Outlook for 2011-12

Following months of acrimony over the electoral calendar, political stability in Comoros has improved, although risks remain. The elections for federal president and the islands' governors have taken place in line with the deal brokered by the African Union (AU). Ikililou Dhoinine-the candidate backed by the current president, Ahmed Abdallah Sambi, and his Baobab Coalition-has won the federal election. This has lessened the likelihood of disputes over the timing of the transfer of power (which is left open-ended under the AU-brokered deal). However, further unrest could break out in Mohéli-Comoros's smallest and most marginalised island-to which the presidency is due to rotate for the first time since independence. Mr Sambi is unpopular in Mohéli and his ally's victory in an election marred by irregularities may well be seen as an attempt to circumvent a genuine transfer of power to Mohéli. Economic policy will be supported by the extended credit facility (ECF; 2009-12) with the IMF. Comoros is unlikely to meet all of the criteria for debt relief under the heavily indebted poor countries initiative but is nevertheless likely to receive full debt relief in mid-2012. Economic growth is forecast to rise to 2.5% in 2011 and 3% in 2012, supported by foreign investment from the Middle East, debt relief and strong remittances, although this is premised on a peaceful transfer of power.

The political scene

The Constitutional Court has confirmed the results of the elections for the Union president and the islands' governors. Mr Dhoinine has been elected president. Two of the three island governors are pro-Sambi. The government's national disarmament programme has made little progress. The Economist Intelligence Unit's democracy index categorises Comoros as an authoritarian regime.

Economic policy

In January the IMF completed the second review of Comoros's performance under its ECF, declaring that it had been "broadly satisfactory" but noting that numerous fiscal and structural issues remained to be addressed.

The domestic economy

The IMF estimates that real GDP growth strengthened to 2.1% in 2010, the most rapid rate since 2005. A Chinese-funded hospital is to be built in Anjouan.

Foreign trade and payments

A new, three-year fisheries deal has been agreed with the EU. Comoros has been banned from participating in the activities of the African, Caribbean and Pacific group of countries until it pay its membership arrears.

Land area

1,862 sq km, excluding Mayotte (374 sq km)

Population

691,000 (2010; IMF estimate, excluding Mayotte)

Main towns

Population in 2010 (World Gazetteer estimates)

Moroni (capital; Grande Comore): 48,543

Mutsamudu (Anjouan): 25,471

Fomboni (Mohéli): 17,130

Climate

Tropical; hot and humid in November-May; cooler and drier in May-October; weather at Moroni (altitude 59 metres): hottest month, March, 24-31°C; coldest month, August, 19-27°C; driest month, October, 84 mm average rainfall; wettest month, January, 424 mm average rainfall

Languages

French, Arabic, Comorian (derived from Swahili and Arabic)

Religion

Over 95% of the population is Muslim (mostly Sunni)

Measures

Metric system

Currency

Comorian franc (Cfr) = 100 centimes; pegged to the euro at Cfr492:EUR1

Time

Three hours ahead of GMT

Public holidays

May 1st (Labour Day); July 6th (Independence Day); November 27th (anniversary of President Abdallah's assassination); all Islamic holidays are observed in accordance with the lunar calendar; this may mean that the following dates are approximate: Mawlid al-Nabi (the birthday of the Prophet) February 15th, Eid al-Fitr (end of Ramadan) August 30th, Eid al-Adha (Feast of the Sacrifice) November 6th, Islamic New Year November 26th

Official name

The Comorian Union

Form of state

Federal Islamic republic

Legal system

Based on the Napoleonic code and sharia (Islamic law), the constitution was approved in outline by referendum in late 2001

National legislature

Each of the three islands, Grande Comore, Anjouan and Mohéli, has an individual parliament, with different numbers of seats, which are elected directly; the Union has a legislative assembly with 33 members: 24 members of parliament are elected by direct universal suffrage and nine are appointed by the three islands

Head of state

President

National government

Ahmed Abdallah Sambi won the May 2006 presidential election with 58% of the vote; this was the first time that the presidency had been revolved between citizens of different islands, as laid out in the 2000 Fomboni Accord

National elections

Elections for Union president and the governors of the three islands were held simultaneously in late 2010; the first round of voting took place in November and the second round in December; the results have been confirmed by the country's Constitutional Court; the transfer of power to the president-elect is to take place before May 26th 2011; legislative elections took place in December 2009

Main political parties

Comoros has a weak party structure; the political landscape consists of a large number of parties, mainly based on personal loyalties; political alliances are, similarly, typically geared towards supporting a particular leader; the winner of the 2006 presidential election, Mr Sambi, was a founder of the Front national de la justice, an Islamist party; he is now supported by a grouping of parties called the Baobab coalition; the Baobab coalition also secured 19 out of 24 seats in the 2009 election to the Union parliament

