The Executive Board of the International Monetary Fund (IMF) completed today the sixth review under the Extended Fund Facility (EFF) for the Seychelles. The completion of the review enables a disbursement of SDR 1.32 million (about US$2.0 million), which will bring total disbursements under the arrangement to SDR 19.8 million (about US$ 30.5 million). The Executive Board also approved an extension of the arrangement by one year to support the country’s economic reform program and an augmentation of access by 60.6 percent of quota.
The Extended Fund Facility became effective on December 23, 2009, in the amount of SDR 19.8 million (see Press Release No. 09/472).
Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement:
“Economic growth in 2012 has held up, with tourism from new markets offsetting weakness in traditional European arrivals. An uptick in inflation in the first half of the year emanating from higher energy prices and exchange rate depreciation has been successfully curbed by tight monetary policy. The outlook is benign, but remains vulnerable to the uncertain global environment.
“The outlook is supported by sustained strong policy performance. Introduction of the value added tax, now planned for January 1, 2013, marks an important milestone in the ongoing modernization of Seychelles’ tax system, while the move to automatic price adjustment mechanisms for fuel and utilities will help strengthen the financial position of parastatals.
“Current economic policies are appropriate and consistent with falling public debt over the medium term. Tighter fiscal policy should also preempt potential balance of payments pressures and provide scope to loosen monetary policy as inflation declines. Given the difficult global environment and rising debt service, the authorities should aim to build buffers by increasing international reserve holdings, and they should take a cautious approach to contracting new loans. “The structural reform program aptly aims to improve financial discipline in public enterprises through better oversight. Moreover, recent ad hoc price adjustments and the introduction of an automatic price adjustment mechanism for fuel are welcome first steps toward cost recovery pricing, which will be further strengthened by the planned utility tariff reform.”