Press Release No. 12/6

Press Release: IMF Completes the Fourth Review and Financing Assurances Review under the Extended Arrangement for Seychelles

January 12, 2012

The Executive Board of the International Monetary Fund (IMF) has completed the fourth program review and financing assurances review under Seychelles’ program supported by a three-year extended arrangement under the Extended Fund Facility (EFF) on January 11, 2012.. The completion of the review allows the immediate disbursement of an amount equivalent to SDR 3.08 million (about US$4.7 million). The Board also approved the authorities’ request for waiver of applicability for end-December 2011 performance criteria for which data are not yet available.

The extended arrangement for Seychelles became effective on December 23, 2009 in the amount of SDR 19.8 million (about US$30.2 million; see Press Release No. 09/472).

Following the Executive Board’s discussion of Seychelles, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement:

“Aided by sound macroeconomic policies and timely structural reforms, the Seychelles economy rebounded strongly from the crisis of 2008-09. Medium-term prospects are good, but downside risks exist due to the crisis in Europe. Inflation has picked up recently, reflecting the delayed pass-through of global food and fuel price increases, but remains broadly in check.

“Safeguarding debt sustainability is critical for sustaining the gains from macroeconomic stabilization. The restructuring of the loss-making national airline and increases in utility tariffs to cost-recovery levels will help achieve a sounder fiscal position while creating space for needed infrastructure investments. Development of a well-targeted social safety net will be important to protect vulnerable groups.

“The central bank needs to remain vigilant against inflationary pressures. A further build-up of foreign reserves and continued exchange rate flexibility will provide buffers against external shocks.

“Structural reforms continue to focus on improving public financial management and fostering private sector-led growth. In the financial sector, efforts should focus on limiting the role of state-owned institutions, strengthening competition, enhancing governance and transparency, and improving banking intermediation” Mr. Zhu added.