Comoros

Comoros continued its membership of the franc zone, on an individual country basis, after independence in 1975, with very little scope for monetary policy in such a small and open economy.

YearsTargets and attainmentClassification
1976-2017independence July 1975 (of 3 out of 4 of main Comorian islands) in context of soured relationship with previous colonial power, France, but some financial support from Arab countries; very small, poor, open economy; recurring military coups and political instability; longstanding (individual country) membership of franc zone continued under 1977 agreement, with forex reserves (initially 100%, from 1988 65%) kept in operations account with French Treasury; financial and banking system limited, single commercial bank, low access to banking facilities; federal structure with islands’ finances decentralised; Institut d’Emission (set up January 1975) with some central bank functions including rediscount facilities and limited (but a little less so from 1988) lending to government, interest rates set but rarely changed; 1979 resumption of budgetary support from France; Institut d’Emission becomes central bank (with strong French government influence) 1981, monetary instruments little changed and policy remains inactive; 1982 only commercial bank liquidated, replaced by majority French-owned bank, old development bank also liquidated and replaced; 1983 consolidation of islands’ budgets into federal operations, but increasing large fiscal and external deficits, covered in part through foreign borrowing and in part via domestic and external arrears, plus large inflow of remittances from diaspora; periodic stabilisation programmes, but implementation erratic; 1994 Comoros devalues along with rest of CFA franc zone but by 33% instead of 50%; fiscal policy remains lax, structural reforms limited; active monetary instruments are lending to government (subject to strict limits), interest rates, adjusted only rarely and with eye to French (later euro) and CFA franc zone rates, and moral suasion; 1997 emergence of separatist movements on two of three main islands, leading to five years of conflict and tension (with coup in main island) before reunification, decentralisation of power issues finally resolved several years later; reserve requirements introduced 1999, initially to encourage sole commercial bank to repatriate its foreign assets for benefit of official reserves, but later become main monetary instrument, in context of structural excess liquidity; 2008 some improvement in central bank autonomy, two new foreign-owned banks established; by 2010s political conflicts largely reduced and fiscal deficits under better control; by end of period some discussion of modernising monetary policy operations, but substantial financial infrastructure changes required first; statistical data initially very poor, remain pooraugmented exchange rate fix AERF

Selected IMF references: Comoros: Economic Situation, November 1977, pp19-21, 24, 32; RED 1979 pp18-20; RED 1981 pp34-5, 40; RED 1985 pp21-2, 33-8; RED 1989 pp25-6, 27-9; RED 1994 pp26-8; SR 1997 p17; SR 2000 pp5-11; RED 2001 pp5, 11; SISA 2004 pp33-6 40-3; SISA 2006 pp5-6; SR 2008 pp18, 26-7; SR 2015 pp4, 12; SI 2016 pp11-14; SI 2018 pp27-9.

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