IMF commends Seychelles for good performance, but further reforms necessary |30 June 2015

The International Monetary Fund (IMF) has commended Seychelles for its good performance on the amelioration in the economy and the application of the ongoing reform programme.
After completion of the IMF second review of the arrangement under the External Fund Facility (EEF) the IMF has said that among other improvements, it is happy with the country’s commitment towards debt reduction to reach less than 50% by 2018.

In two separate reports published on June 17 and 23 as a result  of what it calls the “the Article IV consultation1 with Seychelles” which ended on the 17th of the same month, the executive board of the IMF states that the macroeconomic outcomes remain solid, and most of the external pressures experienced in 2014 have abated.
 
It adds that tighter monetary policy, a recovery in tourism, and falling global fuel prices have helped to contain the external pressures, resulting in a primary surplus of over 4½ percent of GDP in 2014.

Commenting on the reports, the Minister for Finance, Trade and the Blue Economy Jean-Paul Adam has said that in spite of various vulnerabilities, the positive assessment of Seychelles by the IMF Mission has come as a result of the commitment the country has shown since embarking on the economic reforms in 2008.

He added that Seychelles has been able to show resilience and absorb economic pressures, partly due to an improvement in tourism arrival and the development of the private sector as a result of more access to credit facilities, with met targets which have surpassed IMF expectations. This, although government has continued to invest in infrastructure.

The minister added that the results which include gradual appreciation of the rupee are also due to the maintenance of a strict monetary policy.
He concluded that the IMF has shown appreciation that Seychelles has reached the organisation’s required standard.

The IMF has however warned that while the growth outlook is favourable, the Seychelles’ economy remains vulnerable to global developments with a difficult external environment, while domestic risks are linked to state owned enterprises.

Against this background, its directors have underscored the importance of continued sound policies and structural reforms to strengthen macroeconomic and financial stability, build policy buffers, and foster sustained and inclusive growth.

They have noted that the fragile financial situation of some state owned enterprises represents a significant fiscal risk. Accordingly, they have stressed that any new expansions of state owned enterprise operations or mandates should be carefully vetted and based on a strong and clear rationale for public sector involvement.

The IMF directors have finally agreed that further reforms are necessary to promote a dynamic private sector, while addressing skills mismatches in the labour market remains an important policy priority.

They said that they support measures to further improve the business and investment climate, including by opening up key sectors so far protected from competition.