20100629
afrol

Economic and political reforms in Comoros have reached such a stage that the island nation now was ready to "start receiving debt relief," according to a decision by the IMF.

The International Monetary Fund (IMF) and the World Bank today "determined" that Comoros had taken the necessary steps to reach its so-called "decision point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative."

In practical terms, this means that the archipelago now is cleared by the two institutions to engage in debt relief negotiations with its creditors. In a normal situation, this should lead to a debt cancellation of US$ 144.8 million for Comoros, according to IMF calculations.

The IMF Mission Chief for Comoros, Mbuyamu Matungulu, said that the main progress made in economic and political reforms in Comoros had been made "in the last two years."

Authorities had managed to meet IMF benchmarks "despite challenging circumstances," Mr Matungulu added. Given these reforms, economic growth was now on an upwards trend, public finances were on a firmer footing and better managed, he said.

Comoros has struggled to gain political stability and economic growth ever since independence, but since 2001, a peace agreement has kept the situation on the archipelago mostly calm. Economic growth this decade lagged far behind the African continent, but was still better than in any other decade after independence.

Now, a major debt relief could secure real economic growth in Comoros if there is no return to political instability. According to Johannes Zutt, World Bank Country Director for Comoros, today's decision may open many new doors to the Comorans.

Debt relief would "free up resources to provide health care, education and other essential services to improve the livelihoods of Comorans, especially the poor," Mr Zutt holds.

But debt relief would also enable the government "better to implement the economic reforms that are needed to support sustainable growth in Comoros," he advised. Mr Matungulu added that "fiscal discipline and the acceleration of public utilities reform" were necessary to secure the nation's fragile growth.

Now, Comoros will have to enter negotiations with major creditors and donors to assure that as much as possible of its debt is cancelled. The decisive result will be that of the so-called "Paris Club" group of large creditor nations, mostly defining the conditions given by all major creditors.