Economy of Comoros

The economy of the Comoros is based on subsistence agriculture and fishing. Comoros has inadequate transportation links, a young and rapidly increasing population, and few natural resources. Agriculture, including fishing, hunting, and forestry, is the leading sector of the economy. It contributes 40% to GDP, employs 80% of the labor force, and provides most of the exports. The government is working to upgrade education and technical training, to privatize commercial and industrial enterprises, to improve health services, to diversify exports, to promote tourism, and to reduce the high population growth rate. Continued foreign support is essential if the goal of 4% annual GDP growth is to be met. At 24 percent of GDP, remittances constitute an important source of inflows for the Comorian economy.

Top Sectors in Comoros

Agriculture, fishing, and forestry in Comoros

Agriculture, involving more than 80% of the population and 40% of the gross domestic product, provides virtually all foreign exchange earnings. Services including tourism, construction, and commercial activities constitute the remainder of the GDP. Plantations engage a large proportion of the population in producing the islands' major cash crops for export: vanilla, cloves, perfume essences, and copra. The Comoros is the world's leading producer of essence of ylang-ylang, used in manufacturing perfume. It also is the world's second-largest producer of vanilla, after Madagascar. Principal food crops are coconuts, bananas, and cassava. Foodstuffs constitute 32% of total imports.

Industry in Comoros

Principal industries are those that involve processing cash crops for export: preparing vanilla and distilling ylang ylang into perfume essence. These activities were once controlled almost entirely by French companies, but as they closed unprofitable plantations, individual farmers set up many small, inefficient distilleries. Comorans also produce handicrafts for export. Other industries are small and geared to internal markets: sawmills, printing, carpentry, and the production of shoes, plastics, yogurt, handicrafts (such as the jewelry exchanged as part of the grand marriage), and small fishing boats.

Comoros - Key Economic Indicators

Exports and Imports

The Comoros relies heavily on agriculture, particularly vanilla, cloves, and ylang-ylang for essential oils. In 2023, total exports were estimated at around $125 million, with France remaining a primary trading partner.

Infrastructure Development

Infrastructure development in the Comoros remains limited. The total road network is estimated to be around 850 kilometers as of 2024, with a significant portion in need of improvement. The World Bank has recently approved a loan to support infrastructure development projects in the Comoros, aiming to improve transportation links and access to electricity.

Fiscal Policy

The Comoros government prioritizes social spending and basic infrastructure development. However, its revenue base is limited, heavily reliant on foreign grants and remittances from the Comorian diaspora estimated at around $200 million annually.

Monetary Policy

The Comoros does not have its own central bank and uses the Comorian franc (CF), which is pegged to the euro. Monetary policy decisions are therefore determined by the European Central Bank (ECB), with limited control by the Comorian government.

Trade Agreements

The Comoros participates in some trade agreements, including those with the African Union and the Indian Ocean Commission. These agreements offer some access to wider markets but haven't significantly transformed the export sector. The Comoros is exploring potential trade agreements with other regional partners to diversify its export base.

Tax system

Capital gains tax: Information on a dedicated capital gains tax in the Comoros is limited. Capital gains might be taxed as regular income, with progressive tax rates ranging from 0% to 30% depending on overall income level (2023 estimates).
Corporate tax rate: The standard corporate tax rate in the Comoros is currently 35%. However, there might be variations for specific industries or investment zones. The government is considering lowering the corporate tax rate to 30% in 2024 to incentivize business activity, particularly foreign direct investment.
Sales tax (VAT): The Comoros has a Value Added Tax (VAT) system with a standard rate of 10%. Certain basic necessities, such as staple foods and medications, may have a lower VAT rate or be exempt.
Property tax: Property taxes in the Comoros exist, but details on specific rates and exemptions are scarce. Rates likely vary depending on property type, location, and value. The Comorian government is planning a property tax reform in 2024, aiming to introduce a tiered system with higher rates for luxury properties.
Payroll tax: The Comoros has a social security contribution system funded by both employers and employees. The exact contribution rate can vary depending on the benefits included (unemployment insurance, healthcare, etc.), but estimates suggest a total rate between 20% and 30% of an employee's salary, split between the parties.
Tax deductions and credits: Limited information exists on specific tax deductions and credits offered in the Comoros. However, some common deductions might include business expenses and interest payments on mortgages (up to a certain limit). The government is exploring introducing tax credits for specific sectors, such as renewable energy or tourism, to promote economic diversification.
Tax burden: The overall tax burden in the Comoros is considered moderate, especially for businesses due to the 35% corporate tax rate (potentially decreasing to 30% in 2024).

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Comoros

21 Nov 2024

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