Union government

Union president: Ahmed Abdallah Sambi

President-: lect Ikililou Dhoinine

Vice-president in charge of agriculture, fisheries, environment, energy & handicrafts: Idi Nadhoim

Key ministers

Defence, interior & information: Ibrahima Houmadi Sidi

Education, research, culture & the arts: Fouad Ben Mohadji

Elections: Abdourahamane Ben Cheikh Achiraf

External relations & co-operation: Fahmi Said Ibrahim

Finance, budget & investment: Mohamed Bacar Dossar

Health, solidarity & gender promotion: Sounhadj Attouman

Industry, labour, employment & women's entrepreneurship: Moussa Abderemane

Justice, prisons & Islamic affairs: Mohamed Ahmed Djaffar Mansoib

Posts & telecommunications: Houdhoer Inzoudine

Public service, administrative reform, institutional decentralisation & human rights: Djazila Saindou

Governors of the islands

Anjouan (Nzwani): Anissi Chamisidine

Grande Comore (Ngazidja): Mouigni Baraka Said Soilihi

Mohéli (Mwali): Mohamed Ali Said

Central Bank governor

Vacant

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Following months of acrimony over the electoral calendar, political stability in Comoros has improved, although risks remain. The elections for Union president and the governors of the three islands have taken place smoothly, in line with the agreement brokered by the African Union (AU) in June 2010. Ikililou Dhoinine-the candidate backed by the current federal president, Ahmed Abdallah Sambi, and his Baobab Coalition-has won the federal election. This has lowered the risks of disputes associated with the date on which the transfer of power will take place; the AU-brokered agreement leaves this open-ended, saying only that Mr Sambi must step down before May 26th 2011 (12 months after his term was originally due to end). Furthermore, Mr Sambi's supporters have won the island elections on both Anjouan and Grande Comore. This could lower the incidence of disputes between the centre and island administrations-a recurring theme in Comorian politics.

Despite these improvements, risks to political stability remain. Although Mr Dhoinine is an ally of Mr Sambi, he may try to assert his independence from the president, which could lead to discord over the timing of the transfer of power. Furthermore, there is a risk of renewed unrest in Mohéli-Comoros's smallest and most marginalised island-from which Mr Dhoinine hails, and to which the presidency is due to rotate for the first time in Comoros's history (under the 2001 constitution, the Union presidency rotates between the three islands-Grand Comore, Anjouan and Mohéli-every four years). Mr Sambi is not popular in Mohéli (the opposition won three out of four seats there in the parliamentary election in late 2009, and an opponent of Mr Sambi was elected governor of Mohéli in late 2010). This has cast doubt on the credibility of the presidential primaries, which were confined to Mohéli, and which delivered a victory for Mr Sambi's favoured candidate. Indeed, Mr Sambi's opponents allege that the elections were marred by fraud. Mr Dhoinine's victory may therefore well be seen in Mohéli as an attempt to circumvent a genuine transfer of power to the island. Although there has been no unrest in Mohéli so far, there is a risk that such unrest could emerge over the next few months.

The risk of a coup-a lingering possibility in a country that has experienced 21 coups and coup attempts since gaining independence in 1975-has declined since August 2010, when the head of the army, General Salim Mohamed Amir, was placed under house arrest for his alleged complicity in the murder of a senior army officer, Lieutenant-Colonel Ayouba. General Amir's relationship with Mr Sambi was notoriously poor and his removal from office a few months before the election may have been devised to mitigate the risk of military intervention. Religious tensions remain a source of concern. There has been no repeat of the attack on the facilities of a Catholic relief organisation in 2007, but there is concern that, with such deep levels of poverty and an ineffectual government, the alienated population may turn towards a radical form of political Islam.

The second round of voting for Union president and the islands' governors took place on December 26th 2010. Mr Dhoinine-the former vice-president and the candidate endorsed by Mr Sambi-won the nationwide polls in December 2010 with 61% of the vote. Mohamed Said Fazul, a former president of Mohéli and an opponent of Mr Sambi, trailed in second place with 33% of the vote. The opposition has said that the elections were marred by ballot stuffing, the theft of voting papers and the harassment of opposition observers, and has called on the international community to reject the results. International election observers have acknowledged that there were a number of problems, particularly on Anjouan, but have pronounced the polls "generally free and fair". Voter turnout in the second round was 52.8%, compared with 67% in the primaries. In the island elections, Mouigni Baraka Said Soilihi was elected governor of Grand Comore and Anissi Chamisidine was elected governor of Anjouan; both are supporters of Mr Sambi. In Mohéli the incumbent, Mohamed Ali Said, who is an opponent of Mr Sambi, won re-election. Assuming that the transfer of power from Mr Sambi to Mr Dhoinine proceeds smoothly, it will mark the first time that the presidency has been held by a Mohélian, and only the second time in the country's turbulent history that power has been transferred through the ballot box.

