This is according to the International Monetary Fund (IMF) who led a staff mission to the island for its first review under the IMF’s Extended Fund Facility (EFF) arrangement.
Seychelles’ tuna and tourism revenues remained weak
after reporting exceptional results in 2013 while domestic demand and
imports has grown strongly following a 13 per cent boost in earnings an a
16 per cent growth in credit to the private sector.
“The combination of weak export earnings and rising
imports has led to pressure on the balance of payments,” said Marshall
Mills, mission chief at the IMF.“The authorities have the tools and determination to
manage these short-term pressures. Monetary and fiscal policies are
being tightened, with lower reserve money targets and higher primary
surplus targets than envisaged in the program.”
Overall, the IMF is confident that the Seychellois
government is on track to meet its key objective of reducing public debt
below 50 per cent of GDP by 2018. Also, inflation is projected to be at
2.3 per cent for this year.
“The Seychellois authorities continue to strengthen
the fundamentals of the economy, as well as the conditions for its
sustained growth. The authorities successfully met all their
quantitative program targets for end-June. The sizeable fiscal primary
surplus and increase in international reserves this year bolster the
resilience of the economy, in line with the objectives of the
IMF-supported program,” added Mills.
For 2015, the IMF expects economic growth to increase
slightly to three per cent due to policy adjustments and a gradual
recovery in tourism and tuna exports.
“Fiscal policy will remain on track to meet the debt
reduction target, while monetary policy is expected to steer inflation
back to low single digits by the end of 2015, despite pressures from
depreciation. International reserves are expected to remain stable in
2015, with adequate import coverage, according to staff assessments,” he
The IMF noted that wage levels need to also stay
compatible in order to preserve gains made in macroeconomic stability
and to ensure international competitiveness.
“The authorities’ structural reform agenda continues
to advance. The authorities are on track to implement all structural
measures planned for the first review in a timely manner. Staff
highlighted the risks that public enterprises can pose to the public
finances and development of the private sector and stressed the
importance of pursuing plans to strengthen their oversight and
governance, while enlarging the private sector’s role in the economy.”