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An International Monetary Fund (IMF) staff mission concluded that Seychelles will require further measures to achieve its medium-term debt reduction target.
The Government has made a commitment to the IMF that it will reduce Seychelles' debt-to-gross domestic product (GDP) ratio to below 50 percent by 2020.
According to the IMF, this will require that Seychelles' revenue exceeds expenditure by at least three to four percent, excluding the cost of interest payments on its debt, until then.
A statement by the staff mission said that, "reflecting vibrant tourist arrivals and expanding credit to the private sector, economic growth for 2016 is projected to reach around 4.5 percent. ... With the economy performing well, the primary fiscal surplus is expected to reach three percent of GDP this year."
The surplus will be achieved "despite the impact of the various fiscal initiatives announced in the State of the Nation Address in February 2016," including personal income tax (PIT) cuts and increases in pensions and the minimum wage.
While the IMF noted that "the growth outlook for 2017 remains positive, [and] concurred with the authorities on the need to make more progress in reducing poverty and ensuring that the benefits of economic growth are shared by all," it stressed that such policies should "be done in a manner that safeguards macroeconomic stability. ... In this context, the mission discussed a number of potential measures with the authorities to help entrench fiscal discipline and progress towards the authorities' debt reduction goals."
The State of the Nation Address's PIT reforms are designed to reduce the tax burden on low-income earners and, on a phased basis, make the tax system more progressive. In the next phase, from January 2017, all Seychellois will no longer pay tax on the first SR8,555.50 (USD665.50) of their monthly salary.
Jean Paul Adam, the outgoing Minister for Finance, Trade, and the Blue Economy, who has now been appointed Minister for Health and Social Affairs by the new Seychelles President Danny Faure, noted that, despite the new progressive PIT system, Seychelles is "confident of maintaining [fiscal] discipline and stability in the coming year to allow us to achieve our target of reducing our debt."
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