This paper highlights Seychelles’ First Review Under the Extended Fund Facility Arrangement. Driven by a swift recovery of the tourism sector, the Seychellois economy has rebounded strongly from the severe contraction in 2020 and program implementation is strong. The authorities have made substantial strides in restoring macroeconomic stability and are committed to the structural reform agenda. Front-loaded fiscal adjustment is appropriate to reduce debt vulnerabilities and fiscal risks. The liability management operation implemented in 2021 and deeper fiscal consolidation have substantially reduced rollover risks and laid the foundation for further easing of domestic financial conditions. Prudent debt management remains essential to further reduce vulnerabilities. Further improvements to public debt management capacity would be welcome. Continued efforts are needed to safeguard financial sector stability. The authorities are taking steps to improve transparency and public efficiency. Further efforts to pursue governance reforms are encouraged. It will be important to advance structural reforms to promote private sector development, support diversification, and build resilience to climate change.
Seychelles was hit hard by the COVID-19 crisis. The authorities reacted swiftly, by locking down the economy, thereby keeping infection and fatality rates low. However, the travel restrictions and global economic downturn triggered unprecedented economic contraction. The authorities responded with measures to mitigate the economic fallout on businesses and households. But the public debt ratio increased sharply, reflecting the primary balance deterioration, exchange rate depreciation, and GDP contraction. As soon as vaccines became available, Seychelles led the world in vaccination coverage and reopened its borders. With tourist arrivals bouncing back, a V-shaped recovery is now expected.
This paper refers to Seychelles’ Request for Purchase Under the Rapid Financing Instrument (RFI). The near-term economic fallout of the coronavirus disease 2019 pandemic is expected to be severe. Restriction in travel will hinder tourism and weaken fiscal and external positions, creating large additional financing needs. The authorities reacted swiftly by taking immediate measures of containment, including border closures, strengthening health policy responses and supporting households and firms. The emergency IMF support under the RFI provides timely resources to the authorities to address the urgent balance of payments and budgetary needs. The assistance of other international financial institutions and development partners is crucial to close the remaining financing gaps, ease the adjustment burden, and preserve economic growth. The authorities are committed to transparency and good governance in the use of emergency financing by providing monthly reports of pandemic-related expenditure to the National Assembly and undertaking an independent audit of such spending and procurement and publishing the results.
Mr. Bernardin Akitoby, Ms. Anja Baum, Clay Hackney, Olamide Harrison, Keyra Primus, and Ms. Veronique Salins
How do countries mobilize large tax revenue—defined as an average increase in the tax-to-GDP
ratio of 0.5 percent per year over three years or more? To answer this question, we build a novel
dataset covering 55 episodes of large tax revenue mobilization in low-income countries and
emerging markets. We find that: (i) reforms of indirect taxes and exemptions are the most common
tax policy measures; (ii) multi-pronged tax administration reforms often go hand in hand with tax
policy measures or are stand alone; and (iii) sustainability of the episodes hinges on tax
administration reforms in the key compliance areas (risk-based audits, registration, filing, payment,
Manoj Atolia, Bin Grace Li, Ricardo Marto, and Mr. Giovanni Melina
Why do governments in developing economies invest in roads and not enough in schools? In the presence
of distortionary taxation and debt aversion, the different pace at which roads and schools contribute to
economic growth turns out to be central to this decision. Specifically, while costs are front-loaded for both
types of investment, the growth benefits of schools accrue with a delay. To put things in perspective, with
a “big push,” even assuming a large (15 percent) return differential in favor of schools, the government
would still limit the fraction of the investment scale-up going to schools to about a half. Besides debt
aversion, political myopia also turns out to be a crucial determinant of public investment composition. A
“big push,” by accelerating growth outcomes, mitigates myopia—but at the expense of greater risks to
fiscal and debt sustainability. Tied concessional financing and grants can potentially mitigate the adverse
effects of both debt aversion and political myopia.
This note highlights the unique economic characteristics and constraints facing small developing states. It provides operational guidance on Fund engagement with such countries, including on how small country size might influence the use of Fund facilities and instruments, program design, capacity building activities, and collaboration with other institutions and donors. The guidance note draws on the March 2013 Board papers on small states and the associated Executive Board discussion. The findings of the paper and implications for Fund engagement with small states were presented to small states authorities during the 2013 Annual Meetings, as well as in regional IMF conferences with small states in the Bahamas (September 2013) and Vanuatu (November 2013).
Growth remained strong in the region in 2012, with regional GDP rates increasing in most countries (excluding Nigeria and South Africa). Projections point to a moderate, broad-based acceleration in growth to around 5½ percent in 2013¬14, reflecting a gradually strengthening global economy and robust domestic demand. Investment in export-oriented sectors remains an important economic driver, and an agriculture rebound in drought-affected areas will also help growth. Uncertainties in the global economy are the main risk to the region’s outlook, but plausible adverse shocks would likely not have a large effect on the region’s overall performance.
This paper is an account of Seychelles’ monetary efforts to establish its position in 2012. After the recovery in 2008, the country had solid growth through 2011. The important threat was external risks, which could lower tourist inflows, and piracy. Alternatively, the authorities were vigilant, and organized the state by strengthening state enterprises, introducing new reforms to eradicate obstacles to the private sector, and the increasing bills for monetary purposes. The Executive Board acknowledges that these policies enhanced a positive outlook for the country.
This paper discusses key findings of the Third Review Under the Stand-By Arrangement for Seychelles. The program is on track, and macroeconomic stabilization has advanced rapidly. The authorities continue to implement the program with a high degree of ownership and success. All quantitative performance criteria (PC) and structural benchmarks at end-September 2009 were met. The structural reform effort is progressing well. Key progress has been made on public financial management, notably through the treasury single account. The 2010 budget features a much improved and complete presentation of government finance.