IMF Reports Progress In Seychelles' Reform Program

by Phillip Morton, Investors Offshore.com

21 August 2009

An IMF mission led by Paul Mathieu visited Victoria during August 4-15 to assess performance at end-June under the Stand-By Arrangement with the Seychelles. The mission met with President James Michel, Minister of Finance Danny Faure, and Governor of the Central Bank of Seychelles Pierre Laporte, as well as representatives of the private sector, parliamentarians, and civil society.

At the conclusion of the Mission, the IMF delegation issued the following statement:

“Strong progress is being made by the Seychelles authorities in their reform program. The program is on track and is achieving its economic stabilization and reform objectives. A prudent and well-balanced monetary and fiscal stance has been effective in rapidly reducing inflation to the low single digits. All end-June 2009 quantitative targets under the program were met with margins and structural reforms are being implemented with determination. The economic downturn, reflecting primarily a sharp drop in tourism earnings, is easing and the decline in real GDP is likely to be somewhat less than earlier feared.”

“Looking ahead, the key objectives are to consolidate macroeconomic stability by maintaining tight fiscal policy, and progressively putting in place supporting structural reforms to remove constraints to growth and improve the performance of the public sector. Strong progress on inflation reduction and the appreciation of the rupee has permitted a gradual easing of monetary policy. The preparation of a fundamental reform of the tax system, a major reinforcement of control over parastatal performance, and strengthening of the financial system are proceeding. The tax reform aims to harmonize rates, broaden the tax base, and raise self-compliance, while maintaining the overall tax take.”

“Seychelles' public debt remains unsustainable. Good progress is being made in advancing public external debt restructuring discussions and the mission encourages the authorities to press ahead with their debt restructuring strategy.”

Of the USD24m IMF arrangement, approved on November 14, 2008, USD12.3m has been disbursed. About USD1.4m (SDR0.88m) is available with confirmation that the end-June performance criteria have been observed.

The next program review mission (the third), based on end-September performance, is expected in October 2009, and coincides with discussions on a medium-term structural reform program to be supported by a three-year arrangement under the Extended Fund Facility.

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