This Selected Issues paper for Seychelles argues that sound fiscal policies and smaller governments can be conducive to growth and help reduce a country’s economic vulnerability. Growth in Seychelles has been volatile and underperformed most small states from 1998 to 2005. Seychelles’s revenues, expenditures, and total public debt are higher after an improvement in 2003. Its fiscal balance has worsened and has been weaker in comparison with most small states for most of the period. Seychelles’s expenditure composition is most similar to that of low-growth small states.
Seychelles's economy has recovered strongly from the debt crisis and global recession, owing to high foreign direct investment and a rebound in tourism. Inflation remained near zero, and the country continued to rebuild its international reserves and reduce public debt. In 2011, the policy mix under the economic program supported by the Extended Fund Facility has been adjusted in response to global commodity price shocks and financial difficulties of Air Seychelles. Structural reforms will focus on strengthening the financial sector and restructuring of state-owned financial institutions.
Staff Report for the 2019 Article IV Consultation and Third Review Under the Policy Coordination Instrument and Request for Modification of Targets and Monetary Consultation Clause-Press Release; Staff Report; and Statement by the Executive Director for Seychelles