IMF commends Seychelles for reform success |18 May 2009

He was speaking after IMF’s second two-week review of the reforms which were launched in November.

“We really need to congratulate the authorities, the Central Bank and the government for the strength of the reform process and the determination they have shown in implementing this reform.

“Early signs of success are already apparent. These strong and difficult reforms are producing results,” he told a press conference attended by Finance Minister Danny Faure, the executive director representing Seychelles at the IMF Dr Hi-Su Lee, Central Bank governor Pierre Laporte, principal secretary for finance Ahmed Afif and reporters from all media local houses.

He said inflation has been declining rapidly in the last four months and “dropped to the low single digits from 37% before the rupee was floated which is a remarkable achievement. The rupee has stabilised after the float and in fact has appreciated significantly to about 14.1 rupees to the dollar on Friday which is an 18% appreciation since the peak in December so confidence is returning to the rupee which is very noteworthy, said Mr Mathieu.

He said interest rates on government securities have been declining very quickly from 30% in January to 13% on Friday in line with the falling inflation.

“All these are indications that the programme is working and is succeeding in stabilising the macroeconomic environment.

“At the same time, the foreign exchange reserves of the Central Bank are building up and should continue as the current account deficit narrows as a result of a sharp contraction of imports and lower commodity prices for example of petroleum products which have gone down quite a bit.”

He said the achievements were made as a result of a very tight budget and monetary policy and there is very strong evidence of success.

“The programme is on track and is achieving its economic stabilisation and reform objectives.”

Mr Mathieu said all end-march 2009 quantitative targets under the programme were met with margins and structural reforms are being implemented as agreed but noted the economy is being severely affected by the global economic crisis and the IMF mission estimates that GDP will fall by 11% in 2009 on a sharp drop in tourism and construction.

He said unemployment has also risen but the effects of this are being mitigated by the social welfare scheme.

“The mission welcomes the steps that have been taken so far and encourages the authorities to press ahead with their debt restructuring strategy,” he said.

The mission head however pointed out a need to reinforce control over parastatals where weaknesses could put at risk the hard-worn gains in macrostabilisation and public finances.

In a separate interview, Finance Minister Danny Faure told Nation that government has hired external auditors who are already doing audit management on parastatal bodies and have completed work on four of the organisations.

“We’ve also hired external auditors to look at the financing. With their recommendations we will prepare action plans to improve efficiency within. We will also have the information on which ones – if any are at a financial risk – we need to pay particular attention to. He said he was happy with the IMF findings and commendations of our success with the reforms.

“We are satisfied that what we are doing is the correct thing. That President James Michel took the right decision to do these reforms and so far so good because there is discipline by the Ministry of Finance, all the ministries and good monetary control by the Central Bank and this is mainly because we have a population that feels the pinch but also understands that it is the only way to go.

Minister Faure said the public understands and supports the reforms.