June 2, 2017

• Seychelles has made progress toward economic stability and external sustainability through bold reforms
• Program aims to support authorities’ efforts to strengthen the economy through sustained and inclusive growth
• The flexible exchange rate regime has served the country well and should be maintained

On June 2, 2017, the Executive Board of the International Monetary Fund (IMF) completed the sixth and final review of Seychelles economic program supported by an arrangement under the Extended Fund Facility (EFF).[1] The completion of the review enables the disbursement of an amount equivalent to SDR 1.635 million (about US$2.3 million) bringing the total disbursements under the arrangement to SDR 11.445 million (about US$15.8 million).

Seychelles’ three-year, SDR 11.445 million arrangement (about US$17.6 million at the time of approval, the equivalent of 50 percent of Seychelles’ current quota in the IMF) was approved by the IMF Executive Board on June 4, 2014 (see Press Release No. 14/262) to support authorities’ efforts to reduce high debt levels, improve external buffers and sustainability in the face of balance of payments pressures, and to strengthen the economy through sustained and inclusive growth.

Following the Executive Board's discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:

“Seychelles has made noticeable progress toward economic stability and external sustainability through bold reforms since the crisis in 2008. While the growth outlook is positive, the economy remains vulnerable to external shocks, and over the long term, climate change.

“The authorities should give priority to achieving their medium-term debt target to preserve the hard-won economic stability and external sustainability. Without additional measures in the 2018 budget, the authorities’ target of bringing public debt-to-GDP ratio below 50 percent would be significantly delayed while the country’s external position could come under pressure. The authorities should also take steps to create further fiscal space over the medium term to accommodate investments aimed at reducing vulnerability to climate change.

“The flexible exchange rate regime has served the country well and should be maintained with minimal intervention to preserve the international reserve buffers at around the current level. Meanwhile, the authorities should continue efforts to avoid further loss of correspondent banking relationships. Further strengthening the AML/CFT framework will be helpful in this regard.

“To support sustained and inclusive growth, structural reforms should aim at diversifying the economy through improvements in the business environment. Reducing cross-subsidization in electricity prices, efficient use of public-private-partnerships, and further accelerating investment in education would help improve the business environment, raise productivity, and go a long way toward promoting shared prosperity.”