Press Release: Statement at the Conclusion of an IMF Staff Mission to the Seychelles

September 19, 2008

Press Release No. 08/212

An International Monetary Fund (IMF) staff mission, headed by Mr. Paul Mathieu, visited the Seychelles during September 5-19, 2008, to initiate discussions on the authorities' economic reform program, which could receive financial support from the IMF in the form of a Stand-by Arrangement. The mission met with President James Michel, Finance Minister Danny Faure, Central Bank Governor Francis Chang-Leng, and other senior government officials, as well as with representatives of the business and diplomatic communities, parliamentarians, and civil society.

The mission issued the following statement in Victoria today:

"The Government of Seychelles is embarking on a comprehensive reform of economic policies to address macroeconomic imbalances and put the economy on a sustainable growth path. A long period of expansionary macroeconomic policies, together with the maintenance of an exchange rate peg and pervasive exchange restrictions has resulted in an unsustainable debt burden, arrears to foreign creditors, persistent exchange shortages, rising inflation, and the near exhaustion of the foreign reserves of the Central Bank. The economic situation has been exacerbated by the surge in world oil and food prices."

"The discussions focused on the main causes of the current economic difficulties and the government's reform strategy. The mission shares the authorities' view that fiscal and monetary policies need to be tightened and that exchange controls need to be lifted. We support the authorities' intentions to put in place well targeted safeguards to protect the most vulnerable segments of the population."

"The authorities have taken a number of steps to begin putting fiscal, monetary, and exchange rate policies on a consistent and sustainable footing, including increasing fuel and utility prices to cost recovery levels, reducing subsidies, centralizing authority to contract government debt, and raising the reserve requirement for commercial banks. The authorities recognize that much more remains to be done and informed the mission that they will continue to work in the coming weeks on fully articulating a comprehensive reform strategy."

"The mission welcomes the open and constructive discussions with the authorities and their strong commitment to tackling Seychelles' economic challenges. Discussions will continue in Washington in October with a view to concluding them in time for IMF Executive Board to consider the government's request for a Stand-by Arrangement in November."


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