VICTORIA, Mahé, May 9, 2013/African Press Organization (APO)/ — The Executive Board of the International Monetary Fund (IMF) today completed the seventh review of Seychelles’ economic performance under a program supported by the Extended Fund Facility (EFF).1 Completion of the review permits the immediate disbursement of SDR 3.3 million (about US$5.0 million), bringing total disbursements under the four-year arrangement to SDR 23.1 million (about US$34.9 million). At the same meeting, the Executive Board also concluded the 2013 Article IV Consultation with Seychelles, details of which will be published in due course in a Public Information Notice
The Executive Board approved a three-year EFF arrangement for Seychelles in December 2009 in an amount equivalent to SDR 19.8 million (then about US$31.1 million—see Press Release No. 09/472). The arrangement was extended by one year in December 2012 to support the country’s economic reform program, with an augmentation of access of SDR 6.6 million (about US$10.0 million)—equivalent to 60.6 percent of Seychelles’ quota.
Following the Executive Board’s discussion of Seychelles, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, made the following statement:
“The authorities’ strong commitment to macroeconomic stability has helped the economy overcome the 2008 balance of payments and debt crisis, and return to a path of continued growth, low inflation, fiscal surpluses, and declining debt. While the outlook is benign, the economy remains vulnerable to an uncertain global environment. Going forward, policies and structural reforms should aim at preserving macroeconomic and financial stability, raising policy buffers, and fostering stronger and inclusive growth.
“The authorities have made important strides toward improving financial discipline at the central government level. To ensure fiscal sustainability, it will be critical to strengthen the oversight and financial position of parastatals and to make further progress in public financial management. For the medium term, the government is rightly targeting a primary fiscal surplus of around 5 percent of GDP in order to reach the goal of reducing public debt to 50 percent of GDP by 2018. The debt restructuring is largely completed, and caution should be exercised when contracting new external debt.
“On monetary policy, durably removing excess liquidity is the needed first step toward strengthening the monetary transmission mechanism, and will require a transparent and credible mechanism to cover the fiscal cost of sterilization. A further increase in the reserve coverage would provide a stronger buffer against shocks.
“Structural reforms should aim to deepen markets and to foster inclusive and broad-based growth. Recent improvements in the business climate are welcome. Stronger efforts towards broadening access to credit, enhancing infrastructure, addressing data weaknesses, and reducing skills mismatches in the labor market would further facilitate private sector development.”
1 Assistance under the EFF can be provided to help countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address. Assistance under the EFF 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.