PESA
Trade and Regional Integration in the Comoros: FY2019/20

Trade and Regional Integration in the Comoros: FY2019/20

The Comoros’ exports have been growing slower than imports during the period from 2015 to 2018. This has not affected Comoros’ gross official foreign exchange reserves. The growth in imports has led to deterioration of the Comoros’ current account balance. The Comoros is still heavily dependent on agriculture-based exports which are also its top traded goods with its neighbours in the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC). In addition, the Comoros is highly integrated in the COMESA and SADC regions albeit unbalanced due to its low levels of intra-regional exports and high levels of intra-regional imports from both regions. The Comoros might want to rationalise its membership in the regional economic communities given that it is seemingly more highly integrated within SADC. This suggests that there is significant room to increase Comoros’ exports to COMESA and SADC; and balance or rationalise its membership in these regional economic communities.

 

Figure 1: Merchandise Trade Balance in the Comoros (2015-2018)

Merchandise Trade Balance in the Comoros (2015-2018)

Source: UNCTAD 2019, UNCTADStat Database.

 

Total merchandise imports to the Comoros have increased to USD 300.5 million in 2018, from an annual average of USD 228.2 million from 2015 to 2017[1]. Exports increased to USD 52.0 million in 2018 from an annual average of USD 29.1 million from 2015 to 2017[2]. The slower growth in exports has not assisted to improve the Comoros’ growing merchandise trade deficit to -USD 248.5 million in 2018 from an average of -USD 199.1 million from 2015 to 2017[3]. The slower growth in export earnings has not affected gross official reserves due to the slight appreciation of the KMF.

 

Figure 2: Gross Official Reserves in the Comoros (2016-2022)

Gross Official Reserves in the Comoros (2016-2022)

Sources: IMF 2019a, Comoros Request for Disbursement Under the Rapid Credit Facility; IMF 2018, Comoros 2018 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.

 

Gross official foreign exchange reserves increased to USD 213.8 million in 2018 from an annual average of USD 190.7 million from 2015 to 2017[4]. During this period, the KMF appreciated by 8.8% in 2018 to KMF 400.4 per USD (2017: 2.0%)[5]. The appreciation in the currency has driven growth in imports following the significant depreciation in 2015. The KMF depreciated by an annual average of -4.9% from KMF 443.4 per USD in 2015 to KMF 435.7 per USD in 2017[6]. Gross official reserves are projected to decrease to USD 197.3 million in 2019, which is equivalent to 5.6 months’ import cover[7]. In the forward-looking medium-term from 2020 to 2022, gross official reserves are projected to increase to an annual average of USD 195.3 million (approx. 5.3 months’ import cover)[8]. The faster growth in imports has widened the persistent current account deficit.

 

The Comoros’ current account balance deteriorated to a deficit of -USD 46.8 million in 2018, from a deficit averaging -USD 23.4 million from 2015 to 2017[9]. In addition to the growth in merchandise imports, which deteriorated the current account balance, demand for services imports also increased to further deteriorate the merchandise trade deficit. Services imports increased to KMF 44.7 million (approx. USD 111,638.4) in 2018 (2017: KMF 41.3 million; approx. USD 94,790.0)[10]. The current account balance is projected to deteriorate further to a deficit of -USD 92.0 million (approx. -7.7% of GDP) in 2019[11]. In the forward-looking medium-term from 2020 to 2022, the current account balance is projected to moderate to a deficit averaging -USD 82.9 million (approx. -6.2% of GDP)[12].

 

Figure 3: Current Account Balance in the Comoros (2016-2022)

Current Account Balance in the Comoros (2016-2022)

Sources: IMF 2019a, Comoros Request for Disbursement Under the Rapid Credit Facility; IMF 2018, Comoros 2018 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.

 

However, the Comoros’ exports are still volatile due to dependence on agricultural exports which are vulnerable to the adverse impact of climate change. For example, 2019 exports should be severely affected by the most recent Cyclone Kenneth which hit the Comoros in April resulting in fatalities, destruction of infrastructure and agricultural crops[13]. Spices such as vanilla, cloves and ylang-ylang constituted 77.2% of the Comoros’ total export earnings in 2018 which has decreased from the average of 83.1% from 2015 to 2017 (2014: 85.9% of exports)[14]. In spite of this concentration of exports, the Comoros is highly integrated in terms of regional trade with neighbouring countries in COMESA and the SADC but its trade is unbalanced.

