Washington — The World Bank Board of Directors approved today a $10 million development policy financing (DPF) grant to protect the poor and vulnerable by supporting the Government's immediate COVID-19 response program and to support reforms that will help economic recovery and enhance resilience in the future. The DPF will also help the Government meet emerging fiscal and external financing gaps resulting from the pandemic, as the country experiences lower remittance inflows, a reduction in export earnings (especially tourism-related), and lower fiscal revenues at the same time that public expenditures are growing.
"The global health crisis poses several risks to Comoros' social and economic development, with a decrease of remittances, job losses caused by social distancing and lock-down measures, and disruptions in public services and international trade", said Boubacar Walbani, Resident Representative, Comoros. "This operation seeks to strike a balance between the immediate needs generated by the COVID-19 crisis and the medium-term structural reforms necessary to restore growth."
This operation supports the Government's emergency response to the pandemic as well as structural reform measures to foster a resilient recovery. The operation is structured around two strategic pillars: 1) protecting poor and vulnerable households and enhancing the resilience of firms; (2) strengthening policies and institutions for rebuilding better.
Policy commitments made by the Government in the context of this operation include: (i) a reduction of total customs duties and taxes (30% to 10% reduction) on selected food and medical products till December 31, 2020; (ii) the establishment of a national social registry for social safety net (SSN) program beneficiaries; (iii) a tax deferral of three months for large firms and nine months for micro, small, and medium enterprises; (iv) a restructuring of the National Company of Post Office and Financial Services (SNPSF), beginning with the separation of its postal and banking activities; (v) the promulgation of a law on payment services; (vi) the publication on the Central Bank's website of a semi-annual statistical bulletin on debt, including domestic and external debt and publicly guaranteed debt; (vii) and the creation of a fast-track lane for perishable, sensitive, and dangerous goods as well as joint inspections by the customs authority and the INRAP. These measures represent a sub-set of the Government's broader long- term agenda, the Plan for Emerging Comoros, which, in turn, addresses some structural obstacles for economic transformation and job creation in Comoros.
"This operation aims at mitigating long-standing fragility-related risks by supporting relief measures but also policy actions that would strengthen government trust and renew the social contract. Indeed, measures aiming to increase SSN efficiency, debt transparency and financial stability help build trust and legitimacy in the country's institutions. This support is critical since the current crisis could exacerbate fragility-related risks, hindering recent progress", said Jose Luis Diaz Sanchez, Country Economist for Comoros and Task Team Leader of the operation.
This operation, which addresses external and fiscal financing gaps created by the pandemic, is carefully sized to complement the financial support provided by the International Monetary Fund (IMF), other multilateral banks and bilateral donors. Participation in the Debt Service Suspension Initiative (DSSI), in turn, should strengthen the country's fiscal performance, improve debt sustainability and enhance transparency.
This operation is part of the World Bank Group response to address the impact of the COVID-19 pandemic in Comoros that comprises the adjustment of the ongoing portfolio, including the activation of Contingent Emergency Response Components of its portfolio to support the Government's health and social response and support to micro, small, and medium enterprises.
World Bank Group COVID-19 Response
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs.
The World Bank Group is making available up to $160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.
PRESS RELEASE NO: 2021/069/AFR