Finance minister reacts to IMF report: |13 March 2014

‘Government will continue to protect the most vulnerable’

The government will continue with its economic reforms while at the same time caring for the more vulnerable citizens.

The Minister for Finance Trade and Investment Pierre Laporte said this in reaction to the report on the IMF (International Monetary Fund)-supported macro-economic reform programme which Seychelles is currently going through.

The report was read at a press conference at the Ministry of Finance’s headquarters on Tuesday afternoon by Marshall Mills, the head of an IMF mission which had been in the country between February 26 and March 11.

The report states that Seychelles has largely achieved the objectives of the IMF-supported programme which ended last December, and concludes that the measures put into place by the Seychelles government will eventually address the current economic vulnerabilities.

It also reveals that the IMF is currently considering Seychelles’ demand for a new three-year arrangement of 17.8 million US dollars in support of the economic and financial programme of the government and the Central Bank.

The new arrangement will be submitted to the IMF executive board for approval by the end of June this year.

Commenting on the report, Minister Laporte said that the new arrangement was a choice and not an obligation for the country.

He added that the Seychelles could make do without it but has rather decided to take advantage of the facility and the current confidence of the IMF, the World Bank as well as investors.

In the general context of the IMF-partnered programme, Minister Laporte has said that the government will evaluate the progress made and see how far it is necessary to carry on with it.

As for the extension of the programme, it will support a new generation of reforms which will consist of maintenance of low inflation, good governance and accountability, elimination of red tape, improved fiscal discipline, development of the financial sector as well as development of the private sector whereby the State will reduce its implication in commercial activities, especially in the production sector.

In this area, the minister has indicated that on the model established by the State Assurance Corporation of Seychelles (Sacos) and the Seychelles Commercial Bank, other parastatals will also be privatised.

Mr Laporte however stressed that it is important to maintain a right balance between government and private sector investment in order to guarantee certain services such as public transport and energy supply.

He added that the government will intervene when the private sector fails, especially where essential goods are concerned.

He gave the example of the Seychelles Trading Company (STC) which has the mandate of helping to reduce prices.

He has however observed that government enjoys no monopoly in the sectors where it intervenes and will pull out when it feels that the market is satisfied.

At the same time, government will continue to discuss with the private sector and even subsidise private businesses where and when this is deemed necessary.

In the benefit of the private sector, government will continue with its effort to decrease taxes. The Finance Minister has nevertheless warned that one way of doing that is to ensure that all taxpayers take their responsibility and pay their taxes promptly.

Where the public sector is concerned, the minister has pointed out that wastage remains a concern as highlighted by recent Auditor General’s reports. He said that steps are being taken to remedy the situation and that the government will do all it can to reduce wastage in public departments. He insisted that accounts must be audited within each financial year with proper control from the Ministry of Finance and pressure from the National Assembly.

On a social point of view Minister Laporte also talked against general or universal subventions but reassured that government will continue to consider targeted subventions for the most vulnerable.
 
He explained that it is in this spirit that it has decided to delay the adjustment in electricity bills that would reduce commercial tariffs and increase those of domestic use. He insisted that the delay is in the interest of the Seychellois people.
 
The Minister for Finance also assured the population that there will be no further freezing of posts or redundancy cases within the macro-economic reform programme.

Minister Laporte concluded that the government will against all odds continue to maintain economic and fiscal discipline and promised that it will in no case derail from this policy as this will affect the country’s fiscal position through over-spending.

He reminded that demand for supplementary budget has been reduced to only one per year, and that this will only be done if the government has recorded savings which can be transferred to other areas of needs.

On her part, the Governor of the Central Bank Caroline Abel assured that Seychelles’ economy currently shows no reason for concerns. She based the argument on two main factors: firstly, the Central Bank has now accumulated the equivalent of 449 million dollars of foreign exchange reserves covering four months of importation, representing 82 percent of external debts and 8 years of debt repayment capacity. At the same time, she promised that accumulation of reserves will continue.

Secondly, inflation has now dropped to an acceptable level of 3.4 percent and the Central Bank will adjust its policies if the situation becomes alarming with a rise of up to around five percent.