyta ani of culanle feaan otf nemuincoeee - Cneputed foam ansad Iorpse an,d uneployedbut ..e udlgb, es, a,aodna t etergy eclnasert f ran foo sepplls snatlebn irionney per telna censeng popuinton of llragee. et loin one it I....e oont.lca er pe .dY A-aileheupltee eaP'l deule prod-nten- imponrelc ore. t-p-cble, 1960, 1970 end i979 dase. hooto ,ndnagee in atonk. tet sappl tea a-nlde aeimal feed. esede, Pe-is ....n. a) - Female labor farcea pa..ne-ngc of tota labor .fecs.. qontsead In fnod prenete..ig, aed 1.....e It dietlibsetie Rsquire- AeloIen Selme) I Lben force tI trang, forc...ry, huntingen maotasa.reeetliated by PAl beard en physllgolred o orist-fiehieg as pecetg f total Ishe frce lOO L9ad. 1979 daee- oioy and health -onsdanegnnrnectal naprnn, bdy agt !g I.d..tro (-ennc ahcfrcI inn,innu nine, eatfanturlo and ... di_iobution ofppI-ln.ad a1teeleg tO pernan. ton cause at and ai-tninity,..smer and gaa as penoe....ge of total labor fenpe 1960, household Ic_l 1961-A, 17,a197 977d dt.170 end 1979 dats. Par lsolta eupply of neneete farsee oar day)_-Protein -eese ef pen .aplt. Pareiloiat"ie tans frncat - total, mae.ae t aepsttttpeon or nte epply at food pen day. Net aupply of toad Ia defteed eu abet.- Re aretityese ar oeada ntl,mlt e femae lba faniam qu tcen forIal euele etbltihad bp OlDA pre-ide for itetma pe aee a total maead femal bpepalati,n o l a e epcctinely; allen.n. at.o AS grace of tetal proeto pen day and SO grama of animal end 1960, 1970. and 1979 dat.ThesIr ae tfn enapnoratee rue roor f abte 10 gama eould be animal p..le!. Thsueuse-d- Ielnlgaese nerneof the population, and long time trend A rdsn laerthan thoa.f. gsafonl rIead 3 graceof feettlot...c fom ...nnlenone aIma p-osel as an -nrage for abe el1d, plopo...d bp PAO In ohs Thted F-eot ureenctel - satin IE popalarot andac IS and AS mod I0c Ateld Pood Iuroe. 1ul961-A,6 1_9710 ard.1977 dateannb to ta l al1bor focce per recite Poeteinuol fin ai_l sed euIsc-Pcnaeie supplYoef food As- cioedAfneeim= ed Pule In gries per dap, 1961 -65, 1970 aed 9,7P dana. INtCOME DISTtIBUTION Thild Sagas S-I)N Pton inalt sate ... cuaad( - Annual deaha Pan eh ...and I. Pe-etaga of Pr aneIn-eme Iboth In cent and kind) - tRotoed hyclete- age . Pra S-A er.r birni th eaI1,1. . eg ..g.op fee sa tdene.lopeg case- 5 perceen. richest 20 peccat, poo-a 20 percen..ad p.o-ta 40 percent trIes dan deI e Ifetbles 191.197 and 1919 dat, of hb....bolde. HALATHi PLOilI alfICSP Life Imnecesoryattrb(aa)-A reage n-eber of Fesel ef life -ealleihefilteeg_ ERTimaARGEareRnePy approlet acsne f ponece lenele abit;1960, 90an 99daa ndBelib eenntdcitnnhdrbe ate Intent Kantliey gatle (per theagand5 Annual1 deatha at lef.t.ar under see peer tEtimathd Abolete Penecy t-hsm Le-e (US pear napita) -uban ad rua -1 Al.ag ter ethmc r ln Aibha hlsto pa..rly -enom lerel1i th ba teaelee eenetb5-il etr IsppY fe dee lraed mart ac eteao taetnsed bitt.. ueteamlotad Eti-tmad Rglai-er Po-ty In-n Lanai (01$ pec ca.rite) - urban end r-rl caer each asthastfrom proteneed boeheolee, aprioga, and ..nttacyeui(5 ualeiro soryinm mdi o-hido nrgoprapn peecnge e benrsenin eplalee InnrbnI h.aabi dontf attdpend a dtspdonnoree an fth-a ItI2 freInIng b thet j. ..tfrlih -ofl~. b.r. the.. honI-n an'pd Idiupotl.p.atin..t Fc elbtar hc:ataYt,Io huma.eneth.enmnadSrilln tao andl . case-str by. pee-eoorne e h e fptpine n tt ntoi nlosadPojcin tprm olN- astte fo aedialaho as~~-W ucdsc tip lea.t.d.. maleandemal grd dite ..uresit pracethnl teatn..ets o hedaeiua _ ares. ..It.dS,lDt iji. COMOROS - ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1979 ANNUAL RATE OF GROWTH (%, constant prices) US$ Mln. % 1976-79 1979 GNP at Market Prices 92.4 100.0 3.9 3.6 Gross Domestic Investment 24.8 26.8 16.3 27.1 Gross Domestic Saving 11.5 12.4 20.5 47.5 Current Account Balance -12.8 -13.8 Exports of Goods, NFS 19.8 21.4 -0.1 34.2 Imports of Goods, NFS 33.1 35.8 4.4 25.1 OUTPUT IN 1979 Value added US$ Mln. % Agriculture 42.3 42.1 Industry 13.4 13.3 Services 44.8 44.6 Total 100.5 100.0 GOVERNMENT FINANCE Central Government CF Mln. % of GDP 1979 1979 Current Receipt 2563 12.0 Current Expenditures 5308 24.8 Current Deficit -2745 -12.8 Capital Expenditure 2989 14.0 External Assistance 5761 26.9 MONEY, CREDIT and PRICES 1978 1979 1980 (June) (Million of CF outstanding end period) Money and Quasi Money 2424 3548 4016 Bank Credit to the Government 86 174 732 Bank Credit to Private Sector 2203 2254 3234 (Percentage or Index Numbers) Money and Quasi Money as % of GDP 14.3 16.6 16.3 GDP Price Deflator (1979 = 100) 86.9 100.0 110.8 Annual percentage changes in GDP Price Deflator 15.6 15.1 10.8 Bank Credit to the Government -77 102 320 Bank Credit to Private Sector 10 2 43.5 Note: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. Not applicable COMOROS - TRADE PAYMENT AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1977-79) 1978 1979 1980 e/ US$ mln. % (US$ Million) Ylang-Ylang essences 2.8 23.5 Vanilla 6.1 51.3 Exports of Goods, NFS 12.2 19.7 12.8 Copra 0.9 7.6 Imports of Goods, NFS 21.3 32.3 44.8 Cloves 1.8 15.1 Resource Gap (deficit -) -9.1 -12.6 -32.0 Other commodities 0.3 2.5 Interest Payments (net) -0.1 .. .. Total 11.9 100.0 Other Factor Payments (net) -1.5 -1.2 -1.6 Net Transfers 11.1 1.0 9.2 Balance on Current Account 0.4 -12.8 -24.4 EXTERNAL DEBT, DECEMBER 31, 1979 Net MLT Borrowing 3.3 15.2 24.5 Disbursements 3.9 15.2 24.5 US$ Mln. Amortization 0.6 - - Others 1/ 0.5 -0.2 -0.1 Public Debt, incl. guaranteed 38.7 Change in Reserves -4.2 -2.2 0.0 Non-Guaranteed Private Debt = increase) Total Outstanding & Disbursed 38.7 DEBT SERVICE RATIO FOR 1979 2/ Memo item Public Debt, incl. guaranteed 1.3 Imports of Petroleum Products 1.9 1.8 4.3 Non-Guaranteed Private Debt Total outstanding & Disbursed 1.3 IBRD/IDA LENDING, (March 31, 1981) (US$ Mln.) IBRD IDA Outstanding & Disbursed . 4.8 RATE OF EXCHANGE 1978 1979 1980 Undisbursed . 5.4 Outstanding incl. Undisbursed . 10.2 US$1.00 = CF 225.64 212.72 211.30 CF I = US$ 0.0044 0.0047 .0047 e/ Estimates 1/ Including errors and omissions 2/ Ratio of Debt Service Payments to Exports of Goods and Non-Factor Services not available not applicable SUMMARY AND CONCLUSIONS Structural Characteristics of the Economy i. The Comoros irchipelago consists of four main islands stretching over an area of 270 km north of the Mozambique channel; the distance bet- ween islands ranges from 50 km to 90 km. With a per capita income of US$260 in 1979, the Federal Islamic Republic of the Comoros is one of the poorest countries in the world and is considered by the United Nations to be among the least developed. The Archipelpgo is densely populated with 400,000 inabitants in an area of 2,166 km . The population density (185 inhabitants/ km ) is among the highest in the Eastern Africa Region, pa5ticularly when the ratio of population to cultivable land (325 inhabitants/km ) is taken into account. The islands are volcanic in origin, fairly rugged, and covered with lush vegetation. They have a maritime, tropical climate and receive over two meters of rain in the rainy season. Their topography creates several micro- climates, as a result of which a variety of crops can be cultivated. ii. Agriculture occupies the vast majority of the people, and over 80 percent of the population live in rural areas. Most cultivation is of food- stuffs for local consumption, the main food crops being coconuts, rice, cassava and pulses. However, about 10 percent of the cultivated area is planted with high-value cash crops, the most important being ylang-ylang, coconut, vanilla, and cloves. These cash crops and copra account for virtually all export earn- ings. Prevailing farming methods are inefficient and yields are low. As a consequence, food production is insufficient to meet local needs and food imports absorb nearly all the entire export revenues. Protein foods, espe- cially meat and fish, form a small part of the diet and malnutrition is widespread. iii. The existing cropping patterns are inappropriate to the country's agricultural resource base and nutritional needs. However, studies have shown that replacing rice by a combination of maize, pigeon peas and sweet potatoes is highly desirable. EDF is financing a project to develop maize production. Providing that the results of this project are as beneficial as projected, the Government should take measures to replicate this type of project and other- wise to adopt such mixed cultivation patterns, and in particular to substitute maize for rice cultivation. Vegetable production needs also to be encouraged. iv. There is limited scope for replacing export crops by food crops, since many food crops are grown in association with export tree crops and lands suitable for tree plantation are not always suitable for food crops. There is however scope for developing new tree crops for export. In partic- ular the possibility of developing fruit production as an alternative to ylang-ylang and vanilla should be explored. Lychees, corossol and mangoes already grow in the Comoros, but other fruits like macademia nuts could also prove to be technically feasible and economically viable. 1/ The Comoros Archipelago comprises 4 islands. However, unless specified future reference in this report to Comoros or the Comoros apply to the three islands of Grande Comore, Anjouan and Moheli. - ii - v. Land resources are overutilized in some areas and underutilized in others. For example, parts of Anjouan are so densely populated that agri- cultural land is faced with severe erosion. On the other hand, Moheli has large tracts of fertile land not yet cultivated. Given these conditions, new policy initiatives, including possibly some form of land resettlement, are needed to ensure that the scarce land resources are more fully exploited and that none are left underutilized. vi. Non-agricultural activities are limited. The very small processing and manufacturing sector consists mainly of the distillation of ylang-ylang into perfume essences, a small soft drink bottling plant, a sawmill and a soap factory. To stimulate foreign investment in industry, the Government has prepared an Investment Code to be submitted to Parliament for approval. Although tax incentives appear generous, the Investment Code may have only a limited impact because most existing commercial and industrial ventures are granted similar, if not better, tax privileges. Furthermore, the size of enterprise for which the Code provides incentives might be too large for the Comorian market. vii. Population pressure is a serious problem in that it has led to extensive deforestation and land erosion by inducing farmers to extend culti- vation to higher slopes of the hills. Between 1968 and 1974 forest areas declined by 44 percent; in the most densely populated island, Anjouan, the decline was 69 percent. Since then, the situation has further deteriorated. Erosion is aggravated by existing farming methods, particularly by the lack of terracing. Population growth has also increased the demand for firewood, imposing more strain on the forests. In August 1980, the Government under- took a census, with assistance from the United Nations Fund for Population Activities. However, more active steps regarding the control of population growth will require overcoming political and religious obstacles. The popula- tion is currently estimated to be growing by about 3.7 percent annually. At this rate the population and the man to land ratio would more than double by the year 2000. viii. Although statistical data are scanty, the available information indicates that nutritional and health conditions are extremely poor. It is estimated that one-half of all children die before reaching the age of four. Most children suffer from malnutrition and intestinal parasites. About 80 percent of the adult population suffers from malaria, and a high incidence of tuberculosis and leprosy is also reported. The Ministry of Health is unable to cope with the situation because of its limited facilities, the inadequate supplies of drugs, and the shortage of middle-level qualified personnel to carry out health improvement programs. ix. School enrollments had already started expanding rapidly before independence, and by 1978-79 primary school enrollments exceeded 80 percent of the population in the 7-12 age group. The system is however patterned on that of France and is not well suited to the Comoros' needs. As a result, there is a severe shortage of adequately trained personnel, particularly in agriculture, health, public administration and industry. - iii - x. Transport, both internal and external, has always been a problem for the Comoros. International sea transport is rendered costly and irregular by the smallness and isolation of the islands. This situation is aggravated by the absence of a deepwater port and by the lack of a natural site for port development. Hence, large ships are reluctant to call at Comorian ports and cargo has to be transhipped through the ports of neighboring countries, with more costs and delays. Given the Comoros dependence on foreign trade, this is a heavy economic burden, mitigated only in part by the use of air freight for high-value export items. Sea transport between the islands depends mostly on small steamers and dhows and is also hampered by the lack of adequate port infrastructure. Within the islands, transport is limited by the lack of reliable road connections between the coast and the hinterland. Because of this, farmers have difficulty in bringing perishable crops to markets in time. Recent assistance from several multilateral and bilateral agencies, including IDA, is helping to improve the road transport situation. xi. Since independence, the Government has given priority to the comple- tion of the coastal ring roads. There is little need to further expand the network of paved roads. Priority should be placed on upgrading secondary earth roads. Developing feeder roads connecting the plateaux of the interior with the coastal towns is essential to rural development and the marketing of food production. The Government is considering building about 250 km of secondary and tertiary roads by 1985. This is a commendable objective which is financially supported by IDA. Another area of priority for the Government is the maintenance of the existing road network. Road maintenance has been carried out irregularly because of inefficient organization and insufficient equipment and funds. IDA has financed two road maintenance projects in 1979 and 1981 to improve this situation. xii. Despite the distance from Europe, the potential for tourism exists. Tour operators and foreign investors are eager to sign contracts with the Government. The Government should be cautious in engaging in such ventures and should carefully assess the net benefits for the country itself (vis- a-vis the returns to the foreign investors) to be sure they are greater than their total costs. These ventures should yield at least a net surplus when all import bills have been met and interests and dividends on foreign capital have been paid. Moreover, the Government should also seek to maximize the local value added for tourism through developing agriculture, livestock and fish production. Recent Developments and Key Policy Issues xiii. Although Government current outlays have been reduced considerably since independence, they still exceeded Government revenues in 1979. Wages and salaries account for about 46 percent of Government current expenditures, with purchases of goods and services accounting for another 36 percent. Transfers and government subsidies to the rest of the economy appear rela- tively small, the latter taking the form principally of tax exemptions. - iv - xiv. No consistent trends are discernible in exports, savings, agricul- tural production or stocks, all of which have flucuated considerably over the period. A few trends, however, are particularly notable, namely: (i) the increases in investment, public consumption, and imports which were facil- itated by resumed capital inflows and balance of payments support; and (ii) on the production side, the surge in construction activity accompanied by near stagnation in other sectors of the economy. xv. The immediate post-independence period was marked by an acute recession which was halted only in 1977 when new foreign assistance became available to replace French financial and administrative assistance that was suddenly terminated after independence. During 1977-78, GDP grew about 3.5 percent per annum, which meant a slight decline in per capita income, given the high rate of natural population growth and the repatriation of about 20,000 Comorians expelled from Madagascar. The economy recovered in 1979 (with GDP growing by 9.5 percent) mainly as a consequence of the resumption of budgetary support from France, the reconstitution of the administrative services (which generated further employment and stimulated internal demand), favorable world prices for Comoros' major export commodities, and the imple- mentation of a number of investment projects initiated by the previous Govern- ment with the support of Arab States such as Kuwait. xvi. Economic activity in 1980 was less buoyant as GDP growth slowed down to an estimated 4.3 percent. The decline was mainly due to a fall in export of goods and services by about 30 percent in real terms (back to about the 1978 level), caused by a virtual stoppage in vanilla exports. The Government had encouraged exporters not to export vanilla, in an unsuccessful attempt to keep prices at the unprecedently high level of 1979. A main source of economic growth was the substantial rise in public investment, which increased by an estimated 50 percent above the 1979 level. xvii. With respect to the balance of payments, the current account balance turned from slightly positive in 1978 to a progressively larger deficit of US$13 million or 13 percent of GDP in 1979 and an estimated US$24 million in 1980. These deficits were financed by increased capital inflows from official sources. After stagnating at around US$8-10 million over the 1976-78 period, merchandise exports increased to US$18 million in 1979 (when vanilla exports nearly trebled in value) but fell by 40 percent in 1980 to a current price level of about US$11 million. Customs records for the first ten months of 1980 indicate that there was a substantial setback in 1980 export earnings, as all exports declined in this period. Clove exports were however reported to have picked up considerably in the last two months of the year, so that clove exports for the year as a whole likely exceeded the 1979 level. xviii. Food and consurner goods account for about 70 percent of Comoros' merchandise imports. Rice has traditionally represented a large share of imports, accounting for more than 20 percent of total imports over the last decade. Rice imports declined in volume under the Soilih administration, when foreign exchange was scarce, but increased by about 16 percent in 1979. The low share of intermediate goods imports reflects the small scale of Comoros' industrial sector and the low level of investment in machinery and equipment. A large increase in capital goods imports in 1980 reflected mainly investment in road construction financed by external aid agencies. -v- xix. When the Soilih administration dismissed 70 percent of the civil servants, budgets were no longer prepared and expenditures were decreed at intervals. The first post-independence budget was only adopted in mid-1979, a year after the present Government came to power. Most archives and official records were destroyed by the previous Government; hence, it has not been possible to ascertain the evolution of government revenues and expenditures for the period between independence and the beginning of 1979. xx. Although total government outlays have been curtailed since inde- pendence, they were stilt almost three times the level of government domestic revenues in 1979; the current and overall deficits were covered almost entirely by large inflows of external assistance comprising both project and non-project aid. Foreign aid disbursements (grants and loans) amounted to almost twice the level of capital expenditures. Government tax revenues represent only a small share of GDP (11 percent); these