Press Release No. 10/404

Press Release: Statement at the Conclusion of a Staff Mission to Seychelles for the 2010 Article IV Consultation and Second Review Under the Extended Fund Facility

October 28, 2010

An International Monetary Fund (IMF) mission led by Mr. Jean Le Dem visited Victoria during October 15–28, 2010 to conduct the discussions for the Article IV consultation and the second program review under the Extended Fund Facility (EFF) Arrangement with Seychelles. The mission met with His Excellency President James Michel, Minister of Finance Danny Faure, Governor of the Central Bank of Seychelles Pierre Laporte, and other senior government officials as well as representatives of the private sector, civil society, and the diplomatic community. Mr. Roger Nord, Senior Advisor of the IMF’s African Department, and the mission participated in the 1^st Economic Symposium for Parliamentarians on October 20 to discuss global and regional economic prospects and challenges facing Seychelles.

At the conclusion of the visit, Mr. Le Dem issued the following statement today in Victoria:

“The Seychelles economy continues to recover strongly. Its far-reaching economic program, supported by the IMF, under which the government removed all exchange restrictions, floated the currency, liberalized interest rates, introduced a modern monetary policy framework, and significantly tightened fiscal policy, has borne fruit. Inflation has fallen from over 30 percent in 2008 to low single digits and the exchange rate has stabilized. It also helped Seychelles successfully restructure most of its external debt obligations, returning Seychelles to a path towards sustainable debt levels.

“The economy weathered the global economic crisis of 2009 well and has rapidly recovered this year on the back of a rebound in tourism, sizeable foreign direct investment, and a widespread pick-up in the domestic economy. Economic growth is now projected to exceed 6 percent in 2010. Inflation remains close to zero, which has allowed the central bank to bring key policy interest rates to low levels. The very tight fiscal policy in 2009 has been relaxed, although buoyant revenues are expected to contribute to a primary surplus of 9.4 percent of gross domestic product (GDP) for 2010, two percentage points above the full year program target. This provides welcome fiscal space for debt reduction and priority spending.

“Prospects for 2011 are favorable. Despite the fragile global recovery, the tourism drive, and encouraging prospects for tuna exports suggest that growth could be around 4.3 percent, while continued pursuit of sound fiscal and monetary policies would help keep inflation in low single digits and bring public debt to a sustainable level. The current account deficit is projected to narrow on account of higher tourism earnings and lower foreign direct investment (FDI) flows for large hotel projects.

“Strong progress is being made by the Seychelles authorities in their EFF-supported program. All end-September 2010 quantitative targets under the program were met and progress has been achieved in the ambitious agenda of structural reforms. Looking forward the program priorities will be to consolidate stabilization gains, complete the modernization of the tax system through the introduction of the value added tax (VAT), reduce infrastructure bottlenecks, improve governance and financial management in the public sector, and support financial sector development.

“It is expected that the IMF's Executive Board will discuss the program review in December 2010. The EFF arrangement, approved on December 22, 2009, is for SDR19.8 million (about US$31 million), of which SDR 7.48 million (about US$11.7 million) has been disbursed. SDR 1.76 million (about US$2.8 million) would be available upon completion of the second review. The third program review mission is expected in March 2011.

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