Comoros - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Despite some improvement in debt sustainability indicators (compared to the 2024 Debt Sustainability Analysis), Comoros’ risk of external and overall public debt distress remains assessed as high, mainly due to persistent liquidity constraints and recurrent as well as unresolved legacy external arrears. Nonetheless, debt is assessed to be sustainable, including over the medium term, contingent on continued fiscal consolidation and reliance on highly concessional financing. Under the baseline scenario, one of the four external debt burden indicators—the external debt service-to-exports ratio—breaches its threshold in 2029, albeit one-off and marginal. Under stress tests scenarios, two indicators—the present value of debt to exports ratio and debt service to exports ratio—breach their thresholds. Though consistent with a moderate external risk rating, staff apply judgment to maintain a high risk rating given: (i) structural liquidity vulnerabilities rooted in low revenue mobilization, no market access, limited fiscal buffers, and a dependency on external inflows; (ii) recurring external arrears, with successive breaches of the corresponding continuous quantitative performance criterion under IMF’s Extended Credit Facility (ECF), reflecting persistent weaknesses in liquidity and debt management; and (iii) elevated macroeconomic and climate vulnerabilities. Mitigating factors include the authorities’ reform agenda supported by the ECF and World Bank Development Policy Operations (DPOs), as well as the consistently strong performance of remittances, which supports external sustainability. The overall assessment is contingent on: (i) progress in domestic resource mobilization and sustained fiscal consolidation, (ii) avoidance of additional non-concessional borrowing, and (iii) stronger financial oversight of SOEs. Stress tests suggest that Comoros’ external debt remains susceptible to export and contingent liability shocks.