depend mainly on indirect taxes on foreign trade. The heavy reliance on indirect taxation on foreign trade is partly due to the low level of taxable domestic production and income, but it also results from the low recovery rate of direct taxes, which ranges from 74 percent for the tax on profits to 7 percent for the general turnover tax. The Government has taken an important step to improve tax administration by creating the Central Tax Administration (CTA), which is supposed to determine the basis for indirect taxes, prepare fiscal regulations governing indirect taxes, and assist the Islands' governments in designing legislation for direct taxes and their enforcement. The Government is now receiving IMF technical assistance in this field. xxi. Public enterprises suffer from inadequate organizational structure and a lack of managerial skills. At present, their financial accounts are sparse and unreliable. Available evidence indicates that there is a compli- cated network of unpaid debts within the public sector. The Government there- fore needs to undertake immediate action to improve the financial performance of the public sector. In particular, the accounting services of the enter- prises need to be strengthened and financial controls established. xxii. Urgent action is needed to improve the performance of the parastatal sector. The legal framework within which public enterprises are to operate has to be better defined, the accounting services of the enterprises strength- ened, and a system of financial controls established. Stricter financial discipline needs to be imposed, and the practice of building up debts within the public sector abolished. Finally, tax exemptions should be abolished and replaced by budgetary subsidies explicitly provided for in the budget. xxiii. The Government could improve its budgeting system by consolidating the Islands' budget with the Federal budget. At present, there is no provision in the Federal budget for financing the deficits of the Islands; these deficits have to be met by cash resources held at the Treasury. To control the volume of recurrent budgetary expenditure, the Government should also integrate foreign assistance into the budgetary process and avoid the unbud- geted use of foreign financial assistance. The budgetary and the planning processes should be integrated to avoid investments that do not suit the country's objectives and priorities. - vi - xxiv. Given the limited administrative capabilities of the Government, the dual objectives of reducing the administrative burden and of promoting effi- cient allocation could be served by a greater reliance on fiscal policy vis-a- vis direct price control. For example, the solution of the food problem depends largely on a major shift of Comorian food consumption from rice to maize. By introducing a tax on rice which could be progressively increased as maize production develops, the Government would discourage rice consumption and stimulate the demand for maize. The proceeds of this tax could even be used to subsidize temporarily the consumer price for maize. Furthermore, the present system of price control on consumer goods has led to scarcities and distortions in the distribution of essential food products. xxv. Although electricity rates have been raised to CF 53 per kwh in December 1980 from a CF 41 per kwh, (rates unchanged since 1975) they are well below the cost of production. The price of electricity needs to be set at a level which covers production cost and unpaid bills while the number of unpaid bills should be reduced. xxvi. The new Government has reformulated the objectives set out by its predecessor, and Presidential statements have outlined the very general and overall framework of its development strategy. Food self-sufficiency remains in principle the number one priority, but the Government also attaches high priority to four other objectives: (i) developing port and road infrastruc- ture, (ii) developing energy and water resources, (iii) improving health and beginning to address the population problem; and (iv) improving the quantity and quality of technical skills. At present, the objectives are stated only in qualitative terms; it remains for the Government to translate them into quantitative targets and to prepare action programs aimed at their realiza- tion. xxvii. The mission believes that these general priorities are on the whole appropriate and should be reflected in the development plan to be elaborated by the recently established National Planning Commission with the assistance of a group of foreign experts financed by the United Nations. The main devel- opment priority should be agricultural rehabilitation and expansion of pro- duction of basic foodstuffs and export crops. Achievement of this objective would entail: (i) expansion of maize production to reduce imports of rice; (ii) development of new export crops; and (iii) expansion of fisheries and small livestock production to reduce meat imports and improve the protein intake of the population. Additional priority objectives should include the strengthening of export and marketing institutions, reforestation, soil erosion control, and regulation of land ownership rights. In the area of public health, high priority is clearly warranted for malaria eradication, tetanus vaccination, and improving supply of potable water. With respect to population control, it remains for the Government to formulate a policy and program for family planning -- a task in which the World Bank and/or other donors will clearly be prepared to provide technical and financial assistance. The thrust of educational development should emphasize voca- tional and technical training geared to the economic realities and require- ments of the country. And-with respect to infrastructural development, the emphasis on port and road construction seems warranted, although in light of the large scale and heavy cost of the projects underway and envisaged, particular attention needs to be given to appraising the economic return of such projects. - vii - Prospects xxviii. The near term economic prospects for Comoros are rather modest. An illustrative scenario developed by the Bank mission foresees the possibility of a 4.5 percent annual growth in the period 1981-85 (i.e. around one per- cent in terms of GDP per capita), assuming that agriculture will grow somewhat less than 4 percent per annum, industry at 6 percent and the rest of the economy at perhaps 5 percent. These growth rates may prove to be on the optimistic side, but feasible given the low yields of agricultural production, the small size of the industry sector, and the high level of investment contemplated during the period by both Government and aid donor agencies. xxix. After a poor performance in 1980, exports are likely to recover in 1981. But since the sluggishness of world market conditions for Comorian export commodities is likely to continue, exports have been projected to grow in volume by no more than 1 percent annually over 1981-85. The demand for imports can be expected to remain high throughout the period 1981-85. Capital goods imports are projected to continue at a high level as the higher investment levels are maintained; imports of raw materials and intermediate goods are expected to keep up with the projected expansion of economic activity. Imports of petroleum products are projected to grow in volume at 7 percent per annum. Food imports are projected to remain at the same level throughout the period. Imports of other consumer goods have been assumed to remain constant in volume. Import prices have been projected in line with Bank price projections. Altogether, the import bill is projected to increase at almost 11 percent per annum. xxx. Assuming that the present deficit on services will continue to rise, the balance of goods and non-factor services is projected to show a cumulative deficit of about US$200 million over 1981-85. This deficit will have to be financed by external assistance. Several aid agencies are currently extending financial and technical assistance to the Comoros. France has resumed her assistance, and aid from other sources has also been growing. Major donors include the African Development Bank Group, IDA, Arab Funds, the United Nations Development Program (UNDP), the European Development Fund and France. Unless major changes take place in the relationship of the Federal Islamic Republic with its major aid partner, a reduction in the level of aid is unlikely. Thus, the Bank mission has projected aid flows to remain cons- tant, in real terms, i.e., to keep pace with world inflation in current prices. The external debt of the Comoros is projected to remain relatively small in its amount and concessionary in its terms, owing to the predominance of ODA transfers and the absence of commercial bank lending. xxxi. The Comoros will have to continue to rely on foreign financial and technical assistance, on terms as concessionary as possible. Current revenues are insufficient to run government services. The Bank mission has projected that government domestic revenues would increase from CF 2.6 billion in 1979 to CF 7.8 billion in 1985 on the assumption that the recovery rate of direct taxes will increase, thus the share of taxes in GDP would increase from 11 percent in 1979 to 15.5 percent in 1985. - viii - xxxii. Growth prospects will also depend on the Government's ability to design and implement appropriate development programs, mobilize domestic resources, and strengthen the institutions and improve their administrative capacity. The administration has experienced severe shortages of qualified staff and has a very limited capacity for project preparation and implementa- tion. Aid agencies should be prepared to finance a large proportion of local cost, if the lack of local funds is not to impede the successful implementation of external assistance. I. INTRODUCTION 1.1 This is the second World Bank economic report on the Comoros. The first report, 1/ which comprised a general introduction to the economy of the Comoros Islands, reflected the findings of an economic mission that visited the country in December 1976, a year after independence. Since then, the country has undergone a series of political shocks which have disrupted the economy in general and the administrative infrastructure in particular. Because of this, as well as because of a shortage of data, there is insuffi- cient information for a thorough analysis to be made of recent trends in Comoros- economic development. Insofar as the data permit, however, this report reviews the current economic situation and assesses the major devel- opment issues and economic prospects of the three islands under Federal Government administration (see below); the report's view of demographic issues, on the other hand, refers to all four islands. 1.1 The Comoros Archipelago has a strategic location astride one of the principal sea lanes from the Gulf to the Cape route around Africa. The2 Archipelago consists of four main islands stretching over an area of 270 km north of the Mozambique channel. The distance between islands ranges from 50 km to 90 km. Grande Comore, at the northern end, lies 280 km off the coast of Africa while Mayotte, at the southern tip, is located at 310 km from Madagascar. The Government of the Islamic Federal Republic of the Comoros 2/ has effective control over three of the four islands. 1.3 With its lush vegetation growing on fertile soil and mild tropical climate, the Comoros islands look like paradise. On these volcanic moun- tainous islands a wide variety of crops can be grown--from tropical fruits and spices on the low-lands to vegetables and cereals in the temperate higher zones. Rainfall is abundant, and the maritime and mountain environments temper the hardship of the tropical climate. 1.4 Despite these favorable natural conditions, Comoros is among the poorest countries in the world, with a per capita income of only US$260 in 1979. The Archipelago is heavily populated, with 400,000 inh2bitants in an area of 2,166 km . The population density (185 inhabitants/km ) is among the highest in the Eastern Africa Region, parti2ularly when the ratio of population to cultivable land (325 inhabitants/km ) il taken into consideration. The latt r ratio ranges from 78 inhabitants per km on Moheli to 522 inhabitants per km on Anjouan. 1/ The Comoros, Problems and Prospects of a Small, Island Economy published in July 1979 provides detailed account of the geography, history and economy of the islands which is not repeated in this report. 2/ Unless otherwise specified future reference in this report to Comoros or the Comoros apply to the three islands of Grande Comore, Anjouan and Moheli. 1.5 The three islands have different characteristics. Grande Comore, the largest of the islands and the capital and administrative center of the Republic, still has an active volcano. Anjouan, which is especially over- populated, has steep hillsides and a serious soil erosion problem. Moheli, on the other hand, has wide and fertile valleys and a thick forest cover; it is also both the least populated and the least developed of the islands. - 3 - II. RECENT DEVELOPMENTS 2.1 The period since Comoros accession to independence has been rela- tively short and has been marked by a series of political and economic disrup- tions from which the country is now slowly recovering. On July 6, 1975, the Comorian Parliament unilaterally proclaimed the independence of the whole archipelago, despite the opposition of the representatives of Mayotte, who had indicated their desire to remain under French administration. On August 30, 1975, Ahmed Abdallah, the first President, was overthrown by Ali Soilih, who mounted a military expedition against Anjouan to consolidate his control over the country. Encouraged by his success in November 1975, Ali Soilih attempted another expedition to rally Mayotte to his Government, but was repelled by the French garrison. The French refused further negotiations on the transfer of their administrative responsibilities in Mayotte, and withdrew all military and technical assistance personnel from Grande Comore, Anjouan and Moheli. Relationships between the two Governements were broken. A referendum held in Mayotte in February 1976 resulted in a majority voting in favor of remaining under French administration, while the population of the other islands voted in favor of independence. 2.2 The new Government faced a difficult situation. Government ser- vices were disorganized (most of them being left unmanned by the withdrawal of French expatriates), and government financial resources were reduced severely when France suspended its budget assistance. A United Nations mission which visited the country in December 1975 issued an urgent appeal for economic assistance. Despite the difficult situation, the Government launched a program to modernize the social structure of the country through a series of social reforms that were met with passive resistance by a large part of the population. To obtain the support of Comorian youth, the Government established a highly decentralized government system which gave major respon- sibilities to a number of young people. The more secular ideological framework for the intended new society was revealed in 1978 in the country's first development plan. The country was divided into new administrative territorial units, the Moudirias, which were given responsibility for agricultural produc- tion, crop marketing, education, health and local services. In the meantime, the former administrative services were dismantled. Most of the civil servants were dismissed, and a wholesale destruction of Government archives was carried out. The Central Government was restructured into four Ministries (Presidence, External Affairs, Home Affairs, and Planning) and staffed with the few remain- ing civil servants. 2.3 Acute financial difficulties, poor economic management, constant shortages of food, and the introduction of revolutionary changes, taken together, led to general dissatisfaction. Political unrest was widespread, and confrontations between the conservative elements of the population and the youth became more frequent and more serious. In May 1978, Soilih was over- thrown and Ahmed Abdallah was restored to power. A new constitution was adopted in October 1978 and Ahmed Abdallah was once again confirmed as pre- sident in elections held in December 1978. - 4 - 2.4 The Islamic Republic of the Comoros is now slowly recovering from the post-independence political disruptions. However, the administration is still weak. The scars left from the post-independence period are numerous and will take time, patience and effort to heal. Recent Economic Developments 2.5 The immediate post-independence period was marked by an acute recession which was halted only in 1977, when new foreign assistance became available to replace the French financial and administrative assistance whose sudden termination had precipitated the economic decline. After the fall of the Soilih administration, economic activity resumed at a quick pace. The recovery was stimulated by several factors, viz: the substantial budgetary support from France and the reconstitution of the administrative services, which generated further employment and stimulated internal demand; favorable world prices for Comoros major export commodities; and the implementation of a number of investment projects initiated by the previous government. 2.6 Table 1 summarizes the movement in selected macroeconomic vari- ables 1/ over the period 1977-80. As may be seen, no consistent trends are discernible in exports, savings, agricultural production or stocks, all of which have fluctuated over the period. A few trends are however, particularly notable, namely: (i) the increases in investment and public consumption and imports which were facilitated by resumed capital inflows and balance of payment support; and (ii) on the production side, the surge of construction activity, accompanied by near stagnation in other sectors of the economy. 2.7 Over the two-year period 1977-78, GDP grew at the moderate pace of 3.5 percent per annum. Given the high rate of population growth, augmented by substantial immigration in this period, per capita income declined over the period. Exports of goods and non-factor services (see Table 1) declined at an annual average rate of about 14 percent, while imports declined also, but at a slower pace of 4.6 percent per annum. Investments grew at about 11 percent per annum, mainly on account of stock accumulations resulting from the decline in exports, since fixed investment only increased at an average of 4.3 percent per annum. 2.8 In contrast, 1979 was a year of recovery, with GDP growing at 9.5 percent as exports grew by 34 percent in real terms as a result of exceptional exports of vanilla. The shortfall of Madagascar-s vanilla production benefited the Comoros, which was able to export larger quantities of its vanilla at higher prices. Conversely, imports of goods and services grew by 25 percent as France resumed its budget support and investment projects negotiated by the Soilih administration were implemented. Investments increased nearly 30 percent over the level of 1978, while stocks of capital goods and consumer goods were being replenished. 