IMF Staff Reaches Staff-Level Agreement on the Second Review Under the Extended Fund Facility (EFF) and Concludes 2022 Article IV Consultation with Seychelles

IMF News, May 9, 2022

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Canonical URL: IMF Staff Reaches Staff-Level Agreement on the Second Review Under the Extended Fund Facility (EFF) and Concludes 2022 Article IV Consultation with Seychelles

Press Release No. 22/142.
Mission led by Boriana Yontcheva visited Victoria from April 26-May 9, 2022 to conduct discussions on the second review of Seychelles’ economic and financial program supported by the Extended Fund Facility (EFF) Arrangement, and the 2022 Article IV consultation.
End-of-Mission statement conveys preliminary findings of IMF staff; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Real GDP grew to an estimated 8 percent in 2021, driven by a swift rebound of the tourism sector.
Tourism earnings in March 2022 surpassed the 2019 level.
GDP growth is expected to reach 7 percent in 2022.

Price inflation rose to 10.1 percent in December 2021 up from 1.2 percent in 2020, reflecting the lagged impact of the large depreciation of the rupee in 2020 as well as pandemic-related cost-push factors.
Inflation declined to 2.2 in March 2022 due to the impact of the 2021 appreciation of the currency.
The surge of global prices is expected to bring inflation to 5.7 percent at the end of year.

The primary fiscal deficit declined from 15.4 percent in 2020 to 3 percent of GDP in 2021, overperforming program targets by 3.3 percent of GDP—mainly owing to gains from strengthened revenue efforts, and lower current and capital spending.
The debt-to-GDP ratio declined to around 76 percent of GDP in 2021 from 93 percent in 2020.
Contingent liabilities from Air Seychelles have been reduced since Air Seychelles has gone under administration and its debt got restructured; staff underlined the need to ensure that the government should incur no further liability from Air Seychelles.

The government made impressive progress in implementing the EFF and restoring macroeconomic balances, meeting all quantitative targets under the program; all end-December 2021 quantitative targets under the program were met—some, including the fiscal primary balance target, by a wide margin.
The broader structural reform agenda is also moving ahead.
The government is pursuing its commitment to bolstering governance and fighting corruption.
- As of end April 2022, ninety percent of the international business companies submitted information to the beneficial ownership database launched in July 2021.
- The authorities are pursuing efforts to ensure accuracy and availability of the collected information.
Staff welcomed the recently approved public enterprise monitoring bill.

The Central Bank of Seychelles (CBS) has maintained an appropriately accommodative monetary policy.
The CBS continues its efforts to strengthen Seychelles monetary policy framework and closely monitor financial sector soundness to reinforce banks’ ability to support the recovery.

Short-run risks: spillover effects from the war in Ukraine expected to weigh on the external and fiscal balances in 2022 due to a surge in commodity prices.
Distributional risk: rising food and fuel prices are expected to disproportionately affect the poor.
Authorities plan a set of temporary means-tested support measures to contain the effects of commodity price surges on the most vulnerable; staff emphasized these measures should:
- not generate market distortions,
- remain temporary and well-targeted towards the most vulnerable,
- be kept in line with medium-term fiscal sustainability targets.
Long-run vulnerabilities: Seychelles’ open economy remains highly vulnerable to external shocks and climate change.
Policy priorities: maintaining the buildup of buffers against shocks requires continuation of prudent macroeconomic policies and the safeguarding of international reserves.

The IMF team met with President Ramkalawan, Minister of Finance, National Planning and Trade Hassan, Governor of the Central Bank of Seychelles Abel, and other senior government officials as well as representatives of the private sector.
The IMF team thanked the Seychellois authorities for their close collaboration and openness during the discussions.

Source: Press Release No. 22/142, May 9, 2022, IMF Communications Department.