Seychelles makes remarkable progress, says IMF |24 December 2009

In a press release yesterday, the IMF gave further details of its three-year extended fund facility (EFF) to Seychelles, announced last weekend.

The fund’s executive board approved an arrangement for 19.8 million special drawing rights (SDR), equivalent to about US $31.1 million, to support the economic programme in 2010-12.

The approval also makes available a disbursement of SDR 0.88 million, about US $1.38 million.
The executive board has also completed the third and final review under the Stand-By Arrangement (SBA), which enables a disbursement amounting to SDR 2.2 million, about US $3.46 million.
 
With completion of this review, the SBA has been cancelled.
The IMF said Seychelles’ EFF-supported programme aims to put public finances on a sustainable footing and increase growth.
The key objectives are to support the public debt restructuring process and re-establish external sustainability; accompany the second generation of structural reforms aimed at securing macro-economic stability and raising growth performance; and put in place a macro-economic framework to guide policies through 2012.

After the executive board met to discuss Seychelles on December 18, Takatoshi Kato, the IMF’s deputy managing director and acting chairman, said: “The Seychelles authorities have made remarkable advances over the last 12 months in addressing long-standing economic problems and establishing macro-economic stability.

“Inflation has been near zero, and economic recovery is expected to gain traction in 2010. Programme implementation has been exemplary, even in the face of headwinds from the global recession, backed by strong ownership and broad public support.

“Progress has also been made in negotiations with external creditors aimed at achieving a restructuring compatible with Seychelles’ payment capacity.”

Mr Kato said the strong fiscal adjustment in 2009 played a key role in stabilising the economy. Good progress has also been made in strengthening public financial management, with the introduction of a treasury single account.

The 2010 budget represents another major step forward in improving transparency and the performance of the public sector, and in launching a major tax reform, he added.

“The new market-based monetary policy has been instrumental in achieving price stability. The flexible exchange rate regime, which has made an important contribution to stabilisation and eased the burden on monetary policy, remains appropriate,” said Mr Kato.

“In view of the very good progress achieved so far, the focus now shifts to carrying out second generation reforms.
“The new three-year EFF arrangement puts in place a macro-economic framework to guide policies through 2012 and support the authorities’ medium-term reform agenda.”

Mr Kato said Seychelles’ key objectives are to consolidate macro-economic stability, remove constraints to growth and achieve public debt sustainability.

Major improvements in public sector governance practices are needed over the medium term to contain fiscal risks, raise productivity and reduce the size of the state, he added.

“It will be important to press ahead with efforts to strengthen financial discipline and accountability in the parastatal sector, bolster the financial system, overhaul tax policy and administration, reinforce their debt management capacity, and pursue public external debt restructuring negotiations,” he said.