The Comorian 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. Surprisingly from the domestic instability, the Comorian 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 Comorian francs value.
POLITICS: Comoros was formerly known as the Federal Islamic Republic of Comoros. Comoros is known for political instability with 20 plus coups or attempted coups since independence from France in July 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. In 2009, further constitutional amendments were implemented.
ECONOMY: fragile as the economy is isolated with minimal 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. Agricultural employs 80 percent of the labor force and accounts for 40 percent of GDP. Comoros is a food importer (rice). Exports include vanilla, perfume oil, copra while imports consist of 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. Major industries for the Comorian economy include tourism, remittances, perfume distillation, agriculture, cloves, vanilla (world’s number 2 producer), and perfume essences as Comoros is a producer of ylang-ylang, copra. Foreign economic aid accounts for 9 percent of GDP with Gulf countries recently pledging financial grants to Comoros.
Economic Statistics
Total GDP as measured by purchasing power parity at 800 million USD (2010) with corresponding GDP per Capita at 1,000 USD. Market priced GDP is at 530 million USD (2010). Real GDP growth for 2010 was 2.1 percent of GDP, 2009 at 1.1 percent. Inflation for 2010-11 at 3 percent, year 2009 at 4.8 percent. Current account is in a large deficit position at 10.2 percent of GDP, 2011-12 projected at 12 percent. Trade shortfall at 110 million USD (2006). Unemployment at 20 percent.
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, electricity – balanced with production & demand. 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 any time – year 2005 where 10,000 people fled their homes, young and rapidly increasing population with few natural resources - oil dependent, foreign grant reliance, Comoros must rely on food imports - rice, inadequate infrastructure, tropical storms & fire, environmental issues.
BANKING SYSTEM: dramatic change with micro-finance lenders now in place. Foreign exchange reserves as of January 2010 at 112 million USD. 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 and Turkey are 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.
CURRENCY: ISO Symbol ‘KMF’, Comorian franc, Comoros franc. At time of review on June 7, 2011, the Comorian franc was valued at 335.64 KMF to 1 US-dollar (‘USD’). The exchange rate regime is currency peg to the Euroland euro since January 1999 at 491.96775 KMF to 1 EUR.
CURRENCY HISTORY: the exchange peg to the French franc throughout most of the 1990’s provided exchange rate stability to the Comorian franc: Historical currency quotes include: year 2007 at 361 KMF to 1 USD, 2006 at 392 KMF, 2005 at 395 KMF, 2004 at 396 KMF, 2003 at 436 KMF, year 2002 at 523 KMF to the USD, 2001 was at 550, January 2000 at 485.44, year 2000 at 534, year 1999 at 462 KMF and 1998 at 443, year 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, Comorian franc was tied into the French Franc zone (not the CFA franc zone) at an exchange valuation of 50 KMF to 1 FRF. Beginning January 12, 1994, the Comorian franc was devalued to 75 per French francs (FRF). Market exchange rates differ to the official rates, in January 2002 the black market rate for the Comorian franc was at 557 KMF to the USD.
CURRENCY FORECAST: inherent currency risk is very high for the Comorian 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 sustains a period of weakness. good news is that the euro peg has stabilized interest rates and kept inflation low for Comoros which helps to foster an economic climate for creating wealth.
