Press Release No. 12/403

Press Release: IMF Concludes EFF Review Mission to Seychelles

October 29, 2012

An International Monetary Fund (IMF) mission led by Carol Baker visited Victoria from October 17–26, 2012 to assess performance at end-June for the sixth program review under the Extended Fund Facility (EFF) Arrangement with Seychelles and discuss the authorities’ request for a one-year extension of the three-year arrangement and augmentation of access.¹ The mission met with President James Michel, Vice President Danny Faure, Finance Minister Pierre Laporte, Central Bank Governor Caroline Abel, and other senior government officials and representatives of the private sector.

At the conclusion of the mission, Ms. Baker issued the following statement:

“The Seychellois economy has shown resilience in the face of the difficult global environment. Economic growth has held up thanks to increasing tourist arrivals from non-traditional markets; fiscal policies have remained firmly on track toward the government’s target of bringing public debt down to 50 percent of gross domestic product (GDP) by 2018; and debt restructuring is nearly complete. Monetary tightening has been successful in reversing the mid-year inflationary uptick, and inflation pressures are expected to continue their recently observed downward path.

“The government has made sustained progress in implementing the IMF-supported program. All end-June 2012 quantitative targets under the program were met—some, including the fiscal primary balance target, by a wide margin. The broader structural reform agenda is also moving ahead, with implementation of the electronic clearing house and completion of a study on utility tariff reform. The mission welcomes adoption of the value-added tax (VAT), and notes that delayed implementation to January 1, 2013 does not materially affect the reform agenda.

“However, challenges remain. Seychelles’ open economy remains highly vulnerable to external shocks, while the weak financial position of public enterprises may increasingly strain public finances in the absence of domestic price adjustments. Ensuring a buildup of buffers against shocks will be critical in the current global environment, and requires the continuation of prudent macroeconomic policies and the safeguarding of international reserves. Moreover, the mission urges the authorities to bring the same level of fiscal discipline observed at the central government level to the broader public sector, including through the gradual adjustment and rebalancing of domestic utility, food and transport prices. Throughout this price adjustment process, it is of utmost importance to take the necessary steps to protect the most vulnerable segments of Seychellois society.

“In light of these challenges, the IMF mission and the Seychelles authorities have reached an agreement, subject to approval by IMF management and the Executive Board, on a one-year extension of the Extended Arrangement through December 2013 which includes an augmentation of access of 60.6 percent of quota ($10.23 million), bringing total access under the EFF-supported arrangement to 242.3 percent of Seychelles’ quota in the IMF. Specifically, the authorities and the mission reached understandings, ad referendum, on economic policies and reforms to lock in the gains to date, make further inroads on key reforms and build policy buffers in the uncertain global environment.

“The mission appreciates the high quality of the technical discussions and wishes to thank the authorities for their warm hospitality, and the open and constructive dialogue.”

¹ The Extended Fund Facility under the Extended Arrangement is an instrument of the IMF designed for countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address. Assistance under the extended facility features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period. (See http://www.imf.org/external/np/exr/facts/eff.htm). Details on Seychelles’ current arrangement are available at www.imf.org/seychelles.