 

The top export from the Comoros to COMESA is spices, which constituted 2.0% of total exports in 2018 (2015-‘17: 3.0% of total exports)[15]. The value of spice exports from the Comoros to COMESA increased to USD 1.0 million in 2018 from an annual average of USD 843,421.7 from 2015 to 2017[16].  The other top-four exports from the Comoros to COMESA are motor vehicles (1.1%), fish (1.0%), watches (0.5%) and seafood (0.2%) which contributed an additional 2.9% of total exports in 2018.  Therefore, the top-five exports constituted 4.9% of total exports from the Comoros in 2018 (2015-‘17: 5.2% of total exports)[17]. The value of the top-five exports from the Comoros to COMESA increased to USD 2.6 million in 2018 from an average of USD 1.5 million from 2015 to 2017[18].

 

The value of total exports from the Comoros to COMESA increased to USD 3.2 million (approx. 6.2% of total exports) in 2018 from an average of USD 1.8 million (approx. 6.1% of total exports) from 2015 to 2017[19]. These are poor or below-average levels of intra-regional trade given that the COMESA average intra-regional exports level was 11.9% of total exports in 2018. The COMESA intra-regional exports, meaning total exports amongst COMESA countries, as a share of total exports to the world increased from an average of 10.5% from 2015 to 2017[20]. Hence, there is room for the Comoros to increase its exports to COMESA countries.

 

Figure 4: Nominal Exchange Rate in the Comoros (2015-2018)

Nominal Exchange Rate in the Comoros (2015-2018)

Sources: IMF 2019a, Comoros Request for Disbursement Under the Rapid Credit Facility; IMF 2018, Comoros 2018 Article IV Report.

 

The Comoros’ top-five imports from COMESA are petroleum, natural gas, vegetables and shipping containers. Although these imports are diversified they constituted only 8.0% of total imports to the Comoros in 2018 (2015-‘17: 2.3% of total imports)[21]. The value of the top-five imports from COMESA to the Comoros increased to USD 23.9 million in 2018 from an annual average of USD 5.3 million from 2015 to 2017[22].

 

The value of total imports to the Comoros from COMESA increased to USD 54.1 million (approx. 18.0% of total imports) in 2018 from an annual average of USD 17.2 million (approx. 7.5% of total exports) from 2015 to 2017[23]. These are high or above-average levels of intra-regional trade given that the COMESA average intra-regional imports level was 6.5% of total imports in 2018[24]. The COMESA intra-regional imports, meaning total imports amongst COMESA countries, as a share of total imports from the world increased only from an average of 5.5% from 2015 to 2017[25].

 

Table 1: COMESA Regional Trade for the Comoros (2015-2018)

COMESA Regional Trade for the Comoros (2015-2018)

Source: UNCTAD 2019, UNCTADStat Database.

 

Hence, there is significant room for the Comoros to increase its exports to COMESA countries given the trade deficit that the country has with the region. The trade deficit may reflect the structure constraints of the Comoros’ geographic position which allows it to take advantage of its proximity to Southern and East African countries as a member of COMESA. But long-term dependence on imports for the region may slow the growth and competitiveness of Comorian exports which means the country needs to narrow the trade deficit. Therefore, there is room to increase Comorian exports to COMESA in order to rebalance trade in the region. This would also make the Comoros’ intra-regional trade balance in COMESA more equitable.

 

The top export from the Comoros to SADC is spices, which constituted 2.3% of total exports in 2018 (2015-‘17: 3.3% of total exports)[26]. The value of spice exports from the Comoros to SADC increased to USD 1.2 million in 2018 from an annual average of USD 945,477.7 from 2015 to 2017[27].  The other top-four exports from the Comoros to SADC are passenger vehicles (1.1%), fish (1.0%), watches and clocks (0.5%), and seafood (0.2%) which contributed an additional 2.9% of total exports in 2018.  Therefore, the top-five exports constituted 5.2% of total exports in 2018 (2015-‘17: 5.5% of total exports)[28]. The value of the top-five exports from the Comoros to SADC increased to USD 2.7 million in 2018 from an average of USD 1.6 million from 2015 to 2017[29]. Given the overlap in membership between SADC and COMESA, these figures and the composition of trade suggests that the Comoros is trading with the same country or group in both regions. In addition, it seems as though the Comoros is gaining more benefits from intraregional trade with SADC countries instead of COMESA.

