Magazine article African Business

Reforms Seek to Prune the Size of the Public Sector

Magazine article African Business

Reforms Seek to Prune the Size of the Public Sector

Article excerpt

The Comoros has had its request for assistance from the IMF accepted, in the form of a second annual credit under a structural-adjustment facility (Saf) loan for SDR1.35m ($1.9m).

Under the Saf, the IMF provides balance-of-payments financial assistance on concessional terms to support medium-term structural reforms in low-income developing member-countries.

The background of the Comoros' request for the IMF loan lies in an economic deterioration since the mid-1980s, marked by a worsening of its terms of trade, a substantial rise in arrears on domestic and foreign debt, and sizeable current-account deficits.

Rocky reform path

The government adopted an adjustment programme for 1991-93 that was supported by financial assistance under the Saf. The programme ran into trouble, however, and in the second half of 1992, the government decided to strengthen its adjustment efforts by focusing on improving its budgetary position.

Despite some success in reducing fiscal imbalances, the economic outlook at the end of 1993 remained bleak. Economic growth was below the increase in population for the fifth straight year, and unemployment was rising.

Along with other members of the Franc Zone, the Comoros decided to agree to a devaluation of the Comorian franc against the French franc in January of this year.

The government's main objectives for 1994-96 are to lay the basis for sustainable economic growth and improved employment opportunities, while returning to price stability and external viability.

GDP growth

These objectives call for a speeding up of real economic growth to about 4% during the period. Inflation is to be held at an average of about 4% in 1995/96, and the current-account deficit is to be brought down to less than 15% of GDP by 1996.

The government's strategy to meet these goals rests on improving the Comoros' competitiveness through the recent devaluation, on following prudent fiscal policies and on accelerating structural reform to reduce the size of the public

sector and improve the conditions for private-sector development. …

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