IMF Executive Board Completes Second Reviews Under the Extended Fund Facility and the Resilience and Sustainability Facility Arrangements and Concludes the 2024 Article IV Consultation with Seychelles

IMF News, June 3, 2024

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IMF Executive Board Completes Second Reviews Under the Extended Fund Facility and the Resilience and Sustainability Facility Arrangements and Concludes the 2024 Article IV Consultation with Seychelles

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• Published: June 3, 2024

Program actions and financing

• The Executive Board completed the second reviews of Seychelles’ economic performance under the 36-month EFF and RSF Arrangements approved on May 31, 2023.
• Completion of the reviews allows the authorities to draw:
  • the equivalent of SDR 6.1 million (about $8.1 million) under the EFF, and
  • SDR 3.1 million (about $4.1 million) under the RSF.
• Total disbursements to date:
  • EFF: SDR 18.3 million (about $24.3 million)
  • RSF: SDR 6.2 million (about $8.2 million)
• The Executive Board’s approval will allow for a total disbursement of SDR 9.2 million ($12.2 million) as a result of these reviews.

Recent economic performance (2023) — key findings

• Real GDP growth: 3.2 percent in 2023, compared to 15 percent in 2022.
• Tourist arrivals: rose to about 91 percent of the pre-pandemic high (2019); spending per tourist was flat.
• Sector performance: Information technology drove non-tourism growth, along with fishing and construction; manufacturing contracted following unseasonably heavy rains, flooding, and an industrial explosion in December 2023.
• Inflation: Year-on-year headline inflation was -2.7 percent by December 2023, reflecting lower global commodity prices and a broadly stable exchange rate.
• Gross international reserves: increased to $682 million (3.2 months of imports) by end-2023.
• Fiscal outcome: Government primary fiscal surplus of 1.7 percent of GDP was higher than expected, driven mainly by lower than projected current and capital spending.
• Longer-term vulnerabilities: limits to sustainable tourism-based growth, need for economic diversification, and high vulnerability to climate change.

Outlook and projections

• Real GDP growth: projected to rise to 3.7 percent in 2024.
• Annual average inflation: expected to reach 1.2 percent in 2024.
• Gross foreign exchange reserves: projected to reach $751 million by end-2024, equivalent to 3.4 months of imports.
• External current account: expected to remain broadly stable.
• Potential downside risks include:
  • Seychelles’ high vulnerability to external shocks (such as volatility in commodity and shipping prices),
  • climate-related events,
  • disruptions to tourism.

Selected quantitative indicators (selected rows preserved exactly as presented)

• Nominal GDP (millions of Seychelles rupees): 25,164 (2021); 29,373 (2022); 30,019 (2023); 31,464 (2024); 33,420 (2025); 35,496 (2026); 37,874 (2027); 40,462 (2028); 43,213 (2029).
• Real GDP (millions of Seychelles rupees): 22,700 (2021); 26,100 (2022); 26,926 (2023); 27,920 (2024); 29,072 (2025); 30,155 (2026); 31,229 (2027); 32,330 (2028); 33,457 (2029).
• Real GDP (annual percent change): 0.6 (2021); 15.0 (2022); 3.2 (2023); 3.7 (2024); 4.1 (2025); 3.6 (2026); 3.5 (2027); (2028 and 2029 entries not shown).
• CPI (annual average): 9.8 (2021); 2.6 (2022); -1.0 (2023); 1.2 (2024); 2.3 (2025); 3.0 (2026).
• CPI (end-of-period): 7.9 (2021); 2.5 (2022); -2.7 (2023); 1.6 (2024).
• Gross official reserves (end of year, millions of U.S. dollars): 702 (2021); 639 (2022); 682 (2023); 751 (2024); 805 (2025); 841 (2026); 879 (2027); 937 (2028); 977 (2029).
• Months of imports, c.i.f.: 3.1 (2021); (2022 entry displayed as 3.1 under table heading but context shows 3.2 months of imports by end-2023 in text).
• Total government and government-guaranteed debt (percent of GDP): 74.5 (2021); 61.4 (2022); 58.5 (2023); 60.0 (2024); 59.1 (2025); 57.0 (2026); 53.5 (2027); 49.5 (2028); 45.5 (2029).
• Current account balance including official transfers (percent of GDP): -10.1 (2021); -7.4 (2022); -7.2 (2023); -7.3 (2024); -7.8 (2025); -8.4 (2026); -9.1 (2027); -9.3 (2028).
• Total external debt outstanding (millions of U.S. dollars): 5,261 (2021); 5,387 (2022); 5,570 (2023); 5,859 (2024); 6,145 (2025); 6,386 (2026); 6,581 (2027); 6,501 (2028); 6,470 (2029).
• Terms of trade (-=deterioration): -8.5 (2021); -3.6 (2022); -2.6 (2023); -1.8 (2024); -1.1 (2025); -0.7 (2026).
• Seychelles rupees per US$1 (end-of-period): 14.7 (2021); 14.1 (2022); 14.2 (2023).
• Seychelles rupees per US$1 (period average): 16.9 (2021); 14.3 (2022); 14.0 (2023).

