This letter provides an assessment of recent macroeconomic developments in Seychelles and an update on the discussions of Fund staff with the Seychelles authorities on macroeconomic policies and structural reforms that could form the basis for the authorities' request for a new arrangement supported by the International Monetary Fund.
Program implementation and economic fundamentals continue to be strong, but the external position weakened in mid-2014. Projected growth for 2014 has been revised down to 2.8 percent from 3.7 percent, due to weaker demand for Seychelles’ two main exports—tourism and canned tuna. At the same time, strong growth in personal earnings and private sector credit have fueled a surge in imports, putting further pressure on the balance of payments. As a result, the exchange rate depreciated an estimated 11 percent in nominal effective terms from early August to late-October.