IMF reaches staff-level agreement with Seychelles on first review of EFF and RSF

Minister Hassan (right) and IMF Mission Chief in Seychelles, Schneider in a press conference on Friday. (Minister for Finance, National Planning and Trade)

The International Monetary Fund (IMF) has reached a staff-level agreement with Seychelles on the first review under the Extended Fund Facility (EFF) arrangement and the Resilience and Sustainability Facility (RSF).

This followed an IMF mission in Seychelles led by the mission chief, Todd Schneider, where discussions were held with authorities from September 21 to October 3.

The IMF staff will prepare a report, that subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

In a press conference on Friday, the Minister for Finance, National Planning and Trade, Naadir Hassan, told reporters that the talks were very positive.

"The Seychelles' economy is still doing well and we expect to have 3.8 percent GDP growth for 2023 and this is in line with the long trend that we have seen for the economy," said Hassan in a joint press conference.

On his side, Schneider said that "the authorities have made significant progress in implementing the EFF-supported programme and strengthening macroeconomic balances. All end-June 2023 quantitative performance and indicative targets under the programme were met, and structural reforms are proceeding at a good pace."

He added that the Seychelles' economy is continuing to recover in 2023.

"Real GDP growth is projected at 3.8 percent in 2023, based largely on a continued increase in tourist arrivals. This outlook is subject to continued risks given the challenging international environment and uncertainty around tourist arrivals and average spending. Year-on-year inflation was negative (-2.4 percent) as of August, reflecting the impact of lower international commodity prices on food inflation as well as moderating prices for housing and utilities," said Schneider.

Hassan said, "We anticipate doing better than forecast in our budget, in terms of our fiscal performance, where in the first six months of 2023, the revenue collected is higher than anticipated."

A total of SCR3.8 billion ($285.8 million) was projected in terms of revenue, but Seychelles collected SCR4.3 billion (325.1 million), with expenditures also less than projected, mostly due to under-execution of capital projects.

 The mission chief said that Seychelles' external balances have improved with the continued recovery in tourism and that tourist arrivals through August were estimated at 229,000, or about 92 percent of 2019 levels.

Meanwhile, the governor of the Central Bank of Seychelles (CBS), Caroline Abel, said that the CBS has maintained an accommodative monetary policy, but is concerned about external factors that could affect the policy, especially the rise in oil prices.

In terms of IMF assistance to Seychelles for climate change under RSF, Abel explained that the island nation must look at adjusting the financial system to adapt to climate change measures.

The IMF said that as a small island state vulnerable to external shocks and climate change, it remains critical for the Seychelles to stay the course, with respect to reducing public debt, rebuilding fiscal space, and increasing foreign exchange buffers while increasing the efficiency of public investment and support for the most vulnerable segments of the population.