IMF Completes the Eighth and Final Review Under the Extended Fund Facility (EFF) for Seychelles

Press Release No. 13/530
December 19, 2013

On December 19, 2013, the Executive Board of the International Monetary Fund (IMF) completed the eighth and final review under the Extended Fund Facility (EFF)1 for Seychelles. The Executive Board’s decision was taken on a lapse-of-time basis.2 The completion of the review enables a disbursement of SDR 3.3 million (about US$5.1 million), which will bring total disbursements under the arrangement to SDR 26.4 million (about US$ 40.7 million).

The EFF was approved in December 2009 for an amount of SDR 19.8 million (see Press Release No. 09/472) and was extended by one year in 2012, with an augmentation of access of SDR 6.6 million (about US$10.0 million).

Strong policies have fostered economic growth, brightening Seychelles’ near-term outlook. A robust rise in tourism earnings in 2013 supported growth, as well as a reduction in the current account deficit as a share of GDP. The exchange rate strengthened slightly, at the same time as the central bank accumulated more international reserves than expected. Inflation decelerated below 5 percent, and the government is on track to achieve its 5 percent of GDP primary surplus target, as a shortfall in tax revenue and grants has been offset by lower-than-anticipated capital expenditure. All performance criteria under the EFF for end-June 2013 were met, as were the third quarter indicative targets. The measures in the structural benchmarks were also all completed, although there were short delays compared to initial plans for technical reasons.

The authorities’ macroeconomic policy framework for 2014 provides a solid basis to continue to reinforce external and fiscal sustainability. The authorities remain on track with their objective to reduce public debt below 50 percent of GDP by 2018, while increasing allocations to address social needs. Monetary policy will continue to aim to stabilize inflation at low levels and to accumulate international reserves, and the authorities and staff agreed on the need to strengthen the monetary policy framework to improve the transmission mechanism. Structural reforms aim to extend improvements in financial discipline to the broader public sector, including through rebalancing utility prices to reduce implicit subsidies and through better oversight of parastatals, which staff stressed was key to avoiding potential future losses and ensuring better focus on their core mandates. Financial sector reforms seek to increase access to credit.

With the completion of this review, the EFF arrangement comes to an end. The program’s key objective of placing the economy firmly on the path to external and fiscal sustainability has been achieved, based on the successful implementation of the debt restructuring, robust fiscal consolidation, and the resumption of growth. Public debt has been brought down from 124 percent of GDP at end-2009 to an estimated 71 percent at the end of 2013, reflecting an average primary surplus of over 6 percent of GDP and growth of 3½ percent. Inflation has fallen below 5 percent. External reserves, a vital buffer for such an open economy, have improved from just over 2 months of imports at the start of the program to over 3½ months at the end of 2013.

While substantial progress has been achieved under the current Extended Fund Facility (EFF), the economy faces continuing vulnerabilities from still high debt levels, low reserve coverage, and an unfinished reform process. The authorities indicated their intention to request a successor arrangement with the IMF to consolidate and extend the progress made during this EFF. Discussions on a possible successor arrangement will continue early next year.

1 The Extended Fund Facility under the Extended Arrangement is an instrument of the IMF designed for countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address. Assistance under the extended facility features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period. (See Details on Seychelles’ arrangement are available at

2 The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.


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