Kemi Osukoya


March 19, 2019

The International Monetary Fund said Tuesday Seychelles‘ economic outlook for 2019 remains positive, growth in 2018 reached 4.1 percent, aided by prudent monetary policy, steady exchange rate, surge in tourism earnings and robust output in the fishing industry.

Inflation remained controlled throughout 2018, external current account deficit narrowed to 17.1 percent of GDP, and the inflation annual average margin for the year was met owing to declines in international fuel prices in late 2018. 

The main fiscal surplus for 2018 reached 3.2 percent of GDP, assisted by lower than budgeted capital outlays and strong tax revenue growth, comfortably exceeding the program target. The net international reserves also exceeded the program target by US$31 million.

“The declining trend in international fuel prices up to early 2019 could have a positive impact on the external balance in 2019, while some of the fiscal measures in the 2019 budget could put pressure on inflation and on the balance of payments,” said IMF Staff Amadou Sy, following a recent IMF’s analysis of the country under the Policy Coordination Instrument Arrangement. “International reserves are expected to remain at an adequate level, anchored by prudent macroeconomic policies. Downside risks to the outlook stem largely from the external sector.”

Mr. Sy, who led a team of IMF staff on a mission to Seychelles this month, met with the Seychelles’ government, President Danny Faure, Minister of Finance, Trade, Investment, and Economic Planning
Loustau-Lalanne and Governor of the Central Bank of Seychelles, Caroline Abel, as well as other government officials, members of the National Assembly, and representatives of the private sector and civil society.

The group discussed with the government permanent fiscal steps that should be taken now that will help Seychelles secure the medium-term debt reduction target in 2020 and emphasized that delays in the execution of Air Seychelles’ restructuring plan could weaken government’s efforts to sustain strong fiscal primary surpluses and jeopardize medium-term public debt reduction goals.

The IMF team agreed with the government that the Central Bank should continue to maintain a flexible exchange rate while limiting foreign exchange interventions to the extent needed to avoid excess volatility and preserve reserve coverage at an adequate level as well as the need to address structural weaknesses and promote inclusive growth, including through further diversification in the context of the Blue Economy initiatives, improving the business climate, Financial technology, and strengthening the state-owned enterprise sector.

The CBS is urged to remain vigilant to inflationary pressure stemming from rising domestic demand including from fiscal measures in the 2019 budget.