(Ecofin Agency) - Seychelles has reached a staff-level agreement with the International Monetary Fund (IMF) for a $107 million Extended Fund Facility (EFF). The announcement was made by the institution in a July 7 statement.
Set to be deployed over 28 months between 2021 and 2023, the economic program consists of reinforcing the Seychellois economy by addressing debt and fiscal consolidation issues. “The authorities’ reform efforts will be anchored by several key pillars: reducing risks to debt sustainability through an ambitious but realistic fiscal consolidation and liability management operation, tackling structural fiscal issues, including the implementation of a medium-term fiscal or budget framework, and strengthening debt and State-Owned Enterprise (SOE) management,” the statement reads.
This program comes in a difficult context for the country’s economy, marked by the negative effects of the coronavirus pandemic. The tourism sector has been particularly hard hit and tourism revenues have collapsed. According to the IMF, this has led to a contraction in real GDP of around 13%, while “public debt burden indicators hit their highest levels in 2020, peaking at about 100 percent of GDP in 2020.”
However, thanks to the swift response of the authorities, who were the first on the African continent to launch a vaccination campaign, the country has been able to reopen its borders and the economy is expected to recover through an increase in tourism activity. According to the IMF, GDP is expected to grow by 7.7% in 2021 while the current account deficit is expected to narrow to 22% of GDP, thanks to the recovery in tourism revenues.
According to Boriana Yontcheva, the institution's head of mission for Seychelles, the reform program will also focus on protecting the environment and the most vulnerable segments of the population. Let’s recall that the agreement must first be validated by the board of directors before coming into force.
Moutiou Adjibi Nourou