Comoros-a former French colony whose currency is linked to the euro-retains strong ties with France, its main bilateral aid donor and trading partner. In September 2010 the two countries revived a military co-operation pact that was originally signed in 1978 but suspended in 1999. Although Comoros routinely condemns France's "occupation" of Mayotte (the fourth island in the archipelago, which is a French overseas territory) there is little risk that relations between the two countries will break down. Under Mr Sambi, who studied Islamic theology and political theory in Iran and is known locally as "the ayatollah", the emphasis of foreign policy has shifted towards the Middle East. These closer relations, combined with Mr Sambi's religious credentials, have raised some concern over a potential move towards a more Islamist political environment. Ties with the Middle East are expected to stay strong under Mr Dhoinine (who is expected to stick largely to Mr Sambi's policy agenda) and the region is likely to remain an important source of investment and aid. The resolution of the dispute over the electoral calendar will help to sustain Comoros's access to aid from the West, although this could change if further disruptions were to occur to the transfer of power.

The prospects for economic policy reform have improved slightly following the recent improvements in political stability. Much will now depend on whether the transfer of power proceeds peacefully (which looks increasingly likely) and whether Mr Dhoinine's government has the political will and the broad support required to push through long-overdue reforms (which is unlikely, although there are grounds for cautious optimism). Economic management will continue to be supported by the extended credit facility (ECF; 2009-12) with the IMF. The authorities will face pressure to improve the management of parastatals and rein in the civil service wage bill. Some effort will be made to find private-sector partners for the water, electricity and telecommunications utilities but progress on all fronts will be slow. Having reached decision point under the IMF and World Bank's heavily indebted poor countries (HIPC) initiative, Comoros is on track to reach HIPC completion point in mid-2012. The government is very unlikely to meet all the conditions for debt relief but some shortfalls are likely to be overlooked, and as long as the current pace of gradual progress is sustained debt relief is likely to be granted. Limited progress is expected in improving the business environment, which the World Bank ranks as one of the worst in the world. Capacity in the civil service is likely to remain weak. Membership of the Franc Zone will remain an important anchor for inflation.

The government will continue to face pressure to improve public finance management and restore fiscal discipline as conditions for reaching HIPC completion. It will be aided by interim debt relief, which will reduce its interest payments. It is also likely to make some progress (with the IMF's assistance) in improving public finance management. However, progress in reforming parastatals and curtailing the public-sector wage bill is likely to be slow. Improvements in fiscal performance will also be restricted by the small domestic revenue base-domestic revenue amounted to an estimated 14.5% of GDP in 2010-which largely reflects the high degree of informalisation. Overall, the Economist Intelligence Unit expects that fiscal discipline will be gradually restored, but the efficiency of public spending will remain weak. The fiscal deficit is forecast to moderate from an estimated 1.7% of GDP in 2010 to 1.5% of GDP in 2011 and 1.1% of GDP in 2012. Modest but chronic fiscal deficits have boosted external public debt as a ratio of GDP to roughly 50%, and the IMF has pronounced Comoros at risk of debt distress. Comoros should receive full HIPC debt relief in mid-2012, which would restore its debt sustainability towards the end of the forecast period.

Monetary policy is dictated by Comoros's membership of the Franc Zone and is geared towards sustaining its currency peg to the euro. This restricts growth in the money supply and is an important source of price stability. Since 1999 the policy interest rates set by the Banque centrale des Comores (the central bank) have been aligned to the euro overnight index average. Growth in the euro zone is expected to remain weak and we do not expect a rate rise from the European Central Bank until mid-2012. Interest rates in Comoros are therefore likely to remain low. However, this is not expected to create undue price pressure, as financial markets remain thin and the money supply, rather than interest rates, is the prime instrument of monetary policy.

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Real GDP growth is expected to rise gradually in 2011-12, although this is conditional on political stability being sustained. In 2010 growth is estimated to have increased to 2.1%, underpinned by a large rise in donor inflows and strong growth in construction, funded largely by remittances. In 2011-12, if the current pace of gradual progress in improving economic policies is sustained, foreign direct investment (FDI) from the Middle East should rise, donor engagement would be sustained, progress towards HIPC completion would continue and the development of tourism-which has been shackled by chronic political instability and poor infrastructure-could begin. In line with this, growth is forecast at 2.5% in 2011 and 3% in 2012. Further increases in growth will be difficult to achieve over the short term because of the structural constraints that Comoros faces, particularly its geographic isolation, its small domestic market and its limited supply of fertile land. Even this modest forecast is subject to risks, and growth could weaken sharply in the event of political instability, ineffectual leadership or drought. Conversely, if the government is particularly successful in entrenching political stability and attracting foreign investment, there is a small chance that growth will rise above 3% in 2012.

