IMF happy with steps to keep inflation low |25 October 2011

The IMF noted global factors will put a strain on economies and push prices up all over the world, but said in Seychelles inflation will remain low.

Vice-President Danny Faure – who is also the Minister for Finance and Trade – said he will outline measures that the government plans to put in place to mitigate inflation when he reads Budget 2012 on November 29.

Central Bank of Seychelles governor Pierre Laporte said Seychelles inflation is quite low and cannot be compared with the trends seen in many other countries.

They were speaking at a press conference at which they addressed the media after an IMF mission that was here for two weeks to review performance of the reform programme.

The mission was led by Jean Le Dem, who noted Seychelles monetary policy remains “focused on keeping inflation low, while providing enough room for private credit growth”.

He nevertheless said “the full pass-through of international oil prices to domestic prices will be essential to lift the burden on public finances and strengthen the financial standing of utilities,” but added, “the mission welcomes the authorities’ intention to strengthen the social safety net to address the needs of the most vulnerable layers of the population”.

Mr Le Dem said the mission encouraged the authorities to continue with public enterprise reforms “aimed at optimising the role of the state in the economy and fostering private sector-led growth”. “In this context, the mission welcomes the planned steps to divest government’s non-strategic participations and the intention to streamline the operations of Air Seychelles to better adapt it to market conditions and make the airline financially viable.”

He said the IMF's executive board is tentatively expected to consider the review in December 2012. “The Extended Fund Facility arrangement was approved on December 22, 2009, for SDR19.8 million (about US $30.9 million), of which SDR12.7 million (about US $19.1 million) has so far been disbursed. SDR3.08 million (about US $4.6 million) would be available upon completion of the fourth review,” he said.

“The authorities and the mission reached understandings on economic policies and reforms to maintain macroeconomic stability and further progress towards the government objective of reducing public debt to less than 50 percent of GDP by 2018.

“To this end, prudent fiscal policies will be maintained in 2011 and 2012, which will also help to address the risks stemming from the volatile global economic environment. Absent adverse external developments, a moderate gradual fiscal easing might be warranted thereafter.”