26 June 2012

Seychelles: Statement At the Conclusion of an IMF Staff Visit to Seychelles

press release

Washington, DC — An International Monetary Fund (IMF) team led by Jean Le Dem visited Victoria during June 20-27, 2012. The team met with Vice President Faure, Finance Minister Laporte, Central Bank Governor Abel, and other senior government officials. It also participated in a government-sponsored conference on ways to strengthen private sector-led growth in Seychelles. At the conclusion of the visit, the mission issued the following statement:

"In June, the IMF Executive Board completed the fifth review of the program supported by an arrangement under the Extended Financing Facility. Discussions for the 2012 Article IV consultations and for the sixth review of this program are scheduled to take place in September-October 2012. Quantitative targets as of end-June appear within reach, and progress has been achieved on several structural reforms, including in the area of public finance management.

"Recent economic data are broadly in line with projections, with GDP expected to grow by about 3 percent in 2012. Strong growth in tourist arrivals from new markets has more than compensated for the drop-off in visitors from traditional markets in Europe, where economic activity has been weak. Inflation has picked up (8.7 percent year-on-year), but is expected to decelerate in the second half of 2012 in the wake of the current tightening of monetary policy. The present fiscal policy stance continues to be appropriately geared toward maintaining macroeconomic stability and reducing public debt.

"Challenges remain. Improved coordination between the central bank and the treasury is needed to resolve anomalies in the structure of short-term interest rates. The authorities have indicated their desire to conduct additional analysis of the economic and social impact of introducing a value-added tax (VAT). The mission hopes that these studies will help to alleviate public concerns about the new tax, which is to replace the current sales tax; international experience has underscored the merits of VAT as a broad-based and effective form of indirect taxation. Plans to introduce the VAT in July have been put on hold, pending completion of the proposed studies.

"The mission wishes to thank the authorities for their warm hospitality and the constructive discussions."

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