Press Release No. 24/352

IMF and the Seychellois Authorities Reach Staff-Level Agreement on the Third Reviews Under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF)

October 1, 2024

• IMF staff and the Seychellois authorities have reached staff-level agreement on the third reviews under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF) arrangements. Approval of the reviews by the IMF’s Executive Board would release financing of SDR 9.2 million, equivalent to $12.3 million.
• The government has made strong progress in implementing policies under the EFF and RSF programs. All quantitative targets for the third reviews have been met. Good progress has been made on a range of macro-structural issues, although several measures still need to be completed before end-year.
• Economic growth in Seychelles appears to have slowed relative to earlier forecasts. Tourist arrivals have declined in the wake of a recent decrease in direct flights, and spending per tourist has also weakened as spending patterns tighten relative to very high levels seen in the two years following the pandemic. Inflation remains low and is expected to remain so for the remainder of 2024.

Washington, DC: An International Monetary Fund (IMF) mission, led by Mr. Todd Schneider, conducted discussions with the Seychellois authorities in Victoria from September 18- October 1, 2024, and reached a staff-level agreement on the third reviews under the Extended Fund Facility (EFF) arrangement and the Resilience and Sustainability Facility (RSF). This agreement is subject to approval by the IMF’s Executive Board. Approval would release financing of SDR 9.2 million, equivalent to $12.3 million.

At the end of the mission, Mr. Schneider issued the following statement:

“The authorities continue to make progress in implementing the EFF-supported program. All end-June 2024 quantitative performance criteria and indicative targets under the program were met. Structural reforms related to improving management of public investment, strengthening the central bank balance sheet, and bolstering oversight of banks are proceeding.

“Economic growth appears to be slower than anticipated. Real GDP is projected to grow by 3 percent in 2024 compared to an earlier forecast of 3.7 percent. This reflects lower tourist arrivals in the wake of a temporary reduction in the number of direct flights and a decline in average spending per tourist. Some recovery is expected in the last quarter of 2024. Year-on-year inflation was about 0.5 percent as of August, reflecting stable utility rates and the impact of stable or declining prices for fuel and other commodities.

“Fiscal performance in the first half of 2024 was tighter than budgeted, driven by robust tax collection. Tax revenues were 7 percent higher than anticipated, including a 27 percent increase in business tax and higher than expected collections from VAT, income tax, and dividend income. Government spending was largely consistent with budget projections, with a minor under-execution across wages and salaries, goods and services, and capital expenditures. The government is expected to achieve a primary fiscal surplus of 1.1 percent in 2024—roughly on par with 2023.

“Despite the slowdown in tourism, the external balance of payments is expected to strengthen in 2024. Weaker income from tourism is expected to expand the current account deficit to 10.7 percent of GDP in 2024 compared to 7.2 percent in 2023, even with higher tuna and other exports. However, financial inflows—in the form of foreign direct investment—will cushion this temporary downturn and facilitate an increase in central bank foreign exchange reserves to the equivalent of 3.7 months of import cover by end-year.

“The Central Bank of Seychelles (CBS) has maintained an accommodative monetary policy, which has helped to facilitate an increase in the growth of private sector credit. While inflation remains low, the CBS stands ready to act if inflationary pressures materialize. The CBS will continue its efforts to strengthen Seychelles’ monetary policy framework and closely monitor financial sector soundness.

“The authorities are committed to bolstering governance and fighting corruption. The Public Enterprise Monitoring Commission—through an independent audit firm—will complete governance and performance assessments of six key public enterprises by end-year. The 2025 budget will contain an estimate of foregone revenue from existing tax expenditures (such as exemptions, deductions, and reduced rates). The government also continues to improve the transparency of the beneficial ownership database and ensure the accuracy of collected information.

“With respect to climate change mitigation and adaptation, the authorities are advancing with reform measures agreed under the RSF. Efforts in this area focus on climate-related public investment, developing a strategy for climate financing, and strengthening supervision to assess climate risks to the banking sector.

“The team thanks the Seychellois authorities for the open dialogue and close collaboration. Meetings were held with President Ramkalawan, Minister for Finance, National Planning and Trade Hassan, Governor of the Central Bank of Seychelles Abel, and other senior government officials as well as representatives of the private sector.”