Seychelles' debt vulnerability "substantially reduced" through tourism activity, says IMF

The IMF delegation was in Seychelles for the third review of the economic and financial programme supported by the Extended Fund Facility (EFF) Arrangement. (IMF/Flickr) Photo License: CC BY-NC-ND 2.0

Seychelles' economy continues to record a strong recovery in 2022 and debt vulnerability has been substantially reduced as tourism activity rebounds, the International Monetary Fund (IMF) Mission Chief for the island nation stated on Wednesday.

Calixte Ahokpossi made the statement during a press conference following a two-week mission in Seychelles for the third review of Seychelles' economic and financial programme supported by the Extended Fund Facility (EFF) Arrangement.

"The economic rebound that started last year has gathered steam, having been even stronger this year, and growth is going to be a little more robust than anticipated," said Ahokpossi.

Seychelles' finance minister, Naadir Hassan, outlined that by December 2022, the island nation is projected to see economic growth of 10.6 percent. Growth was previously expected to stand at around 7 percent in 2022.

"However, there are still a lot of downside risks in the global economy. We are still going through a pandemic that can affect the economy. At the moment, the biggest risk is the war in Ukraine and how it affects tourism markets, especially in Europe, as well as commodity and fuel prices," said Hassan.

The IMF delegation also concluded that debt vulnerabilities have been substantially reduced, helped by the strong rebound in tourism, successful implementation of the Liability Management Operation in 2021, rupee appreciation and the ambitious fiscal consolidation.

"Fiscal consolidation pace has been a little stronger than envisioned thanks to efforts from the government's side but also an improvement in the national economic environment. Debt vulnerability has also gone down substantially and we anticipate that it should be able to come to around 50 percent of GDP in 2026," said Ahokpossi.

Hassan elaborated that "by the end of the year, our debt to GDP is projected to reach 67.9 percent and by 2023, it will fall to 64.7 percent."

He said that when he took office in late 2020, Seychelles' debt to GDP stood at 100 percent, which was not sustainable.

"At the moment our debt is sustainable and is on a trajectory that will make it more sustainable as we move forward," added Hassan.

The mission also outlined that inflation in Seychelles has been relatively subdued this year, moderated to 2.8 percent by the end of August since the same period last year. It is projected to average at 3 percent in 2022, against 9.8 percent in 2021.

"This country is small and very sensitive to the international environment and in that sense, it is important for the government to keep pushing and making progress in implementing the programme and reforms so that they can build buffers for the future," said Ahokpossi.

Since the start of the Extended Fund Facility programme by the IMF in Seychelles, a total of $72.6 million has already been disbursed out of the programme's $107 million total. A further $9.5 million is expected to be disbursed in December. The programme will end in June 2023.