Comoros Economy

Introduction

Human beings perceive island nations to be beautiful and a place many long to escape to for sun, sea, and serenity. However, not all island nations are paradise. While some are densely populated, economically unstable, and vulnerable, others are termed as paradise on earth with their stable economy comprised of various resources. This paper seeks to discuss the economy of the African country Comoros- an island state nation. It provides various signs of economic health in the country while pointing out interesting facts about the country.

Comoros Economy

To begin with, it is critical to identify a unifying economic factor in Comoros. Most people have the perception that island nations have the US dollar as the official currency since tourist all over the world could visit the island, thus using one of the most supreme currency in the world. On the contrary, this is not the case. The Comorian Franc (KMF) is the currency used at Comoros (Quod, Naim & Adourazi, 2000). One US dollar is equal to 422.2513 KMF. In contrast with other African currencies such as the Kenyan currency (KSH), the Comorian Franc is among one of the highly devalued currencies in Africa. While the KSH has an exchange rate of one US dollar equals 100ksh, the KMF currency is four times higher. The currency devaluation that occurred in January 1994 affected the currency of countries such as Comoros affiliated with the Franc zone.

One may argue that the economy of Comoros is dependent on the exchange rates that fluctuate each day due to the devaluation of the KMF currency. The fluctuating of the exchange rates has an adverse impact on the economy of Comoros since it deters import and export activities in the island. For instance, if a businessperson wants to import a car into the island from another country, but the exchange rate increases rapidly hence, he or she may be forced to wait until the exchange rate is stable. Such occurrences have affected both the importation and exportation of major commodities in Comoros. Currently, Comoros is a major exporter of commodities such as cloves, vanilla, ylang-ylang, scrap aluminium, wood charcoal, and essential oils (OEC, Comoros, 2018). Did you know that Comoros is the world’s leading producer of ylang-ylang, which is used in making perfumes and the world’s second-largest producer of vanilla? In fact, there is a likelihood that your perfume has been manufactured from ylang-ylang from Comoros.

Comoros is also a major importer of various commodities. It mainly imports fuel and cars. The importation of fuel accounts for 23% of total imports, whereas the importation of cars accounts for 18% of the total imports. Other imports include sugar, rice, fish, and cement. With the increased importation and exportation activities, the island nation has trade partners. For instance, according to (Comoros, 2018), Turkey, France, Kenya, United Arab Emirates, and Pakistan are its major import partners. In contrast, its major export partners are Singapore, Netherlands, and India. The island state has to ensure a balance in its import and export activities to avoid the occurrence of a trade imbalance. For instance, in 2016, Comoros imported goods worth $409 million and exported commodities worth $78.3million leading to a negative trade balance of $331 million (Comoros, 2018). Although the country is the 189th largest export economy in the world, negative trade balances have mainly affected its GDP.

Currently, the Gross Domestic Product (GDP) in Comoros is worth 0.65 billion dollars. The GDP represents less than 0.01% of the world economy, which is still a fragile state for the country’s economy. Looking back, the electricity crisis that occurred in 2014-2015 led to the downfall of the country’s GDP affecting its economy (Comoros, 2018). With the resolution of the electricity crisis and increased investment programs, economic growth has rose from 2.8% in 2016 to an estimated 3.4% in 2017. It is evident there is some advancement in the economic growth of the country with economic growth projected to reach 3.7% by the year ended 2018 and 4.1% by 2019.

Increased investment programs have spurred economic growth at Comoros. For instance, in 2017, the programs targeted the public sector mainly in improving the roads and national hospitals while the private sector comprised of tourism and hospitality. Again, according to Quod et al. (2000), an increased regularization of civil servant’s salaries and cash transfers from the diaspora have improved private investment, which in turn has led to an increase in the country’s GDP. In terms of supply aiding in the country’s GDP, growth relies heavily on the recovery of the primary sector whereas in terms of demand, end-use consumption drives growth primarily.

Although the recovery of the primary sector has driven the economy of Comoros, the budget position inherited by the 2016 government has affected the GDP of the island. The government elected in 2016 has endured financial constraints since the country did not have a cooperation program with the International Monetary Fund (IMF). Surprisingly, most African countries are dependent on the IMF due to their overly ambitious budgets, which they are unable to fund. Comoros is an excellent example of a country with an overly ambitious budget. The 2017-2018 budget has been criticized as over ambitious with taxes accounting for only 22.3% of the country’s GDP (Comoros, 2018). Nonetheless, inflation is stable at under 3% due to the involvement of the Comoros central bank that has been managed soundly although this does not mean that the trade balance has been stabilized. In fact, it is expected to worsen slightly due to the economic recovery. Increased cash transfers to the diaspora are expected. They will consequentially amount to 25% of the country’s GDP.

