PROGRAM INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: 101301
November 24, 2015
Operation Name
Region
Country
Sector
Operation ID
Lending Instrument
Borrower(s)
Implementing Agency
Date PID Prepared
Estimated Date of Appraisal
Estimated Date of Board
Approval
Concept Review Decision
Comoros Development Policy Operation
AFRICA
Comoros
Public Administration, Law, and Justice (40%); Industry and
trade (20%); Energy and mining (20%); Information and
communications (20%).
P154842
Development Policy Lending
GOVERNMENT OF COMOROS
Vice-Presidency in charge of Finance of the Union of the
Comoros
November 11, 2015
March 1, 2016
April 28, 2016
Following the concept review, the decision was taken to
proceed with the preparation of the operation.
Other Decision {Optional}
I.
Key development issues and rationale for Bank involvement
1.
Comoros is a small and fragile state with a narrow economic base, widespread
poverty and thin institutional capacity. Years of political instability contributed to acute
underinvestment in services, infrastructure, education, institutional capability and the productive
sectors of the economy. The economy has relied primarily on the export of a few agricultural
commodities, and has been subject to terms of trade and price shocks associated with global market
fluctuations. These factors have contributed to widespread poverty and unemployment,
particularly amongst women1. Recent data on poverty are unavailable given that the latest
indicators date back to 20042, when poverty was estimated to affect 46 percent of individuals3.
Poverty was observed to be primarily concentrated in rural areas, but recent urban migration may
have further exacerbated poverty in crowded urban suburbs. Remittances from the Comorian
diaspora have emerged as a major pillar of the economy, simultaneously supporting both
household welfare and the external position. Demographic forces will exert further pressures on
Female labor force participation in Comoros was estimated at 35 percent of the active workforce. Women’s
employment is concentrated in informal and agriculture sectors.
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New poverty estimates are currently being prepared by the Comoros statistics institute with support from a World
Bank poverty assessment that is due by mid-2016.
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Based on the national poverty line.
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the economy with the population projected to grow by 50 percent and the labor force expected to
double over the next 15 years4.
2.
The return of political stability in recent years has been instrumental for building
more stable institutions and has enabled Comoros to pursue reforms, but significant
challenges remain and the pace of reform is slow. Comoros has emerged from a prolonged
period of political instability since its independence in 1974. Enhanced political dialogue in the
2000s paved the way for a gradual move to political stability, allowing two democratic transitions
of power to occur in the last decade and the adoption of a new Constitution in 2009. The country
is now beginning to benefit from greater levels of trust and cooperation between the union and
island governments, and has implemented a series of macro-stabilization and structural reform
programs to secure gains in fiscal consolidation, macroeconomic stability and public finance
management. Nevertheless, the context remains fragile and significant challenges impede
economic development, poverty reduction and shared prosperity in Comoros. The fiscal position
continues to be delicate with a low revenue effort, persistent spending pressures and limited room
for maneuver, and is supported by weak public finance management systems. In terms of growth,
investment and job creation continue to be held back by a high cost environment for the business
sector, difficulties in securing reliable access to electricity and affordable connectivity through
modern telecommunication services. Pressures stemming from these factors, and the recent
electricity crisis in particular, reduced the rate of economic growth to 2.1 percent in 2014. The
fiscal position is also increasingly difficult with underperforming revenues in 2015. The
government has outlined a reform agenda to tackle these constraints but capacity on the ground is
limited and the pace of reform is slow.
3.
The successful completion of this DPO is expected to improve Comoros’ fiscal position
and strengthen the environment for growth. This operation builds on the policy agenda pursued
through the previous DPO series, other World Bank programs and ongoing macroeconomic policy
dialogue. The program aims to place Comoros on a more stable fiscal footing through revenue,
expenditure and debt management reforms. The program also seeks to boost the environment for
economic growth by improving performance in the telecoms and energy sectors, and by enhancing
the business environment.
II.
Proposed Objective(s)
4.
The Development Objective of this DPO is to enhance fiscal management and the
conditions for economic growth.
III.
Preliminary Description
5.