Comoros's membership of the Franc Zone will continue to have a restraining effect on inflation, as it limits the government's ability to print money and hence curtails the growth of the money supply. The IMF estimates that inflation moderated to 2.7% in 2010 despite higher oil prices and an increase in imported inflation caused by a weaker euro-to which the Comorian franc is pegged. This was probably driven by the 10% decline in international prices for the staple food, rice, and by the government's fuel subsidy, which would have partly offset the effect of higher oil prices. In 2011 inflation is forecast to increase to 3.5% as oil prices continue to rise (and pressure to balance the budget limits further increases in the fuel subsidy), rice prices increase marginally and the euro continues to depreciate. In 2012 inflation is forecast to moderate to 2.5% as international oil and rice prices decline by 8.6% and 4.5% respectively.

The Comorian franc has been loosely pegged to the euro at Cfr492:EUR1 over the past decade, and to the French franc before that. Comoros's foreign-exchange reserves are estimated by the IMF at a comfortable 6.1 months of import cover (well over the benchmark of three months of import cover) and are expected to remain high over the forecast period, aided in part by further interim debt relief. This should allow the currency peg to be sustained at the prevailing rate. The euro is expected to weaken further against the dollar over the forecast period, owing to fundamental fiscal problems in the euro zone. The Comorian franc is therefore forecast to depreciate from Cfr371.5:US$1 in 2010 to Cfr388.9:US$1 in 2011 and Cfr410:US$1 in 2012. There are, however, significant risks of sharp movements in either direction, notably in response to the debt crises in some euro-zone countries.

The current-account deficit will remain wide over the forecast period. Goods exports-which consist largely of ylang-ylang, vanilla and cloves-will remain extremely small and will continue to be dwarfed by imports. Export growth will be constrained by weak prices and low agricultural yields. Imports will grow less rapidly than in 2010, in line with commodity price trends, but the structural trade deficit will nevertheless continue to widen. Services exports will grow very slowly, as a record of enduring political stability will need to be established for tourism to take off. Services imports will rise in line with goods imports, leading to a growing services deficit. Income debits will fall as interim debt relief reduces the external debt-servicing requirement. Current transfers-remittances and foreign aid-will remain substantial (equivalent to over 25% of GDP) and will finance the vast majority of the trade deficit, although aid inflows are expected to fall as Western governments continue to face severe fiscal pressures. Overall, the current-account deficit is forecast to widen to 11.9% of GDP in 2011 and 12.9% of GDP in 2012, largely as aid inflows decline. This deficit will be financed in part by FDI inflows from the Middle East and credit from the IMF.

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Comoros passed a significant political milestone on January 13th 2011, when the country's Constitutional Court confirmed the results of the polls for the Union presidency, held in late December. According to the court-which ratified the results announced by the Commission électorale nationale indépendante (CENI) on December 29th-Ikililou Dhoinine, previously the Comorian vice-president and the candidate supported by the current Union president, Ahmed Abdallah Sambi, and the pro-Sambi Baobab coalition, secured 61% of the vote. Mohamed Said Fazul, the president of Mohéli from 2002 to 2007 and an opponent of Mr Sambi, secured 33%, while Abdou Djabir-a civil servant who secured his place in the second-round poll after the Constitutional Court slightly altered the vote tallies from the first round of voting, moving Bianrifi Tarmidi from third to fourth place-gained 6%. Turnout across the three islands was estimated at 52.8% of registered voters.

The polls were not without their difficulties: opposition parties claim that there were numerous irregularities in the December vote, particularly on Anjouan (Mr Sambi's power base). Alleging ballot-stuffing, the theft of voting papers and harassment of opposition observers, Said Larifou, an opposition spokesman, claimed that "the chaos was orchestrated in places where the ruling party candidate wasn't doing well in order that the results might be" annulled. "These were targeted actions". Meanwhile, Mohamed Djanfaari, the leader of the opposition on Anjouan, called on the international community and the Constitutional Court to reject the results. Observers from the African Union, the Arab League, the Organisation of the Islamic Conference and Francophonie also noted a number of problems, particularly on Anjouan, adding that CENI was "sometimes dysfunctional" and that the counting process was often opaque. Nonetheless, in a joint statement the four bodies described the poll as "generally free and fair".

Mr Dhoinine's victory marks the first time that a Mohélian politician has won the presidency since the country's independence from France in 1975. As such, it marks the fulfilment of the terms of the country's 2001 constitution-designed to address secessionist tensions and protracted political instability-under which the federal presidency rotates every four years between Grand Comore, Anjouan and Mohéli. Indeed, it was Mohélian suspicion that the island would be deprived of its "turn" at the presidency that led to riots on the island when Mr Sambi sought to extend his term from May 2010 until November 2011 (June 2010, The political scene).