The Gross National Product at Comoros has grown over the years with increased growth expected even with money transfers to the diaspora. In 1998, the GNP of Comoros was estimated at $370 million. The per capita income has in real terms increased at an average annual rate of 3.1% with output growing at a rate of 2.6%. The population growth in the island has increased with most families relying on small-scale agriculture for their livelihood even with the low output. According to Comoros (2008), the island state has a population of more than 795,000 people who are unevenly distributed in the three major islands of Anjouan, Grande Comore, and Moheli. With comparison to the size of the country and its population size, Comoros is densely populated. There are 400 inhabitants per square kilometre in Comoros with more than half of the population comprised of children. However, with the different islands having much to offer, the dense in the island state does not only depend on agriculture for their livelihood but also depend on the ocean by conducting fishery activities.

As a small island state, Comoros economy is 28% dependent on the ocean. With the country endowed with rich cultural resources of Arabic Decent and white beaches coupled with the Indian Ocean waters, it forms a tourist destination thus generating revenue for the country. Most people are also employed in hotels located on the white beaches, which aids in minimizing the rate of unemployment in the country. The increased rate of unemployment has led to increased poverty. According to the last household survey conducted in 2004, almost 18% of the population in Comoros lives below the international poverty line of $1.9 per capita per day (Quod et al. 2000). The rate of poverty varies from one island to the other with rural areas being the most affected. The Moheli Island is the poorest with people living on $1 per capita per day. In other terms, it is the land of survival.

The dense population and increased poverty has led to the sourcing of foreign aids and increased debts. Today, the World Bank is committed to reducing the country’s vulnerability and the strengthening of its capacity and accountability. The French Aid and Cooperation fund has aided Comoros 5.7 million French Francs in funding various projects such as sustaining food production in the country and providing effective housing and education systems (Comoros, 2018). Moreover, the isolated location of the nation and the lack of any high-valued mineral resources have made it rely heavily on foreign aid. Nonetheless, this does not imply that the island state does not have any mineral related resources.

Comoros has various minerals that are used for domestic consumption. They include sand, clay, gravel, and crushed stones. Since Comoros is located in the Indian Ocean, such minerals are in plenty although they do not have any significant impact on the economy of the country. Firstly, they are only used for local consumption, hence the country does not benefit from foreign revenue acquired through the exportation of minerals such as diamond (Quod et al.2000). Secondly, Comoros does not have any trading partners who have an interest in its minerals. However, this has not isolated the country from creating economic relationships with other countries although it has little to offer. Notably, Comoros is a member of the African Union.

Comoros has an economic relationship with countries such as Pakistan, United Arab Emirates, India, China, Turkey, and the United States. Most of these economic relationships have been built based on trade. The importation and exportation of various commodities have strengthened the economic relationship between Comoros and its trading partners (US Trade Representative, 2018). For instance, with the US importing agricultural products amounting to $3 from Comoros, the two states have strengthened economic relations with the US providing aid funds to the Island state through the French Aid and Cooperation fund (US Trade Representative, 2018). Although the two states have an economic relationship, the US does not have an embassy in Comoros. The US Ambassador to Madagascar is accredited as the US Ambassador to Comoros.

In conclusion, the economy of the African country Comoros is still growing. It is not a paradise on earth. The densely populated island has poverty issues, unemployment issues, vulnerability issues, debts, and it lacks minerals that are of value. However, the country is the main exporter of ylang-ylang, wood charcoal, cloves, and vanilla. On the other hand, it is a huge importer of cars, sugar, fuel, rice, fish, and cement.

Reference

Comoros. (2018). retrieved from: http://www.worldbank.org/en/country/comoros

OEC, Comoros. (2018). OEC- Comoros Exports, Imports and Trade Partners. Retrieved from: https://atlas.media.mit.edu/en/profile/country/com/

Quod, J. P., Naim, O., & Abdourazi, F. (2000). The Comoros archipelago.

US Trade Representative (2018). Comoros. Retrieved from: https://www.state.gov/r/pa/ei/bgn/5236.htm

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