An International Monetary Fund (IMF) mission led by Jean Le Dem visited Victoria from February 28 to March 12, 2012 to conduct discussions for the fifth program review under the Extended Arrangement with Seychelles.¹ The mission met with President James Michel, Vice President Danny Faure, newly-nominated Finance Minister Pierre Laporte and Central Bank Governor Caroline Abel, and other senior government officials as well as parliamentarians, representatives of the private sector and the diplomatic community.

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

“Seychelles has weathered well global economic turbulences in 2011. Activity expanded by an estimated 4.9 percent driven by a strong increase in tourist arrivals. Inflation increased to 5½ percent at end-year reflecting mainly the pass-through of higher international oil and food prices onto domestic prices. Macroeconomic policies were in line with program expectations, fiscal balance and international reserve targets were exceeded. All quantitative performance criteria at end- 2011 were met, and progress has been achieved in the program of structural reforms, although utility prices are not yet at full cost recovery.

“In 2012, gross domestic product (GDP) growth is projected to slow down to 2.8 percent, mainly due to the worsening environment in Europe, Seychelles’ main tourism market. Moreover, lower exports of services, continued international tensions on international oil markets, and the depreciation of the euro against the dollar are weighing negatively on the external current account balance. The floating exchange rate has allowed for a quick adjustment to these factors. With appropriate macroeconomic policies, CPI inflation is projected to decrease to 5 percent by year-end.

“The government has confirmed its commitment to continue the implementation of the reform program. It is assessing the fiscal implications of the recently agreed strategic alliance of Air Seychelles with Etihad Airways. While strengthening prospects for a rapid return to profitability of the airline, the agreement entails significant one-off costs to the government, in the form of additional expenditures and debt. Discussions will continue over the coming weeks to update this year’s economic program accordingly.

“The mission appreciates the high quality of the technical discussions and wishes to thank the authorities and citizens of Seychelles for their warm hospitality and a very open and stimulating dialogue.”

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¹ The Extended Fund Facility under the Extended Arrangement is an instrument of the IMF designed for countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address. Assistance under the extended facility features longer program engagement–to help countries implement medium term structural reforms–and a longer repayment period. (See http://www.imf.org/external/np/exr/facts/eff.htm). Details on Seychelles’ current arrangement are available at www.imf.org/seychelles.