Seychelles: Fourth and Fifth Reviews under the Extended Arrangement and Requests for Modification and Waiver of Applicability of Performance Criteria and Waiver of Nonobservance—Supplementary Information, and Supplementary Letter of Intent
Author: International Monetary Fund. African Dept.
Publication Date:
21 Feb 2017
eISBN:
9781475579079
Language:
English
Keywords:
ISCR; CR; SONA initiative; program performance criteria; US$; year-on-year inflation; SONA; payment arrears; staff appraisal; UK pound; December Reserve Money target; external debt service payment
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Completion of the fourth review was delayed after the government announced in early 2016 expenditure and revenue initiatives with estimated annual fiscal costs of 3 percent of GDP. After the opposition won a majority in parliament in September, the President announced his resignation and the Vice President took over. With low commodity prices and strong tourist arrivals, the economic developments since the third review have been favorable and economic outlook for 2016?17 remains positive.

Abstract

Completion of the fourth review was delayed after the government announced in early 2016 expenditure and revenue initiatives with estimated annual fiscal costs of 3 percent of GDP. After the opposition won a majority in parliament in September, the President announced his resignation and the Vice President took over. With low commodity prices and strong tourist arrivals, the economic developments since the third review have been favorable and economic outlook for 2016?17 remains positive.

This supplement provides information that has become available since the issuance of the staff report (www.imf.org). The information does not alter the thrust of the staff appraisal.

  • The reserve money target for end-December was narrowly missed. At SR 2,990 million, reserve money was one percent over the performance criterion set during the third review (Table 1a). In the view of staff, this minor deviation will not affect the program’s goals, and staff therefore support the authorities’ request for a waiver of nonobservance of the reserve money target on the grounds that the deviation is minor.

  • Other macroeconomic outcomes appear favorable. With a mid-rate at 13.381, the rupee remains stable against the dollar, and preliminary indications suggest that the PC on net international reserves was met. Inflation remains subdued, at -0.4 percent y/y in November. As of December 25, 295,425 visitors arrived in Seychelles, an increase of 10% over the figure for 2015.

Table 1a.

Quantitative Performance Criteria Under the Extended Arrangement 1

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Sources: Seychelles authorities and IMF staff estimates and projections.

The NIR floor is adjusted as defined in the TMU.

As per TMU, the ceiling is the upper bound of a symmetrical band of three percent in both directions around the reserve money target.

The last column is the end-December outturn rather than a proposed revised target.

The nonaccumulation of new external payment arrears constitutes a continuous performance criterion. Excludes arrears for which a rescheduling agreement is sought.

Cumulative net flows from the beginning of the calendar year; includes external non-project loans and cash grants net of external debt service payments.

Program exchange rates have been set according to prevailing market rates at the last available update on projected external public financing flows.

Supplement to Letter of Intent

Ms. Christine Lagarde

Managing Director

International Monetary Fund

January 5, 2017

Dear Ms. Lagarde:

1. This letter supplements our Letter of Intent dated December 19, 2016.

2. Since then, preliminary information for the end-December Reserve Money target has become available. At SR 2,990 million, the outturn was slightly above the target set at the time of the Third Review. In this context, we request a waiver of nonobservance of the Performance Criterion, since the breach was minor, and we intend to maintain tight and prudent monetary policy to ensure domestic price stability.

Sincerely yours,

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Cover IMF Staff Country Reports
Seychelles: Fourth and Fifth Reviews Under the Extended Arrangement and Request for Modification and Waiver of Applicability of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Seychelles
Author: International Monetary Fund. African Dept.
Volume/Issue:
Volume 2017: Issue 051
Publisher:
International Monetary Fund
ISBN:
9781475579079
ISSN:
1934-7685
Pages:
65
DOI:
https://doi.org/10.5089/9781475579079.002