IMF and Seychelles reach staff-level agreement on resilience facility and EFF
Seychelles will be assisted with approximately $46.19 million under a newly negotiated Resilience and Sustainability Facility (RSF) and $56.96 million under a new Extended Fund Facility (EFF) with the International Monetary Fund (IMF).
IMF staff and the Seychellois authorities reached a staff-level agreement on a successor to the two facilities following a mission in Seychelles led by Calixte Ahokpossi, from March 16-29 to review the previous EFF which will end in June.
The two programmes will support the island nation's economic policies and reforms. Seychelles is the second African country to reach a staff-level agreement to access the Resilience and Sustainability Trust (RST).
The IMF chief of mission, Calixte Ahokpossi, told reporters on Wednesday that "to address long-term challenges, the authorities have requested access under the new facility, which helps countries make progress on their climate agenda, and we know that Seychelles is that forefront of climate policies."
He added that "the new EFF would support the authorities in their efforts to build on the progress in macroeconomic, fiscal, and financial reforms started under the EFF that was approved in July 2021."
The agreement is subject to approval by the IMF management and executive board and consideration by the board is tentatively scheduled for May 2023.
Seychelles' finance minister, Naadir Hassan, explained that as the previous programme will end this year, a new EFF was negotiated to help finance new reforms.
"We have negotiated for a smoother pathway to reach our targeted debt to GDP ratio, where initially we had to reach 50 percent by 2026, but now we have to move it to 2028. This will give us more space to be able to invest, especially where it concerns the country's infrastructures," Hassan added.
The International Monetary Fund also reviewed the progress made by Seychelles from the previous EFF and Ahokpossi said the IMF is satisfied.
"The government has made significant progress in implementing policies and reforms set out in the current IMF-supported EFF programme and in restoring macroeconomic balances," he said.
"Quantitative performance has been strong and the broader structural reform agenda has also proceeded at a good pace. The current programme is expected to be cancelled and replaced by the new one," said Ahokpossi.
The IMF's report after the review states that despite a difficult global environment, tourism recovered strongly in 2022, with arrivals hitting about 87 percent of pre-pandemic levels.
From 5.4 percent in 2021, GDP growth accelerated to 9 percent and this year the economy is anticipated to grow at a reduced rate of 4.3 percent. The challenging global environment, however, exposes this outlook to risks on the downside linked to tourism.
"Inflation in Seychelles was relatively low in 2022, reflecting the lagged effects of currency appreciation as well as base effects. After averaging 9.8 percent in 2021, inflation declined to 2.6 percent on average in 2022. For 2023, inflation is expected to keep moderating and decline to 1.4 percent on average in 2023," the report added.
In contrast to deficits of 3.2 percent in 2021 and 15.2 percent in 2020, last year Seychelles reported a primary fiscal surplus of 0.7 percent of GDP.