IMF Executive Board Approves US$105.63 Million Extended Arrangement Under the Extended Fund Facility for Seychelles

July 29, 2021

Washington, DC: On July 29, 2021, the Executive Board of the International Monetary Fund (IMF) approved a 32-month extended arrangement under the Extended Fund Facility (EFF) for Seychelles for SDR 74 million (US$105.63 million), or 323 percent of Seychelles’ quota. The Board’s approval allows for an immediate disbursement equivalent to US$ 34.26 million.

Seychelles was hit hard by the COVID-19 crisis. The authorities reacted swiftly, by locking down the economy, thereby keeping infection and fatality rates low. However, the travel restrictions and global economic downturn triggered unprecedented economic contraction. The authorities responded with measures to mitigate the economic fallout on businesses and households. But the public debt ratio increased sharply, reflecting the primary balance deterioration, exchange rate depreciation, and GDP contraction. As soon as vaccines became available, Seychelles led the world in vaccination coverage and reopened its borders. With tourist arrivals bouncing back, a V-shaped recovery is now expected.

The key objective of the proposed program is to support the authorities’ efforts to restore macroeconomic stability and debt sustainability while strengthening the post COVID-19 recovery. The program would support the authorities’ ambitious fiscal consolidation efforts and reduce debt sustainability risks through a three-pillared, frontloaded adjustment comprising fiscal adjustment, a liability management operation (LMO), and external support. The authorities successfully completed the LMO, which seeks to significantly reduce the rollover risks, immediately after the conclusion of the program discussions.

At the conclusion of the Executive Board’s discussion, Mr. Tao Zhang, Deputy Managing Director and Chair stated:

“The Seychelles’ economic outlook is positive, but risks remain high. Tourist arrivals since March 2021 point to a strong recovery. Nonetheless the outlook is uncertain and contingent on the pandemic path, the effective rollout of vaccines in Seychelles’ key tourist markets, and the expected recovery in external demand.

“The new arrangement under the Extended Fund Facility will support Seychelles’ post-pandemic recovery, anchor reform implementation and catalyze additional external financing.

“The key strategy focuses on maintaining the recovery momentum while reducing the risks to debt sustainability. Advancing the reform agenda through an ambitious fiscal adjustment, reinforced debt management, strengthened fiscal governance frameworks, and financial sector development and inclusion are essential priorities to sustain the post-COVID-19 recovery and generate high, sustainable, and inclusive growth.

“Enhancing public financial debt management, and improving governance of state-owned enterprises, will reduce fiscal vulnerabilities. Modernizing and revamping the banking resolution and emergency liquidity assistance frameworks will help safeguard financial stability. Further reforms to modernize the financial sector, including through digital finance, and improve the business environment will help support private sector development and foster sustainable and inclusive growth. The capacity development strategy aligned with the program is an important tool to achieve reform potential.”

Seychelles: Selected Economic and Financial Indicators

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Act.

Act.

Act.

Act.

Prel.

Proj.

(Annual percent change, unless otherwise indicated)

National income and prices

Nominal GDP (millions of Seychelles rupees)

18,989

20,858

21,540

22,192

20,021

23,585

26,219

28,889

31,235

33,781

36,464

Real GDP (millions of Seychelles rupees)

8,423

8,843

8,960

9,132

7,957

8,506

9,160

9,780

10,266

10,781

11,297

Real GDP

4.4

5.0

1.3

1.9

-12.9

6.9

7.7

6.8

5.0

5.0

4.8

CPI (annual average)

-1.0

2.9

3.7

1.8

1.2

10.0

3.7

3.2

3.0

3.0

3.0

CPI (end-of-period)

-0.2

3.5

3.4

1.7

3.8

8.6

3.9

3.5

3.2

3.0

3.0

GDP deflator average

-0.8

4.6

1.9

1.1

3.5

10.2

3.2

3.2

3.0

3.0

3.0

Money and credit

Broad money

12.1

16.4

7.7

13.9

29.2

…

…

…

…

…

…

Reserve money (end-of-period)

14.5

18.9

4.5

22.7

40.4

…

…

…

…

…

…

Velocity (GDP/broad money)

1.4

1.3

1.3

1.1

1.1

…

…

…

…

…

…

Money multiplier (broad money/reserve money)

