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.”
