Seychelles’ economy performing well, need for progress on poverty reduction |02 November 2016

Seychelles’ economy is performing well but there is a need to make more progress to reduce poverty, ensuring the benefits of the economic growth are shared by all.

This came out in a statement by members of a mission from the International Monetary Fund (IMF) following a review of Seychelles’ economic performance under the extended arrangement with the international financial institution.

The mission, led by Wendel Samuel, deputy division chief for the IMF Africa Department, on Monday presented some of its review findings on Seychelles’ economy for the past few months to the press in the presence of outgoing Minister for Finance, Trade and the Blue Economy Jean-Paul Adam, together with high officials from the same ministry as well as the governor of the Central Bank Caroline Abel who accompanied and led the IMF delegation throughout its working mission.

“After two weeks here I am happy to say that the mission has reached an agreement framework that would facilitate the completion of the fourth and fifth review on the extended agreement with Seychelles,” Mr Samuel said.

“Seychelles’ macroeconomic performance has been robust in 2016, programme performance criteria were met and solid progress has been made with regards to the implementation of the structural agenda,” Mr Samuel pointed out.

He said the external current account deficit is estimated to have narrowed supported by low international commodity prices and strong tourism receipts reflecting vibrant tourist arrivals. Expanding credit to the private sector, economic growth for 2016 is projected to reach 4.5%,” he added.

Mr Samuel noted that the year-on-year inflation has been negative since the beginning of this year and this he said is largely due to low commodity prices and stable exchange rates.

“With the economy performing well, the primary fiscal surplus is expected to reach 3% of GDP this year despite the impact of various fiscal initiatives announced in the State-of-the-nation address in February,” Mr Samuel pointed out.

He added that the growth outlook for 2017 remains positive buoyed by foreign direct investment, related projects in the tourism sector while a recovery in the national commodity prices could have some negative impact on the balance of payment. The country’s international reserves coverage is expected to remain adequate anchored by strong macroeconomic policies.

Mr Samuel said the mission agreed with the authorities on the need to make more progress to reduce poverty, ensuring the benefits of the economic growth are shared by all.

“However, this should be done in a manner that safeguards macroeconomic stability and preserve the gains achieved through reforms being implemented since the 2008 crisis,” Mr Samuel noted.

The mission discussed a number of potential measures to help entrenched fiscal discipline and progress towards Seychelles’ debt reduction goals.

“The Central Bank of Seychelles should also remain vigilant to potential impacts on inflation of domestic demand pressures,” Mr Samuel said.

Mr Samuel added that the IMF executive board is expected to discuss the completion of the reviews in January next year.

He availed of the opportunity to commend the authorities for the high level of the discussions and constructive dialogue during two weeks’ work here.

Minister Adam noted that the reforms the country has carried out and some of which are still ongoing while others are being planned, have resulted in the good performance and resilience of our economy.

“Working with the mission is an opportunity to reinforce efforts and measures to continue to reduce poverty and address the concerns and challenges of the more vulnerable people in society. We really appreciate the work of the mission,” Minister Adam stressed.

For her part, Governor Abel said since the IMF mission’s last visit in March the CBS has ensured strict monetary policies which have resulted in controlling pressure with regard to increasing demands for foreign exchange.

“We are satisfied with the results of the measures we took which have resulted in an increase in our reserves, thus strengthening our resilience,” Ms Abel said.

Commenting on the need to continue reducing poverty following the introduction of a 13th month salary, increase in pension, minimum wage and other related schemes and benefits to address issues related to increasing people’s income, Minister Adam said the progressive  tax reform is the most important and would have the greatest impact on reducing people’s vulnerability thus subsequent poverty.

“In Seychelles we are lucky to have a high employment rate and even for people not in employment there are jobs and we have the capacity to absorb them,” Minister Adam said, noting that with the reduction in taxes  and putting people in employment will result in reducing people’s vulnerabilities.

He went on to stress that poverty very often is the result of substance abuse and addiction as well as the results of numerous social problems.

Asked if the new appointments and creation of new posts and recruitments in public sector will not put additional financial pressure on the economy, Minister Adam said even though additional financial costs are being incurred, these are within the manpower recruitment and budgeting exercise and can be absorbed by each ministry and department.