1/ There are no official national accounts estimates. The Ministry has made some preliminary estimates for 1976-1980 which are presented in Annex IV. -5 - Table 1: GDP: STRUCTURE AND GROWTH, 1977-80 1979 Annual Growth Rate -t CF As percent Million of GDP 1977 1978 1979 1980 (est.) Agriculture 8,991 42.0 11.3 -7.3 8.3 3.9 Manufacturing 1,033 4.8 3.4 -1.1 2.6 4.0 Construction 1,738 8.1 15.3 2.3 10.1 18.6 Trade 5,368 25.1 2.6 0.3 9.8 -1.4 Public Administration 3,069 14.4 -29.0 79.1 17.8 7.7 29ther 1,187 5.6 4.5 4.0 4.2 3.3 GDP - 21,386 100.0 4.0 3.0 9.6 4.3 Resource Gap 2,828 13.2 . Imports of goods and NFS 7,050 32.9 -1.5 -7.6 25.1 21.8 Exports of goods and NFS 4,222 19.7 6.2 -30.0 34.2 -39.1 Resource Availability and Use 24,214 .113.2 1.8 7.1 10.0 17.0 Consumption 18,931 88.5 1.6 4.5 6.0 8.0 Public 4,392 20.5 -7.1 15.7 9.9 12.1 Private 14,539 68.0 4.1 1.6 4.9 6.7 Investment 5,282 24.1 2.8 20.2 27.1 49.3 Fixed Investment 4,591 21.5 8.5 0.5 14.6 22.4 Change in stocks 691 3.2 h' Domestic Savings 2,455 11.5 31.9 -10.2 47.5 -24.0 1/ In 1979 prices 2/ At market prices Not applicable Source: Tables 2.2 and 2.4 in Statistical Annex - 6 - 2.9 The country's performance for 1980 was less buoyant, with GDP growth estimated to have been around 4 percent. The main source of growth was the enlarged public investment program. Fixed investment is estimated to have increased by about 50 percent in real terms over its 1979 level. The decline in the GDP growth rate was mainly due to a fall in exports by about 30 percent in real terms over 1979 (back to about the 1978 level), caused by the virtual stoppage in vanilla exports. The Government had encouraged exporters not to export vanilla in an unsuccessful attempt to keep prices at the unprecedented high level they had reached in 1979. Although imports of goods and non-factor services grew at a slower pace in 1980 than in 1979, they still rose by about 22 percent in real terms. Import growth was facilitated in both years by the higher flows of external capital in the form of both project and non- project assistance. 2.10 With higher economic growth, domestic consumption increased sharply, particularly in the public sector following the reconstitution of administra- tive services. In 1979-80, per capita private consumption rose by an average of nearly 3 percent per year, in contrast to the decline experienced in the previous two years. 2.11 Domestic savings have always been low in the Comoros, although they are at a level comparable to countries with similarly low per capita incomes. Reflecting the insecurity prevailing under the Soilih regime and the decline of per capita consumption, domestic savings declined to slightly above 8 percent of GDP in 1976 and remained at that level until 1978. During the resumption of economic activity, the savings rate rose to about 11 percent of GDP in 1979. In 1980, with the expanding consumer demand, increased imports and the drastic decline in exports, the savings rate dropped again to about 8 percent. The External Sector 2.12 Table 2 summarizes the balance of payments for the period 1978-80. It shows a small deterioration in the balance of goods and non-factor services in 1979, although export performance improved somewhat. The deficit nearly tripled in 1980, however, as exports registered a severe setback and imports increased on account of a strong domestic demand for consumer goods, and an acceleration in road construction. The increase in official transfers (grants from foreigni governments and international institutions) was partly offset by increased transfers abroad from resident private sources (salary remittances from expatriates and profit repatriations). The current account balance moved from a slightly positive position in 1978 into increasingly large deficits in 1979 and 1980. Public capital inflows increased steadily, in line with progress in the implementation of the large road construction program. Comoros built up its foreign exchange reserves in 1978 and again in 1979. 2.13 Comoros' trade balance is perennially in deficit, with the level of imports and the actual size of the deficit depending mainly on the avail- ability of foreign assistance. The level of imports is clearly conditioned more by the amount of foreign resources available than by the level of -7 - export earnings. The trade deficit declined in 1976 following the reduction of foreign assistance, whereas the deficit increased again when financial support from Arab sources started substituting for French assistance. Table 2: Balance of Payments Summary 1978-80 (CF millions) 1978 1979 1980 (est.) Merchandise exports 2,103 3,688 2,282 Merchandise imports 3,161 4,749 6,581 Trade deficit -1,058 -1,061 -4,299 Services, net -1,371 -1,873 -2,809 Transfers, net 2,517 218 1,945 of which: public 3,424 2,612 4,201 private -907 -2,394 -2,256 Current account balance 88 -2,716 -5,163 Medium and long-term capital 738 3,228 5,184 of which grants n.a. 605 912 Other capital -333 -54 -21 Change in reserves (- increase) -956 -458 0 Memorandum items Current account balance as % of GDP 0.5 -12.7 -20.9 Debt service ratio 1.5 1.3 4.0 Source: Statistical Annex Table 3.1. 2.14 Comoros export performance depends on four commodities: ylang- ylang, vanilla, cloves and copra; together, these account for 98 percent of total exports. Export receipts have been relatively stable, with increases in one or another commodity being offset by declines in others. With the exception of 1979, the total value of Comoros exports has stagnated at around CF 2 billion since independence. Customs records for the first ten months of 1980 indicate a substantial setback in that year, as all exports declined excepting cloves. For more details on Comoros exports, see Annex I. - 8 - 2.15 Food and consumer goods account for about 70 percent of Comoros merchandise imports. Traditionally, rice has represented a large share of imports, accounting for more than 20 percent of total imports over the last decade. Rice imports declined in volume under the Soilih regime when foreign exchange was scarce, but increased by about 38 percent in 1978 and 16 percent in 1979. With the resumption of budgetary assistance, meat imports, which had been reduced in the 1975-77 period at the cost of destocking the national herd, more than doubled in volume in 1978. After a 20 percent decline in 1979, they rose again in 1980. 2.16 The low level of intermediate and capital goods imports reflects the weakness of Comoros industrial sector and the low level of investment in machinery and equipment. A breakdown of imports of raw materials and capital goods is not available from official sources. The increased imports of both capital goods and intermediate products in 1979 and 1980 reflects largely the investment efforts in road construction financed by the aid agencies. 2.17 The Comoros received substantial financial and technical assis- tance 1/ in 1977-80, with a growing share being provided by France which resumed her assistance in mid-1978. Total grants, in form of budgetary support, direct provision of technical assistance, and financing of equipment and supplies amounted in 1979 to about CF 3.9 billion (equivalent to 80 percent of export receipts and 55 percent of import payments) in 1979, and to CF 5.4 billion in 1980. Total French aid disbursements in 1980 amounted to CF 2.4 billion, as compared to only CF 1.7 billion in 1979. The outstanding disbursed, external public debt amounted to about CF 12.5 billion at the end of 1980, of which 1.9 billion is reportedly to be cancelled by the French Government in the near future. An additional amount of CF 9.5 billion has been contracted but is still not disbursed. Most assistance has been granted on concessionary terms, about 40 percent of it from Arab sources. Debt service is therefore minimal, and accounted in 1979 for about 0.6 percent of total debt outstanding (including undisbursed) and for about 1.3 percent of the export of goods and services. 2.18 The Comoros belongs to the Franc zone, and the Comorian Franc is convertible into the French Franc at the rate of 50 CF to 1 FF. Funds are moved freely within the Franc zone between the Comoros and France its major trade partner. Public Finances 2.19 Because of the lack of data, it is not possible to analyze the Govern- ment-s finances before 1979. Most archives and official records have been destroyed by the Soilih government; hence, it is not possible to ascertain the levels and changes in government revenues and expenditures for the period between independence and the beginning of 1979. During the two years 1979 and 1980, however, the salient feature of the Comoros- public finances 1/ Details of aid programs are given below in the sectoral reviews. - 9 - has been the size of the overall deficit, which averaged about 25 percent of GDP and which was financed nearly entirely by foreign assistance. Foreign aid disbursements in 1978-79 amounted to about twice the level of public sector capital expenditures. The analysis presented in this section refers to the consolidated finances of the Federal Government, the budgets of the Island Governments, and the foreign assistance program. 2.20 With the virtual dismantling of the civil service under the Soilih government, the administration was handed over to inexperienced youths. The management of the economy was reduced to a level of improvisation. Budgets were no longer prepared, and expenditures were decreed at intervals by ordinance. The first national budget was adopted only in July 1979, a year after the present Government came to power. During the interim period, the Government operated on a hand-to-mouth basis, and decisions on expenditures were made independently of any budgetary framework. As the Government had to rely on budgetary subsidies from France and on what few taxes could be col- lected, arrears were accumulated and the Government resorted to confiscating the deposits that various public sector institutions had with the treasury. 2.21 In 1979, Government tax revenues represented only a small share (11 percent) of GDP and comprised mainly indirect taxes on foreign trade. Taxes on imports in that year accounted for more than 63 percent of total tax revenues, while taxes on exports accounted for another 25 percent. The heavy reliance on indirect taxation, i.e. of foreign trade, is partly due to the low level of taxable domestic production and the small number of wage earners. But it also results from the low recovery rate of direct taxes, given the weakness of the local tax administration. In 1979 the taxes actually collected represented only 72 percent, 39 percent and 7 percent of what was forecast in the budget for the profit tax, the general income tax and, the turnover tax, respectively. Furthermore, on the basis of the national accounts data, the mission estimates that the yield from the tax on profits and the turnover tax could have been considerably higher than what was actually collected. In any event, it is evident that there is considerable scope for increasing the receipts from direct taxes, even if the tax rates were to remain at their present moderate level. Table 3: Government Domestic Revenue (CF million) 1980 1974 1979 (9 months) Indirect Taxes on Foreign Trade 1292.0 2253.8 1476.2 Other Indirect Taxes 84.0 83.2 147.2 Direct Taxes 323.0 96.8 100.9 Non Taxes Revenues 322.0 129.4 178.4 Total Govt Domestic Revenues 2021.0 2563.2 1902.7 Source: Table at 5.2 in the Statistical Annex and Table 20 in "The Comoros, Problems and Prospects of a Small Island Economy." IBRD July 1979. - 10 - 2.22 The fiscal administration of the Comoros is disorganized owing in part to the lack of qualified staff in the tax administration and more impor- tantly the lack of the requisite political will to enforce existing taxes. Moreover, the tax system is administered sporadically, sometimes in apparent disregard of legal provisions. Tax laws are modified by fiat, and tax exemptions accorded without any demonstrated financial or economic rationale. Many commercial enterprises have stopped paying taxes in anticipation of a promulgation of a new Investment Code currently under preparation. Finally, influential taxpayers have limited their tax payments to a small fraction of what they should have paid. The net result has been the low recovery rates noted above. 2.23 The Government has recently taken an important step to improve tax administration by creating the Central Tax Administration (CTA), which is supposed to determine the basis for indirect taxes, prepare fiscal regulations governing indirect taxes, and assist the local island governments in designing fiscal legislation for direct taxation and its enforcement. The Government is now receiving IMF technical assistance in these fields. 2.24 Although Government current outlays have been reduced considerably since independence, they still exceeded Government revenues in 1979. Wages and salaries account for about 46 percent of Government current expenditures, with purchases of goods and services accounting for another 36 percent. Transfers and government subsidies to the rest of the economy appear rela- tively small, the latter taking the forn principally of tax exemptions. 2.25 In 1979, 30 percent of current expenditures directly supported by the local and federal governments were allocated to health and education taken together, and 21 percent to administrative and other services, and 10 percent to defense. The shares allocated for agriculture and industry (1 percent each) and for transport and tourism (3 percent) were minimal. Insufficient funds are allocated to meet maintenance and operating costs, resulting in underutilization of existing facilities and a deterioration of physical assets, particularly in agriculture, roads, education, and health. The shortage of recurrent funds particularly affects agricultural extension services and training facilities. Similarly, the funds earmarked through the Road Fund for road maintenance are well below requirements. The relatively large share of current expenditure devoted to education does not reflect a basic needs-oriented policy, since a large share of the budgetary resources allocated to the sector provides for free boarding facilities during secondary schooling 1/ and for scholarships abroad for most secondary school leavers. At the same time, primary schools have few instructional materials, while hospitals lack medicine and other supplies. The Government is aware of the situation and has taken some steps to remedy it. For example, the Government 1/ The allocation for boarding facilities have reportedly been suppressed in the 1981 budget, but have been replaced by scholarship for boarding students. - 11 - has decided since January 1980 to earmark a portion of taxes on gasoline for financing road maintenance. Further steps are being considered among which a 30 percent increase in the taxes on gasoline and a new tax on diesel oil for automotive use, also to be earmarked to the Fund. 2.26 To government budgeted current expenditures 1/ should be added current expenditures directly financed by external assistance (See Table 4) which in 1979 were equal to nearly 50 percent of the Government's own expendi- tures. Thus the current account deficit of the consolidated account of local governments, federal government and external assistance amounted in 1979 to some CF 2.74 billion--equivalent to about 15 percent of GDP. Most public capital expenditures are not reported in the Government's own budget insofar as they are directly financed by external assistance. However, in the consolidated analysis, they form part of the Government expenditures and therefore the total budget deficit for 1979 reached CF 6.3 billion (25 percent of GDP). Preliminary estimates for the first nine months of 1980 show a further worsening of the deficit reaching CF 7.3 billion (i.e. 30 percent of GDP). 2.27 As the above table shows, the deficit was financed mainly by exter- nal assistance in the form of grants or concessional assistance; domestic borrowing accounted only for a small part of the financing. 2.28 The bulk of capital expenditures is being directly financed by foreign donors. Capital expenditures budgeted by the Federal Government have been relatively modest, representing 19 percent of total public investment outlays. These consist mainly of buildings, minor public works and local contributions to aid-financed development projects. These budgeted investment expenditures are also financed by external sources, since the country is unable to generate domestic revenues to finance capital expenditures. The main sources are French aid, Stabex and counterpart funds generated from EEC and Chinese merchandise grants. As external finance was concessionary and budgetary aid available, the Government did not refuse any project proposed by foreign assistance, even if the total requirements for local counterpart funds exceeded the domestic resources available. 1/ Federal Government and local governments. - 12 - Table 4: Fiscal Developments 1979-80 (Million of CF) 1979 1980 (for 9 months) Estimates Domestic Revenues 2563.2 1902.1 Current Expenditures 5307.7 4576.4 of which (Budgeted Current Expenditures) (3660.7) (2761.4) (Current Expenditure Financed by External Resources) 1/ (1647.0) (1815.0) Current Deficit 2744.5 2674.3 Capital Expenditures 2989.2 4542.0 of which (Budgeted Expenditures) (571.5) (544.6) (Expenditures financed directly by external resources) (2417.7) (3997.4) Change in Government Liabilities 648.2 47.6 Overall Deficit Financed by: 6381.9 7263.9 External Financing 5761.0 6967.2 Grants (3838.3) (4059.8) Loans (1922.7) (2907.5) Domestic Financing 620.9 296.7 Source: Table 5.1 in Statistical Annex. 1/ Does not include budgetary assistance provided by foreign aid institutions, hence the total expenditures financed by external resources are lower than the total of foreign assistance. - 13 - 2.29 The largest share of investments in the past two years went to infrastructure, mainly roads (over 70 percent). Agriculture was relatively neglected, receiving only 5 to 8 percent of total public investments. Table 5: Sectoral Distribution of Public Capital Expenditures, 1979-80 (in million CF) 1979 1980 Actual % (Provisional) % Estimates Agriculture 164 5 456 8 Industry 42 1 169 3 Tourism - - Transport 2449 76 4247 70 Telecommunication 21 1 42 1 Energy & water supply 21 1 85 1 Health 127 4 191 3 Education 79 2 174 3 Miscellaneous 318 10 692 11 Total 3221 100 6056 100 Source: Table IV in Annex II. 2.30 Furthermore, the Government should improve its budgeting system by consolidating the Islands budget with the Federal budget. At present, there is no provision in the Federal budget for financing the deficits of the Islands; these deficits have to be met by cash resources held at the Treasury. Furthermore, to control the volume of recurrent budgetary expenditures result- ing from new investment, the Government also needs to integrate foreign assistance into the budgetary process and to avoid the unbudgeted use of foreign financial assistance. Action also needs to be taken to integrate the budgetary and the planning processes to avoid investments that do not suit the country's objectives and priorities. - 14 - Parastatals 2.31 Comorian public enterprises 1/ suffer from an inadequate organiza- tional structure and a lack of managerial skills. Their institutional frame- work is undefined and most of them do not have legal statutes. They are run by general managers appointed by, and responsible to, the Government. They do not have boards of directors, which results in a lack of management account- ability. It is almost impossible to determine the amount and the structure of their equity capital. Up-to-date financial accounts are sparse and unre- liable. The available information indicates the existence of a complicated network of unpaid debts within the public sector. 2.32 An example of this network is provided in the petroleum importing agency, SNH. As the electricity tariff has been kept below cost for "social" considerations and only 30 percent of consumers pay their electricity bills, the electricity and water company (EEDC) has been unable to pay its SNH fuel bill. Besides EEDC and other parastatals, the State itself is very slow in settling its debts to SNH. In 1980, SNH's accounts receivable from consumers amounted to CF 811 million, equivalent to 68 percent of the company's total assets. To avoid further deterioration of its financial situation, the res- ponse of SNH has been to withhold tax payments to the Government. Similarly the Government owed Air Comores CF 105 million in 1979, while Air Comores' tax debt to the Government amounted to CF 40 million. These payment arrears incurred by the public enterprises and the Government not only introduce a major element of instability in public finance, but also cause a lack of confidence in public institutions. 