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IMF Executive Board Completes Second Review Under the Policy Coordination Instrument for Seychelles; programme largely on track and authorities remain committed…..

December 10, 2018

Monday 10th December 2018, VICTORIA, SEYCHELLES: The Executive Board of the International Monetary Fund (IMF) has completed the second review under the Policy Coordination Instrument (PCI for Seychelles on December 7, 2018. According to IMF, economic developments since the last IMF review was completed in June 2018 have been broadly in line with expectations. The program is largely on track and authorities remain committed to safeguarding the hard-won economic stability. The Central Bank of Seychelles’ prudent monetary policy has helped to contain the inflationary pressure.

While rising international fuel prices could adversely affect inflation and external balance, the economic outlook continues to be favorable. Downside risks to the outlook are largely stemming from external shocks, including from possible weaknesses in the key tourism markets and global banks’ withdrawal of correspondent banking relationships.

The IMF delegation, led by Mr. Amadou Sy, IMF, Deputy Chief, conducted the second review, from the 19th September to the 02nd October 2018, and it looked at the targets for June 2018 as well as future economic development of the country. And in a press conference conducted on the completion of the mission here, Mr. Sy, stated that they have consulted widely with various stakeholders, including members of the parliament.

According to an IMF Press Release, the Executive Board welcomes Seychelles’ assurance that the large infrastructure and climate change related projects planned in the coming years would be implemented within the fiscal targets set in PCI. And stated that the authorities are encouraged to stay focused on structural reforms to minimize fiscal risks potentially arising from state-owned enterprises restructuring.

IMF is also urging authorities to step up efforts to strengthen anti-money laundering and terrorism financing framework and implementation.

Following the Executive Board’s discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statements; “Seychelles’ macroeconomic performance continued to be robust in 2018. Real GDP growth is estimated to reach around 3½ percent, reflecting strong output in the fishery industry and the information and communications sector. The external current account narrowed thanks to strong tourismearnings. Targets on the primary fiscal surplus and net international reserves up to end-June 2018 were met by a comfortable margin. The economic outlook for 2019 remains positive.

“The authorities are committed to the program’s fiscal anchor of reducing public debt below 50 percent of GDP by the end of 2021. The authorities’ 2019 budget submitted to the National Assembly is in line with the program objectives. The authorities intend to implement large infrastructure projects in coming years within the envelope of the program’s primary surplus target of 2½ percent of GDP.

“The Central Bank of Seychelles’ (CBS) prudent monetary policy has helped contain inflationary pressures. The CBS should stay vigilant to any sign of inflationary pressures and maintain the flexible exchange rate policy. The authorities’ sustained efforts for a smooth transition to a new monetary policy framework are welcome.

“Steps to strengthen the AML/CFT framework and its implementation, in line with international standards and best practices, are important to preserve correspondent banking relationships. The structural reform agenda should continue to focus on reducing fiscal risks potentially arising from state-owned enterprises and public private partnerships, improving public investment efficiency, and enhancing prospects for inclusive growth and resilience to climate change.”

Seychelles is the first IMF member country to request a PCI. It was approved by the Executive Board on December 13, 2017 and aims to support the authorities’ efforts to reinforce macroeconomic stability and foster growth.

 The PCI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PCI helps countries design effective economic programs that, once approved by the IMF's Executive Board, signal to donors, multilateral development banks, and markets the Fund's endorsement of a member's policies.

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