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‘Light at the end of the economic crisis tunnel’   • IMF however warns against complacency By Elsie Pointe  |09 November 2021

‘Light at the end of the  economic crisis tunnel’     • IMF however warns against complacency  By Elsie Pointe 

The press conference: (l to r) Governor Abel, Minister Hassan, Mrs Yontcheva and SS Payet (Photo: Joena Meme)

Seychelles has made an impressive turnabout in its economy and its fiscal policies as well as great progress in implementing the International Monetary Fund (IMF) supported reform since July 2021, an IMF mission has deduced.

The IMF mission, which was being led by Boriana Yontcheva, carried out an exercise from October 23 and November 8 to assess the country’s first programme review under the IMF’s Extended Fund Facility agreement with Seychelles.

Thanks to its positive performance so far, Seychelles is scheduled to receive a disbursement of US $34.74 million from the IMF in December this year, in addition to the US $34.36 million it provided to Seychelles in August.

These came out yesterday afternoon in a joint press conference organised by the IMF, Ministry of Finance, Economic Planning and Trade and the Central Bank of Seychelles (CBS).

Present at the conference were Minister for Finance, Economic Planning and Trade Naadir Hassan, IMF mission of chief for Seychelles Boriana Yontcheva, secretary of state for finance, economic planning and trade Patrick Payet and the Governor of CBS Caroline Abel.

The semestrial reviews are conducted by the IMF to determine whether the Seychelles government is meeting its reform targets.

The 32-month Extended Fund Facility, which the IMF approved late July this year, will serve to fill in for the budget deficits caused by the impacts of Covid-19 and assist with post-pandemic recovery.

Two other IMF disbursements of US $18 million each are expected be doled out for 2022 and 2023.

“We have reached a preliminary agreement that will allow us to recommend to our board  of directors the conclusion of this first review, which according to our schedule should be done by the end of the year which will bring a disbursement of US $34.7 million,” explained Mrs Yontcheva.

“The government has made impressive reforms in reducing the fiscal and debt vulnerabilities that were coming from the Covid crisis. It is so easy to forget but only two months ago we were just at the exit of the Covid crisis which had deteriorated macroeconomic balances and increased the risks to debt sustainability.”

Even with these constraints, Mrs Yontcheva keenly highlighted the fact that the government was able to attain all the targets set, and some by a wide margin such as the primary deficit.

On his part, Minister Hassan said that Seychelles is seeing a more positive economic performance than initially anticipated, going from a projected budget deficit of 9.1% for 2021 to a forecasted 6.6% thanks to increased revenues and government’s discipline in regards to expenditures.

“The targets that were set for us to continue on the programme and structural benchmarks have been met. This includes the amended legislations we worked on to help remove us from the EU blacklist. The Cabinet has approved amendments to the Business Tax and it will appear before the National Assembly just after the budget concludes, and once this is done we will have a new business tax regime.”

Other targets that the country has met are the publication of debt management reports on a quarterly basis, the decision for the government to stop pumping money into Air Seychelles and revision of the Public Enterprise Monitoring Commission (PEMC).

“Our programme is on track with the IMF and we will be able to recover  if we continue to remain disciplined and consistent so that we come out of the pit we fell as soon as possible and make our debt sustainable,” stated Minister Hassan.

Although these indicate light at the end of the economic crisis tunnel, Mrs Yontcheva warned that Seychelles continues to remain highly vulnerable to external shocks and climate change, and hence needs to build up a buffer so as to be better prepared for the next crisis.

Towards this effort, Governor Abel noted that the country’s net reserve was forecasted at US $394 million by the end of this year but all indications show that this expects to be superseded to reach an estimated US $425 million, and this is expected to increase as more money comes in the country.

Now as Seychelles is done with its first review, it must work towards meeting targets that for the second IMF review in another six months.

SS Payet noted that targets that the government has to meet in 2022 and 2023 include revision of the value added tax (VAT), reforming its cash flow system, automating procedures at customs, and working towards the sustainability of the Seychelles Pension Fund (SPF).

 

Elsie Pointe

 

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