An International Monetary Fund (IMF) staff team led by Mr. Wendell Samuel
visited Victoria from March 22‒April 4 to conduct discussions on the 2017
Article IV consultation and the sixth review under the Extended Fund
Facility (EFF)
[1]
Arrangement with Seychelles.
At the conclusion of the visit, Mr. Samuel issued the following statement:
“Macroeconomic performance continued to be strong in 2016. Economic growth
reached 4.5 percent, reflecting increased tourist arrivals, stronger output
in the fishing industry, and expanding credit to the private sector. Helped
by low commodity prices and a stable exchange rate, inflation
(year-on-year) was negative throughout 2016. The external current account
deficit remained largely unchanged, while net international reserves
exceeded the program target by US$14 million. Supported by lower than
budgeted capital outlays and strong tax revenue growth, the 2016 primary
fiscal surplus reached 3.4 percent of GDP, comfortably exceeding the
program target. The end-2016 reserve money ceiling was missed by a very
narrow margin, due to stronger-than-expected growth in foreign currency
deposits.
“With continued foreign investments and rising arrivals in the tourism
sector, the growth outlook for 2017 remains positive. The rising trend in
international fuel prices since late 2016, along with fiscal measures in
the 2017 budget, could put pressure on inflation and on the balance of
payments. International reserves are expected to remain at an adequate
level, anchored by strong macroeconomic policies. Downside risks to the
outlook stem largely from the external sector.
“In view of the fact that the 2017 budget is supported mainly by one-off
revenue measures, the mission discussed permanent fiscal measures in 2018
that would help secure the medium-term debt reduction target. It stressed
that inability to contain fiscal spending pressures could undermine
government’s efforts to sustain strong fiscal primary surpluses and
jeopardize medium-term public debt reduction goals. The team concurred with
the authorities about the need to address structural weaknesses and promote
inclusive growth, including through further diversification in the context
of the Blue Economy initiatives, improving the business climate, and
strengthening the state-owned enterprise sector. The central bank should
continue to maintain a flexible exchange rate while limiting foreign
exchange interventions to the extent needed to avoid excess volatility and
preserve reserve coverage at an adequate level. At the same time, the bank
is called upon to remain vigilant to inflationary pressure stemming from
rising international commodity prices and fiscal measures in the 2017
budget.
“As a small archipelagic country, Seychelles is becoming increasingly
vulnerable to natural disasters and to climate change. Over the long run,
the economic costs of such events could be large and unpredictable. To
better address these challenges, the authorities jointly with international
partners need to pursue a medium-term strategy that would create additional
fiscal space to undertake the necessary climate change mitigation and
adaptation measures. In addition, climate change should be integrated into
public financial management and options for risk sharing need to be
carefully explored.
“Subject to the approval of IMF Management, the IMF Executive Board is
expected to discuss the completion of the review and the Article IV
consultation in June 2017. The mission appreciates the high quality of the
discussions and thanks the authorities for their hospitality, as well as
the open and constructive dialogue.”
The team met with His Excellency President Danny Faure, Minister of
Finance, Trade, and Planning Peter Larose, and Governor of the CBS Caroline
Abel, as well as other government officials, members of the National
Assembly, and representatives of the private sector and civil society.
[1]
The Extended Fund Facility under the Extended Arrangement is an
instrument of the IMF designed for countries facing medium-term
balance of payments problems because of structural weaknesses that
require time to address. Assistance under the Extended Fund
Facility features longer program engagement—to help countries
implement medium-term structural reforms—and a longer repayment
period. (See
http://www.imf.org/external/np/exr/facts/eff.htm
). Details on Seychelles’ Extended Arrangement are available at
www.imf.org/seychelles
.
