Washington, DC:
The executive Board of the International Monetary Fund (IMF) completed
today the second review of Seychelles’ economic performance under the
32-month Extended Fund Facility (EFF) arrangement that was approved on July
29, 2021. The completion of the review allows the authorities to draw the
equivalent of SDR 6.5 million (about $8.7 million), bringing total
disbursements under the current EFF to SDR 54.5 million (about $72.6
million).
Seychelles’ economic recovery in 2021 vastly outperformed projections,
fueled by a faster-than-expected rebound of the tourism sector. The
recovery is expected to continue in 2022 with projected real GDP growth of
7.1 percent as the tourism sector shows resilience to COVID-19 waves and
geopolitical tensions. The recovery has been accompanied by a significant
fiscal overperformance.
The authorities’ near-term priorities aim at supporting the post-pandemic
recovery and addressing the repercussions of the war in Ukraine while
reducing debt vulnerabilities and creating fiscal space to address future
risks.
At the conclusion of the Executive Board’s discussion, Mr. Bo Li, Deputy
Managing Director and Chair stated:
“Program implementation remains strong and all program targets at
end-December 2021, except the floor on social spending, and all end-March
2022 targets were met, and appropriate progress was made toward structural
benchmarks. In line with their commitment, the authorities published the
audit of COVID-related emergency expenditures. To address current
challenges, the authorities requested the modification of performance
criteria to allow a more gradual fiscal consolidation. This will permit
increased social spending to attenuate the impact of surging commodity
prices on the most vulnerable households. Monetary policy remains
appropriately accommodative, and the authorities are committed to closely
monitoring inflationary pressures.
“The authorities are committed to reducing debt vulnerabilities and
creating fiscal space to address future risks. The structural reform agenda
will continue to focus on revenue administration, public financial
management, and governance, including digitalization, state-owned
enterprise reform, and climate change adaptation and mitigation policies.
“The Seychellois economy continues to face significant risks. The economic
outlook, while positive, remains subject to external risks including a
further surge of commodity prices and fewer tourist arrivals. Higher
nonperforming loans in the banking sector could emerge as COVID-support and
forbearance measures are being withdrawn. The country remains vulnerable to
climate change.”
Following the Executive Board discussion, Mr. Li , Deputy Managing Director
and Acting Chair, made the following statement:
“Fueled by a fast rebound of the tourism sector, Seychelles’ economic
recovery in 2021 outperformed expectations, with stronger-than-expected
growth and fiscal outturns. The tourism sector has shown resilience to
COVID-19 waves and geopolitical tensions. The recovery has been accompanied
by a significant fiscal overperformance, creating fiscal space to address
current challenges. The economic outlook, while positive, remains subject
to external risks including from spillovers of the war in Ukraine, a
further surge of commodity prices and fewer tourist arrivals.
“Program implementation remains strong and all program targets at
end-December 2021, except the floor on social spending, and all end-March
2022 targets were met, and appropriate progress was made toward structural
benchmarks. In line with their commitment, the authorities published the
audit of COVID-related emergency expenditures. To address current
challenges, the authorities requested the modification of performance
criteria to allow a more gradual fiscal consolidation. This will permit
increased social spending to attenuate the impact of surging commodity
prices on the most vulnerable households.
Monetary policy remains appropriately accommodative, and the authorities
are committed to closely monitoring inflationary pressures. Higher
nonperforming loans in the banking sector could emerge as COVID support and
forbearance measures are being withdrawn.
“The authorities are committed to reducing debt vulnerabilities and
creating fiscal space to address future risks. The structural reform agenda
will continue to focus on revenue administration, public financial
management, and governance, including digitalization, state-owned
enterprise reform, and climate change adaptation and mitigation policies.
The country remains vulnerable to climate change.”
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