Comoros: New World Bank Report Identifies Reforms to Address Fiscal Challenges to Achieving Inclusive Growth

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For Comoros to have a fiscal policy that achieves inclusive growth, while being sustainable, the country must improve public financial management, enhance domestic resource mobilization, improve the efficiency of public health spending, and take steps to incorporate climate change and disaster risk management. Improved public financial management could generate fiscal space of up to 1.8% of GDP, which could be used to finance expenditures that will improve public service delivery, such as healthcare. This is according to the World Bank’s Public Expenditure Review (PER), launched today.

The Union of the Comoros has long struggled with modest economic expansion and fiscal issues which have had an impact on long-term growth. GDP growth averaged 2.7% from 2011–2020, resulting in per capita GDP growth averaging 0.4% over the same period. The economy has been primarily driven by consumption, fueled by remittances and tourism receipts from the diaspora. Economic activity is undiversified, characterized by a small, largely informal, private sector with limited value added.

“Limited fiscal space to address development needs is at the origin of Comoros’ low human capital and poor quality of infrastructure that in return hamper efforts to increase productivity and private sector development. Added to this is the low performance of state-owned enterprises (SOEs) that make up an important part of the Comorian economy and cause significant fiscal risks,” explains Boubacar Walbani, World Bank Resident Representative for Comoros. “The analysis presented in this PER supports the efforts of the Government of Comoros to enhance public expenditure efficiency, create fiscal space, and limit fiscal risks.”

This PER focuses on public investment and public financial management, identifying reforms that could yield fiscal and efficiency gains, and assesses the governance of state-owned enterprises (SOEs).

“An increase in public expenditure efficiency through better public investment management could yield between 0.03 and 0.15 percentage points of additional GDP growth between 2022 and 2050, and specific public financial management reforms could help increase fiscal performance by values ranging between 0.27% and 1.76% of GDP,” explains Steve Loris Gui-Diby, Senior Country Economist and lead author of the report.

The PER also focuses on possible reforms in the health sector and on disaster risk management.. Reforms in these areas could improve public service delivery and inclusive growth, helping reduce the country’s fragility.

“We have closely worked with the World Bank in the preparation of this analysis, and it provides useful guidance for government policies,” said Mze Abdou Mohamed Chanfiou, Minister of Finance, Budget, and Banking Sector of the Union of Comoros. “We are happy to be launching this insightful review and look forward to continuing to work with the World Bank to support our efforts to achieve a more inclusive growth for Comoros.”

The new report also looks at ways to accelerate reform in areas such as domestic resource mobilization,  strengthening the public financial management system, and enhancing disaster risk management. It also identifies key issues for immediate attention to improve the health of the population.

Distributed by APO Group on behalf of The World Bank Group.