IMF Executive Board Completes the Third Reviews Under the Extended Fund Facility and the Resilience and Sustainability Facility Arrangements and Approves US$12.1 Million Disbursement for Seychelles

December 9, 2024

  • The Executive Board of the International Monetary Fund (IMF) completed today the third reviews of Seychelles’ economic performance under the Extended Fund Facility and Resilience and Sustainability Facility Arrangements. The completion of the reviews allows for an immediate disbursement of about US$12.1 million to help strengthen macroeconomic stability, boost growth, and strengthen fiscal and monetary policy frameworks, while also supporting efforts to strengthen resilience to climate change, exploit synergies with other sources of official financing, and catalyze financing for climate-related investments.
  • Economic growth in Seychelles appears to have slowed relative to earlier forecasts, reflecting lower tourist arrivals and lower tourist spending in Q2 and Q3. Inflation remains low, fiscal performance in the first half the year was tighter than budgeted, and central bank accumulation of foreign exchange reserves was above the program target.
  • Performance under the EFF and RSF programs has been good. All quantitative targets for end-June 2024 were met, and significant progress has been made on structural benchmarks under the EFF and reform measures under the RSF.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the third reviews of Seychelles’ economic performance under the 36-month EFF and RSF Arrangements approved on May 31, 2023. The completion of the reviews allows for the authorities to draw the equivalent of SDR 6.1 million (about $8 million) under the EFF and SDR 3.1 million (about $4.1 million) under the RSF, bringing total disbursements to SDR 24.4 million (about $32.1 million) and SDR 9.3 million (about $12.2 million) under the EFF and RSF, respectively.

Economic growth in Seychelles appears to have slowed relative to earlier forecasts, due in part to lower tourist arrivals from most regions as well as shorter stays and less spending per tourist. Fisheries and related product manufacturing is also lower than expected, driven by lower tuna production targets. Year-on-year inflation rose to 0.6 percent by September 2024, compared to -2.7 percent in December 2023, due primarily to higher utility tariffs. The Central Bank of Seychelles (CBS) has maintained an accommodative monetary stance. Fiscal performance in the first half of the year was tighter than budgeted, driven by robust tax collection. Lower than expected tourist arrivals and lower spending per capita is expected to contribute to a wider current account deficit by year-end. Nonetheless, gross international reserves rose to $754 million by August 2024, equivalent to 3.5 months of import cover.

Program performance remains good. All end-June 2024 quantitative performance criteria (QPCs) and all end-September 2024 indicative targets (ITs) were met. Good progress was made toward structural benchmarks, although some were implemented with a delay or rescheduled to a later implementation date due to capacity constraints. Three reform measures (RMs) under the RSF for the third review have been adjusted, with two now extended to September 2025. The third RM—adoption of a National Climate Finance Strategy—was achieved with a short delay.

The outlook is stable but faces significant near- and medium-term challenges. Real GDP growth is projected at 4.3 percent in 2025, stabilizing at around 3.5 percent in the medium term. Average annual inflation is expected to reach 2.3 percent in 2025, stabilizing at around 3 percent thereafter. The current account deficit is anticipated to average about 9 percent of GDP over the medium term. A balance of payments surplus, supported by modest improvements in the goods and services balance and continued FDI, is projected to raise reserve coverage to approximately 3.8 months of imports. Potential downside risks include rising global commodity prices, external shocks to tourism demand, and climate change.

The authorities’ near-term priorities are to bolster economic growth, enhance fiscal and external buffers, and maintain macroeconomic stability. In the medium term, the authorities’ focus is on gradual fiscal consolidation to reduce the ratio of public debt to GDP, while simultaneously improving the efficiency of public spending. Building capacity with respect to public financial management and financial sector supervision—particularly with respect to climate change, is another key focus. The structural reform agenda emphasizes revenue administration, public financial and investment management, and governance improvements, including digitalization and fiscal transparency.

Following the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director, and acting Chair, issued the following statement:

“Seychelles continues to demonstrate sound macroeconomic management and progress on structural reforms under the EFF and RSF, despite volatility in the external environment and intensification of climate shocks.

“While growth in 2024 is likely to slow moderately, macroeconomic stability has been maintained, and continued progress has been made on critical macrostructural reforms. Better than expected fiscal outturns have contributed to a decline in public debt. Monetary policy remains accommodative in the context of low inflation and high real interest rates, but the authorities should remain vigilant to inflationary pressures and adjust the monetary policy stance if needed.

“The outlook is broadly stable but there are risks to near- and medium-term growth. These include a slowdown in tourism, risks from global economic and geopolitical developments, and the accelerating effects of climate change.

“The EFF arrangement will continue to help to protect macroeconomic stability and support stronger fiscal and external buffers, while supporting the authorities’ structural reform agenda. Fiscal consolidation through revenue gains, prudent spending, and improvements in public financial management will help reduce debt and create space for priority expenditure, including social spending and investment in climate change adaptation and mitigation. The authorities are committed to continue reforms to boost inclusive growth by supporting economic diversification and value added, improving social protection, and investing in human capital. Ongoing reforms are also geared to improve the monetary policy implementation framework and to strengthen financial system resilience.

“Implementation of reform measures under the RSF will help to strengthen the climate-resilience of public investment, integrate climate change into the budget process and financing strategy, and bring climate risks to the fore in financial sector supervision. Looking ahead, continued implementation of the RSF will also help authorities strengthen climate-related risk management for financial institutions, and undertake climate adaptation and mitigation reforms, including through measures to facilitate energy transition.”