 

Table 2: SADC Regional Trade for the Comoros (2015-2018)

SADC Regional Trade for the Comoros (2015-2018)

Source: UNCTAD 2019, UNCTADStat Database.

 

The value of total exports from the Comoros to SADC increased to USD 3.4 million (approx. 6.5% of total exports) in 2018 from an average of USD 1.9 million (approx. 6.1% of total exports) from 2015 to 2017[30]. These are very poor levels of intra-regional trade given that the SADC average intra-regional exports level was 17.9% of total exports in 2018. The SADC intra-regional exports, meaning total exports amongst SADC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[31]. Hence, there is significant room for the Comoros to increase its exports to SADC countries.

 

The Comoros’ top-five imports from SADC are petroleum (3.5%), natural gas (1.3%), vegetables (1.1%), shipping containers (1.1%) and timber (1.0%). Although these imports are diversified they constituted only 8.9% of total imports in 2018 (2015-‘17: 7.0% of total imports)[32]. The value of the top-five imports from SADC to the Comoros increased to USD 26.7 million in 2018 from an annual average of USD 15.3 million from 2015 to 2017[33].

 

The value of the Comoros’ total imports from SADC increased to USD 65.3 million (approx. 21.7% of total imports) in 2018 from an annual average of USD 49.6 million (approx. 21.7% of total exports) from 2015 to 2017[34]. These are high or above-average levels of intra-regional trade given that the SADC average intra-regional imports level was 20.9% of total imports in 2018[35]. The SADC intra-regional imports, meaning total imports amongst SADC countries, as a share of total imports from the world increased only from an average of 20.7% from 2015 to 2017[36].

 

This illustrates the reliance of the Comoros on SADC for its imports, which is above the average intra-regional trade levels. In addition, the Comoros might want to reassess the benefits to its COMESA membership given that it seemingly receives more benefit and is more highly integrated with SADC countries – in spite of the unbalanced trade. Therefore, there is significant room to increase and diversify the Comoros’ exports to COMESA and SADC. This would also make the Comoros’ intra-regional trade balance with COMESA and SADC more equitable.

 


[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 26 September 2019]; IMF 2018, Comoros 2018 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 26 September 2019].
[5] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.; IMF 2018, Comoros 2018 Article IV Report, ibid.
[6] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.; IMF 2018, Comoros 2018 Article IV Report, ibid.
[7] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.
[8] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.
[9] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.; IMF 2018, Comoros 2018 Article IV Report, ibid.
[10] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.; IMF 2018, Comoros 2018 Article IV Report, ibid.
[11] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.
[12] IMF 2019a. Comoros Request for Disbursement Under the Rapid Credit Facility; ibid.
[13] IMF 2019b. IMF Staff Completes Mission to Comoros on Possible Emergency Financial Assistance Following Cyclone Kenneth, on the International Monetary Fund Website, viewed on 4 October 2019, from https://www.imf.org/.
[14] UNCTAD 2019. UNCTADStat Database, ibid.
[15] UNCTAD 2019. UNCTADStat Database, ibid.
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.
[28] UNCTAD 2019. UNCTADStat Database, ibid.
[29] UNCTAD 2019. UNCTADStat Database, ibid.
[30] UNCTAD 2019. UNCTADStat Database, ibid.
[31] UNCTAD 2019. UNCTADStat Database, ibid.
[32] UNCTAD 2019. UNCTADStat Database, ibid.
[33] UNCTAD 2019. UNCTADStat Database, ibid.
[34] UNCTAD 2019. UNCTADStat Database, ibid.
[35] UNCTAD 2019. UNCTADStat Database, ibid.
[36] UNCTAD 2019. UNCTADStat Database, ibid.

 


Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

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