4.6

4.5

4.6

4.3

3.9

…

…

…

…

…

…

Credit to the private sector

10.3

17.8

11.5

22.3

20.2

9.1

16.6

17.7

18.7

16.5

15.6

(Percent of GDP, unless otherwise indicated)

Savings-Investment balance

External savings

20.6

19.6

18.9

16.1

29.5

25.7

22.0

19.8

17.8

16.9

15.5

Gross national savings

9.6

9.2

7.8

10.3

-6.2

2.3

5.7

8.1

8.8

9.5

10.8

Of which : government savings

3.8

3.7

4.3

4.6

-13.8

-6.1

-1.1

2.6

3.7

5.3

5.8

private savings

5.8

5.5

3.5

5.7

7.7

8.4

6.7

5.4

5.1

4.2

5.0

Gross investment

30.2

28.9

26.7

26.4

23.4

28.0

27.7

27.8

26.6

26.4

26.3

Of which : public investment 1

5.0

4.3

5.2

3.9

5.9

9.0

8.7

7.3

6.1

5.9

5.5

private investment

25.2

24.6

21.5

22.5

17.5

19.0

19.0

20.5

20.5

20.5

20.8

Private consumption

47.1

50.9

52.6

52.6

49.9

54.9

56.1

54.8

52.7

53.4

52.1

(Percent of GDP)

Government budget

Total revenue, excluding grants

36.7

35.0

37.1

37.6

35.7

30.7

33.1

34.3

36.2

36.8

37.2

Expenditure and net lending

38.2

36.4

38.8

37.7

57.1

48.4

43.6

39.2

38.1

38.0

37.9

Current expenditure

33.2

32.1

33.6

33.8

50.1

38.9

35.4

33.0

33.1

32.0

31.9

Capital expenditure 1

5.0

4.3

5.2

3.9

5.9

9.0

8.7

7.3

6.1

5.9

5.5

Overall balance, including grants

-1.4

0.1

0.7

-0.9

-19.5

-13.6

-7.7

-2.9

-0.4

0.2

0.7

Primary balance

0.0

0.0

0.0

0.0

Primary balance

3.4

3.1

3.0

2.8

-16.3

-9.7

-5.0

-0.4

2.8

3.0

3.2

Total government and government-guaranteed debt 2

72.8

65.7

62.3

61.8

100.8

87.7

87.6

83.0

77.2

71.2

64.5

External sector

Current account balance including official transfers (in percent of GDP)

-20.6

-19.6

-18.9

-16.1

-29.5

-25.7

-22.0

-19.8

-17.8

-16.9

-15.5

Total external debt outstanding (millions of U.S. dollars) 3

4,299

4,475

4,682

4,874

5,093

5,452

5,823

6,147

6,362

6,588

6,830

(percent of GDP)

301.5

292.8

303.7

308.5

447.7

346.7

331.8

314.8

297.6

281.2

264.0

Terms of trade (-=deterioration)

-13.8

-2.9

-3.3

6.7

10.6

-3.6

-4.1

-0.4

0.9

0.9

0.0

Real effective exchange rate (average, percent change)

-0.1

-3.2

...

...

...

...

...

...

...

...

...

Gross official reserves (end of year, millions of U.S. dollars)

522.6

546

548

581

561

670

743

815

816

824

848

Months of imports, c.i.f.

3.7

3.5

3.7

5.2

4.5

4.6

4.4

4.4

4.0

3.8

3.9

In percent of Assessing Reserve Adequacy (ARA) metric

113.3

112.6

110.9

112.4

111.9

114.4

115.9

117.4

111.1

107.0

104.6

Exchange rate

Seychelles rupees per US$1 (end-of-period) 4

13.5

13.8

14.0

14.1

21.6

…

…

…

…

…

…

Seychelles rupees per US$1 (period average) 4

13.3

13.6

14.0

14.0

17.6

…

…

…

…

…

…

Sources: Central Bank of Seychelles; Ministry of Finance; and IMF staff estimates and projections.

1 Includes onlending to the parastatals for investment purposes.

2 Includes debt issued by the Ministry of Finance for monetary purposes.

3 Includes private external debt.

4 As to 2020, exchange rate measured as of July 14, 2020.

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