Press Release No. 09/174

Press Release: IMF Staff Mission Sees Early Signs of Success in Seychelles Economic Program

May 19, 2009

An International Monetary Fund (IMF) mission led by Mr. Paul Mathieu visited Victoria during May 4-18, 2009 for discussions on the second review under the Stand-By Arrangement with Seychelles. The mission met with His Excellency President James Michel, Minister of Finance Danny Faure, and Governor of the Central Bank of Seychelles Pierre Laporte, as well as representatives of the private sector, parliamentarians, and civil society.

At the conclusion of the visit, Mr. Mathieu issued the following statement today:

“The Seychelles authorities are implementing their reform program with determination and early signs of success are apparent. The program is on track and is achieving its economic stabilization and reform objectives. A prudent and well-balanced monetary and fiscal stance have been effective in stabilizing the exchange rate and rapidly reducing inflation to the low single digits. All end-March 2009 quantitative targets under the program were met with margins and structural reforms are being implemented. However, the economy is severely affected by the global economic crisis, and the mission estimates that GDP will fall in 2009 on a sharp drop in tourism and construction. At the same time, the build-up in foreign exchange reserves should continue, as the external current account deficit narrows as a result of a sharp contraction of imports and lower commodity prices.

“Looking ahead, the key objectives are to consolidate macroeconomic stability and sustain the momentum of structural reform. To that end, the mission welcomes the fundamental reform of the tax system, to be implemented from mid-2009, and the major reinforcement of control over the parastatal sector to address weaknesses which, if left unaddressed, could put at risk the hard-won recent gains in macrostabilization and public finances. The financial system is being strengthened through enhanced supervision and a modernized regulatory environment.

“Seychelles’ public debt remains unsustainable. The mission welcomes the steps that have been taken so far and encourages the authorities to press ahead with their debt restructuring strategy.

“The IMF arrangement, which was approved on November 14, 2008, is for about US$24 million (SDR17.6 million), of which US$10.5 million has been disbursed. About US$1.3 million (SDR 0.88 million) would be available upon completion of the second review, which is tentatively scheduled for consideration by the IMF Executive Board in late June 2009.”