Press Release No. 21/386

IMF Executive Board Completes First Review Under the Extended Fund Facility Arrangement for Seychelles

December 17, 2021

Washington, DC: The executive Board of the International Monetary Fund (IMF) completed today the first review of Seychelles’ economic performance under the 32-month Extended Fund Facility (EFF) arrangement that was approved on July 29, 2021. The completion of the review allows the authorities to draw the equivalent of about $33.6 million (SDR 24 million), bringing total disbursements under the current EFF to about $67 million (SDR 48 million).

The expected macroeconomic recovery has materialized. Seychelles remains a leader in vaccine coverage at home, and the widespread availability of vaccines in Seychelles’ key tourist markets, particularly Europe, is contributing to a strong rebound in tourism. The economic outlook, while positive, remains subject to the uncertain evolution of the COVID-19 pandemic globally, including the omicron variant.

The authorities kept expenditures below program, reflecting mostly lower capital expenditures resulting from a reduction in expected external financing. As a result, public debt is on a faster downward trajectory. Yields on government securities have fallen markedly, supported by improved investor confidence and monetary policy accommodation. The combined effects of the liability management operation successfully implemented in July 2021 and deeper fiscal consolidation have substantially reduced rollover risks.

At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director and Chair stated:

“Driven by a swift recovery of the tourism sector, the Seychellois economy has rebounded strongly from the severe contraction in 2020 and program implementation is strong. The authorities have made substantial strides in restoring macroeconomic stability and are committed to the structural reform agenda.

“Front-loaded fiscal adjustment is appropriate to reduce debt vulnerabilities and fiscal risks. Measures to enhance revenue performance and the unwinding of COVID-related support measures are welcome. The authorities are taking steps to develop a medium-term fiscal framework and improve spending efficiency.

“The liability management operation (LMO) implemented in 2021 and deeper fiscal consolidation have substantially reduced rollover risks and laid the foundation for further easing of domestic financial conditions. Prudent debt management remains essential to further reduce vulnerabilities. Further improvements to public debt management capacity would be welcome.

“The accommodative monetary policy stance remains appropriate and continued efforts to strengthen the transmission mechanism are welcome. The authorities are monitoring inflationary pressures and are committed to maintaining a market-determined exchange rate.

“Continued efforts are needed to safeguard financial sector stability. A well-planned strategy for unwinding the COVID-19 related support measures and continued efforts to enhance the AML/CFT framework are important priorities.

“The authorities are taking steps to improve transparency and public efficiency. Further efforts to pursue governance reforms are encouraged. It will be important to advance structural reforms to promote private sector development, support diversification, and build resilience to climate change.”