Mr Dhoinine is due to be inaugurated on May 26th. The fact that he is clearly Mr Sambi's preferred choice should minimise the likelihood of any attempts by the existing administration to delay the transfer of power, and the attendant risks of increased political tensions (December 2010, The political scene). It should also minimise strains between the two men during the three-month transition period. However, this is not guaranteed: Mr Dhoinine may well want to introduce his own appointees to key posts, whereas Mr Sambi may wish to retain advisers if-as opponents believe-he wants to wield a strong influence behind the scenes. In addition, the very fact that Mr Dhoinine is so closely associated with Mr Sambi-who described the president-elect as "the only one capable of continuing what I began. He's a patriot and an upright man who will not be tempted by corruption"-suggests that he will face opposition from those suspicious of his predecessor. This in turn suggests that there is unlikely to be an immediate end to the inter-island rivalries and suspicions that have long dogged Comorian policymaking.

It is possible, however, that these rivalries will be somewhat ameliorated, given the results in the gubernatorial elections, held simultaneously with the Union polls. The Constitutional Court has also validated these results, the outcome of which is that the three governors, to be inaugurated on May 23rd, will be: Mouigni Baraka Said Soilihi (Grand Comore), Anissi Chamisidine (Anjouan) and Mohamed Ali Said (Mohéli). Both Mr Soilihi and Mr Chamisidine are perceived to be supporters of Mr Sambi and his party, and are thus expected to work broadly with Mr Dhoinine. Mohamed Ali Said ran on an anti-Sambi platform, suggesting that there could be tensions on Mohéli. This has tended to be the pattern under the federal system, with the governor (president) of the island on which the Union presidency has devolved seeking to build his own power base.

Comoros's 48-year-old president-elect, Ikililou Dhoinine, has a background in healthcare: he trained in Guinea as a pharmacist and is married to a public health professional who works in the country's anti-AIDS programme. In 2006 he was appointed by the outgoing president, Ahmed Abdallah Sambi, as vice-president in charge of health and finance. During the election campaign Mr Sambi gave Mr Dhoinine his imprimatur, commenting, "I have chosen him because he is the only one capable of continuing what I began. He's a patriot and an upright man who will not be tempted by corruption." Mr Dhoinine was also keen to emphasise the links between the two men, using a campaign poster with the caption "the link that reassures", and even adopting Mr Sambi's previous campaign song.

Unsurprisingly, therefore, the president-elect says that his programme will be a continuation of Mr Sambi's-that is, of "opening up to the outside world and stronger links to Comoros's traditional allies". He has also pledged to "strengthen the nation's unity and integrity", to continue putting the country's finances in order and to achieve the cancellation of its debt, as well as making efforts to attract foreign investors. This is likely to include a continued focus on Middle Eastern and other Islamic investors. Like his predecessor, Mr Dhoinine is described as a "diligent Muslim". More importantly, however, Islamic investors have proved willing to commit funds to a wide variety of projects-although progress in their implementation has on occasion proved slow, and attempts to woo Iran, in particular, opened up the presidency to accusations of religious bias.

Mr Dhoinine's close identification with his predecessor could also potentially cause problems, since it is likely to spark suspicions that Mr Sambi is simply trying to run the government from behind the scenes. Already critics of the president-elect are suggesting that he is Mr Sambi's "creation", with no personality of his own.

The government is rethinking its Programme national de désarmement, démobilisation et réinsertion (PNDDR; National Disarmament, Demobilisation and Reintegration Programme), according to the UN's Integrated Regional Information Networks, because of the failure to account for small arms (ranging from pistols to assault rifles) used in the 2007-08 attempt by the then president of Anjouan, Mohamed Bacar, to retain the island's presidency despite the lack of international or Union recognition of the elections (September 2007, The political scene).

The PNDDR, implemented by the central government with the support of the UN Development Programme and funded by the UN Peacebuilding Fund, estimates that there are some 400 small arms on the island, some belonging to the state military and others brought in illegally. However, six months after the start-up of the programme in June 2010, just three weapons-an assault rifle, pistol and hand-grenade-had been received.

This is problematic not just because of the implications of having a stock of weapons unaccounted for but also because disarmament has been regarded as a precursor to reintegration. Without the weapons some former combatants have been unable to enter re-skilling programmes (in areas including agriculture, mechanics and computer use). Thus, according to Ahmed Ben Said Jaffar, the director of Mr Sambi's cabinet, the disarmament and demobilisation programme will now be carried out "simultaneously", suggesting that former combatants will not have to cede weapons in order to be accepted onto rehabilitation programmes. Nonetheless, there is continuing suspicion among some former members of the Forces de gendarmerie d'Anjouan (FGA), that the missing weapons are providing a pretext for the Comorian government to withhold outstanding salaries and pensions for ex-FGA members. The risk is that ongoing problems with the rehabilitation process will alienate former soldiers, with potentially negative consequences for political stability on Anjouan.

