However, there are downside risks to the outlook due to the uncertainty surrounding the global environment; The government made significant progress in implementing policies under the EFF and restored macroeconomic balance, met all quantitative and indicative targets for the 3rd review under the program, and made significant progress on structural issues; As a small island state vulnerable to external shocks and climate change, it remains critical for the Seychelles to maintain the build-up of shock buffers while protecting the most vulnerable people.
An International Monetary Fund (IMF) mission led by Calixte Ahokpossi, Head of Mission for Seychelles, visited Victoria from 22 September to 5 October 2022 to hold discussions for the third review of Seychelles’ economic and financial program backed by the Extended Facility Facility (EFF) Arrangement.
At the end of the mission, Mr. Ahokpossi issued the following statement: “The Seychelles economy has continued its strong recovery in 2022, as tourism activity accelerated its recovery despite a challenging global environment.
Real GDP growth is projected at 10.6%, largely based on the rebound in tourism, before moderating to 5.4% in 2023.
This outlook is subject to downside risks given the challenging international environment.
“Inflation moderated to 2.8% (year-on-year) at the end of August and is projected to average 3.0% in 2022, down from 9.8% in 2021.
The lagged effect of the appreciation of the rupee in 2021 helped absorb pressures emanating from higher international prices in 2022.
Inflation is projected to average 4.5 percent in 2023.
“The primary fiscal deficit is expected to be contained at 1.1 percent of GDP by the end of 2022, declining from 3 percent in 2021 and 14.7 percent in 2020.
The target Deficit in 2022 exceeds the program’s initial projection of 1.4 percent of GDP, due to lower current and capital spending .
The primary fiscal balance is projected to reach a surplus of 1.1% of GDP in 2023.
“A welcome package of temporary support measures is being put in place which, along with other social protection programs, should help cushion the effects of sudden increases in the prices of raw materials in most people.
“Debt vulnerabilities have been reduced substantially, helped by the strong rebound in tourism, the successful implementation of the Responsibility Management Operation in 2021, the appreciation of the rupee and ambitious fiscal consolidation.
The debt-to-GDP ratio is expected to decline to around 68% of GDP in 2022 from 76% of GDP in 2021 and 89% of GDP in 2020.
Air Seychelles’ contingent liabilities have been significantly reduced since the company passed to be under administration and its debt was restructured with a significant haircut.
“The government has made significant progress in implementing the IMF-supported program and restoring macroeconomic balances.
All quantitative and indicative objectives of the program were met by the end of June 2022.
The broader program of structural reforms is progressing well.
“ The government is committed to strengthening governance and combating corruption.
In this regard, the authorities are making efforts to improve the transparency of the beneficial ownership database and ensure the accuracy of the information collected.
““The Central Bank of Seychelles (CBS) has maintained an appropriately accommodative monetary policy.
The CBS is ready to act if inflationary pressures materialize.
The CBS will continue its efforts to strengthen Seychelles’ monetary policy framework and closely monitor the soundness of the financial sector to bolster banks’ ability to support the recovery.
“As a small island state, Seychelles’ open economy remains highly vulnerable to external shocks and climate change.
Maintaining the buildup of shock absorbers, while protecting the most vulnerable portion of the population, remains critical in today’s global environment.
Such a strategy requires the continuation of prudent macroeconomic policies and the safeguarding of international reserves.
“The team would like to thank the Seychelles authorities for the open dialogue and their close collaboration.”
The IMF team met with President Ramkalawan, Minister of Finance, National Planning and Trade Hassan, Seychelles Central Bank Governor Abel, Opposition Leader Pillay, and other senior government officials, as well as private sector representatives.