 

Seychelles: Selected Economic and Financial Indicators, 2021-29

 
               

 

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

2022

 

2023

 

2024

2025

2026

2027

2028

2029

 

 

Act.

 

Prel.

 

Proj.

 

(Annual percent change, unless otherwise indicated)

                           

National income and prices

 

                       

Nominal GDP (millions of Seychelles rupees)

 

25,164

 

29,373

 

30,015

 

31,041

33,033

35,027

37,208

39,561

42,055

Real GDP (millions of Seychelles rupees)

 

22,700

 

26,100

 

26,922

 

27,735

28,922

29,929

30,983

32,079

33,205

Real GDP

 

0.6

 

15.0

 

3.2

 

3.0

4.3

3.5

3.5

3.5

3.5

CPI (annual average)

 

9.8

 

2.6

 

-1.0

 

0.5

2.3

3.0

3.0

3.0

3.0

CPI (end-of-period)

 

7.9

 

2.5

 

-2.7

 

2.5

3.0

3.0

3.0

3.0

3.0

GDP deflator average

 

2.7

 

1.5

 

-0.9

 

0.4

2.0

2.5

2.6

2.7

2.7

 

 

 

 

 

 

 

 

 

         

 

 

 

 

 

 

 

 

 

         

Money and credit

 

 

 

 

 

 

 

 

         

Broad money

 

-5.1

 

0.6

 

5.8

 

11.3

Reserve money (end-of-period)

 

11.1

 

-3.0

 

-3.5

 

11.3

Velocity (GDP/broad money)

 

1.1

 

1.2

 

1.2

 

1.1

Money multiplier (broad money/reserve money)

 

3.3

 

3.4

 

3.7

 

3.7

Credit to the private sector

 

-11.9

 

4.0

 

7.4

 

10.0

10.2

10.1

9.9

9.8

9.8

               

 

         
 

(Percent of GDP, unless otherwise indicated)

Savings-Investment balance

                         

External savings

 

8.7

 

7.4

 

7.2

 

10.7

9.8

9.2

9.5

9.3

8.9

Gross national savings

 

16.8

 

15.6

 

17.5

 

14.7

17.0

16.3

16.2

17.0

17.4

Of which:  government savings

 

-3.2

 

1.2

 

2.2

 

2.1

3.6

3.2

4.3

5.1

5.8

private savings

 

20.0

 

14.5

 

15.4

 

12.6

13.4

13.1

11.9

11.8

11.6

Gross investment

 

25.5

 

23.0

 

24.8

 

25.4

26.8

25.5

25.7

26.2

26.3

Of which:  public investment 1

 

5.2

 

2.6

 

4.3

 

4.9

6.2

4.9

5.1

5.6

5.7

private investment

 

20.3

 

20.4

 

20.5

 

20.5

20.6

20.6

20.6

20.6

20.6

Private consumption

 

45.7

 

51.1

 

48.8

 

49.1

47.0

48.3

49.9

50.2

50.6

                           
 

(Percent of GDP)

Government budget

             

 

         

Total revenue, excluding grants

 

30.3

 

29.5

 

31.5

 

33.9

35.3

33.4

33.1

33.0

32.9

Expenditure and net lending

 

39.1

 

31.0

 

33.6

 

37.0

38.2

35.4

33.9

33.5

32.8

Current expenditure

 

33.8

 

28.6

 

29.8

 

31.9

32.1

30.1

28.8

27.8

27.1

Capital expenditure 1

 

5.2

 

2.6

 

4.3

 

4.9

6.2

4.9

5.1

5.6

5.7

Overall balance, including grants

 

-5.7

 

0.1

 

0.2

 

-2.0

-1.6

-1.2

-0.1

0.2

0.7

Primary balance

 

-3.1

 

1.0

 

1.7

 

1.1

1.1

1.5

2.3

2.6

3.0

Total government and  government-guaranteed debt 2

 

74.5

 

61.4

 

58.6

 

61.5

60.8

59.1

55.9

52.5

48.7

               

 

         

External sector

                         

Current account balance including official transfers
    (in percent of GDP)

 

-8.7

 

-7.4

 

-7.2

 

-10.7

-9.8

-9.2

-9.5

-9.3

-8.9

Total external debt outstanding  (millions of U.S. dollars) 3

 

5,297

 

5,481

 

5,708

 

6,082

6,386

6,642

6,873

6,919

7,017

 (percent of GDP)

 

355.5

 

266.3

 

266.6

 

285.0

286.8

284.1

279.5

267.3

257.6

Terms of trade (-=deterioration)

 

-3.0

 

-8.5

 

-3.3

 

1.9

10.3

-1.5

-1.0

-0.8

-0.7

Gross official reserves (end of year, millions of U.S. dollars)

 

702

 

639

 

682

 

806

851

852

889

958

1,001

Months of imports, c.i.f.

 

3.7

 

3.1

 

3.3

 

3.7

3.8

3.6

3.6

3.7

3.8

In percent of Assessing Reserve Adequacy (ARA) metric

 

121

 

102

 

104

 

118

119

116

118

123

125

Exchange rate

                         

Seychelles rupees per US$1 (end-of-period)

 

14.7

 

14.1

 

14.2

 

Seychelles rupees per US$1 (period average)

 

16.9

 

14.3

 

14.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

               

 

         

Sources: Central Bank of Seychelles; Ministry of Finance; and IMF staff estimates and projections.

     

 

         

  1 Includes onlending to the parastatals for investment purposes.

             

 

           

  2 Includes debt issued by the Ministry of Finance for monetary purposes.

         

 

           

  3 Includes private external debt.

             

 

           

 

 

 

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