The Economist Intelligence Unit's 2010 democracy index ranks Comoros 127th out of 167 countries, placing it among 55 countries categorised as "authoritarian regimes". This group includes 24 other African countries, including Madagascar (113th), Ethiopia (118th), Zimbabwe (146th) and Sudan (151st). In contrast, the island state of Mauritius falls into the "full democracy" category, while neighbouring Tanzania and Mozambique are classified as "hybrid regimes". Comoros's poor score on the index is underpinned by long-standing strife between the Union and island administrations, an ineffectual government, and a disillusioned electorate. Since 2008 Comoros's score has weakened following a dispute over the term of the Union president, Ahmed Abdallah Sambi. In March 2010 Mr Sambi used the parliamentary majority of the ruling, Baobab Coalition to extend his term as president by 18 months, with the stated intention of harmonising the Union and island elections. This led to unrest on the island of Mohéli, to which the Union presidency was due to rotate in May 2010. Since mid-2010 there has been some progress in resolving the dispute; the African Union has brokered an agreement between Mr Sambi and the island governments, and elections have been held in accordance with this. If the transfer of power now takes place smoothly and if the president-elect, Ikililou Dhoinine, is able to build better relations with the island administrations, Comoros's score on the democracy index could begin to improve.

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Flawed elections

Comoros scores poorly in all five categories of the democracy index. The country's highest score is in the electoral process category. Elections for the Union president and island governors were held peacefully in late 2010. Although the elections were marred by flaws, international observer groups declared that they were "generally free and fair". If the transfer of power takes place smoothly, this will mark only the second time in Comoros's history that power is transferred through the ballot box-a significant milestone for this coup-ridden nation.

Ineffective government and widespread apathy

Comoros's lowest score is for the functioning of government. Although it has four governments-the Union government and one on each of the islands-none functions particularly well. Power is heavily concentrated in the executive, capacity is weak, transparency is low, and there is limited political will to push through much needed reforms. Policymaking has also been undermined by conflicts between the Union and island governments, although this could begin to improve following the referendum in May 2009 that removed the Union and islands' shared jurisdiction over some key areas and rebalanced power in favour of the centre. The weaknesses in the functioning of government have had knock-on effects on political participation and political culture, as they have engendered widespread disillusionment with the country's political system. Civil liberties are poorly protected. A private media does exist but is subject to government interference, and judicial independence, although improving, remains weak.

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Democracy index 2010: Democracy in retreat, a free white paper containing the full index and detailed methodology, can be downloaded from www.eiu.com/DemocracyIndex2010.

Note on methodology

There is no consensus on how to measure democracy and definitions of democracy are contested. Having free and fair competitive elections, and satisfying related aspects of political freedom, is the sine qua non of all definitions. However, our index is based on the view that measures of democracy that reflect the state of political freedom and civil liberties are not "thick" enough: they do not encompass sufficiently some crucial features that determine the quality and substance of democracy. Thus, our index also includes measures of political participation, political culture and functioning of government, which are, at best, marginalised by other measures.

Our index of democracy covers 167 countries and territories. The index, on a 0 to 10 scale, is based on the ratings for 60 indicators grouped in five categories: electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture. The five categories are inter-related and form a coherent conceptual whole. Each category has a rating on a 0 to 10 scale, and the overall index of democracy is the simple average of the five category indexes.

The category indexes are based on the sum of the indicator scores in the category, converted to a 0 to 10 scale. Adjustments to the category scores are made if countries fall short in the following critical areas for democracy:

• whether national elections are free and fair;
• the security of voters;
• the influence of foreign powers on government; and
• the capability of the civil service to implement policies.

The index values are used to place countries within one of four types of regimes:

• full democracies-scores of 8 to 10;
• flawed democracies-score of 6 to 7.9;
• hybrid regimes-scores of 4 to 5.9;
• authoritarian regimes-scores below 4.

In late January the IMF completed the second review of Comoros's performance under its extended credit facility (ECF; 2009-12) programme and approved the disbursement of a further SDR1.56m (US$2.42m), bringing total disbursements under the ECF to SDR7.34m so far. Performance under the ECF has been "broadly satisfactory", according to the Fund, with economic activity accelerating (although it continues to fall short of population growth) despite the "challenging" political environment, and the authorities undertaking "prudent" debt management. However, concerns over fiscal and structural issues remain. In particular, the Fund argues that the government needs to focus on the following points.