2.33 The Government needs to take urgent action to improve the performance of the parastatal sector. The legal framework within which public enterprises operate has to be better defined, the accounting services of the enterprises strengthened, and a system of financial controls established. Stricter financial discipline needs to be imposed, and the practice of building up debts within the public sector abolished. Finally, tax exemptions should be abolished and replaced by budgetary subsidies explicitly provided for in the budget. 2.34 To ensure that the above measures are implemented the Government should establish a qualified corps of auditors to audit the accounts of all agencies; it should compel public and large private companies to submit accounts within three months after the end of the fiscal year, so that their performance can be audited and their taxes properly assessed. 1/ There are six parastatals in the Comoros: (i) the Electricity and Water Company (Electricite et Eaux des Comores EEDC); (ii) National Printing Office (Imprimerie Nationale); (iii) Petroleum Importing and Marketing Organization (Societe Nationale des Hydrocarbures, SNH); (iv) Air Comores; (v) CREDICOM, a financial institution for term-lending; and (vi) the National Bank of Comoros. In addition, the existing four hotels are publicly-owned but privately managed. The Government holds shares in three major companies SOCOVIA (meat imports), STICOM (telecommunications), and BAMBAO (commerce, agriculture, industry). - 15 - Money and Credit 2.35 In 1979, the money supply increased by 46 percent. This increase was almost entirely explained by the increase in net foreign exchange reserves by CF 458 million; the increase in domestic credit was relatively small (6 percent). Data for the first six months of 1980 indicate an accelerated growth in domestic credit as claims on the private sector rose by some CF 1 billion (43 percent) while net claims on government rose by some CF 550 million (fourfold). Also in the first half of 1980, foreign assets declined by CF 78 million while the money supply increased by 28 percent. Pricing Policy 2.36 Like many other countries with low per capita incomes, the Govern- ment of the Comoros Islands has sought to control the prices of major commod- ities. Indeed, official policy is to control the prices of all products. Profit margins are set at the wholesale and retail level. The result is that goods which would normally be available on the official market tend to be hoarded and diverted to the black market where prices are higher. 2.37 Producers, exporters and traders are required to submit to the Price Commission an analysis of their costs of production. But for a number of imported products, the administration is in no position to challenge the cost estimates provided by the importers. World prices, exchange rates, and other cost elements fluctuate and can easily be inflated. Furthermore, in many instances, when the price proposed by the importer or the exporter is considered by the Commission to be too high, the Government has compromised and granted tax exemptions to compensate for its setting of lower prices; cement and rice are two specific examples. 2.38 Price controls are not sufficiently flexible to adjust prices to variations in demand and supply, and official consumer prices may remain for long periods well below actual production cost levels. Consequently products for which this is the case tend not to be marketed on the official market. In this way controls harm the interests of the consumers. 2.39 Another issue relating to the price controls is the existence of de facto monopolies over certain types of exports anid imports. For example, only a few companies are authorized to export vanilla. Prospective exporters have to demonstrate that they have at least ten tons of produce to obtain an export license. By restricting access to export markets, the Government restricts competition among exporters. The Government would be well advised to stimulate greater competitLon among importers and to liberalize access to trading activity. 2.40 The Government would be well advised to switch from a policy of price control to a policy in which prices would serve as the principal instrument for equilibrating demand and supply. On the other hand, certain - 16 - well conceived pricing policies, including those effected through changes in taxes and subsidies, may be appropriate to the pursuit of specific economic and social objectives. For example, as mentioned in para. 3.8, the solution of the food problem depends largely on effecting a major shift of Comorian food consumption from rice to maize. By introducing a tax on rice, which could be progressively increased as maize production develops, the Government would discourage rice consumption and stimulate the demand for maize. The proceeds of this tax could even be used to subsidize temporarily the consumer price for maize. - 17 - III. SECTORAL ISSUES 3.1 This section reviews briefly the various sectors of the economy in terms of their key problems, possible lines of policy action, and their investment programs. Agriculture 3.2 Most cultivation of foodstuffs is for local consumption, the main food crops being coconut, rice, cassava and pulses. However, about 10 percent of the cultivated area is planted with high value cash crops, the most important being ylang-ylang, coconut, vanilla, and cloves. These cash crops and copra account for virtually all exports. The farming methods used are inefficient and yields are low. As a consequence, food production is insufficient and food imports absorb almost the entire export revenue. Protein foods, especially meat and fish, form a small part of the diet and malnutrition is widespread. 3.3 Agriculture is the largest sector in the economy and, within this sector, nearly 60 percent of the production is for subsistence. The sector as a whole contributes over 40 percent of GDP and accounts for nearly all commodity export earnings. Between 80 to 90 percent of the population depend on agriculture for their livelihood. In addition, most of the industries are based on simple processing of agricultural products. Modern agriculture is concentrated on export crops, which account for only 24 percent of the value of total agricultural production. 3.4 Good agricultural land is relatively scarce in the Comoros. Accord- ing to a land survey conducted in 1976 (in Moheli, Anjouan and Grande Comore), out of 170,000 ha only 17,000 ha were then suitable for food crop production. Another 41,000 ha could be upgraded for additional food crop production, while another 45,200 ha are suitable for tree plantations. But 66,700 ha were deemed to be of such low quality that they would remaLn uncultivated while about one-third of this area should be reforested. 3.5 There is considerable scope for making better use of land and water resources to improve production, provide productive employment, and establish a basis for long-term growth of the sector. Land resources are overutilized in some areas and underutilized in others. For example, parts of Anjouan are so densely populated that agricultural land is faced with severe erosion. On the other hand, Moheli has large tracts of fertile land not yet cultivated. Given these conditions, new policy initiatives, including possibly some form of land redistribution, are needed to ensure that the scarce land resources are more fully exploited and that none are left unutilized. 3.6 Agricultural productivity is extremely low, especially in food crops. Cultivation methods are rudimentary. Land tilled with traditional tools is only superficially loosened. Improved seeds are unknown and crops are seldom rotated. Fertilizers are not used, and thus soil is not regenerated - 18 - and loses many of its nutrients. Cropping patterns are far from optimal, and crops traditionally cultivated in association are not necessarily compatible. Rodents and other pests take a heavy toll on crops in general, yet the use of pesticides is unknown. The overall result is extremely low yields in most cases, as shown in the following table. Table 6: Yields for Main Foodcrops kg/ha Comoros Madagascar Swaziland Normal Yields Rice, mountain 400 1,700 1,100 700-800 Maize 600 1,100 1,500 500-1,000 Cassava 6,000 6,500 n.a. 3,000-1,500 Banana 8,000 n.a. n.a. 1,500-4,500 Pigeon peas 300 n.a. n.a. 800-1,800 Taro 8,000 n.a. n.a. 8,000-15,000 Sweet Potato 3,000 4,500 4,700 3,000-10,000 Source: IRAT and FAO Production Year Book, Manuel de l'Agronome (BDPA). 3.7 These low yields are partly a consequence of the inadequacy of extension services. The Government has created the CEFADER (Centre Federal d'appui au developpement rural) at the federal level, and the CADER (Centre d'appui au developpement rural) at the regional level. Each CADER should provide extension services to 20 - 25 villages. At present, only four CADERS are planned, and their staffing is less than complete. This initiative deserves to be encouraged and extended even if at present results reflect the lack of competent staff and recruitment difficulties due to budgetary constraint. 3.8 Studies prepared in connection with the EDF maize project have shown (i) that the existing cropping patterns are inappropriate to the country's agricultural resource base and nutritional needs, and (ii) that replacing rice by a combination of maize, pigeon peas and sweet potatoes is highly desirable. The yields for maize are higher than yields for mountain rice, while maize is more nutritious. The EDF maize project, which started in 1978, is aimed at developing the production of maize, sweet potatoes and pigeon peas, in associated cultivation, over an area of 2,000 ha by 1983. Its targets are to produce 4,000 tons of maize, 1,000 tons of pigeon peas and 4,000 tons of sweet potatoes. At full production, these will substitute for about 6,500 tons of imported rice. If successful, the project would be extended to cover larger areas, with paddy to be replaced by a rotation of maize and pigeon peas. At present, rice covers an area of about 9,300 ha, as compared to 3,300 ha for cassava and 2,300 ha for maize. By replacing rice with a combination of maize and pigeon peas, the Comoros could produce an additional 28,000 tons of cereals and pulses by the year 2000. 3.9 Even at existing low yields, more land could be brought under cultivation by developing food crop cultivation under the taller trees (coconut and ylang-ylang). Good yields could be obtained by improving - 19 - cultivation methods, through use of fertilizer, proper rotations and mingling compatible crops to make better use of existing land. Some experiences of vegetable cultivation in pilot farms are extemely encouraging; and farmers should be induced to develop vegetable production. The demand exists in urban areas, but there is no marketing and no transportation system from the production area to the consumption centers. Thus, there is a need for the Government to develop the feeder road system and assist farmers in marketing their products by creating marketing cooperatives. 3.10 Another issue is soil erosion. Population pressure has led to extensive deforestation and erosion as the growing numbers of farmers have been forced to extend cultivation to higher slopes oE the hills. Between 1968 and 1974, forest areas have declined by 44 percent. In the most densely populated island, Anjouan, the decline was 69 percent. It is reported that the situation has further deteriorated. In some parts of the islands, land is so scarce that even slopes of over a 30 percent incline are being cultivated. With the tropical rainfall, this is causing severe soil erosion, and wide areas under food crop cultivation need rehabilitation. With the assistance oF the World Food Program the Government has undertaken a rural development program focussed on soil rehabilitation. Given the results of the rehabilita- tion effort in the CADER-s zones, this four year program (1981-84) is likely to yield noticeable results. But the rehabilitation program depends on the peasant being given some tenurial rights, so that he will be guaranteed the right to continue working the land once he has rehabilitated it. 3.11 The distribution of land ownership is now uneven and governed by Koranic tradition. About 20 percent of the land belongs to company estates, 40 percent to the Government, and 40 percent to Comorian individuals. The imbalance between the land owned by Government and estates on one side and by Comorian families on the other is even stronger, since most of the land belonging to individual Comorians is concentrated in a few families who live in towns and do not directly cultivate it. A small fraction of land forms the village reserves, which are allocated according to customary law. Each family is allocated a traditional plot, which, over the years, has become too small as the population has grown. As a consequence of the land shortage, a system of share cropping was instituted, and salaried manpower has developed on estates and private holdings. 3.12 There is limited scope for replacing export crops by food crops, since many food crops are grown in association with export tree crops and lands suitable for tree plantation are not always suitable for food crops. The experience in Anjouan, where landless people moving into estate plantations have uprooted trees to replace them by food crops, is not encouraging, insofar as yields per hectare on the estates are much lower than the average yields for the country. Furthermore, erosion problenas in some areas are such that it is difficult to replace tree plantation by food crops successfully without a minimum of investment that farmers are now unable to finance. - 20 - 3.13 An alternative would be to develop new tree crops for exports. It would be appropriate to explore the possibility of developing fruit produc- tion as an alternative to ylang-ylang and vanilla. Lychees, corossol and mangoes already grow in the Comoros, but other fruits like macadamia nuts could also be envisaged. The profitability of a lychees project has been demonstrated in the case of Mauritius, whose soil composition and climate is similar to the Comoros. Demand is relatively strong in the world market. The unit value of the product on the world market is even high enough to justify air shipment. The replacement of ylang-ylang by such crops would be justified. Rough calculations show that the income per hectare planted with lychees is about CF 2.8 million, as compared to CF 200,000 for ylang-ylang. But since it takes seven to eight years for these alternative trees to come into production, farmers would have to wait for a corresponding period before they could expect a substitute income. Thus, a progressive replacement program of ylang-ylang trees has to be designed for the farmer to maintain sufficient income in the intervening period. 3.14 A striking feature of Comorian food consumption is its lack of animal protein. The deficit in fish and meat is met at present by steadily growing imports. In the future it could be met partly by limited cattle and poultry raising without displacing other crop cultivation. The potential for extensive livestock development is limited to Moheli. Cattle raising is not well adapted to the volcanic soil and the lava rocks of Grande Comore which can cause injuries. In Anjouan the scarcity of land prevents fodder cultivation. Sheep and goats are more adapted and could be developed in Grande Comore. To the extent that cereal production is increased, there is also a potential for poultry development. Fishing is another potential source of protein. The fish catch is only 4,000 tons per year and could be increased by improving fishing methods and by providing fishermen with better equipment. With more powerful boats, fishermen could have access to areas further away from the coast and increase the time they spend on actually fishing by reducing the time spent rowing. A small fishing project undertaken by the Government with AfDF financing (US$5.9 million for 1981-86) is a step in the right direction. 3.15 Since 1976 the agricultural sector has received large amounts of external assistance (financial and technical). Projects financed by foreign aid represent nearly all of the ongoing projects under execution by the Ministry of Production. There are currently six principal ongoing projects: a Smallholder Maize Project (US$2.5 million, 1978-83) financed by the European Development Fund (EDF); a Vanilla and Cloves Investment Project (US$7.6 million, 1977-82) financed by the African Development Fund (AfDF); a Coconut Rehabilitation and Rodent Control Project (US$5.2 million, 1980-85) financed by IDA; the first phase of the Rural Development Center Program financed by the UNDP (US$2.5 million, 1980-82); a Small Livestock Project cofinanced by the EDF, UNDP and UNICEF (US$1.3 million). In addition a Pilot Rural Development Project for the Nioumakele Peninsula on Anjouan financed by the EDF (US$600,000, 1980-82) has been appraised and will soon begin operating. - 21 - 3.16 A series of subprojects in various stages of preparation were identified by a FAO programming mission to the Comoros in 1979 and/or by government agencies and by various aid donor missions, and could be considered for further development of the agricultural sector. Identified subprojects are: further development of food crop production, in particular vegetables and irrigated rice (5th EDF/IDA) - development of livestock through rehabilitation of existing ranches (RDA) - reafforestation and strengthening of the forestry insti- tution (FAO/SIDA) - production and exportation of fresh fruit based products (UNDP/FAO/UNCTAD) - creation of a small-scale sugar industry (UNCTAD) - creation of semi-industrial fisheries (UNCTAD) - provision of agricultural credit (UN Capital Development Fund) - construction and maintenance of feeder roads (WFP) - provision of training in the agricultural and veterinary fields through creation of a training center (see also Education sector) - supply of agricultural tools and equipment and fertilizers to be integrated within the above projects, or as part of general equipment supplies (e.g. the Chinese loan, RFA) - construction of marketing facilities (e.g. covered market in Moroni, UN Capital Development Fund) - study to promote marketing of export crops (4th EDF) - reform of the marketing system of food crops (pricing, unit system, packaging, etc.) These various project elements need to be appraised so that they could be implemented separately within an integrated rural development project. The mission recommends that the Government review them with the aim of establishing their relative priorities, so that they could be incorporated in an action program for agriculture. - 22 - Industry 3.17 The formal industrial sector is extremely small. It accounts for less than 4.5 percent of GDP and employs about one thousand workers. Most industrial activities are linked to processing and conditioning of export crops. The rest of the sector is devoted to domestic needs, mainly crafts- manship. Handicraft activities are widespread in the Comoros. Basket weaving, furniture making, outrigger canoe construction, pottery, and hut construction are the most frequent activities. However, it is difficult to quantify the share of these activities in GDP since they form part of the village tradi- tional life, i.e. the subsistence economy. 3.18 Most industrial plants are rudimentary and consist mainly of stills for ylang-ylang distillation and kilns for drying copra and vanilla. In the past, large firms held a near monopoly in the processing industries, but sharp increases in the cost of fuel oil have led them to reduce their activities. This in turn has led to the establishment of a number of small producers who use local fuel wood, often illegally cut from the nearby forests. 3.19 Besides the export related industries, the industrial sector includes about 20 sawmills (three of which are reasonably modern), a printing plant, a soft drink bottling plant, a soap factory, and a small plastic plant. The last three plants, set up in 1975, have already experienced some difficulties due to lack of industrial experience and qualified personnel, insufficient working capital and inability to compete with imported products. 