Comoros Public Expenditure Review: Addressing Fiscal

Comoros, a three-island archipelago in the Indian Ocean with a population of roughly 850,000, faces mounting fiscal pressures that threaten macroeconomic stability and investor confidence. A landmark World Bank Public Expenditure Review has now laid bare the structural inefficiencies draining the government's budget—and mapped a roadmap for reform that could reshape the nation's growth trajectory through 2030.

## What is Comoros' core fiscal challenge?

The World Bank review identifies chronic budget deficits driven by inefficient spending, weak revenue mobilisation, and a bloated civil service payroll relative to GDP. Government expenditure routinely exceeds domestic revenues, requiring persistent external financing. This fiscal squeeze crowds out productive investment in education, healthcare, and infrastructure—the very sectors needed to lift incomes and reduce poverty across the islands. For investors, persistent deficits signal currency pressure, inflation risk, and potential debt-sustainability concerns.

Comoros' debt-to-GDP ratio has climbed above 60%, leaving limited fiscal space for countercyclical spending during economic shocks. Tourism, fishing, and vanilla exports—the economy's pillars—are vulnerable to climate volatility and global price swings, yet the government's tax base remains narrow and inefficiently collected.

## How does the World Bank propose restructuring spending?

The expenditure review recommends a three-pillar approach: (1) **revenue enhancement** through improved tax administration, broadened tax bases, and stronger customs enforcement; (2) **efficiency gains** by rightsizing the civil service, eliminating ghost workers, and redirecting savings to high-impact social spending; and (3) **capital reallocation** toward climate resilience, digital infrastructure, and blue economy sectors where Comoros holds comparative advantage.

Critically, the Bank argues that Comoros must shift from consumption-heavy budgets to investment-led growth. Current expenditure prioritises wages and debt servicing (roughly 70% of the budget), starving development projects. A recalibration could free 3–4% of GDP annually for productive spending—enough to meaningfully accelerate growth if paired with anti-corruption measures and improved public financial management.

## What does this mean for investors and the private sector?

Fiscal consolidation, if executed credibly, creates a more stable macroeconomic environment. Lower deficits reduce currency depreciation risk, stabilise inflation expectations, and improve debt affordability for the government—lowering sovereign risk premiums. This de-risks long-term investments in tourism, agriculture, and renewable energy.

However, short-term implementation risks are real. Reducing the civil service payroll—where roughly 40% of government spending is absorbed—will face political resistance. Revenue reforms require functional tax administration capacity that Comoros is still building. Investor patience depends on sustained policy commitment, transparent progress reporting, and World Bank programme monitoring.

The review also flags climate vulnerability: rising seas threaten infrastructure and tourism assets. Investors should factor adaptation costs into project appraisals. Conversely, Comoros' exclusive economic zone and tuna stocks offer blue economy opportunities if governance improves.

**Bottom line**: Comoros' fiscal review is not mere bureaucratic exercise—it is a stress test and a road map. Countries that execute public expenditure reforms unlock GDP growth of 1–2 percentage points annually and attract FDI. Those that delay face currency crises and capital flight. The next 18–24 months will be decisive.

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