• Revenue mobilisation and wage restraint. Although the country's fiscal performance improved in the first half of 2010, there were substantial slippages in the second half-probably at least in part a reflection of increased government spending in the run-up to the election for the Union presidency.
• Improvements in tax efficiency and customs administration. Delays in collecting taxes and implementing new fiscal measures pushed the deficit above the programme target for end-September 2010. According to a regional publication, Indian Ocean Newsletter, tax revenue fell by 6% in January-June 2010, while the authorities made little progress in collecting an estimated Cfr1.6bn (US$4.4m; roughly 7% of domestic revenue in 2010) in tax arrears from Comores télécom (Comtel). Corrective measures have since been announced, but implementation will be crucial if the fiscal programme is to be kept on track.
• The management of public utilities. Private-sector participation in the management of the telecommunications, electricity and oil-importing parastatals has long been pledged but, although the authorities have completed reform strategies for key public utilities, progress in implementing these and related measures has remained slow.
• Improving the overall business environment. Comoros ranks 159th out of 183 countries in the World Bank's 2011 Doing Business rankings, with particularly poor scores for the ease of opening and closing a business, obtaining credit and enforcing contracts (December 2010, Economic policy).
• Improvements to bank oversight. Although there have been some moves towards strengthening banking supervision, structural impediments to financial intermediation remain, including weaknesses in the legal framework and inadequate internal control mechanisms and reporting standards at banks.

The IMF built on a number of these themes in its Article IV consultation with the country, details of which were released in early February. While remaining upbeat about macroeconomic fundamentals, the Fund again asserted that progress in fiscal consolidation had been slow. The domestic primary fiscal deficit was 2.6% of GDP in 2009-little changed on the 2008 figure of 2.8%-and it is unlikely that Comoros will achieve the revised programme target of 1.6% of GDP in 2010, given delays in collecting taxes and controlling expenditure, particularly with regard to the public-sector wage bill.

There are, however, some encouraging signs, according to the Fund. For example, the authorities have requested a multi-year technical assistance programme from the International Finance Corporation (IFC) to assist with the public enterprise reform programme, and plan to issue calls for private-sector involvement in the management of Comtel and the petroleum importer, Société comorienne des hydrocarbures (SCH). However, there is some scepticism about this timetable-understandably, given experience thus far. Legislation authorising the liberalisation of the telecoms sector and the privatisation of the telecoms operator was passed by parliament in 1997, but it was not until 2004 that Comtel was split from the postal services of the state-owned post and telecommunications company, Société nationale des postes et télécommunications. The search for a strategic foreign investor remains ongoing-a reflection, in part, of fears about political interference in the running of the telecoms service and the small size of the domestic market (which seem to have limited investor interest), but also of delays on the part of policymakers.

It is hardly surprising, therefore, that the Fund cites political resistance to public enterprise reform as one of the main potential risks to a more positive economic outlook for Comoros-along with civil service pressures for higher wages and renewed political instability following the 2010 elections. It emphasises, however, that far-reaching structural reforms are necessary if Comorian growth is to be boosted from current levels of an annual average of just over 1% over 2006-10 (well below the rate of annual population growth, which has averaged 2.3% over this period).

In addition, strengthening the country's fiscal performance is a precondition for reaching completion point under the IMF-World Bank's heavily indebted poor countries (HIPC) initiative, under which Comoros reached decision point in June 2010 (September 2010, Economic policy). At present Comoros is expected to reach completion point in late 2012. External debt as a percentage of GDP and in net present value terms reached 46.2% in 2009-up from 37.4% the previous year-and remains unsustainable. The hope is that the authorities will increasingly focus on reaching completion point now that the distraction of the Union presidential election has passed; however, political in-fighting between the various islands has had a deleterious effect on economic policymaking for years, and there is little to suggest that there will be any substantial improvement in the short to medium term.

Certainly, the economic policymaking environment is unlikely to be improved by the failure to appoint a new governor of the central bank, Banque centrale des Comores (BCC). The five-year mandate of the previous governor, Amadi Abdul Bastoi, expired in September 2010, but although the outgoing president, Ahmed Abdallah Sambi, submitted a shortlist of three candidates to the BCC-the finance minister, Mohamed Bacar Dossar; the former general secretary of the ministry of finance, Ahamadi Yahaya; and Ibrahim Ben Ali, who was the BCC governor under a previous president, Azali Assoumane-none was selected. Instead, the BCC board has decided to choose a new governor at its next meeting, in June 2011.

It would appear that the BCC wants to defer its decision until after the inauguration of Ikililou Dhoinine as Union president in May, fuelling speculation that Mr Dhoinine will want to appoint an official from Mohéli. Although this may well help to minimise friction between the president and the BCC governor, it is likely to alarm the other island governments-suggesting that the transfer of power to Mohéli will do little to address the impact of mutual political mistrust on policymaking.

