The Comoran franc is national currency for the islands that make-up Comoros. The current environment is indeed challenging with economic constraints coupled with on-going political concerns. As recently as September 23, 2003, three people were detained and arrested for an attempted coup. Surprisingly from the domestic instability, the Comoran franc over the last 5 years from our research has not crashed but rather traded in a fairly stable range against hard currencies. But will this continue or will the market price in a higher exchange rate reflecting devaluation concerns? Below is a snapshot with relating facts to the Comoran francs value.
POLITICS: President Azali Assoumani since May 2002 for the new federation now called ‘Union of Comoros’. Comoros was formerly known as the Federal Islamic Republic of Comoros. Coup plagued Comoros is known for political instability with 20 coups or attempted coups since independence from France in 1975 along with current tensions of a separatist movement on the island of Anjouan. Democratic political institutions were restored at the end of 2001 after three years of instability with the reunification of Comoros after the islands of Anjouan and Moheli declared independence from Comoros in 1997. Some Comorians believe that a connection with France results in continued political instability and violence. A draft constitution approved by the voters in December 2001 was implemented where greater autonomy to each of the three islands, each island will have their own president. In addition, a national president elected for four years on a rotating basis from each island will take hold.
ECONOMY: fragile as the economy is isolated with no foreign direct investment. The country survives on few industries but heavily from approximately 150,000 Comorians living abroad who send money/transfers back home to Comoros. Exports include vanilla, perfume oil, copra while imports consist of rice, petroleum, cement, consumer goods. Foreign aid support is required to maintain positive GDP growth rates. Tourism accounts for 25,000 visitors a year, if political stability were to take hold, this figure could easily double. Foreign aid accounts for 9 percent of GDP. Major industries for the Comorian economy include tourism, remittances, perfume distillation, agriculture, cloves, vanilla (world’s number 2 producer), perfume essences as Comoros is a producer of ylang-ylang, copra, fruity and economic aid.
Economic Statistics
GDP as measured by purchasing power parity is at $441 million USD (2002) with correspoinding GDP/Capita at $700 USD. Market priced GDP is at $256 million USD (2002). GDP growth for 2002 was 2.5 percent of GDP, year 2001 at 1 percent. Real GDP growth with 1998 declining by 0.5 percent, 1999 fell by 1.4 percent, year 2000 growth fell 1.1 percent due to lower foreign aid and domestic instability. Inflation for 1999 at 3.5 percent, 2000 at 4.5 percent, 2001 inflation at 9 percent, 7 percent in 2002. Inflation from 1996-01 averaged 3 percent. Current account deficit came was balanced in year 2000, a significant improvement from 1995-97 when the deficit reached 9.5 percent of GDP. However, year 2001 the pattern reversed with a shortfall of 5 percent of GDP. Fiscal deficit for year 2001 was at 7 percent when excluding grants. External debt at $230 million USD (2000). Short term debt is at $24.2 million USD equivalent. Agriculture accounts for 40 percent of GDP. Unemployment is at 20 percent. Foreign aid per capita is at $48 USD with contributions from France, European community and some Arab states.
POSITIVE: significant trade partners include France and the United States, modest growth of domestic credit & broad money growth, geothermal energy is considered a future possibility. CONCERN: Mount Kartala is an active volcano (7920 feet vertical) on the main island of Grand Comore is sending signals of a serious eruption at anytime, young and rapidly increasing population with few natural resources - oil dependent, Comoros must rely on food imports - rice, inadequate infrastructure, tropical storms, few telephones, environmental issues.
BANKING SYSTEM: year-end 2000 gross official reserves increased to 8 months of import coverage although declining modestly to 7 months in 2001. Banque Centrale des Comores was established in 1981 and is responsible for the nation’s banking system. Foreign banks have branches within Comoros including France’s BNP. On January 1, 2000, the Central Bank of Comoros introduced a flexible interest rate policy linking rates for the single commercial bank to those prevailing in the euro zone.
REGIONAL ANALYSIS: Indian Ocean, Tanzania, Mozambique
Strategic location as Comoros lies within international shipping lanes. Economically, Comoros has very little to do with local countries except for the import of oil from Tanzania, France is Comoros’ major trade partner.
KNOWLEDGE: Comoros during its history survived on plantations for agricultural production. French conglomerates ran the economy and those Comorians privy to being well connected. The companies raped the country of its wealth rather than re-investing the profits back into the infrastructure and to the people. Consequently, Comoros today is not self-sufficient in food production, it relies on food imports including its staple rice.
CURRENCY: ISO Symbol ‘KMF’, Comoran franc, Comoros franc. At time of review on September 25, 2003, the Comoran franc was valued at 426.25 KMF to 1 US-dollar (‘USD’). Since January 1, 1999 with the inception of the euro, the Comoran franc was accordingly pegged to the euro at a rate of 491.97 KMF to 1 EUR. Market exchange rates differ to the official rates, in January 2002 the black market rate for the Comoran franc was at 557 KMF to the USD.
CURRENCY HISTORY: the exchange peg to the French franc throughout most of the 1990’s provided exchange rate stability to the Comoran franc: the exchange in 1997 at 437.75 KMF to 1 USD, 1996 at 383.66, 1995 at 374.36, 1994 at 416.40, 1993 at 283.16, year 1991 at 272. From 1979 to 1994, Comoros participated in the African Franc zone, during the 1980’s the exchange link was tied to the French franc at 50. Beginnning January 12, 1994, the Comoran franc was devalued to 75 per French francs (FRF) from 50 per FRF at which it had been fixed since 1948. Average valuation for year 2002 at 523 KMF to the USD, 2001 was at 550, January 2000 the exchange was 485.44 to the USD and averaged 534 for year 2000, year 1999 at 462 KMF and 1998 at 443.
CURRENCY FORECAST: since the KMF is linked to the euro, the KMF has also appreciated versus the USD thanks in part due to the euro’s significant appreciation versus the misaligned overvalued USD over the last couple of years. Regionally, if the CFA franc (common currency for several African countries) devalues again, the KMF will appreciate making Comoran exports more expensive to areas of mainland Africa. And if the euro continues to appreciate which is most likely in year 2004 versus the USD, the KMF may appreciate relative to neighboring currencies in Tanzania, Kenya, South Africa, etc. Inherent currency risk is very high for the Comoran franc with such a weak and fragile economy mixed in with a delicate political picture. The KMF may again have to be pegged at a higher rate - further devaluation to Comoros if the economy remains weak is likely. UPDATED: September 25, 2003
