Press Release: Statement by IMF Staff at the Conclusion of the 2006 Article IV Consultation Discussions with Seychelles
November 21, 2006Press Release No. 06/259
The following statement was issued today in Victoria by an International Monetary Fund (IMF) staff mission:
"An IMF team, headed by Mr. George Tsibouris, visited Victoria during November 8-21, 2006 in order to conduct the 2006 Article IV consultation discussions with Seychelles. It reviewed economic developments and prospects and discussed the authorities' policy intentions. The mission met with the Minister of Finance Danny Faure, the Governor of the Central Bank of Seychelles Francis Chang-Leng, other senior government officials, and representatives of the private sector, NGOs, and the diplomatic community.
"The economic situation is improving, with strong tourism arrivals and construction activity driving the recovery. Real GDP growth is projected to reach 4½ percent in 2006, after increasing by 1.2 percent in 2005. Underlying inflationary pressures resulting from a rapid liquidity increase have not been reflected in the official price statistics. The fiscal outturn of the consolidated government in 2006 is expected to fall somewhat short of the budget target. On the external front, the current account deficit is being financed by record inflows of foreign direct investment, which indicate renewed confidence in the economy.
"Following the July 2006 presidential election, the authorities are implementing a package of policy reforms aimed at addressing Seychelles' key macroeconomic imbalances. These policies include a change in the reference currency basket for the Seychelles rupee, a shift of the responsibility for foreign exchange allocation to banks, repayment of external debt financed by the recent issuance of a sovereign bond, and a commitment to a significant reduction of public debt by 2016.
"The mission welcomes the authorities' commitment to reform and the measures implemented so far. The challenge is to develop a consistent macroeconomic policy framework that will enhance the economy's competitiveness and support strong growth. Fiscal policy, starting with the 2007 budget, needs to be managed carefully to bring public debt on a sustainable downward path. Continued emphasis on structural reforms, including measures aimed at eliminating potential growth bottlenecks in terms of employment and infrastructure, further privatization, and the gradual elimination of price controls will be important over the medium term.
"The IMF stands ready to assist the authorities in the implementation of its reform program and looks forward to continued policy dialogue in the period ahead."