3.20 Industrial development is hampered by the small size of the domestic market, especially since that market is fragmented among the three islands. It is also hindered by poor infrastructure, and by high transport costs (due to the distance from both supply sources and potential export markets) and by the inadequacy of port facilities. In addition, extreme lack of skills of the labor force, the high illiteracy, poor health of the work force, and lack of administrative skills militate against any substantial industrial develop- ment. 3.21 Investment during the last two years in the industrial sector was very limited and came mostly from local financing. It included in particular: (i) the use of hydroelectricity for stills in Anjouan and the installa- tion of a heat pump unit for stills in Grande Comore; (ii) the extension of the soap factory ($0.2 million); (iii) the construction of a bakery ($0.2 million); (iv) the building of warehouses and offices for the construction industry ($0.2 million). 3.22 To stimulate foreign investment the Government has prepared an Investment Code to be submitted to Parliament for approval. Investors who - 23 - invest in the so called "priority sectors" (job creation for 150 Comorians or investment of CF 150 million and job creation for 50 Comorians) are granted a series of tax privileges for a period of 3 to 5 years. If the investments exceed CF 500 million over a three-year period, especially foreign invest- ments, the Government will provide other special tax privileges. Although the tax incentives appear generous, the Investment Code may have a limited impact on investments since most existing commercial or industrial ventures are granted similar, if not better, tax privileges. Furthermore, the size of the enterprise for which the Code provides incentives might be too large for the Comorian market. 3.23 Another Government initiative to stimulate industrial investment is the creation of a Development Bank. It is hoped that this new bank, to be jointly financed by the French CCCE, the European Investment Bank and the Comorian Currency Board (IEC), would be able to provide financing to a number of small-scale industrial projects. However, the profitability of this bank may be affected by the limited availability of industrial projects over the next few years. 3.24 Possible industrial projects to be financed by the Development Bank include a sandal factory (US$0.5 million), a jeans factory (US$0.5 million), a mattress factory (US$0.2 million), a paint factory (US$0.7 million), a fruit pulp and juice factory, miscellaneous artisanal activities, further expansion of the construction industry, extension of the print shop, and further improvement in the processing of high value export crops. In addition, a salt extraction project for local consumption will also be under considera- tion (US$0.9 million). Tourism 3.25 The scenery of the Comoros is dramatic and yet unspoiled. The Archipelago-s tropical climate, luxuriant vegetation, varied marine fauna, wild deserted beaches and still unpolluted waters display attractive features to tourists in search of untrodden vacation sites. Despite its distance from Europe, the potential for tourism exists. Tour operators and foreign investors are eager to sign contracts with the Government. 3.26 The present size of the tourism sector is very small. Some 1,500 and 1,300 1/ tourists visited Comoros in 1978 and 1979, respectively. The present hotel capacity comprising only four hotels totalling 90 rooms is limited. But the existing hotel capacity is not, at present, a constraint to tourism expansion, since the occupancy ratio was less than 20 percent in 1979. However occupancy does not seem to have increased in 1980. The major obstacle to promoting tourism is the insufficient transport connections with the rest of the world. At present, an Air France Boeing 727 flies from Paris once a week; Air Tanzania has two weekly connections with Dar es Salaam, and Air Comores has two flights weekly to and from Reunion and Mayotte and one flight weekly to and from Mombassa. These do not, however, operate regularly. 1/ 90 percent of them were businessmen. - 24 - 3.27 Although the existing four hotels are state-owned, the Government does not have a clearly defined policy on how the country s tourism industry should be developed and managed. The Soilih administration created Comortours, a company whose prime responsibility was to promote tourism in the Comoros and to centralize purchases for the hotel industry. But because of poor financial management, supplies for the hotel industry were insufficient and existing equipment deteriorated severely owing to lack of maintenance. The Government is now in the process of liquidating the company. In the meantime new managers have been appointed to the four hotels. Their contracts range from salaried employment to profit sharing. In practice, the Government does not exert any control on the management and the accounts are not audited on a regular basis. 3.28 A tourism development plan was prepared by consultants in 1974, but its recommendations have not been implemented. Three tourism projects total- ling about CF 1 billion are currently under consideration. These involve expanding the existing capacity of Hotel Itsandra in Grande Comore and Hotel Al Amal in Anjouan, (adding 60 rooms) and constructing 10 bungalows in Moheli, which does not yet have any hotel accommodation. The French CCCE is considering financing this program. Some thought is also being given to the construction of a luxury hotel with a capacity of 100 rooms, in Moroni. The cost would be around CF 1 billion. The Government would like to take a 51 percent participa- tion in this investment to be financed by foreign private interests. The Government should, however, be cautious in engaging in such ventures, and should carefully assess them to ensure that the net benefits for the country itself (vis-a-vis the returns to the foreign investors) are greater than their total costs. These ventures should yield at least a net surplus when all import bills have been met and interest and dividends on foreign capital have been paid. Moreover, the Government should also seek to maximize the local value added for tourism through developing agriculture, livestock and fish production. Transport 3.29 Transport, both internal and external, has always been a problem for the Comoros. International sea transport is rendered costly and irregular by the smallness and isolation of the islands. This situation is aggravated by the absence of a deep water port and the lack of a natural site for port development. Hence, large ships are reluctant to call at Comorian ports and cargo has to be transshipped through the ports of neighboring countries, with more costs and delays. Given the Comoros dependence on foreign trade, this is a heavy economic burden, mitigated only in part by the use of air freight for high-value export items. Sea transport between the islands depends mostly on small steamers and dhows and is also hampered by the lack of adequate port infrastructure. Within the islands transport is limited by the lack of reliable road connections between the coast and the hinterland. 3.30 Transportation in the Comoros is expensive and unreliable but critical, since the country depends heavily on foreign trade and needs to export crops grown at different altitudes. Because of the absence of a - 25 - natural deep sea port which would permit large ships to call, Comoros relies on foreign ports for transshipment to its own small ports (Mutsamudu and Moroni). The transport problem is compounded by the country-s being an archipelago. Each island needs good access. Even if adequate facilities were built on one island, the others would still depend on costly transshipments. 3.31 Intra-island transportation is also difficult. Because of the island's volcanic origin, their topography is very rugged and their rocky coastlines prevent small boats from anchoring safely, except on a few beaches. Thus, coastal shipping has not developed; instead, coastal ring roads have been built to facilitate the export of cash crops to the ports. Only a few feeder roads connect the hinterlands to the shore, thereby limiting the marketing of food crops. 3.32 The Comoros relies on maritime transportation for imports and exports. About 10 to 12 coasters (300-400 tons capacity) service the Comoros and 50 to 60 dhows (5-20 tons capacity) carry lighter and inter-island traffic. Larger ships calling only infrequently at the Comoros deliver mainly cement from Kenya and rice from the Far East. The national shipping company (SNMC) owns two ships, the Moinantsi (430 T) and the Tritonis (80 T) which navigate between islands or to Madagascar and Mombassa. The ships need extensive maintenance and overhauling. SNMC also leases the Bilinga (1,500 T) for shipping to France and South Africa. But for fear of being impounded for late payments, this boat does not leave Comoros territorial waters. It is currently berthed at Mutsamudu and is in urgent need of repairs which cannot be done in the Comoros. The National Petroleum Company (SNH) has recently purchased a 600 T vessel. 3.33 Port facilities are inadequate to handle ships over 400 T in Grande Comore or over 600 T in Anjouan. Larger ships must anchor offshore and be loaded and unloaded by dhows. This is a slow and unreliable process, especially in poor weather or during the monsoon season, and causes high 1/ handling charges and freight rates. 3.34 Since independence, a series of preinvestment studies have been undertaken (i) to determine the economic attractiveness of investments in the port subsector and (ii) to prepare detailed designs of the selected projects. Three main projects, designed to lessen the isolation of the islands and to foster regular inter-island exchange of goods and transportation, are being considered: 1/ The Central Bank estimates at 30 percent the difference between FOB and CIF prices to account for freight handling charges, insurance and losses. - 26 - (i) transformation of the Mutsamudu Port into an international port (US$40.0 million) to be financed partly by a loan from BADEA and AfDB; (ii) upgrading of the Moroni Port and the creation of a port at Fomboni (Moheli) (US$20 million), each to be financed partly under the 5th EDF program and; (iii) purchase of a vessel to insure regular traffic between the islands (US$0.5 million). The mission was not in a position to evaluate the economic justification of these projects and therefore could not assess their relative priority vis-a-vis other projects under consideration. 3.35 International air traffic is vital to the Comoros insofar as it constitutes the major mode for both passenger traffic and shipment of ylang- ylang essence and vanilla exports. To overcome the maritime traffic con- straints, the French administration developed Comoros air services. Each island has an airport, and an international airport has recently been built in Grande Comore. Two DC 4's received at Independence are now out of service and have been replaced by a Fokker 27 capable of carrying about 24 passengers. This capacity is well below existing needs, and the Government is considering the purchase of a second Fokker. Air Comores, the national airline, is facing financial difficulties, and the development of further activities is conditioned on adopting stricter management and financial discipline. To ease Air Comores difficult financial situation, the Govern- ment is seeking a greater participation from Air France, which at present owns 51 percent of the shares of Air Comores. Further investment in airport facilities appears to have a low priority, given relatively greater need for new investment in agriculture and infrastructure in general. Nevertheless, the Government is seeking extended financing for the following projects: (i) upgrading of the Hahaya runway and the completion of the airport, to be financed by France; (ii) provision of additional equipment for the Anjouan and Moheli airports. 3.36 Since independence, the Government has given priority to the completion of the coastal ring roads. The rugged topography makes the development of roads difficult and costly. The paved road network was expanded from 105 km in 1970 to 451 km in 1980, a remarkable achievement. Concessional loans from Saudi Arabia, Kuwait, African Development Fund and the OPEC Fund, totalling about US$45 million, have been used to finance studies, engineering, construction and supervision of these roads, as well as some maintenance equipment. Compared to other Eastern Africa countries, the density of paved roads is high (200 m/km2). Since the vehicle fleet is esti- mated at around 1,800, the vehicle density is four per kilometer, one of the lowest in the world. There is little need to further expand the network of paved roads. Priority should be placed on upgrading secondary earth roads. - 27 - Developing feeder roads connecting the plateaux of the interior with the coastal towns is essential to rural development and the marketing of food production. The Government is considering building about 250 km of secondary and tertiary roads by 1985, an objective which is financially supported by IDA. 3.37 Another area of priority for the Government is the maintenance of the existing road network. Road maintenance was carried out irregularly, because of inefficient organization and insufficient equipment and funds, until the start of the first IDA road maintenance project (US$5 million) in early 1979. The cost of paved road construction is extremely high, and without proper maintenance investment will be jeopardized. Earth roads require more attention since soil erosion destroys them continuously. A second road maintenance project has been approved by the Board of IDA. Telecommunications and Postal Services 3.38 Existing telecommunication installations are inadequate to provide reliable communications among the various islands. Inter-island communications pass by radio and by telegraph, and their quality is poor. Communications with the rest of the world depend on a one-way radio link with AntananarLvo and two two-way radio links with Paris. 3.39 The European Development Fund has financed studies of internal and inter-island telecommunications (US$0.4 million). Technical studies have been carried out for the installation of a VHF network for inter-island communi- cations; the investment needed is considerable (US$0.8 million) since a number of high pylons will have to be constructed. A loan was signed in March 1980 with BADEA for US$1.6 million to finance partly the project; EDF is financing US$3.3 million while the remaining funds US$3.1 million are likely to be provided by the Kuwait Fund. 3.40 The installation of new automatic exchanges in the main cities would require a total investment of US$13.0 million. In the longer term (1998) the Government is considering the installation of an earth station to receive satellite transmissions and thereby improve international communications. 3.41 There are at present only seven post-offices, four of which are on Grande Comore, two on Anjouan and one on Moheli. Their functions are limited to mail and money order services; the proposal to extend their responsibilities to the management of a new savings bank has not borne fruit. In order to improve postal services in rural areas, the purchase of 14 vehicles that would serve as mobile post-offices is under consideration. Energy 3.42 The Comoros faces the general energy problems which are common to countries with similarly low levels of development and limited endowment of energy resources, namely (i) a high petroleum import bill resulting from the recent price increases and (ii) a rapid depletion of fuel wood - 28 - supplies resulting from the substitution of wood for other energy sources. In addition, Comoros lacks the institutions either to perform proper energy planning or to manage efficiently the sector. 3.43 Petroleum imports are estimated to have reached CF 915 million (US$4.5 million) in 1980, or 10 percent of total imports. Government pricing policy on petroleum is sound and follows closely the pricing policy of European governments. Gasoline is currently priced at CF 150 per liter (US$2.70 per gallon). The Government was considering raising it to 200 FC at the end of 1981. The main problem affecting this part of the energy sector is the lack of petroleum storage facilities, resulting in an uncertainty of supply. 3.44 Most of the traditional sector of the economy uses fuel wood and charcoal for its domestic needs. Wood is collected in an uncontrolled manner, which rapidly depletes the limited forestry resources. Average per capita wood consumption for energy purposes has been estimated at 0.7 m3 by a FAO mission. At this rate of consumption, the forestry resources will soon be depleted if the Government does not undertake a reafforestation program. The problem is aggravated by the substitution of fuel wood for high cost fuel oil by artisanal distilleries. 3.45 Electrical power is supplied by thermal power stations operated by a parastatal company, "Electricite et Eaux des Comores" (EEDC). Total available installed capacity in Grande Comore is 2400 kw, and 1350 kw in Anjouan. Moheli is supplied only by isolated generators. 3.46 Electricity consumption supplied by EEDC reached about 4600 kwh in 1979 and 5100 in 1980 after growing at a 6 percent annual rate over the period 1975-79. Given the low level of industrial development, electricity is consumed mostly for lighting purposes. Although electricity rates were raised to CF 80 per kwh in October 1981. In addition, since only a few consumers actually pay their bills, EEDC is still incurring heavy financial losses (see para. 2.32). Hence the Government and EEDC need to work out and then implement a financial program and appropriate pricing and other policies to restore the financial viability of EEDC. In the meantime, greater efforts should be made to collect unpaid bills and to enforce the collection of future bills. 3.47 On its part, EEDC will need to improve the transmission network to reduce high losses, complete the Moheli thermal power station, rehabilitate the Mutsamudu power plant and add an additional unit at Voidjou to adequately supply the electrical, energy demand in the short term. The Government should meanwhile seek to investigate the possibilities for developing alternative and renewable energy resources. Grande Comore has a potential for geothermal energy development which needs to be more fully assessed, both technically and financially. Under the most optimistic assumptions, a project would take at least six to eight years to become operational. - 29 - 3.49 Anjouan and Moheli have a hydroelectric potential which could be partially tapped. Detailed feasibility studies have just been compl-eted for the installalton of a 3 x 1500 kw power plant and regulating reservoir in Anjouan and a 275 kw power plant in Moheli. The World Bank has not yet appraiseld themn and thus cannot assess their economic viability. Other possible energy sources to be iiivestigated include the gasification of coconut husks currently wasted or burned at a low effLcLency, and the use oE solar energy. Finally, the Government needs to encourage the use of ,more efficient energy e.g. with better stoves, or through the installation of heat pumps in distilleries. Water Supply 3.50 While rain is abundant, although irregular, water supply is insuffi- cient throughout the Comoros and poses a problem for both people and an-inals. In Anjouan and Moheli, where perennial water streasas exist, the population living along those streams has an ample supply. But, natural springs are rare, and water becomes a problem for those far from the streams. Peasants have to carry water for domestic consumption over several kilometers. Man- made wells are too fe4 and the drilling capacity is insaifficient to reach aquifers. The problem is even more acute in Grande Comore, where the lava rocks are too porous to support any permanent water course. The rain infil- trates the soil and is absorbed by the lava rock 1/ and then gradually reaches the sea. The population has overcome the water problem by constructing water tank storages, using the "fombous" 2/, the water which wells up from underground sources at the shore and coconut milk ("coco-boire") 3/. Cattle satisfy their water needs by drinking from the "fombous" and from chopped banana trees whose trunks constitute a natural water storage. Well drilling in Grande Comore is extremely costly because of the basaltic soil. Existing wells have to be drilled between 30 and 90 meters deep. Rain storage tanks are the most commonly used but these entail serious health problems insofar as their contaminated water is a major source of gastroenteritis and othler intestinal parasites. Most tanks are old and need to be repa[r2d. Most of them were built with cheap materials anl because they are buriel at too shallow depth, they are often cracked by seismtc shocks. Furthermore, their capacity is limited as water is only collected on small areas (e.g roofs of mosques or administrative buildings). 