IMF Completes Second Review and Financing Assurances Review Under the Extended Arrangement for Seychelles and Approves US$2.7 Million DisbursementPress Release No. 10/507
December 21, 2010
The Executive Board of the International Monetary Fund (IMF) has completed the second program review and financing assurances review under Seychelles’ program supported by a three-year extended arrangement under the Extended Fund Facility (EFF). The completion of the second review allows the immediate disbursement of an amount equivalent to SDR 1.76 million (about US$2.7 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 9.24 million (about US$14.2 million).
The Extended Arrangement for Seychelles became effective on December 23, 2009 in the amount of SDR 19.8 million (about US$30.3 million, or 225 percent of Seychelles’ quota in the Fund (see Press Release No. 09/472).
Following the Executive Board’s discussion on December 20, 2010, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, made the following statement:
“The Seychellois authorities’ strong stabilization efforts have helped the economy overcome the 2008 balance of payments and debt crisis and the recent global recession. This was achieved through a remarkable turnaround of economic policies, including foreign exchange market liberalization and floating of the rupee, exceptional fiscal adjustment, enhanced management of public finances and the central bank, and successful external debt restructuring, now close to completion.
“With the economy rapidly recovering on the back of a rebound in tourism and higher foreign direct investment, strong revenue performance in 2010 offers fiscal room to support the country’s development needs, including priority recruitment in the public sector and infrastructure investment in 2011, while maintaining an ambitious path toward debt sustainability.
“Sustained private sector-led economic growth will also require further modernization of public finances. The ongoing rationalization of the tax system, including preparations for the launch of a value-added tax in mid-2012, and measures to improve transparency and efficiency of the budget are important steps in this direction.
“Measures by the authorities to enhance the efficiency of state-owned enterprises are crucial for improving the growth prospects. Further efforts should focus on strengthening the governance and financial viability of the national airline and the public utility company.
“The authorities’ intention to maintain a flexible exchange rate regime is welcome, and vigilance is needed against the inflation and exchange rate risks stemming from excess liquidity in banks, which is emerging from the reduction of domestic public debt. The programmed monetary tightening and the authorities’ commitment to mop-up liquidity are appropriate responses.
“While the banking system appears healthy, efforts to promote competition among banks, reduce state intervention in the financial system, and enhance disclosure requirements and consumer protection will promote credit growth and intermediation.”