Policy messages and recommendations from IMF senior management (Mr. Bo Li, Deputy Managing Director, acting Chair)

• Overall assessment: The Seychellois economy has demonstrated resilience despite external volatility and intensified climate shocks; performance under the EFF and RSF has been strong.
• Fiscal policy:
  • Pursue sustained growth‑friendly fiscal consolidation through revenue mobilization, prudent spending, and improved public financial management to reduce debt vulnerabilities and create fiscal space for priority social and climate-related investment.
  • Address bottlenecks in public sector hiring.
  • Strengthen the debt management framework.
  • Improve governance, transparency, and monitoring of state-owned enterprises.
• Monetary and financial sector policy:
  • Monetary stance is appropriate; closely monitor inflationary pressures.
  • Strengthen the central bank’s balance sheet and enhance the monetary policy framework to improve policy transmission.
  • Maintain a flexible exchange rate regime.
  • Closely monitor non-performing loans to safeguard financial sector stability.
  • Upgrade the regulatory framework for crisis prevention and management.
  • Further strengthen the AML/CFT framework, including enhancing transparency of beneficial ownership information.
• Structural and climate policies:
  • Commit to reforms to boost inclusive growth, economic diversification, modernization of public service and the education system, and strengthening climate change resilience in line with the National Development Strategy.
  • Implement RSF reform measures to strengthen the climate-focus of public investment, integrate climate change into the budget process, and develop a climate financing strategy.
  • Strengthen climate-related risk management for financial institutions and deepen climate adaptation and mitigation reforms.
• Development partner support: Strong support from development partners is critical for successful implementation of the reform agenda.

Executive Board Assessment — Directors’ emphasis

• Directors commended strong performance under the Fund‑supported programs and recognized the favorable outlook while noting vulnerabilities to external and climate‑related shocks.
• Main recommendations echoed:
  • Preserve macroeconomic sustainability and build buffers while supporting inclusive growth and resilience.
  • Sustain growth‑friendly fiscal consolidation; strengthen public investment management; address civil service hiring bottlenecks; modernize and streamline tax procedures to bolster revenues.
  • Strengthen the debt management framework in light of potential lower access to concessional financing.
  • Improve governance, transparency, and monitoring of state‑owned enterprises.
  • Monitor inflation and be ready to adjust monetary policy; strengthen central bank balance sheet and policy transmission.
  • Continue building external buffers and maintain a flexible exchange rate regime.
  • Safeguard financial sector stability; monitor non‑performing loans that remain well above pre‑pandemic levels.
  • Upgrade regulatory framework for crisis prevention and management.
  • Strengthen AML/CFT, including beneficial ownership transparency.
  • Advance structural reforms: economic diversification, public service and education modernization, and climate resilience; sustain reform implementation and secure development partner support for climate mitigation and adaptation goals.

IMF Press Release No. PR24203, June 3, 2024 — IMF Communications Department

References

• PRESS CENTER
• Seychelles and the IMF
• IMF Policy Advice -- A Factsheet
• IMF-World Bank Debt Sustainability Framework for Low-Income Countries -- A Factsheet
• Special Drawing Rights (SDRs) -- A Factsheet
• Press Releases
• approved on May 31, 2023
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home