3.51 Another method recently suggested by FAO is the use of volcano cr-at2-4 ts -iatural water tanks. A promising experiment was undertaken at MaouenL where a mixture of sand and clay secures the water Li-htness of th'e reservoir. But this water, collected on the slope of Lagrille, is still sub- ject to contamination. Major towns have theti own water systems. A recently 1/ 1 meter of lava rock absorbs 300 mm of rainfall. 2/ Less salted, fresh water floats on the sea water which circulates and ivLpregnates the basis of the island. 3/ It can only be sutst[taterl for drinking purposes, not for cooking or other natural w7ater uses. - 30 - completed EDF-financel project enabtes water to be pumped into public reser- voirs from a well sunk 2 km inland, thus assuring Moroni and its vicinity of a year-round water supply. China and various multilaterSi* o-artiizations have financed the installation of water tanks in rural cities. The UNDP is financing a general water resource study (at a cost of US$345,000) to evaluate the islands- water supply potential and to develop a water resource development master plan. In the meantime the Government is considering the undertaking of feasibili-y studies for the rehabilitation and extension of the water supply system in Mutsamudu (Anjouan) and Fomboni (Moheli). Education 3.52 The education structure calls for two years of pre-school educatioq in Koranic schools, six years of primary education, three years of lower secondary education and four years of upper secondary education. Higher education is provided in 19 different foreign countries, with the plurality of students in France and Algeria. Of the estimated 550 students attending higher education institItio 1s, only about 2 percent are studying agriculture. It is reported that a large proportion of students going abroad do not return home. A Ministry of Education was recently established, but the central staff consists of only a few overworked officials. 3.53 Enrollment has increased rapidly from a total of 15,000 students in 1970 to 70,000 in 1979-80. Enrollments and participatioa rates by educational level are estimated as follows: primary education, 56,000 students (including over-aged children and repeaters); equivalent to about 100 percent of the population aged 7 to 12; lower secondlary education, 7,100 or 36 percent of 13 to 15 year olds, and upper secondary education, 1,900 or 8.0 percent of 16 to 19 year olds. Enrollment rates are very high for a country at the Cornoros- stage of development. However, the quality, efficiency and economic relevance of the education system are low. 3.54 While dropout and repetition rates at the primary level are low, the quality of primary education is poor. Only 25 percent of all primary school teachers are fully trairned. While the official policy is to provide free primary school textbooks, a lack of recurrent funds has reluced substantially the number of books per student. The physical infrastructure is very poor; most schools consist of one roon aud and thatch structures, and many function on triple shifts. All books are imnported and the curriculum is not adapted to the Comorian social or economic environment. 3.55 To improve pri,aary education, the Government intends to centralize all primary teacher training in a new school to be located in Anjouan. The effective operation of this school will be essential for the long-term improve- ment of the primary school syste'n. 3.56 At the upper secondary level, the Government's official policy is to provide a terminal, occupationally oriented education to most students. However, this objective is not being achieved because the curricula are - 31 - inappropriate, teachers are not available 1/, and jobs for graduates (in either government or the private sector) are scarce. Students therefore prefer the academic stream in the hope of getting overseas scholarships and possibly remaining abroad. 3.57 The Government will continue to provide a large share of the limited budgetary funds to finance recurrent expenditures, and to rely on foreign assistance to finance capital expenditures. Of particular importance is the recently signed agreement with the African Development Fund to carry out a project (at a cost of US$8.8 million) to construct primary school classrooms, practical subjects workshops in lower secondary schools, and a National Insti- tute for Education (INE); the project will also provide related scholarships, training and technical assistance. In addition, France is assisting in pre- service training of junior secondary teachers, curriculum development and in-service training, the provision of secondary school textbooks and in aug- menting the power of the local radio station. UNDP/UNESCO experts are assist- ing in educational planning and curriculum development. 3.58 IDA appraised and approved a credit for an education project which will include the construction of a primary teacher training college, health training school and textbooks for primary education. 3.59 The Government would like to undertake additional projects to com- plement the above projects. These include: (i) expansion of the primary school classroom construction program (US$4.1 million); (ii) expansion of a recently initiated experimental program of school gardens for primary schools, and its extension to artisanal activities (US$7.1 million); and (iii) expansion of the program of practical subject workshops in lower secondary schools (US$1.0 million). Population and Health 3.60 Although statistical data are scanty, available information indi- cates that the population growth rate is extremely high, and that nutritional and health conditions are extremely poor. It is estimated that one-half of all children die before reaching age four. Most children suffer from mal- nutrition and intestinal parasites. About 80 percent of the adult population suffers from malaria, and a high incidence of tuberculosis and leprosy are 1/ The secondary school system is almost entirely dependent on expatriate teachers (financed by Arab League, Agence de Cooperation Culturelle et Technique, (France), APEFE (Belgium), Entraide Universitaire Mondiale (Canada), WHO, and UN volunteers. - 32 - also reported. The Ministry of Health is unable to cope with the situation because of its limited facilities and supplies, and the shortage of middle- level qualified personnel to carry out health improvement programs. 3.61 Until the results of the August 1980 census become available, there will remain considerable uncertainty about the size of the population, which was believed to be around 400,000 in 1980. Two major demographic features of the Comoros are: (i) the very high rate of population growth, which acceler- ated between 1950 and 1980, and (ii) the consequent high ratio of children to adults. 3.62 According to the limited data available, the rate of population growth appears to have gradually accelerated from about 3 percent annually in the period 1950-55 to nearly 4 percent in the years 1975-80. This increase resulted both from a faster reduction in mortality rates than in birth rates and from the return from Madagascar of some 20,000 Comorians in 1977. If the population were to continue to grow at 3.7 percent annually (the currently estimated rate of natural increase) the Comoros population would approximately double by the year 2000. To keep up with the present low standards of living, school facilities, food production, employment creation, housing, and general services to be provided by the Government, would have to expand at the same rate as population growth. 3.63 Another feature of the Comoros demography is the high ratio of children to adults. The population is extremely young. Fourty-four percent are less than fifteen years old and 64 percent less than twenty five years old. Between 1975 and 1980, the population under fifteen years of age has increased by an estimated 28,600. 3.64 Although the Government has recognized that the Comoros does indeed face a population problem, it does not yet have an explicit policy on birth control and family planning. Contraception services are available but only provided on a limited scale because of lack of supplies and the lack of trained personnel to deliver family planning methods. Little is known about the extent of actual or potential demand for family planning services. At present, only about 1.5 percent of married women of reproductive age are believed to be practicing contraceptive methods. There is some evidence that a growing number of abortions is occurring among urban women, in large part under unsatisfactory medical and hygienic conditions. 3.65 The population issue is of the utmost importance for Comoros- future. The Government would be well advised to seek the assistance of specialized agencies to analyze population trends, to design a population control program and implement it. 3.66 The health condition of the population is poor, and malnutrition is widespread. A study on food consumption conducted in 1965 evaluated the average per capita caloric intake per day at 2100. Coconut, rice, banana and cassava account for 78 percent of the calory intake. Animal protein intakes are grossly insufficient. Malaria affects 90 percent of the population in - 33 - one form or ariother, althouglh tuberculosis and leprosy 1/ are not uncommon. Weakened by maalnutrition and mialaria, the population is less able to resist viruses and other illnesses. Diarrhea and intestinal parasites are endemic and along with tetanus contribute to the high rate of child mortality. Syphilis and other venereal diseases are reportedly becoming a major healthn problem. 3.67 Health conditioas could be improved through better *1issemination of information about nutrition, improvements in water supply and through a restructuring and strengthening of existing health services. Medical facili- ties are rudimentary and often do not function properly owing to the lack of qualified personael, equipment, and medical supplies. The total number of hospital beds is 755, i.e. one for every 460 inhabitalnt3 as compared to 1,239 for low income Africa south of the Sahara. There are only three hospitals, ten secondary hospitals and medical centers, four maternity clinics. The Ministry of Healtlh objective is to have 52 health posts. Medical personnel comprise only 28 physicians and specialized medical personnel (including dental and laboratory technicians), 108 nurses, 13 midwives and 100 auxiliary personnel. Medical supplies are virtually unobtainable through offLcLal channa˝ l ini doctors resort to international charitable institutions to obtain the bare minimum. Patients have to purchase their drugs from private drugstores or medicine peddlers, to whom a large part of the meagre official supplies is diverted. 3.68 Expatriate medical staff are provided by Italy, Canada, France, WHO, "Les Amis du Pere Damien", the Red Cross, and the UN Volunteer Program. Investmeats in the health sector have been limited. The EDF' has provided US$0.6 mil1-t:ci for restoration of hospitals and radiological and sterilization equipment; Germany has provided ambulances; and various multilateral and bilateral agencies have donated medicine. 3.69 Hospitals are badly in need of rehabilitation and additional equip- ment. The Government is considering in the long term (1990) the construction of a new hospital in Moroni. It will probably not prove feasible to begin construction for several years; however, one should weigh the priority of the type of investment versus preventive medicine investments and particularly the finanrcil of a malaria eradicai:Lon program. WHO has performed a feasibility study and is allocating JUS$4.0 million of its ordinary budget 1981/82 for this program estimated to cost about US$5.5 million to be disbursed in five years. 1/ The population affected by leprosy and tuberculosis Is estimated at 2500 and 1000 persons respectively. - 34 - IV. DEVELOPMENT ISSUES AND PROSPECTS Institutional Constraints 4.1 As noted in Chapter I, the process whereby the Comoros achieved its independence was a disruptive one, and the political and administrative con- sequences have been profound. The 1978 constitution gave considerable autonomy to the individual islands. The President retains authority over the federal administration, but the islands' Governors (who are elected directly) enjoy wide administrative and political powers. 4.2 Dual authority prevails in the entire administrative system. The Government appoints the civil servants of the federal administration, and, in turn, the Governors appoint their own administrations. The functions of the two administrations tend to overlap. For example, in the case of agricultural extension services, the line of authority and the division of responsibility for staff vis-a-vis line functions are blurred as between the CEFADER which is responsible at the federal level, and the CADERs which are responsible for implementing the program at the level of the island governments. In education, the Federal Government sets the policies but teachers' salaries are paid from the budgets of the island governments. 4.3 Each island prepares and adopts its own budget which is submitted to the Federal Assembly for approval, only if it forecasts a financial deficit. The islands collect direct taxes and receive a percentage of indirect taxes levied by the Federal Government; they cannot however receive external assis- tance without approval from the Federal Government. 4.4 The Comoros islands, despite their high population density, still offer possibilities for settlement on unoccupied lands, particularly on the island of Moheli. The resettlement of people from one island of the federation to another was not foreseen in the Federal Constitution, but legislation to facilitate the movement of people and their homesteading on vacant lands should be considered by the federal legislature. The support of local govern- ments will be essential in any such federally sponsored effort and will require that resettlement be made economically attractive to the receiving island government. Manpower 4.5 Skilled manpower resources are scarce. The number of qualified personnel is insufficient for the needs of the economy, and the labor force is generally young and inexperienced. Even those who have received adequate training abroad have little chance of receiving supplementary on-the-job training owing to the general lack of technical expertise. Government salaries are extremely low and bear little relation to job performance and ability; staff are often obliged to supplement their income through outside activities - 35 - since salaries are sometimes paid only after long delays. Under such circum- stances, it is not surprising that the morale of the civil service should suffer. 4.6. Intermediate and lower level technicians are in great demand. Admin- istrative and secretarial staff are scarce, and this too contributes to the low productivity. For example, there is not more than a handful of qualified accountants; record books are therefore not maintained properly, and financial controls are almost impossible to enforce. 4.7 Technical assistance is widely used as a substitute for local man- power, but the weakness of the civil service often limits severely the effec- tiveness of foreign technicians. The absence of Comorian counterparts in particular reduces the benefits which should be derived from technical assis- tance. In some cases, the shortage of domestic talent is so acute that the use of inadequately supervised technical assistance even becomes disruptive. Familiarizing expatriates with the Comorian environment is a time-consuming task for the few qualified top Comorian managers. Hence, the Government should in general hire only those expatriates who will remain in the Comoros for a minimum period of two years and who are assigned to priority tasks. The Government and the countries providing foreign assistance should also be aware that the costs to the Government may exceed the benefits that the Government can draw from the expert services. Providing the expatriate with an office, secretarial support, housing and transport facilities represents a heavy financial burden for the country. Development Priorities 4.8 The interim development plan prepared by the Soilih Government stressed food self-sufficiency as the major development priority and allo- cated lower priority to export development and employment creation. The plan document did not specify the policy measures to achieve these objectives nor did it spell out the financial implications. Despite its political nature, however, it provided a useful framework for negotiating financial assistance from foreign governments. 4.9 The new Government has reformulated the objectives set out by its predecessor, and Presidential statements have outlined the very general and overall framework of its development strategy. Food self-sufficiency remains in principle the number one priority, but the Government also attaches high priority to four other objectives: (i) developing port and road infrastruc- ture, (ii) developing energy and water resources, (iii) improving health and beginning to address the population problem; (iv) improving the quantity and quality of technical skills; and (v) regional development. At present, the objectives are stated only in qualitative terms; it remains for the Govern,nent to translate them into quantitative targets and to prepare action programs aimed at their realization. 4.10 The mission believes that these general priorities are on the whole appropriate and should be reflected in the development plan to be elaborated - 36 - by the recently established National Planning Commission with the assistance of a group of foreign experts financed by the United Nations. The main devel- opment priority should be agricultural rehabilitation and expansion of pro- duction of basic foodstuffs and export crops. Achievement of this objective would entail: (i) expansion of cereals and leguminous production to reduce imports of rice; (ii) development of new export crops; and (iii) expansion of fisheries and small livestock production to reduce meat imports and improve the protein intake of the population. Additional priority objectives should include the strengthening of export and marketing institutions, reforestation, soil erosion control, and regulation of land ownership rights. In the area of public health, high priority is clearly warranted for malaria eradication, tetanus vaccination, and improving the supply of potable water. With respect to population control, it remains for the Government to formulate a policy and program for family planning -- a task in which the World Bank and/or other donors will clearly be prepared to provide technical and financial assistance. The thrust of educational development should emphasize voca- tional and technical training geared to the economic realities and require- ments of the country. And with respect to infrastructural development, the emphasis on port and road construction seems warranted, although in light of the large scale and heavy cost of the projects underway and envisaged, particular attention needs to be given to appraising the economic return of such projects. As far as regional development is concerned the objective is to adopt a policy of efficient use of land to meet both the demographic pressure and the food self-sufficiency goal. This would also imply some improvement in housing. Prospects 4.11 The economic prospects of the Federal Islamic Republic of the Comoros are rather modest in the foreseeable future. There are not many development alternatives, and the lack of resources makes it all the more important that such resources as are available -- including foreign assistance -- should be allocated efficiently. In any event, the Comoros will have to continue to rely heavily on concessionary foreign assistance in the near future to achieve even a modest rate of growth. A preliminary illustrative scenario developed by the Bank mission envisages that 4.5 percent annual economic growth might be achieved over the period 1981-85 (i.e. 1.0 percent in terms of GDP per capita). 