Press Release No. 18/462

IMF Executive Board Completes Second Review Under the Policy Coordination Instrument for Seychelles

December 7, 2018

• The implementation of the program, that outlines the main Seychelles’ economic and financial policies, is largely on track.
• While rising international fuel prices could adversely affect inflation and external balance, the economic outlook continues to be favorable.

On December 7, 2018, the Executive Board of the International Monetary Fund (IMF) completed the second review under the Policy Coordination Instrument (PCI [1]) for Seychelles.

Seychelles is the first IMF member country to request a PCI. It was approved by the Executive Board on December 13, 2017 and aims to support the authorities’ efforts to reinforce macroeconomic stability and foster growth.

Economic developments since the last IMF review completed in June 2018 have been broadly in line with expectations. The program is largely on track and authorities remain committed to safeguarding the hard-won economic stability. The Central Bank of Seychelles’ prudent monetary policy has helped to contain the inflationary pressure.

While rising international fuel prices could adversely affect inflation and external balance, the economic outlook continues to be favorable. Downside risks to the outlook are largely stemming from external shocks, including from possible weaknesses in the key tourism markets and global banks’ withdrawal of correspondent banking relationships.

The Executive Board welcomes Seychelles’ assurance that the large infrastructure and climate change related projects planned in the coming years would be implemented within the fiscal targets set in PCI. The authorities are encouraged to stay focused on structural reforms to minimize fiscal risks potentially arising from state-owned enterprises restructuring.

The authorities are also urged to step up efforts to strengthen anti-money laundering and terrorism financing framework and implementation.

Following the Executive Board’s discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:

“Seychelles’ macroeconomic performance continued to be robust in 2018. Real GDP growth is estimated to reach around 3½ percent, reflecting strong output in the fishery industry and the information and communications sector. The external current account narrowed thanks to strong tourism earnings. Targets on the primary fiscal surplus and net international reserves up to end-June 2018 were met by a comfortable margin. The economic outlook for 2019 remains positive.

“The authorities are committed to the program’s fiscal anchor of reducing public debt below 50 percent of GDP by the end of 2021. The authorities’ 2019 budget submitted to the National Assembly is in line with the program objectives. The authorities intend to implement large infrastructure projects in coming years within the envelope of the program’s primary surplus target of 2½ percent of GDP.

“The Central Bank of Seychelles’ (CBS) prudent monetary policy has helped contain inflationary pressures. The CBS should stay vigilant to any sign of inflationary pressures and maintain the flexible exchange rate policy. The authorities’ sustained efforts for a smooth transition to a new monetary policy framework are welcome.

“Steps to strengthen the AML/CFT framework and its implementation, in line with international standards and best practices, are important to preserve correspondent banking relationships. The structural reform agenda should continue to focus on reducing fiscal risks potentially arising from state-owned enterprises and public private partnerships, improving public investment efficiency, and enhancing prospects for inclusive growth and resilience to climate change.”