IMF Mission Finds Seychelles’ Three-Year Economic Program on Track

Press Release No. 11/376
October 20, 2011

An International Monetary Fund (IMF) mission led by Jean Le Dem visited Victoria during October 6-20, 2011 to conduct discussions for the fourth program review under the Extended Fund Facility (EFF) Arrangement with Seychelles. The mission met with His Excellency President James Michel, Vice President Danny Faure, Governor of the Central Bank of Seychelles Pierre Laporte, Minister for Energy, Environment, and Transport Joel Morgan, Principal Secretary of Finance Ahmed Afif, and other senior government officials as well as representatives of the private sector.

At the conclusion of the visit, Mr. Le Dem issued the following statement:

“Seychelles’ recent economic performance has been favorable. Real gross domestic product (GDP) grew by 6.7 percent in 2010 and is expected to gain another 5 percent this year, one percentage point more than under earlier projections. Consumer price inflation picked up from near zero in 2010 to about 3 percent in September, primarily due to the impact of higher international food and oil prices. As the pass-through continues, the year-end inflation should increase slightly more but remain in low single digits. At the same time, domestic demand pressures remain contained by prudent fiscal and monetary policies. Good progress was made in implementing the IMF-supported program despite delays in implementing several structural measures. All end-June 2011 quantitative targets under the program were met and most of the missed structural benchmarks are expected to be fulfilled by December. Public debt is projected to decline further in 2011 to about 76 percent of GDP at end-year.

“Growth prospects in 2012 are positive despite the worsening of the global environment. Real GDP is projected to grow by 4 percent, as increasing supply of accommodation is expected to mitigate the impact of the economic slowdown in Europe. Twelve-month inflation is expected to decline to about 3.5 percent by year-end.

“The authorities and the mission reached understandings, ad referendum, on economic policies and reforms to maintain macroeconomic stability and further progress towards the government objective of reducing public debt to less than 50 percent of GDP by 2018. To this end, prudent fiscal policies will be maintained in 2011 and 2012, which will also help to address the risks stemming from the volatile global economic environment. Absent adverse external developments, a moderate gradual fiscal easing might be warranted thereafter. Monetary policy will remain focused on keeping inflation low, while providing enough room for private credit growth. The full pass-through of international oil prices to domestic prices will be essential to lift the burden on public finances and strengthen the financial standing of utilities. The mission welcomes the authorities’ intention to strengthen the social safety net to address the needs of the most vulnerable layers of the population.

“The mission encourages the authorities to continue with public enterprise reforms aimed at optimizing the role of the state in the economy and fostering private sector-led growth. In this context, the mission welcomes the planned steps to divest government’s non-strategic participations and the intention to streamline the operations of Air Seychelles to better adapt it to market conditions and make the airline financially viable.

“The IMF's Executive Board is tentatively expected to consider the review in December 2012. The EFF arrangement was approved on December 22, 2009, for SDR19.8 million (about US$30.9 million), of which SDR 12.7 million (about US$19.1 million) has so far been disbursed. SDR 3.08 million (about US$4.6 million) would be available upon completion of the fourth review.

“The mission wishes to thank the authorities for their warm hospitality and the high quality of the technical discussions.”



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