The IMF's reports on its Article IV and ECF consultations also contain its latest macroeconomic estimates for Comoros. These are broadly positive. According to the Fund's preliminary data, real GDP growth strengthened to 2.1% in 2010-the most rapid rate since 2005-notwithstanding the difficult external environment. This expansion was underpinned by a rebound in donor-funded public investment, a pick-up in private-sector construction (largely funded from remittances) and stronger activity in tourism, as well as an expansion of financial intermediation. The improvement in tourism, despite the global economic downturn, is a reflection of improved perceptions of political stability in Comoros, as well as greater efforts to attract tourists from outside Europe. However, it also demonstrates the extent to which Comoros is dependent on external factors, whether global growth patterns or the ability of the diaspora to send funds to their families and friends.

The authorities have long professed the wish to broaden the basis of Comorian growth, but they face a number of obstacles, including geographical isolation, the small size of the domestic market, the absence of minerals and most other high-value raw materials, and a shortage of fertile land. Thus, the IMF's projection that economic growth will rise to an annual average of 4% in the medium term-driven by stronger activity in agriculture, fishing, inter-island transport and tourism-should probably be treated cautiously. Comorian economic expansion has only twice exceeded 4% since 2000, and the country has struggled for decades to achieve sustainable growth. Indeed, the Fund itself concedes that, should international technical assistance not be forthcoming, weak absorption and implementation capacity would undermine medium-term growth prospects.

Having peaked during the 2008 food and energy crisis, inflation has moderated substantially, to around 3% in late 2010, due in part to the country's membership of the Franc Zone, which limits the government's ability to print money to finance deficits and hence curtails the growth of the money supply. Fuel prices are building, however, because of ongoing political instability in the Middle East, and international prices for the staple food, rice, are expected to rise marginally in 2010. The Economist Intelligence Unit therefore believes that the Fund's projection of an annual average rate of 3% in 2011 is likely to be exceeded, and that inflation is more likely to average some 3.5%.

A hospital with a capacity of more than 100 beds is to be built on Anjouan, following the signing of a bilateral agreement with China. The Chinese government will fund the construction of the Cfr2bn (US$5.6m) facility-the latest in a series of pledges by international governments. In 2006, for example, France announced plans to build a hospital on Anjouan, largely in order to stem the flow of medical evacuations from Comoros to Mayotte, the fourth island in the archipelago, which is a French overseas territory. However this plan was subsequently abandoned in favour of renovating an existing medical centre at Mutsamudu, the capital of Anjouan. Similarly, Arab states have expressed interest in the reconstruction of more than 40 health facilities, including three hospitals. However, there have been few signs of progress thus far (December 2010, The domestic economy).

Although construction of the facility will be welcome, if it indeed proceeds, it will not tackle the systemic problems in healthcare. There are 22 beds but just two physicians per 10,000 people, according to the UN Development Programme's 2010 Human Development Report (December 2010, Foreign trade and payments). It remains to be seen, therefore, just who is going to staff any new facility-and how well they will be paid. In 2007 medical staff at the El Maarouf hospital in Moroni-the country's main facility-went on strike in protest at the lack of equipment (including oxygen and water, as well as gloves and film for X-rays) and pay arrears. Issues such as this will need to be tackled if the country's healthcare indicators are to improve.

In November 2010 EU fisheries ministers approved the renewed protocol of the fisheries partnership agreement (FPA) negotiated with Comoros, a month before the existing protocol was due to expire. Under the new accord, which sets out the conditions and terms of access to fishing zones in Comorian waters for vessels from the EU, 45 tuna seining vessels and 25 surface longliners will have guaranteed access to Comorian fishing zones. For this the EU will pay EUR1.85m (US$2.34m) over a three-year period; of the total, EUR315,250 (US$398,749) per year relates to charges for the right of access to Comorian territorial waters, equivalent to an annual reference tonnage of 4,850 tonnes. A further EUR300,000 per year will be used to help to implement a fisheries policy for Comoros. If authorised annual catches are exceeded, the EU's financial contribution will rise by EUR65 per excess tonne. Overfishing has been a problem in the past, but this is chiefly caused by illegal fishing by non-EU vessels. Indeed, the new FPA authorises an increase in EU fishing: under the previous deal, 40 tuna seiners and 17 surface longliners were allowed to catch tuna in Comorian waters, paying EUR390,000 a year. Fishing has long been mooted as a possible means of broadening Comoros's economic base, since the sector has generally been underdeveloped. It is clear, however, that subsidiary investment-in improved processing and storage facilities, for example-will be necessary if the industry is to be strengthened.

Comoros has been banned from participating in events and activities relating to the African, Caribbean and Pacific (ACP) group of countries until it addresses the issue of membership arrears. These are substantial: ACP membership arrears totalling almost EUR147,000 have been built up between 2000 and 2009. As a result, Comorian representatives will not be allowed to attend any ACP meetings-including the ministerial sessions-and, potentially more significantly, will not receive any documents from the ACP secretariat, notably those relating to trade negotiations with the EU.