Seychelles meeting revenue targets, IMF mission says after visit

IMF is supporting the economic reform programme of Seychelles with a $107 million arrangement under the Extended Fund Facility. (International Monetary Fund, Flickr) Photo License: CC BY 2.0

(Seychelles News Agency) - The Seychelles' government has made impressive progress in implementing an International Monetary Fund (IMF) supported programme and restoring macroeconomic balances, said the head of a first review mission on Monday.

The mission, led by Boriana Yontcheva, was in Seychelles from October 23 to November 8 to assess the country's performance at the end of September for the first programme review under the Extended Fund Facility arrangement with the island nation.

Yontcheva told reporters that at the end of August 2021 quantitative targets under the programme were met, including the fiscal primary balance target, by a wide margin.

"The post-pandemic economic recovery is expected to be V-shaped and driven by tourism. Since July 2021, tourist arrivals have continued apace and real GDP growth is expected to be around 6 percent in 2021, in line with the expectations at the time of EFF approval. Market sentiment has improved, fiscal deficits have narrowed, and debt ratios have been put on a decisively downward trajectory," she added.

On his side, the Minister for Finance, Naadir Hassan, said that under the reform, Seychelles' performance has been a lot better than originally anticipated.

"We had predicted a budget deficit of 9.1 percent for 2021, but we now anticipate that it will be lower, with a projection of 6.6 percent, which is due to the country's revenue being higher than we had expected, while we have also been very disciplined with our spending," said Hassan.

Meanwhile, the IMF mission has warned that average inflation could rise for 2021 where the Central Bank of Seychelles intends to expand the survey of inflation expectations and will be ready to act if inflationary pressures continue.

"Second-round effects of the exchange rate depreciation in 2020, combined with pandemic related cost-push factors, have contributed to inflationary pressure in recent months. Annual average inflation is expected to reach 10 percent in 2021, up from 1.2 percent in 2020," Yontcheva said.

The head of mission said that there are still challenges ahead as "Seychelles' open economy remains highly vulnerable to external shocks and climate change. Ensuring a build-up of buffers against shocks remains critical in the current global environment, and requires the continuation of prudent macroeconomic policies and the safeguarding of international reserves."

Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

IMF is supporting the economic reform programme of Seychelles, an archipelago in the western Indian Ocean, with a $107 million arrangement under the Extended Fund Facility.

This first review was made in line with the agreement, where it was agreed that the loan would be disbursed in four portions, with the first made in July 2021.

As part of the agreement, the second disbursement would be made in December once the IMF has completed the assessment of the benchmark indicators discussed with the government of Seychelles.