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IMF Executive Board Completes First Review Under the Policy Coordination Instrument for Seychelles

June 26, 2018

June 22, 2018

On June 21, 2018, the Executive Board of the International Monetary Fund (IMF) completed the first review under the Policy Coordination Instrument (PCI) for Seychelles. [1] The Executive Board’s decision was taken without a meeting. [2]

The PCI was approved on December 13, 2017 (see Press Release No. 17/492). Seychelles was the first IMF member country to request a PCI.

Macroeconomic performance continued to be strong in 2017. Economic growth is estimated to have exceeded 5 percent, reflecting buoyant tourism arrivals, strong output in the fishery industry, and expanding credit to the private sector. Program implementation is on track and all end-December 2017 quantitative targets were met. Inflationary pressures are emerging due to rising international fuel prices and strong domestic demand in the final months of 2017. The Central Bank of Seychelles (CBS) tightened its monetary policy stance in late March to contain the pickup in inflation. The fiscal policy stance in 2018 is supportive of the monetary policy tightening. With higher policy rates, subdued hotel construction activity, and slower tourism and fishery sector growth, economic growth is expected to moderate this year and next around its estimated potential rate of 3½ percent. The exchange rate is broadly in line with fundamentals and the reserves buffer is estimated to be adequate.

The authorities are committed to the program’s fiscal anchor of reducing public debt below 50 percent of GDP by 2021: the large infrastructure projects planned in coming years would be implemented within the envelope of the program’s primary surplus target of 2½ percent of GDP. The CBS is committed to a flexible exchange rate while staying watchful to any sign of inflationary pressures. The structural agenda for 2018 focuses on strengthening the AML/CFT framework, reducing potential fiscal risks, improving public investments’ efficiency, and enhancing inclusive growth.

[1] The PCI is available to all IMF members that do not need Fund financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors. (seehttps://www.imf.org/en/About/Factsheets/Sheets/2017/07/25/policy-coordination-instrument).

[2] The Executive Board takes decision without a meeting (based on lapse-of-time procedures) when it is agreed by the Board that a proposal can be considered without convening formal discussions.

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