COMOROS, THE COUNTRY DEBT-RELIEF LEFT BEHIND

UNCLAS ANTANANARIVO 000757

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/E AND AF/FO
PARIS FOR D'ELIA
TREASURY FOR FBOYE
TREASURY FOR IMF EXECUTIVE DIRECTOR MEG LUNDSAGER
TREASURY FOR WORLD BANK EXEC DIRECTOR ELI WHITNEY DEBEVOISE

E.O. 12958: N/A
TAGS: EFIN IBRD IMF ECON EAID PREL CN
SUBJECT: COMOROS, THE COUNTRY DEBT-RELIEF LEFT BEHIND

REF: A) ANTANANARIVO 681 B) ANTANANARIVO 615


1. (SBU) SUMMARY: One of the world's poorest Muslim democracies,
the Union of the Comoros has a stock of debt equal to 70 percent of
GDP. If not for an annual influx of over USD 12 million in
remittances from Comorans living abroad, the tiny country of 700,000
mostly subsistence farmers would face persistent humanitarian
crisis. Renowned, if at all, for political instability, the Comoros
is also bereft of economic opportunity. Post encourages the
Department and interagency colleagues to consider debt relief for
the Comoros as early as possible. END SUMMARY.


2. (U) The moderate Muslim democracy of the Union of the Comoros has
a bilateral and multilateral debt totaling USD 280 million; this is
70 percent of the tiny country's GDP. The democratically-elected
Union President Ahmed Abdallah Sambi is currently preoccupied by
Anjouan island renegade Mohamed Bacar, who has brought the country
to the brink of a new secession (reftels). Otherwise, President
Sambi's main concern is finding resources to pay civil servant
salaries and make debt payments - little or nothing is left for
public services and capital investment.


3. (SBU) During the early years of the Heavily Indebted Poor
Countries (HIPC) program, the Comoros was in crisis. Anjouan's
secession in 1997 plunged the country into chaos, but a subsequent
reconciliation and new Constitution restored order. When Sambi was
inaugurated in May 2006, it was the first peaceful and democratic
transfer of power since independence in 1975. Following the free
and fair 2006 Union President election, the IMF put the country on
track for HIPC relief and granted an extension in December. The new
Anjouan crisis has let many would-be donors off the hook to help the
Comoros. Over USD 200 million "pledged" at a December 2005
conference in Port Louis remain mostly empty promises; sadly, the
U.S. is among the countries that has not fulfilled its pledges. The
IMF announced in June it was delaying discussion of HIPC relief or a
full program pending resolution of the Anjouan crisis. The
Multilateral Debt Relief Initiative (MDRI) is also stalled for
Comoros, as it is contingent on HIPC.


4. (U) The Comoros' history of instability has also left the country
among a tiny group of "pariah" nations that do not qualify for the
African Growth and Opportunity Act (AGOA). With a small workforce -
the total population is a mere 700,000 people - and awful
infrastructure, investment is almost nonexistent. The economy has
thus been moribund for the three decades since independence,
averaging little more than two percent annual GDP growth.
Agriculture exports of ylang-ylang (a perfume essence),vanilla, and
cloves provide 90 percent of export earnings and these three
commodities make up 40 percent of GDP.


5. (U) Outside the plantations for cash crops, most Comorans survive
on subsistence farming and fishing. Almost all formal sector jobs
are in the Union Government or the three Island Governments.
Comorans are not starving, but are bereft of opportunity. The
economy floats above crisis on a tide of remittances from Comorans
living abroad; this is estimated at over USD 12 million per year.


6. (U) In 2006, the Comoros ranked 132 out of 177 countries on the
United Nations' Human Development Index (HDI),and GDP per capita
appeared high at USD 1,943 (Purchasing Power Parity). These data,
however, belie an undeveloped economy where Comorans work for a
dysfunctional government, toil in subsistence farming and fishing,
or bide their time until they can escape. All the while
life-sustaining remittances pour in to pay for the imported consumer
goods.


7. (U) In the absence of opportunity in their country, young
Comorans express one desire: to emigrate. Our conversations with
students at the American Corner at the University always center on
the lack of scholarship opportunities for study abroad. Failing to
find means to study in Europe or the United States, many young
Comorans accept offers for "religious study" in Egypt, Pakistan,
Iran, and Saudi Arabia.


8. (SBU) Some of these students, like recent Embassy International
Visitor Hayati Hassani, who studied in Cairo, gain an excellent
education and perfect their English and Arabic language skills.
Hayati returned to the Comoros to join the Ministry of External
Relations and is one of our best contacts. Other students, however,
are radicalized while abroad and return to home with an agenda most
Comorans find troubling. Muslim elders report young returnees
teaching a perversely aggressive and anti-Western version of
"Islam." The Comoros' most infamous export, Harun Fazul, was
radicalized after leaving home and is now a wanted Al-Qaeda

terrorist.


9. (SBU) COMMENT: If programs are halted in light of the continued
intransigence of Anjouan's Bacar, the whole Comoran population will
be held hostage. Post strongly supports the notion of Comoran
unity, but also believes development programs on the free islands of
Grande Comore and Moheli should move forward immediately. We ask
the Department and interagency colleagues to consider and support
HIPC and MDRI debt relief at the first opportunity. The Union
government must have the burden of debt lifted if it is to achieve
anything meaningful for the people of Grande Comore, Moheli and,
eventually, Anjouan.
END COMMENT.

SIBLEY