The Executive Board of the International Monetary Fund (IMF) has completed the fifth review under the three-year Extended Arrangement (EFF) for the Seychelles. The completion of the review enables a disbursement of SDR 2.64 million (about US$5.6 million). The Board's decision was taken on a lapse of time basis.¹ The arrangement became effective on December 23, 2009, in the amount of SDR 19.8 million (see Press Release No. 09/472).

In 2011, the solid recovery that was set in motion by decisive policy changes after the 2008 crisis continued, supported by a vibrant tourism sector and continued high foreign direct investment. Consumer price inflation increased from near-zero levels at the beginning of 2011 to 5½ percent by year end, reflecting higher international food and fuel prices and, late in the year, a depreciating exchange rate. Fiscal performance was stronger than projected, despite higher losses from the national airline’s operations. Public debt remained on a downward trend, and the country continued to rebuild international reserves. The economic program supported by the EFF remains on track, and all quantitative performance criteria at end-December 2011 were met.

In 2012, economic growth is expected to moderate owing to less favorable external conditions. Inflation is projected to peak in mid-year, once recent adjustments of fuel prices and utility tariffs are fully reflected in the consumer price index. Monetary policy is appropriately being tightened, which should alleviate pressures on the exchange rate and bring down inflation during the second half of 2012. Public finances will need to absorb the one-off costs of restructuring Air Seychelles, but an improved fiscal revenues outlook will ensure that the primary balance target is met. The upcoming implementation of the value-added tax will improve the efficiency of the tax system. Public finances should be strengthened by enhanced oversight of public enterprises, the launch of the public sector investment program, and the implementation of further public utility tariff reforms. The financial infrastructure will be improved by the introduction of a new electronic clearing system.

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¹ The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.