## Seychelles—Assessment Letter for the African Development Bank

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**Canonical URL:** [Seychelles—Assessment Letter for the African Development Bank](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2009/_112509.pdf)

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### Macroeconomic performance and outlook
- Macroeconomic performance under the Stand-by Arrangement (SBA) has been favorable; reforms continue with a high degree of ownership and broad public support.
- Key policy actions contributing to stabilization:
  - Liberalization of the exchange regime.
  - Strong fiscal adjustment.
  - Prudent monetary policies.
- Recent indicators:
  - Inflation has been near zero since March.
  - The exchange rate has appreciated steadily from lows early in the year.
  - Official external reserves recovered from near depleted levels in mid-2008 to 1.3 months of imports at end-October.
  - Government expenditure has been tightly controlled and revenue has remained buoyant.
  - The primary surplus reached 13.4 percent in the first 9 months of the year.
- Growth and outlook:
  - Real GDP is now expected to decline 7.5 percent in 2009.
  - Early signs of revival in business activity and employment creation are emerging.
  - Economic growth is expected to rise to 4 percent in 2010 as recovery strengthens.

### Program implementation and reform agenda
- Program implementation under the 2008 SBA has been exemplary despite global recession headwinds.
  - All end-September 2009 quantitative performance criteria were met with margins.
  - All structural benchmarks under the SBA were implemented as scheduled.
  - These achievements provide a good basis for completion of the third program review, scheduled for December 18, 2009.
- Transition to medium-term reform program:
  - With initial objectives achieved, focus shifts to a second generation of reforms in a medium-term context.
  - A new three year arrangement with the IMF under the Extended Fund Facility has been agreed, ad referendum, with Fund staff and is scheduled to be discussed by the Executive Board at the same time as the completion of the third SBA review in mid-December 2009.
- Core objectives of the next phase:
  - Consolidate macroeconomic stability.
  - Remove constraints to growth.
  - Improve public sector performance.
- Planned reform areas:
  - Strengthen public financial management.
  - Institutionalize higher governance standards in public enterprises.
  - Reform taxation.
  - Bolster the financial system.
  - Improve the business environment.

### Progress in debt restructuring
- Despite substantial adjustment efforts, public external debt remains unsustainable.
- Good progress in restructuring talks:
  - Authorities continue good faith efforts to reach agreement on comparable terms with all creditors, consistent with the Fund’s lending into arrears policy.
  - Following agreement with Paris Club creditors in April 2009, one non-Paris Club bilateral agreement has been signed and discussions with other creditors have advanced.
- Role of African Development Bank:
  - Consideration by the African Development Bank of the authorities’ request for a US$10 million Policy-based Guarantee Operation would substantially increase chances of early success of the commercial debt restructuring by lowering risks for creditors.
  - A commercial restructuring on comparable terms is a key component of securing sustainable public debt and essential for economic recovery.

*Source: Seychelles—Assessment Letter for the African Development Bank, November 25, 2009*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2009/_112509.pdf_