'The impressive progress of 2021, will allow scope to assist the most vulnerable' - says Minister Hassan

May 09, 2022

The 10-day mission by the IMF under the Extended Fund Facility came to an end today, Monday 09th May 2022.

Meeting with the local media this morning, the head of the mission, Ms. Boriana Yontcheva, concluded that ‘all in all, we see that all the quantitative targets at the end of 2021 have been met, by a large margin and a lot of reforms have been obtained on the structural reforms.’

The press release issued by the mission, said 'the government made impressive progress in implementing the EFF and restoring macroeconomic balances, meeting all quantitative targets under the program.'

The 2nd review under the EFF, comes at a time when the world is witnessing unprecedented increase in prices of commodities, oil and food, due mainly to the war in Ukraine. Seychelles is also bearing the brunt of the increase in prices.

During negotiations, with the IMF delegation, there’s been agreement, that with the ‘impressive progress’ made in 2021, there will be scope to assist the most vulnerable to cope with the current high cost of commodities.

“'We are working on the right mechanism, to see how best to assist the most vulnerable, as we want the assistance to be very targeted. The mechanism will come into effect in the coming weeks”, explained the Minister for Finance, National Planning and Trade, Naadir Hassan.

Ms. Yontcheva, noted that that ‘it is important to help the population, when there is a crisis.’

“But still all measures need to be carefully targeted to the most vulnerable and made on a temporary basis.”

She said that IMF is projecting that the current crisis is ‘temporary and that oil and food prices are expected to go down next year. It is not a permanent shock.’

When the economic reform programme started in July 2021, Seychelles has had an economic contraction of nearly 8%, by the end of 2020 the budget deficit was at 15.4% GDP and the debt to GDP ratio stood at 93%.

In 2021, Seychelles witnessed an economic growth of 8% and the projected growth for 2022 is 7%.

On the budget side, in 2021, the primary fiscal deficit was only 3%, over performing the programme’s target of 3.3%.

Additionally, as of today, the country’s debt is at 76% GDP and by 2025/2026, the projected debt ratio is expected to be below 50%.

“All the positive results are because we were able to reopen the country and kick started the economic activities as soon as possible. Right now, the tourism sector is doing well, which means the many other businesses dependent on tourism, are also doing well. The massive improvement is also because we have collected more revenue, and control spending. Such performance has allowed for our budget and debt to be sustainable.”

‘We have to remember how impressive it is when you think that it’s been only ¾ of one year. I mean the opening was in March 2021. So we have seen an economic performance that was even higher than we had projected”, said Ms. Yontcheva.

The current war in Ukraine, is the new and main variable, which can derail the ‘impressive recovery’, because according to IMF, its spillover effects are ‘expected to weigh on the external and fiscal balance in 2022, due to the surge in commodity prices.’

Minister Hassan explained that the government has to take actions to mitigate such shocks.

“It is important to have a debt level which is low, because it acts as a buffer against economic/financial shocks and allow space to borrow, to sustain the economy, in time of crisis.”

The IMF staff level agreement will be presented to the Executive Board in June, and if approved, a third disbursement under the EFF, as budget support, will be made to Seychelles, in July.

Click on the link to access the IMF Press Release

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