IMF Executive Board Completes Third Review Under the Extended Fund Facility for Seychelles

IMF News, December 1, 2022

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Canonical URL: IMF Executive Board Completes Third Review Under the Extended Fund Facility for Seychelles

The executive Board completed the third review of Seychelles’ performance under the 32-month Extended Fund Facility (EFF) arrangement approved on July 29, 2021.
Completion of the review allows the authorities to draw the equivalent of SDR 6.5 million (about $8.6 million), bringing total disbursements under the current EFF to SDR 61 million (about $80.6 million).
Seychelles’ economic recovery remained very strong in 2022, led by a rebounding tourism sector.
Growth is uneven across other sectors of the economy.
The government has made significant progress in restoring macroeconomic balances and performance under the EFF program is strong.
Maintaining the buildup of buffers against shocks, while protecting the most vulnerable people remains critical in the current global environment.

Tourist arrivals at end-September 2022 were 125 percent higher than the same period in 2021, with stronger than expected demand from Europe and the Middle East.
Real GDP growth is expected to reach 10.6 percent in 2022, before moderating to 5.4 percent in 2023.
Inflation was 3.0 percent year-on-year at end-September 2022.
Average inflation is expected decline to 3.0 percent for 2022, before rising to 4.5 percent in 2023, reflecting higher import prices and a fading of the cushion provided by the lagged effect of the rupee appreciation.
The recovery is mostly concentrated in tourism-related industries.

The primary fiscal deficit in 2022 is expected to narrow to 1.1 percent of GDP, reflecting an extraordinary consolidation of 13.6 percentage points over the last two years.
Public debt-to-GDP ratio is expected to decline to about 68 percent at end-2022, a 21-percentage-point reduction in two years.
In 2023 and over the medium term, the primary balance will shift to a surplus, as revenue measures will more than compensate for the planned increase in capital expenditure.
The government has provided social support, including a program of targeted, temporary cash transfers to protect the most vulnerable from rising food and fuel prices, which is expected to run through early 2023.

All end-June 2022 quantitative performance criteria (QPCs) and indicative targets (ITs) as well as all end-September 2022 ITs were met.
Good progress was made toward structural benchmarks, although some were implemented with a delay due to capacity constraints.
The authorities’ medium-term measures aim to increase revenues and bolster capital expenditure, with a focus on climate-change mitigation and adaptation.
The structural reform agenda prioritizes revenue administration, public financial management, and governance, including digitalization, and state-owned enterprise reform.

Key risks to the outlook include:
- A worsening of economic prospects in many of Seychelles’ key tourist markets (Russia, the European Union, and the United Kingdom).
- High food and fuel prices and their effect on the most vulnerable.
- A resurgence of COVID-19.
- Higher-than-expected inflation.
- Higher non-performing loans from legacy forborne loans.
- Climate-related shocks as medium- and long-term risks.
Near-term priorities for the authorities:
- Support the post-pandemic recovery.
- Maintain debt sustainability.
- Address the impacts of rising food and fuel prices on the most vulnerable.

Press Release No. 22/413 — December 1, 2022. IMF Communications Department