The proposed program is aligned with Comoros’ National Strategy for Accelerated
and Sustainable Growth, and contributes to reducing poverty and increasing shared
prosperity. The operation is designed around two pillars: (i) improving fiscal management; and
(ii) strengthening the environment for growth. The first pillar seeks to improve fiscal management
by strengthening revenue administration, supporting an integrated wage bill management system,
and introducing a law for enhancing debt management. The second pillar aims to strengthen the
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l’Institut National et des Etudes Economiques et Démographiques.
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environment for growth by supporting structural reforms in the electricity and ICT sectors, and by
easing the business environment for small enterprises.
IV.
Poverty and Social Impacts and Environmental Aspects
6.
Improving fiscal management will indirectly contribute to improved poverty and
social outcomes in Comoros. The revenue measures pursued under this DPO are designed to
narrow the collection gap without imposing a disproportionate burden on the poor. More
specifically, exemption savings will be targeted to the large business ventures as opposed to basic
goods. The implementation of the telecoms tax on airtime relates to progressive tax that is set at a
relatively low rate. Lastly, the normalization of customs exchange rate protocols is not expected
to have a large price effect on the poor given that a large share of basic consumer goods are exempt
from duties. The wage bill management reforms are expected to help control salary spending and
contribute to widening the fiscal space for service delivery and investment, whilst the debt
management law will promote prudence in fiscal management. Overall, a sustainable and
effectively executed budget is an important pre-requisite to a functioning public finance system
that is able to allocate resources to national development priorities and poverty reducing
expenditures.
7.
Energy reforms are expected to have a positive social impact by increasing the
reliability of access to electricity services in Comoros. This will particularly be the case for
households, businesses, health facilities and schools in rural areas that currently have very low
levels of supply and cannot afford to run individual generators. More predictable fiscal flows to
the electricity utility will help lower operational costs, increase reliability of electricity production
and allow it to pursue commercial recovery through improved billing and collection rates. These
measures will require more of the population to pay electricity bills than is currently the case. The
Electricity Sector Recovery Project includes a Poverty and Social Impact Analysis (PSIA) to assess
the impact on the poor – in particular related to better billing and better enforcement of payment.
The PSIA will also seek to better understand policies that could be modified to achieve the
expected results and limit negative impacts on the poor.
8.
Reforms in the telecoms sector will improve access to ICT and reduce costs, thereby
providing wide social benefits and reducing costs faced by the poor. The absence of
competition in Comoros’ telecoms sector is directly associated with the relatively high costs of
telephony, and the low access to internet services. The reforms supported by this DPO to liberalize
the telecoms sector and introduce competing service providers will reduce communications costs
and increase Comorian households’ access to ICT services. Lower communication costs will be of
social benefit in the Comoros context given the important role that connections with family
members and remittances from abroad play in the economic welfare of households.
9.
The business environment reforms will have a positive impact on small business and
entrepreneurs, and may have an associated poverty and social impact. Given that the size of
the formal economy is small, the majority of the poor that are engaged in the private sector through
micro or small enterprises do so through the informal sector. Lowering the costs for registering a
business would spur employment in this sector, support its formalization and enhance access to
credit.
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10.
The policy actions supported by this operation are not likely to have significant
positive or negative effects on the environment, forests, and natural resources. The policies
addressed by this operation focus on institutional reforms without any expected short-term direct
or indirect environmental impact. Thus, no significant adverse environmental or social impacts are
anticipated under the project.
V.
Tentative financing
Source:
Borrower/Recipient
International Development Association (IDA)
IBRD
Others (specify)
Total
($m.)
0
3.0
0
0
3.0
VI.
Contact point
World Bank
Contact: Shireen Mahdi
Title: Economist
Tel: + 263 4 701 233
Fax: + 263 4 705 935
Email: smahdi@worldbank.org
Location: Harare, Zimbawe
Borrower
Contact: Oubeidi Mze Chei
Title: Conseiller du Chef de l'Etat, Secrétaire Permanent de la CREF
Tel: (269) 338.30.82
Email: abououbeidi@yahoo.fr
VII. For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
Web: http://www.worldbank.org/infoshop
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