- The International Monetary Fund (IMF) has today said the reform programme undertaken by Seychelles is promising early signs of success, though still warning a lot has to be done to sustain the achievements made so far.
“The Seychelles authorities are implementing their reform programme with determination and early signs of success are apparent. The programme is on track and is achieving its economic stabilisation and reform objectives," said the IMF mission led by Paul Mathieu which ended its visit in Victoria yesterday.
The mission said a prudent and well-balanced monetary and fiscal stance have been effective in stabilising the exchange rate and rapidly reducing inflation to the low single digits, saying all the country's end-March 2009 quantitative targets under the programme were met with margins and structural reforms are being implemented.
The IMF has however said the Seychelles economy is severely affected by the global economic crisis, and the mission estimates that GDP will fall in 2009 on a sharp drop in tourism and construction, adding that at the same time, the build-up in foreign exchange reserves should continue, as the external current account deficit narrows as a result of a sharp contraction of imports and lower commodity prices.
“Looking ahead, the key objectives are to consolidate macroeconomic stability and sustain the momentum of structural reform. To that end, the mission welcomes the fundamental reform of the tax system, to be implemented from mid-2009, and the major reinforcement of control over the parastatal sector to address weaknesses which, if left unaddressed, could put at risk the hard-won recent gains in macrostabilisation and public finances. The financial system is being strengthened through enhanced supervision and a modernised regulatory environment," the mission said.
It also stated that the Seychelles’ public debt remains unsustainable, though welcoming the steps that have been taken so far and further encouraging the authorities to press ahead with their debt restructuring strategy.
The IMF arrangement, which was approved on 14 November, 2008, is for about US$24 million (SDR17.6 million), of which US$10.5 million has been disbursed. About US$1.3 million (SDR 0.88 million) would be available upon completion of the second review, which is tentatively scheduled for consideration by the IMF Executive Board in late June 2009.”
Seychelles was also approved last month for an immediate disbursement of about US$1.3 million by the Executive Board of the IMF following the completion of the first review of the economic performance under the two-year Stand-by Arrangement, further being granted waivers for the nonobservance of the performance criterion related to the primary balance of the consolidated government budget and the continuous performance criterion related to the nonaccumulation of external payment arrears by the public sector.
The IMF had also called for an increased technical assistance, and project and programme financial support by development partners to the Seychelles government.
The Seychelles support programme was drawn in the midst of an acute balance of payments and public debt crisis, which is jeopardising the population's living standard and the country's economic development.
According to the IMF, large macroeconomic imbalances and vulnerabilities resulting from longstanding unsustainable macroeconomic policies, combined with recent external shocks, culminated in mid-2008 with the near-exhaustion of foreign reserves and missed payments on public debt obligations.
The Seychelles, a small Island off the east coast of Africa, with a small population of less than 100,000, is said to be the world's most owing country, with its tourism sector feeling the bite of the global recession and now its waters at high risk of pirates infestation.
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