IMF approves three-year policy coordination instrument for Seychelles

14 Décembre 2017

Dar es Salaam, Tanzania, December 14 (Infosplusgabon) - Seychelles has not only become the first International Monetary Fund (IMF) member country to request a Policy Coordination Instrument (PCI) but also got it approved by the Fund’s Executive Board.

Announcing the approval in a statement made available to Infosplusgabon in Dar es Salaam on Thursday, the IMF said that the three-year PCI for Seychelles will build on the lessons from the previous programmes supported by the Fund, with the aim of consolidating macroeconomic stabilization and foster sustained and inclusive growth.

The PCI is available to all IMF members that do not need the Fund's financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors.

“Seychelles has made considerable progress toward external viability and fiscal sustainability since the crisis in 2008 under three successive Fund arrangements. The authorities’ strong ownership has played an important role in the success of the Fund-supported programmes,” said IMF Deputy Managing Director and Acting Chair of the Executive Board, Mr. Tao Zhang.

He, however, noted that the Indian Ocean island nation remains vulnerable to external shocks and further efforts are needed to address challenges in maintaining fiscal discipline.

According to Mr. Zhang, the country’s fiscal policy will be anchored by the medium-term target of bringing the public debt-to-GDP ratio below 50 percent by 2021.

“To reconcile this debt reduction target with the authorities’ emphasis on infrastructure investments and measures to enhance the resilience of the economy to climate change, it is critical to steadfastly implement the permanent fiscal saving measures identified in the 2018 budget and the Program Statement.

“It is important to maintain the flexible exchange rate policy and limit foreign exchange intervention to preserve the international reserve buffers at around the current level. The authorities’ continued efforts to ensure a successful transition to the recently introduced monetary policy framework in which interest rates play a prominent role are welcome,” Mr. Zhang emphasised.

According to a brief by the IMF, Seychelles has made considerable progress toward macroeconomic stability since the 2008 crisis under three consecutive IMF programmes.

The public debt to GDP ratio has been reduced by almost two-thirds during the period, while international reserves coverage has improved to around four months of prospective imports from less than one month at end-2008. Consequently, the country does not need the IMF’s financial assistance now.

The IMF said the near- and medium-term economic outlook is favourable. Macroeconomic performance has been robust in 2017. The external current account deficit is estimated to have narrowed, supported by strong tourist arrivals.

Reflecting strong performance in the tourism sector, economic growth for 2017 is projected to reach around 4¼ percent. The growth outlook after 2018 remains positive, buoyed by the tourism sector, it said.

While a strengthening in international commodity prices could have some negative impacts on the balance of payments, the country’s international reserves coverage is expected to remain at an adequate level, anchored by the authorities’ prudent policies.

As a small island economy dependent on tourism in a challenging global economic environment, Seychelles still faces vulnerabilities and pressures, the IMF said, noting that downside risks to the outlook largely lie in the external factors which could dampen tourism performance.

FIN/INFOSPLUSGABON/OIO/ GABON 2017

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