The executive board of the International Monetary Fund (IMF) approved on May 31 a total of $56 million for a three-year arrangement for Seychelles under the Extended Fund Facility (EFF), and $46 million in a three-year arrangement under the Resilience and Sustainability Facility (RSF), according to a press release on Thursday.
The new EFF will replace the previous one approved on July 29, 2021.
Gita Gopinath, first deputy managing director and acting chair of the board, said that "Under the 2021 EFF, the Seychellois economy showed resilience to shocks, including the COVID-19 pandemic and Russia's war in Ukraine. The authorities' policy measures helped the economy recover quickly from the pandemic-related disruptions and provided necessary support for households and the private sector."
She furthermore pointed out that "Strong growth and better than expected fiscal outturns contributed to the rapid decline in public debt and the restoration of macroeconomic stability. Monetary policy has remained appropriately accommodative in light of moderate inflation. However, the authorities should remain vigilant to signs of inflationary pressures and adjust the monetary policy stance if needed."
According to the IMF statement, Seychelles' economic outlook is "positive", noting that tourism performance had almost reached its pre-pandemic level, while inflation is expected to remain moderate. "However, Seychelles continues to face substantial risks, including from global financial and economic developments, which could severely impact tourism, and climate change," the institution said.
Furthermore, the IMF is noted that Seychelles' government authorities have "satisfactorily" implemented policies to restore macroeconomic stability following several shocks, namely those caused by COVID-19.
"All quantitative targets through end-December 2022 were met and all but one structural benchmark were met or implemented with delay," said the statement.
Meanwhile, the RSF is expected to support the island nation's plans to build resilience to climate change by "lifting bottlenecks to climate-related investments and by facilitating the integration of climate-related considerations into macroeconomic policies and frameworks."
The RSF arrangement for Seychelles, the second in Africa, will exploit synergies with other sources of public financing and help catalyze further private financing for climate-related investments.
The arrangement is also intended encourage more private financing together with other official financing, with a focus on "mainstreaming climate change in the government budget, strengthening climate-related risk management for financial institutions, and undertaking climate adaptation and mitigation reforms, including through measures to facilitate energy transition."
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Finance minister welcomes new EFF
Seychelles' finance minister, Naadir Hassan, welcomed the IMF decision to approve a new EFF, according to a press statement.
"The IMF has proven to be a strong and faithful partner of the Seychelles, throughout the country's economic downturn. The support provided by the Institution towards our economic reform programme after the COVID 19 pandemic in 2021 onwards, has enabled the country's economy to recover and allowed the government fiscal space to finance budget gaps. As we move on the next phase of our development, the government is grateful to the IMF for the additional support under the new EFF, he said.
Hassan added that Seychelles is "equally grateful to the IMF for recognising the vulnerability of our country to climate change and the high cost of boosting our resilience to such phenomenon, which has enabled Seychelles to also benefit under the RSF programme."
Updated at 3.53pm