1/ Agriculture is projected to grow at about 3.9 percent per annum, a rate which seems feasible given the present low yields of agricultural production, the encouraging results of the EEC maize project, the expected impact of the IBRD coconut improvement and rodent control project, and the potential impact of other projects under considerati oni. Given the very small size of the industrial sector, the status of government negotiations with foreign partners to establish a Development Bank and other considerations noted earlier, industrial growth has been projected to increase progressively 1/ It is to be emphasized that the projections set forth in this Chapter represent only one seemingly plausible scenario of the economy-s evolu- tion over the next several years. They do not represent a forecast or planning guidelines, but rather an initial attempt to organize some fragmentary information in a quantitative macroeconomic framework as a basis for discussion and as a building block for future analysis. - 37 - from 4 percent in 1980 to 8 percent in 1985. Reflecting the high investment level contemplated for the period, the mission has assumed that the rest of the economy may grow at 5 percent a year. 4.12 The realization of this growth and the further development of-infra---- structure over the period 1981-85 might involve total fixed capital investment on the order of magnitude of CF 37 billion (in constant 1979 prices), 1/ with investment averaging about 27-28 percent of GDP over the period. The implicit capital output ratio is 6.5, reflecting the high share of the slow gestating infrastructure in the investment program. The scenario also envisages that the resource gap would fall from 24 percent of GDP in 1981 to 21 percent in 1985. Consumption is shown to remain at around 90 percent of GDP; the pro- jected fall in domestic savings (from 8 percent of GDP in 1980 to 6.4 percent in 1985) is seen to be a likely consequence of continuous deterioration in the terms of trade (see table 8). Table 7: Projected Resources Availability and Uses (billions of 1979 CF) 1980 1981 1985 1981-1985 average annual growth rate GDP 22.4 23.4 27.9 4.5 Terms of Trade -0.2 -0.8 -0.8 - Gross Domestic Income 22.2 22.6 27.1 - Exports of Goods and NFS valued at import prices -2.5 -3.5 -3.7 1.7 Imports 8.3 8.4 9.4 2.9 Resource Gap 5.8 4.9 5.6 3.5 Consumption 20.1 20.8 25.2 4.9 Fixed Investment 5.6 6.7 7.7 2.8 Public 4.9 5.7 6.0 1.05 Private 0.7 1.0 1.7 11.1 Changes in Stocks 2.3 - - - Domestic Savings 2.1 1.8 1.9 1.9 Source: Mission projections. 1/ The figures shown here and below are essentially based on the mission's assumptions concerning prospective aid and domestic resource availabil- ities and its largely qualitative assessment of the country's absorptive and implementation capacities as they relate to projects under prepara- tion or consideration. - 38 - Financing of the Public Investment Program 4.13 Without prejudging the results of studies to be undertaken by the Planning Commission, the Bank mission has reviewed a preliminary list of projects potentially suitable for external financing. This list was prepared by the Government for a donors' conference held in early 1981 in Addis Ababa under the sponsorship of the United Nations (see Annex III). The list was mainly intended as a "shopping list" to be presented to aid-giving agencies. The mission has supplemented it with information on major ongoing projects as provided by Government services and bilateral and multilateral aid agencies. Based on its estimates of future implementation rates of ongoing projects and on declared intentions of donor agencies, the mission estimates that the public investment program might amount to around CF 45 billion ($214 million) over the period 1981-85 (see table 8). These figures are significantly lower than the figures presented by the Government in September 1981 at the UN Conference on less developed countries. The first tranche of the action program for the 1980's considers a total investment of US$414 million. 4.14 The projected investment in infrastructure reflects mainly the Comoros' need to facilitate trade and communications inside and outside the country (see paras. 3.29-3.37). With the exception of road construction already started, most of this investment corresponds to new road and port projects to be started during the projection period. The investment in ports and airports reflects the Government's concern for lessening the country's isolation. As noted earlier the Mission recommends that the Government review carefully the composition of the prospective large scale investment to establish relative priorities as based upon rates of return, and as estab- lished within a context of realistic estimates of resource availabilities. Table 8: Public Investment Program 1981-85 (CF million at current prices) Total % of which new --- --projects Agriculture 9773 21.5 4940 Industry 191 0.4 191 Tourism 700 1.5 700 Transportation 18889 41.6 14776 -Roads 9794 21.6 5703 -Ports 6678 14.7 6678 -Airports 2417 5.3 2395 Telecommunications 2629 5.8 912 Energy & Water Supply 5809 12.8 5809 Health & Population 2078 4.6 1738 Education 4049 8.9 2417 Miscellaneous 1293 2.9 170 TOTAL 45411 100.0 31653 Source: Table 5.5 in Statistical Annex - 39 - 4.15 The indicated share of investment in agriculture represents about 22 percent of total investment, compared to only 5 percent in 1979. Such a shift in the composition of public investment would appear to be fully warranted in view of the need to develop food production and agricultural exports; on the other hand, a greater shift seems unlikely to be feasible in view of the present limited absorptive capacity of the sector. The shares allocated to industry (0.4 percent) and tourism (1.5 percent) are ainiamal since most investments in these sectors are envisaged to take place in the private sector. The mission has assumed that the Government would limit its role in these areas mainly to creating an environment conducive to private activity. The development of artisanal export-oriented industries based on the Comoros' comparatively low wage labor is critical to absorb the growing labor force which cannot be accommodated in agriculture. 4.16 Government domestic revenues have been projected to increase from CF 2.6 billion in 1979 to about CF 7.8 billion in 1985. This would involve an average annual grcwth rate of 10 percent in real terms and conld be achieved through improving the collection of direct taxes without changing the tax rates. [This is feasible and the share of taxes in GDP would only have to grow from 11 percent in 1979 to about 15.5 percent in 1985.1 Current government expenditures (including technical assistan,ce) have been projected to increase in real terms in line with GDP growth. The budgetary current deficit would therefore increase progressively to CF 5.4 billion in 1985. Capital expenditures have been assumed to rise by 20 percent in 1981 (reflect- ing the increased foreign assistance available from a variety of sources) and then to remain constant in real terms over the period. The overall public sector deficit is therefore projected to increase fron 26 percent of GDP in 1979 to nearly 28 percent in 1985. This deficit would have to be financed by external assistance. The mission has assumed that two thirds of external financing will be in the form of grants, both for technical assistance and direct budget support. Project financing in the form of loans on concessional terms and grants are assuried to come mainly from various traditional aLd sources; i.e., France, EDF and the Arab funds. - 40 - Table 9: Projected Government Budget (CF billion) 1/ 1979 1980 1981 1985 Domestic Revenues 2.56 2.54 3.65 7.82 Current Expenditures 5.30 6.10 7.02 12.26 Current Deficit -2.74 -3.56 -3.97 -5.44 Capital Expenditures 3.00 6.06 6.87 10.95 Overall Deficit -6.38 2/ -9.62 -10.24 -15.39 Grants 3/ 3.84 5.05 5.76 8.48 Loans 1.92 4.27 4.48 6.91 Domestic Financing 0.60 0.40 1/ This projection is in current prices assuming a 10 percent annual inflation rate for the period 1981-85. 2/ Includes changes in government liabilities. 3/ Includes technical assistance, budget support and grants for project financing. Source: Table 5.6 in Statistical Annex Balance of Payments 4.17 After their poor performance in 1980, exports are likely to recover in 1981. But, in view of the limited world demand for Comoros export commodi- ties, exports have conservatively been projected to grow in volume by no more than 1 percent annually over the period 1981-85. Moreover, prices for Comoros' major export commodities are projected to rise at a slower rate than the world inflation index. Thus, export receipts in nominal terms have been projected to increase at an average rate of only 9.3 percent over the period 1981-85. 4.18 The demand for imports can be expected to remain high throughout the period 1981-85. Capital goods imports would be maintained at a high level corresponding directly to the envisaged level of investment. Imports of raw materials and intermediate goods are assumed to grow pari passu with the projected overall expansion of economic activity. Imports of petroleum products have been projected to grow in volume at 7 percent per annum. Food imports have been projected to remain at the same level throughout the period on the assumption that the projected increase in imports of some food products will be offset by a reduction of rice imports as maize production is progres- sively substituted for rice. The feasibility of this target depends critically on the success of the Maize Project and the Government's adoption of a price policy to encourage a shift in food consumption patterns. Imports of other consumer goods have been assumed to remain constant in volume, on the assump- tion that the Government would increase the rate of taxation for such products to discourage their consumption. While the realism of this particular assump- tion is questionable, it will in any event be necessary for the Government to - 41 - restrict the growth of such imports in order for the country to achieve its investment and growth targets. Import prices have been assumed to evolve in line with IDA projections for major commodities. Altogether, over the period 1981-85, the import bill is projected to increase on average at almost 11 percent per annum. As a result of these trends the deficit in the balance of goods and services is likely to increase from about US$31 million in 1981 to US$50 million in 1985. Prospects beyond 1985 will depend on further progress in rice substitution and Government success in developing new export commodities (see para. 3.8). Table 10: Merchandise Imports Current US$ million In Percent 1980 1985 1980 1985 Food 13.6 22.5 31.9 31.9 Other consumer goods 11.3 15.6 26.5 22.0 Petroleum 4.3 9.4 10.0 13.3 Other intermediate goods 8.0 14.2 19.0 22.2 Capital Goods 5.3 8.9 12.5 12.6 TOTAL 42.5 70.6 100.0 100.0 Source: Table 3.7 Statistical Annex Capital Requirements 4.19 Assuming that the present deficit on services will rise gradually, the mission's projections show deficits in the balance of goods and non-factor services aggregating roughly US$200 million for the period 1981-85. Banning any major change in the Government-s relationship with France, the Comoros would continue to receive large amounts of budgetary support and technical assistance from France. The mission has thus projected net current transfers (including official) to remain constant in real terms over the period, which would correspond to an aggregate level of 62 million in current dollars. Since most aid received in the past was in the form of grants or concessional assistance with long grace periods, the amount of amortization to be repaid over the period is expected to be only of the order of US$3.5 million. Accounting for the need to maintain foreign exchange reserves at about two months of imports, capital requirements are projected at about US$150 million over the period. - 42 - Table 11: Illustrative Program for External Capital Flow (Millions of US$) 1980 1981 1982 1983 1984 1985 Total _____ ____ _____ _____ 81-85 Disbursements 24.1 22.1 26.3 29.8 34.9 37.9 151.0 from New Loans 20.1 9.1 14.3 15.7 21.2 27.8 88.1 from Existing Loans 15.9 11.4 6.3 6.6 5.9 4.8 35.0 from Grants 4.0 1.6 5.7 7.5 7.8 5.3 27.9 Commitments 27.8 36.7 38.0 40.0 33.0 175.5 Loans 21.8 30.7 32.0 34.0 27.0 145.5 Grants 6.0 6.0 6.0 6.0 6.0 30.2 Source: Mission Projections 4.20 Thus, the Comoros will continue to need substantial flows of external capital in the near future. About US$35 million is expected to be drawn from loans already contracted. An additional US$88 million would have to be mobil- ized from new loans to be contracted in 1981-85. This level of disbursement would call for aggregate commitments of around US$175 million over the period i.e. an average of perhaps US$35 million per year. The mission believes that this is feasible, given the interest expressed by a number of bilateral and multilateral aid agencies. The illustrative program presented in Table 11 gives an idea of the relative share of grants and concessional loans to be committed over the period 1981-85. - 43 - STATISTICAL TABLES I. Population and Employment 1.1 Population, Employment and Selected Social Indicators II. National Accounts 2.1 Gross domestic product by industrial origin at current prices, 1976-80 2.2 Gross domestic product by industrial origin at 1979 prices, 1976-80 2.3 Gross domestic product by expenditure at current prices, 1976-80 2.4 Gross domestic product by expenditure at 1979 prices, 1976-80 2.5 Origin and Uses of Resources at Current Market Prices, 1979 2.6 GDP price deflators, 1976-80 III. Balance of Payments 3.1 Balance of payments, 1978-80 3.2 Merchandise exports at current prices, 1976-80 3.3 Volume of merchandise exports, 1976-80 3.4 Merchandise imports at current prices, 1976-80 IV. External Debt 4.1 External public debt outstanding including undisbursed as of December 31, 1979 4.2 External public debt: service payments, commitments, disbursements and outstanding amounts. V. Public Finance 5.1 Overall fiscal performamce, 1979-80 5.2 Consolidated budget - Domestic revenues 5.3 Consolidated current Government expenditures, 1979-80 5.4 Consolidated current Government expenditure by function, 1979-81 5.5 Public investment program, 1981-85 5.6 Projections of overall Government operations, 1979-85 -44 - VI. Monetary Statistics 6.1 Monetary survey, 1978-80 6.2 Short-term credit distribution by activity, 1978-80 VII. Agricultural Statistics 7.1 Trends in agriculture production, 1975-79 7.2 Prices of cash crops, 1974-79 7.3 Principal agricultural products, 1979 7.4 Value of agricultural productions, 1976-79 VIII. Others 8.1 Wood consumption by type IX. Wages 9.1 Minimum salaries by qualifications - 45 - Table 1.1 - POPULATION, EMPLOYMENT, AND SELECTED SOCIAL INDICATORS -/ ( in thousands) 1950 1955 1965 1975 1980 2000 Population Total Population 152 176 240 333 404 637 Population Structure 1 to 15 years old 67.0 78.4 109.4 147.9 176.5 246.5 15 to 24 years old 28.9 33.4 44.7 65.3 83.3 127.6 Employment Estimates Labour force 63.9 71.7 91.2 121.4 145.0 229.4 Selected Social Indicators Birth rate (per thousand) 44.2 43.4 41.9 40.1 40.9 32.8 Mortality rate (per thousand) 31.7 28.5 23.2 17.7 16.0 12.0 Life expectancy (years) 41.0 42.0 44.0 46.0 48.0 58.5 1/ All four islands Source: United Nations and World Bank Projections. Table 2.1: GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN AT CURRENT PRICES, 1976-80 (CF millions) 1976 1977 1978 1979 1980 Farming, husbandry, fishing, forestry 5,689 6,734 7,195 8,991 10,224 Manufacturing 690 766 885 1,033 1,195 Electricity, gas, water 70 80 88 90 110 Construction and public works 935 1,123 1,379 1,738 2,354 1/ Trade , hotels, bars, restaurants 3,332 3,682 4,211 5,368 5,886 4 Transport and communications 213 236 281 333 379 Banks, insurance, real estate 364 405 496 597 687 Public administration 1,437 1,099 2,291 3,069 3,675 Other services 109 124 146 167 194 GDP at market prices 12,839 14,249 16,972 21,386 24,704 Net indirect taxes 1,263 1,532 1,904 2,511 2,119 GDP at factor cost 11,576 12,737 15,068 18,875 22,585 GNP at market prices 12,361 13,771 16,494 19,656 23,148 1/ Including dimport duties and taxes Source: Mission estimates Table 2.2: GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN AT 1979 PRICES, 1976-80 (CF millions) 1976 1977 1978 1979 1980 Farming, husbandry, fishing,forestry 8,047.0 8,955.3 8,299.0 8,991.3 9,345.3 Manufacturing 984.1 1,017.7 1,006.6 1,033.0 1,074.3 Electricity, gas, water 70.0 80.0 88.0 89.7 92.9 Construction and public works 1,337.7 1,543.0 1,579.1 1,738.1 2,061,1 Trade-, hotels, bars, restaurants ',753.4 4,877.2 4,890.3 5,368.4 5,293.5 Transport and communications 303.5 313.0 319.5 333.0 340.7 Banks, insurance, real estate 518.9 536.4 564.6 596.5 618.1 Public administration 2,049.4 1,455.0 2,605.9 3,068.9 3,304.9 Other services 15'-.9 164.9 166.3 167.0 174.1 GDP at market prices 18.218.9 18.942.5 19-539.3 21,385.9 22,3004:9 Net indirect taxes 1,791.4 2,010.6 2,191.0 2,510.6 1,912.5 GDP at factor cost 16,427.5 16,931.9 17,328.3 18,875.3 20,392.4 GNP at market prices 17,533.5 18,312.4 i8,9P0.4 19,655.9 20 891.7 1/ Including import duties and taxes. Source: Mission estimates Table 2.3: GROSS DOMESTIC PRODUCT BY EXPENDITURE AT CURRENT PRICES, 1976-80 (CF millions) '976, 1977 1978 1979 1930 Private final consumption 9s,182 10,296 12,098 14,540 17,267 Public consumption 2,'.", 2,607 3,512 4,392 5,474 Gross fixed capital formation 2,569 2,903 3,497 4,591 6,416 Changes in stocks -22' -403 131 691 9,,,1 Exports of goods and services 2,94 3,474 2,767 4,222 2,767 Imports of goods and services 4,239 4,628 5,033 7,050 9,741 GDP at market nrices 12,839 14,249 16,972 21,386 24,704 Source: Mission estimates Table 2.4: GROSS DOMESTIC PRODUCT BY EXPENDITURE AT 1979 PRICES, 1976-80 (CF millions) 1976 1977 1978 1979 1980 Private final consumption 13,097.2 13,636.6 13,860.2 14,538.7 15,516.1 Public consumption 3,716.6 3,452.9 3,995.0 4,392.2 4,923.1 Gross fixed capital formation 3,675.7 3,987.4 4,005.7 4,591.2 5,618.2 Change in stocks - 316.6 - 533.7 149.0 691.0 2,267.1 Export of goods and services 4,235.1 4,496.9 3,145.7 4,222.4 2,570.3 Imports of goods and services 6,189.1 6,097.6 5,636.3 7,049.6 8,589.9 GDP at market prices 189218. 18,942.5 19,519.3 21,385.9 22,304.9 Source: Mission estimates - 50 - Table 2.5 ORIGIN AND USES OF RESOURCES 4T CURRENT MARKET PRICES, 1979 (CF olillion) PRODUCTS Prod -tio- Tapoets Trrda 45rgl6 Conraweiton ChvetgenCh EoportF c.i.f. Pr.no.tion Ipor.- TOTAL Inter- F'nol Adelin.- Enter- Atelnin- Noose- TOTAL Cnre I mdiEto trac=oo peEne. cession hold Sco-k 1. Agrlcltornl prodncts 9382.7 -- 2342.0 -- 11,724.7 991.9 7009.0 -- -- -- -- 35.7 3688.1 2. Mhn..fctoend good. and handiorEfts 1894.0 65c6.0 131.0 4229.8 12,760.8 4917.5 5991.1 - 5 367.4 629.5 -- 1196.9 655.3 -- - Pod, dri.ko .nd tobacco 425.0 2357.6 25.0 1321.2 4128.8 400.1 3628.7 -- --- - - -- 100I0 - Te..tiel 564.0 534.7 -- 256.6 1355.3 435.2 749.1 -- -- -- -- 171.0 -- - ebicala 100.0 125.4 20.0 61.4 306.8 89.8 217.0 -- -- -- -- -- -Woed ted paper 420.0 -- 86.0 -- 506.0 15.0 358.0 -- 78.0 55.0 - -- 133.0 -. -Mineral. -- 145.4 -- 104.7 1250.1 250.1 -- -- -- -- -Petroleum predoctn - 385.4 __ 824.8 1210.2 943.0 200.4 -- -- -- 66.8 -- -Mech-niosl & lectri-al eqoipmneet 235.0 1584.4 __ 823.9 2643.3 1183.1 208.3 -- 489.4 574.5 __ 1063.9 188.0 -- -MhLcelleoe.. 