Sunday, February 22, 2009

Comoros to seek more cash as debts mount

By Richard Lough, PORT LOUIS (Reuters), Thu Feb 5, 2009

The Comoros islands will need a cash injection to support the heavily-indebted country while it seeks some political stability, according to documents released by the International Monetary Fund on Thursday.

Last year's removal of one island's rebel leader in an African Union-led intervention damaged tourist arrivals and foreign investment, while the spikes in oil and food prices stung the import-dependent economy.

Last December the IMF unveiled $5.1 million dollars in emergency funding for the Indian Ocean archipelago.

In a memorandum of understanding with the IMF, the government said its primary budget deficit was projected to decline to 1.6 percent of GDP this year, compared with 2.7 percent in 2008, but debt payments would push the deficit much higher.

"In view of greater debt service obligations falling due, the fiscal financing requirements for 2009 are expected to rise to the equivalent of $25.1 million (4.8 percent of GDP)," said the document dated November 26, 2008.

"The government plans to organise a donor conference in the coming months to seek financial assurances to cover a residual gap currently estimated at the equivalent of $11.5 million (2.2 percent of GDP)," it said.

The Comoros' foreign debts are estimated at $295.6 million, according to the Economist Intelligence Unit (EIU).

Gross domestic product (GDP) grew an estimated 0.5 percent in both 2008 and the previous year, when the world economy was still buoyant.

President Ahmed Abdallah Sambi has said he plans to reduce the fiscal deficit by increasing revenues, fighting corruption, slashing the civil service work force and privatising parastatal institutions.

The global economic downturn is squeezing tourism and has pushed down the price of the country's key export commodity, vanilla.

There have been more than 20 coups, or attempted coups, in the nation of 860,000 islanders since independence from France in 1975.

The document said inflation at the end of 2008 stood at 9.6 percent. The EIU estimated the current account deficit at $18.6 million dollars in 2008 compared with $18.4 million the previous year.