150.0 1373.1 -- 837.2 2360.3 1601.2 629.6 -- -- -- 129.5 -- 3. Peer, 8s., eater 244.6 -- -- -- 244.6 139.1 105.5 -- -- -- 4. ConGtr-tio- 3531.2 -- __ __ 3531.2 136.9 -- __ 363.3 2522.7 508.5 3394.3 _ _ 5. Hotel. and .e.. at scta 493.7 -- -- -- 493.7 175.0 89.0 -- -- -- --- -- 229.7 6. Tranapert. 929.2 368.6 -- -- I 1297.8 665.3 355.4 -- -- -- -- -- __ 277.1 7. Banks 1162.8 175.0 -- -- 1337.8 559.6 750.7 -- -- -- -- -- _ 27,5 8. Pnblio sdeinaitr-,too 4537.9 -- -- -- 4537.9 145.7 -- 4392.2 --- -- -- -- 9. Other serSions 320.0 -- -- -- i 320.0 82.0 238.0 -- -- -- -. - TOTAL 22.496.1 1 2473.0 4229.8 d Il j2 -aW 14 538Z 7 4392.2 930.5 3152.2 508.5 4591.2 691.0 4222.4 - 51 - Table 2.6 - GDP PRICE DEFLATORS, 1976-80 (1979 : 100) 1976 1977 1978 1979 1980 Agriculture 1/ 70.7 75.2 86.7 100.0 109.4 Construction V 69.9 72.8 87.3 100.0 114.2 Gross Domestic Capital Formation 2/ 69.9 72.8 87.3 100.0 114.2 Consumer Prices 3/ 70.1 75.5 87.9 100.0 111.2 Exports 70.7 77.3 88.0 100.0 107.7 Imports 4/ 69.3 75.9 89.3 100.0 113.4 GDP deflator 70.5 75.2 86.9 100.0 110.8 1/ Wages and salaries index. 2/ Average of price indices for steel and consumer prices. 3/ Weighted index of agricultural prices and unit value of manufactured goods for EEC. 4/ Weighted index of unit value of manufacutred goods exported from European Economic Community and other industrial countries. Source: Mission estimates. Table 3.1: BALANCE OF PAYMENTS, 1978-80 (CF mltlionsq1 1978 1979 1980 est. Debit Credit Balance Debit Credit Balance Debit Credit Balance Goods, f.o.b. 3,161 2,103 - 1,058 4,749 3,688 - 1,061 6,581 2,282 - 4,299 Freight and insurance 1,169 278 - 891 1,757 200 - 1,557 2,434 - - 2,434 Other transportation, travel 483 362 - 121 368 307 - 61 470 433 - 37 Interest on debt 23 - - 23 1 - - 1 - - - Government, n.e.s. 138 - - 138 107 - - 107 135 - -135 Other services 222 24 - 198 175 28 -147 256 53 -203 Total for goods and services 5,196 2,767 - 2,429 7,157 4,223 - 2,934 9,876 2,768 - 7,108 " Private transfers 1262 355 - 907 2,684 290 - 2,394 2,626 370 - 2,256 of which: wage-earners; remuneration (429) (355) (- 74) (664) (290) (-374) (700) (370) (1330) Public transfers - 3,424 3,424 264 2,876 2,612 300 4,501 4,201 Total, current account 6,458 6,546 + 88 10,105 7,389 - 2,716 12,802 7,639 - 5,163 Long-term capital 147 885 738 - 3,228 3,228 - 5,184 5,184 Amounts unpaid - 463 463 - - _ _ _ _ Others (incl. errors and omissions) 333 - - 333 54 - - 54 21 - - 21 Total, capital account 480 1,348 868 - _ 3,174 - _ 5,163 overall balance _ 956 _ _ 458 _ - 0 Change in net reserves - 956 _ - 458 _ - 0 (- increase) Sources: Institut d'Emission des Comores (IEC) and mission estimates. Table 3.2: MERCHANDISE EXPORTS AT CURRENT PRICES, FOB, 1976-1980 (CF millions) 19,76 i9-/ 1978 197^ 1930 1930 (10 months) (Estimate) Ylang-ylang essence 618.0 587.1 637.9 708.4 321.9 486.0 Extra (299.1) (265.0) (318.0) *- (227.7) 1st category (40.3) (29.0) (45 5) * * (43. 8) 2nd category (28.2) (18.7) (19.0) *, (16.5) 3rd category (246.4) (262.4) (2'7.6) .-- (15.2) Solid (4.0) ( 2.0) (7.8) .- (13.7) Essence of basil 14.5 17.8 14.0 14.7 62.6 63.0 1 Ln Other essences 23.7 33.6 19.8 2J.I 0.6 5.0 Vanilla 464.9 1084.6 736.3 2272.1 49.7 192.0 Copra 122.7 133,4 205.3 254.2 78.8 138.0 Cloves 812.0 294.1 452.2 446.4 908.1 1374.0 Cocoa 5.1 9.7 3.6 6.3 1.6 4.0 Coffee 17.4 16.9 10.8 9.1 1,2 9.0 Miscellaneous 145.7 25.7 22.2 13.3 10.9 11.0 Total cxDor._ 2224.0 2202.9 2102.6 745.1 1435.4 2232.0 Source: Comorian authorities - 54 - Table 3.3: VOLUME OF MERCHANDISE EXPORTS, 1976-1980 (in Metric Tons) 1976 1977 1978 1979 1980 1980 ____ (10 months) (estimate) Ylang-ylang essence 73.1 60.0 61.1 72.7 20.9 32.0 Extra 19.6 15.6 18.5 -- 11.8 -- 1st eategory 4.1 2.5 3.8 -- 3.5 -- 2nd category 3.7 2.2 2.2 -- 1.6 __ 3rd category 45.5 39.1 36.2 -- 2-3 -- Solid 0.2 0.6 0.4 -- 1.7 -- Essence of basil 1.1 1.4 1.1 1.2 8.3 8.0 Other essences 1.1 0.7 1.1 1.2 0.1 1.0 Vanilla '24.1 230.4 116.9 179.9 3.3 25.0 Copra 2322.6 1317.2 2060.5 2290.8 720.5 1266.0 Cloves 880.2 219.9 329.6 342.0 581.8 880.0 Cocoa 10.7 12.0 .1 Ili. 7 3.0 8.0 Coffee 31.7 18.2 22.8 15.7 2.0 16.0 Miscellaneous ,'-,59.2 239.3 181.8 431.8 105.7 106.0 Total exports 6303.8 2099.1 278390 3350.0 1445.6 2342.0 Source: Comorian authorities Table 3.4: MERCHANDISE IMPORTS AT CURRENT PRICES. C.I.F., 1976-1980 (CF millions) .97k S7 7 1978 7c--i/ l,E.2f .980 (estimate) Food products 1264. 6 1150.5 2004.0 2278 1 1108.2 2871.0 Meat 147.4 '!-.4 343.1 547.4 136.0 577.0 Rice 5 * ,6'7 1'4.'1 1091.7 717.0 1508.0 Flour 71-.1 , .. 3 13'1. 125.4 58. 8 140.0 Sugar 1U. 5 75.' 161.0 264.6 42.0 367.0 Miscellaneous 317.1 32.5.7 3 19.7 249. 0 154.4 279.0 Finished products -- 1184.1 1042.5 (1976.1) __ 2400.0 Tobacco 43.0 5L.9 ?. 2 79.5 10.8 -- Pharmaceuticals 81.2 /5.6 62.3 125.1 34.9 -- Textiles 183.5 186.3 245.1 531.7 -- -- Automobiles 37.7 103.9 49.7 398.4 326.7 __ Miscellaneous -- 793.4 623.2 (838.4) -- Petroleum products 349.8 513.0 432. 5 385.4 375.9 915 0 Aviation fuel 3k.2 42.0 40.5 -- -- -- Automobile fuel 115.2 152.8 95.3 -- 17S.3 -- Gas-oil 148.0 167.8 142.S -- 19. 6 -- Miscellaneous 52.4 150.4 153.9 __ _ Raw materials and semi-finished products -- 529.7 -- (1201. 1) 170a0 Products of animal or vegetable origin -- 3,6 4.1 (5) -- -- Mineral products -- -6.9 L.7 (3C) -- -- Cement 131.1 1cG.4 '22.3 1- .4 122.1 -- Iron and steel 23.2 173.9 __ 520.7 -- __ Miscellaneous -- 17'1.9 325.7 (500) -_ __ Capital goods 7- O 5.9 T h70 665.3 __ 1 0 Farm equipment -- 4S.9 2.7 -- __ Industrial equipment -- 627., 273.3 -- Total imports fLM.6 4CS3.2 41Yr. ; 6506.0 2773,3 90150 -- Npt available 1/ Figures ln parentheses = mission estimates. 2/ First six months Source: Comorian authorities and mission estimates. Table 4.1: EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G : I N A R R E A R S TYPE OF CREDITOR ----------------------------------- -------------------__ CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL PRINCIPAL INTEREST MULTILATERAL LOANS AFRICAN DEV. FUND 1,291 11,684 12,975 - BADEA/ABEDA 10,000 - 10,000 - 303 IDA 2,463 2,537 5,000 - - OPEC SPECIAL FUND 1,000 1,000 2,000 - - SAFA (SP AR FUND AF) 500 - 500 - 5 TOTAL MULTILATERAL LOANS 15,254 15,221 30,475 - 308 BILATERAL LOANS ABU DHABI 383 679 1,062 - - CHINA 2,878 10,489 13,367 - - FRANCE 8,422 110 8,532 1,900 648 KUWAIT 7,880 5,302 13,182 - - SAUDI ARABIA 3,897 10,368 14,265 - - TOTAL BILATERAL LOANS 23,460 26,948 50,408 1,900 648 TOTAL EXTERNAL PUBLIC DEBT 38,714 42,169 80.883 1.900 956 NOTES: (1) ONLY DEBTS WITH AN ORIGINAL OR EXTENDED MATURITY OF OVER ONE YEAR ARE INCLUDED IN THIS TABLE. (2) DEBT OUTSTANDING INCLUDES PRINCIPAL IN ARREARS BUT EXCLUDES INTEREST IN ARREARS. Table 4.2: SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1980 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I O N S D U R I N G P E R I OD OTHER CHANGES : BEGINNING OF PERIOD : DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- : ONLY UNDISBURSED MENTS MENTS ----------- ----------------------: LATIONS MENT - PRINCIPAL INTEREST TOTAL : (1) (2) (3) (4) (5) (6) (7) (8) (9) 1975 4,292 4,867 1.939 899 410 114 524 - -220 1976 4,722 6,176 28,243 14,600 406 122 528 - -215 1977 18,485 33,798 8,372 4,636 250 112 362 77 1,746 1978 23,395 43,589 11,572 3,635 82 103 185 - 3,262 1979 28,051 58,341 21,848 10,272 - 248 248 - 694 1980 38,714 80,883 23,448 20,151 - 525 525 7,995 -1,159 1981 50,357 95,177 * * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * * 1981 50,357 95,177 - 11,339 197 662 859 - 2 1982 61,498 94,982 - 6,226 255 710 965 - - 1983 67,471 94,727 - 6,500 283 736 1.019 - 1 I 1984 73,687 94,445 - 5,912 1,341 768 2,109 - - 1985 78,257 93,104 - 4,812 1,446 782 2,228 - 1 1986 81,625 91,659 - 3,672 3,674 786 4,460 - -1 1987 81,623 87,984 - 2,606 3,657 770 4,427 - 2 1988 80,572 84,329 - 1,814 3.727 749 4,476 - - 1989 78,660 80,602 - 1.041 4,053 722 4,775 - -3 1990 75,643 76,546 - 903 4,071 683 4,754 - 5 1991 72,480 72,480 - - 4,106 648 4,754 - -1 1992 68,373 68,373 - - 4,105 607 4,712 - -2 1993 64,266 64,266 - - 4,079 572 4,651 - 1 1994 60,188 60,188 - - 4,054 534 4,588 - -3 1995 56,131 56,131 - - 4.054 495 4.549 - 2 1996 52,079 52,079 - - 2,747 461 3,208 - -4 1997 49,328 49,328 - - 2,724 420 3,144 - 4 1998 46,608 46,608 - - 2,756 383 3,139 - - 1999 43,852 43,852 - - 2,004 351 2,355 - -2 2000 41,846 41,846 - - 2,069 331 2,400 - 2 * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. - 58 - Table 5.1: OVERALL FISCAL PERFORMANCE (CF millions) 1979 1980 (9 months estimates) Domestic Revenues 2563.2 1902.1 Current Expenditures -5307.7 -4576.4 - Budget Current Expenditures 3660.7 2761.4 - Current Expenditure financed by external resources 1647.0 1815.0 a. Technical assistance 1011.0 1012.0 b. Merchandise 567.0 705.0 c. Fellowships 69.0 98.0 Current Deficit -2744.5 -2674.3 Capital Expenditures -2989.2 -4542.0 - Budgetary expenditures 571.5 544.6 - Capital Expenditure financed by foreign assistance 2417.7 3997.4 Change in Government Liabilities - 648.2 - 47.6 Overall Deficit -6381.9 -7263.9 FINANCED BY: External Financing 5761.0 6967.2 - Grants 3838.3 4059.8 - Loans 1922.7 2907.4 Domestic Financing 620.9 296.7 - Borrowing from the Bank 149.7 386.4 - Special Treasury Accounts 139.9 - 117.7 - Borrowing from the Public 331.3 28.0 Source: 1979 and 1980 Budgets, Treasury Accounts, and mission estimates. - 59 - Table 5.2: CONSOLIDATED BUDGET DOMESTIC REVENUES 1979 1979 1980 19,80 Actual tor Budget % Actual % Budget % 9 months % Indirect Taxes (from trade) 1584.7 (68) 2253.8 (88) 1945.3 (71) 1476.2 (78) of which Import Taxes 1251.4 1612.2 1536.8 1357.9 Export Taxes 333.3 641.6 408.5 118.3 Other Indirect Taxes 394.0 (17) 83.2 (3) 399.6 (15) 147.2 (8) of which Business License Tax 77.0 38.2 77.0 45.4 TCA 199.0 13.4 138.4 23.6 Direct Taxes 136.0 (6) 96.8 (4) 158.7 (6) 100.9 (5) of which IBD 79.5 57.0 90.5 69.4 IGR 56.3 21.8 68.2 31.5 Other -- 18.0 -- -- Non-tax Revenues 205.9 (9) 129.4 (5) 242.4 (9) 178.4 (9) TOTAL 2320.7 (100) 2563.2 (100) 2746.0 (100) 1902.7 (100) Source: Comorian Authorities - 60 - Table 5.3: CONSOLIDATED CURRENT GOVERNMENT EXPENDITURES (CF millions) 1979 1979 1980 Budget Actual Budget Wage & salaries 1814.8 1674.5 2679.9 Federal Government 762.2 717.0 1220.4 Islands 1052.6 957.5 1459.5 Goods & Services 1320.8 1308.5 2178.8 Federal Government 890.4 994.5 1099.2 Islands 430.4 314.0 1079.6 Transfer & subsidies 335.3 189.9 351.4 Federal Government 335.3 187.3 290.2 Islands -- 2.6 61.2 Public debt 73.2 34.1 80.0 Federal Government 73.2 34.1 80.0 Islands -- -- -- Unclassified 88.9 453.6 124.7 Federal Government 48.4 453.6 57.3 Islands 40.6 -- 67.4 Total 3633.0 3660.6 5414..8 Federal Government 2109.5 2386.5 2747.1 Islands 1523.5 1274.1 2667.7 Source: Comorian Authorities Table 5.4: CONSOLIDATED CURRENT GOVERNMENT EXPENDITURE BY FUNCTION -(CF- mil.Lions) 1979 1979 1980 1980 1981 Budget Actual Budget Actual Budget (excluding (for 9 months) Moheli) Administrative and Other 890.8 (25%) 786.7 (21%) 991.7 (18%) 563.6 (20%) 1030.8 (17%) Services Finance 503.7 (14%) 335.8 (9%) 598.7 (11%) 256.4 (9%) 537.4 (8%) Foreign Affairs 88.7 (2%) 50.3 (1%) 167.7 (3%) 51.9 (2%) 169.2 (3%) Public Works 304.6 (8%) 275.9 ((8%) 611.0 (11%) 251.6 (9%) .545.1 (9%) Agriculture & Industry 39.5 (2%) 50.3 (1%) 88.7 (2%) 49.7 (2%) 93,8 '(2%) Defense 386.8 (11%) 359.5 (10%) 708.4 (13%) 339.8 (12%) 658.2 (11%) Transport & Tourism 118.4 (3%) 118.5 (3%) 156.9 (3%) 94.6 (3%) 426.8 (7%) Health & Education 1222.6 (34%) 1063.4 (29%) 1898.5 (35%) 958.6 (35%) 2349.1 (37%) Unclassified 78.3 (2%) 620.2 (17%) 193.2 (4%) 195.2 (7%) 433.9 (7%) Total 3633.4 3660.6 5414.8 2761.4 6244.3 Source: Comorian Authorities Table 5.5 PUBLIC INVESTMENT PROGRAM, 1981-85 (CF millions) 1981-85 1981 1982 1983 1984 1985 Total of which new investment Agriculture 1632 1908 1972 1908 2353 9773 4940 Industry - 85 106 - - 191 191 Tourism 212 276 212 - - 700 700 Transportation 3244 3561 3392 3816 4876 18889 14776 -Roads 3010 1929 1081 1654 2120 9794 5703 -Ports 212 1060 1802 1696 1908 6678 6678 -Airports 22 572 509 466 848 2417 2395 Telecommunications 297 382 551 954 445 2629 912 Energy and Water Supply 742 827 1272 1272 1696 5809 5809 Health and Population 382 339 509 424 424 2078 1738 Education 254 339 890 1484 1081 4049 2417 Miscellaneous 530 403 276 42 42 1293 170 Total 7293 8120 9180 9900 10917 45411 31653 Source: Mission estimates. Table 5.6 - PROJECTIONS OF OVERALL GOVERNMENT OPERATIONS, 1979-85 (CF. billions) 1979 1980 1981 1982 1983 1984 1985 Domestic Revenues 2.56 2.54 3.65 5.04 6.0 6,L6 7.82 Current Expenditures 5.30 6.10 7.02 8.05 9.27 10.66 12.26 Current Deficit - 2.74 - 3.56 -3.37 -3.01 -3.27 -4.20 -4.44 Capital Expenditures 3.0 6.06 6.87 8.09 9.12 9.90 10.95 Overall Deficit - 6.38-/ - 9.62 -10.24 -11.10 -12.39 -14.10 -15.39 Grants 3/ 3.84 5.05 5.76 6.73 7.66 8.35 8.48 Loans 1.92 4.27 4.48 4.37 4.73 5.75 6.91 Domestic Financing 0.62 0.40 - - - - - 1/ This projection assumes a 10 percent annual inflation rate for the period 1981-85. 2/ Includes changes in government liability 3/ Includes Technical Assistance and Budget support and grants for project financing Source: Mission projections - 64 - Table 6.1 MONETARY SURVEY (CF millions) 1978 1979 1980 30/6/80 Foreign Assets (net) 1355 1813 1735 Institut d'Emission 1383 1614 1175 Commercial Bank -28 199 560 Domestic Credit 2289 2428 3966 Claims on Government (net) 86 174 732 Claim in private sector 2203 2254 3234 of which Rediscounts (1159) (738) (1277) Other -1220 -693 -1685 Money Supply (broad) 2424 3548 4016 Currency Outside Banks 1471 1748 2196 Demand Deposits 904 1710 1577 Quasi-money 49 90 243 Source: Institut d'Emission des Comores (IEC) - 65 - Table 6.2: SHORT-TERM CREDIT DISTRIBUTION BY ACTIVITY (CF- millions) 1978 1979 Agricultural crop financing 277.7 126.3 Vanilla 164.0 47.2 Copra -- 20.8 Cloves 13.1 13.9 Ylang-Ylang 100.6 44.4 Export Financing 470.7 151.9 Vanilla 174.3 73.0 Copra 24.6 72.0 Cloves 106.8 -- Ylang-ylang 156.7 -- Other -- 6.6 Manufacture & handicrafts -- 7.6 Commerce (including imports) 1239.9 1634.0 Construction & Services 170.0 160.3 Individuals -- 103.9 Total 2158.6 2184.0 Source: 1978 IMF, 1979, Banque des Comores - 66 - Table 7.1:Trends in Agricultural Production, 1975-1979 (in tons) 1975 1976 1977 1978 1979 Cereals Rice (paddy) 3,281 3,375 3,484 3,661 3,700 Maize 1,316 1,353 1,469 1,545 1,800 Cassava 20,853 21,455 23,261 24,466 25,000 Taro 1,168 1,207 1,303 1,368 1,500 Yam 1,418 1,459 1,582 1,662 2,000 Potatoes 3,003 3,090 3,350 3,523 4,200 Fruits Bananas 26,775 27,548 29,868 31,415 32,000 Coconut 16,200 16,200 16,200 16,200 16,200 Other 1,918 1,974 2,140 2,251 2,300 Export Crops Vanilla (green) 1,055 620 1,150 585 900 Ylang-ylang 65 73 60 61 73 Other perfume 2 2 2 2 2 Copra 1,417 2,323 1,317 2,061 2,750 Cloves 521 880 220 330 342 Cacao 21 11 12 8 15 Coffee 61 32 18 23 16 Meat and Fish Beef 770 770 1,100 800 800 Other meat 270 270 405 292 290 Fish 3,400 3,553 5,600 5,600 5,000 Other Milk 238 245 265 279 300 Eggs (thousand) 3 550 600 600 600 700 Wood (thousand of m ) 541 565 599 643 685 Source: Comorian authorities Table 7.2 : PRICES OF CASH CROPS (CF /kg) 1974 1975 1976 1977 1978 1979 Vanilla - Producer price 360 300 450 500 600 900 - F.O.B. price 2946 3266 3477 4706 6500 9566 Ylang Ylang - Producer price (flower) 40 40 45 46 40 40 - F.O.B. price: . Extra (essence) 9562 14360 15254 16988 18000 18000 . 3rd quality (essence) 5117 5425 5415 6714 5000 7000 Cloves - Producer price 800 500 600 800 600 750 - F.O.B. price: . Cloves 1138 1106 1036 1381 1425 1500 . Crowns 292 226 171 147 150 150 Copra - Producer price 90 45 35 60 40 40 - F.O.B. price 146 90 52 101 105 105 Comments: 1. Vanilla - Producer price is for green vanilla. F.O.B. price is for prepared vanilla. On average 5 kg of green vanilla yields 1 kg of prepared vanilla. 2. 1979 prices are given by way of indication. Only vanilla prices were officially set at that time. 3. Price setting - Producer price is set each year at the start of the season. The official price is the floor price. Buyers may buy at price higher than the floor price. This is set in the light of the world market for the prbduct concerned. F.o.b. price is not officially set but left to the exporter's discretion. Source: Comorian Authorities and Mission estimates. Table 7.3: Principal Agricultural Products Year 1979 Quantity (m. tons) Unit Value of Production Commer- Purchase Price (CFA million) cial Price Non- Marketed Total (CFA/kg) Non- Marketed Total margin (CFA million) Market Market (CFA mln) Cereals 276.0 6.0 282.0 6.0 2,0 Rice (paddy) 3,700 -- 3,700 60 222.0 -- 222.0 -- 2.0 Maize 1,800 200 2,000 30 54.0 6.0 60.0 6.0 - Starch products 932.5 402.5 1335.0 207.0 1.3 Cassava 17,500 7500 25,000 40 700.0 300.0 1000.0 150.0 1.1 Taro 1,050 450 1,500 50 52.5 22.5 75.0 9.0 -- Yams 1,400 600 2,000 25 35.0 15.0 50.0 9.0 -- Sweet potatoes 2,900 1300 4,200 50 145.0 65.0 210.0 39.0 0.2 Fruits 1628.0 376.0 2004.0 276.0 2.1 Bananas 26,000 6000 32,000 50 1300.0 300.0 1600.0 180.0 1.7 Coconuts (000s) 13,000 3200 16,200 15 195.0 48.0 243.0 64.0 0.3 Other fruits 1,900 400 2,300 70 133.0 28.0 161.0 32.0 0.1 Vegetables 308.0 75.0 383'0 39.0 4.0 Pigeon peas 2,700 400 3,100 90 243.0 36.0 279.0 20.0 2.0 Mung beans 300 100 400 90 27.0 9.0 36.0 5.0 Tomatoes 200 200 400 70 14.0 14.0 28.0 6.0 Other vegetables 300 200 500 80 24.0 16.0 40.0 8.0 (cont.) Table 7.3 (cont.) Principal Agricultural Products (Branch 1) Year 1979 Commer- Purchase Quantity (m. tons) Unit Value of production cial price Price (CFA mi1lion) margin (CFA million, Non- Marketed Total CFA/kg Non- Marketed Total (CFA million) Market Market Export products 2409.3 2409.3 1335.8 3745.1 Vanilla -- 900.0 900.0 1,500 -- 1350.0 1350.0 922.1 2272.1 Ylang-ylang essence -- 72.7 72.7 6350 -- 461.6 461.6 246.8 70P.4 Other vegetable essences -- 2.4 2.4 10,220 -- 24.5 24.5 :0.3 34.8 Copra -- 2,750.0 2,750.0 60 -- 165.0 165.0 89.2 254.2 Cloves -- 342.0 342.0 1,130 -- 386.5 59.9 59.9 446.4 Cocoa -- 15.0 15.0 300 -- 4.5 4.5 1.8 6.3 Coffee 16.0 15.0 400 -- 6.4 6.4 2.7 9.7 Miscellaneous -- 433.0 433.0 25 -- 10.8 10.8 8.0 13.8 a, Meat and fish 1223.0 327.0 1550.0 163.0 1713.0 Beef 700 100.0 800.0 470 329.0 47.0 376.0 8.0 384.0 Other meat and poultry 240 55.0 290.0 600 144.0 30.0 174.0 5.0 179.0 Fish 3,000 1,000.0 4,000.0 250 750.0 250.0 1000.0 150.0 1150.0 Miscellaneous 41.5 7.5 49.0 4.0 53.0 Milk _250 50.0 300.0 70 17.5 3.5 21.0 2.0 23.0 Eggs (000s) 600 100.0 700.0 40 24.0 4.0 28.0 2.0 30.0 Forestry (Wood in m3) 571,000 114,200.0 685,200.0 2000 1142.0 228.4 1370.4 91.4 1491.8 Total 555 5551.0 3831.7 9382.7 2122.2 11,504.9 Source: Comorian Authorities and Mission estimates. - 70 - Table 7.4: VALUE OF AGRICULTURAL PRODUCTIONS (CF millions) Unit price 1976 1977 1978 1979 C.F.A./kg_ Cereals Rice 60 203 209 220 222 Maize 30 41 44 46 54 Vegetables Cassava 40 858 930 979 1000 Taro 50 60 65 68 75 Yams 25 36 40 42 50 Sweet-potatoes 50 155 168 176 210 Fruits Bananas 50 1377 1483 1571 1600 Coconuts 15 243 243 243 243 Other fruits 70 138 150 158 161 Export products Vanilla (green) 1500 930 1725 878 1350 Ylang-ylang essence 6350 464 381 388 462 Other vegetable essences 10220 22 21 22 25 Copra 60 139 79 124 165 Cloves 1130 994 249 374 386 Cocoa 300 3 4 2 5 Coffee 400 13 7 9 6 Meat and fish Beef 470 362 517 376 376 Other b1cata 600 162 243 175 174 Fish 250 888 1400 1400 1250 Miscellaneous Milk 70 17 19 20 21 Eggs 40 24 24 24 28 Wood 2000 1130 1198 1286 1370 Total - 8259 9199 8581 9233 Volume Index (1979 = 100) - 89.5 99.6 92.3 100.0 Source: Mission estimates. 430 440 450 Mi tsami oul? rCOMORO ISLANDS IveCheean Ivlembeni GRANDE COMORE ®ail §CAPITAL CITY o OTHER TOWNS -c ) / Ko mSbani f EXISTING ROADS MORON( ------ % A j _ ~ ~ROADS UNDER CONSTRUCTION MORONI m±i PORTS Ioni <, OtBandamadji N*t , *8\ . * ~~~~~~~~~~~~~~AI RPO RTS M Foumbouni Dembeni 0 20 40 60 KILOMETERS I I I -120 M o z a t7 b i q u e MILES 10 20 30 40 12 Anjoudo Ouani?*+) _ MUTSAMUDUIr MOHELI =q Bambao Hoani Sima \ 0 FOMBONI Mirinoni 0 ani Moya M'Remani Nioumachoua ANJOUAN CANZONI IS. OUENEFOU IS. ' ,1 ,. . 430 N/ - - International Boundaries TANZANIA MA YOTTE SEYCHELLES ,COMORO. M'Zamboro J to5ju_ _.1ISLANDS Dzumo/ MAURITIUS Chingoni 0DO Sada DZAOUDZI 4/ IBandele 0 / Reunion Is. F t | 1,> PT R.unn Is. -130 The bountidaries shown oni rhis olap do lot 130 ;t FR. timpli enidorsemenit or acceptance by the sij ii /440 IVorld Batik and its affiliates 450°