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IMF And Seychelles Reach Service Level Agreement On Resilience Facility And EFF

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Seychelles will receive approximately $46.19 million in assistance under a recently negotiated Resilience and Sustainability Facility (RSF) and $56.96 million under a new expanded financing facility (EFF) with the International Monetary Fund (IMF).

IMF staff and the Seychelles authorities have reached a staff-level agreement on a successor to the two facilities following a mission to Seychelles led by Calixte Ahokpossi from March 16-29 to review the previous EFF which will will end in June.

Both programs will support the island nation’s economic policies and reforms. Seychelles is the second African country to enter into a staff-level agreement to access the Resilience and Sustainability Trust (RST).

IMF mission chief Calixte Ahokpossi told reporters on Wednesday that “to address long-term challenges, the authorities have requested access under the new facility, which helps countries make progress on their climate agenda, and we know that Seychelles is at the forefront of climate policies.”

He added that “the new EFF would support the authorities in their efforts to build on the progress of macroeconomic, fiscal and financial reforms initiated under the EFF which was approved in July 2021.”

The agreement is subject to IMF management and board approval and board review is tentatively scheduled for May 2023.

Seychelles Finance Minister Naadir Hassan explained that with the previous program ending this year, a new EFF has been negotiated to help fund further reforms.

The International Monetary Fund has also reviewed Seychelles’ progress over the previous EFF and Mr Ahokpossi said the IMF was satisfied.

“The government has made significant progress in implementing the policies and reforms set out in the current IMF-supported EFF program and in restoring macroeconomic balances,” he said.

“Quantitative performance has been strong and the broader structural reform agenda has also progressed at a good pace. The current program should be canceled and replaced by the new one,” Ahokpossi said.

The IMF report after the review says that despite a challenging global environment, tourism has recovered strongly in 2022, with arrivals reaching around 87% of pre-pandemic levels.

From 5.4% in 2021, GDP growth accelerated to 9% and this year the economy is expected to grow at a reduced rate of 4.3%. The challenging global environment, however, exposes this outlook to downside risks related to tourism.

“Inflation in Seychelles was relatively low in 2022, reflecting the lagged effects of currency appreciation as well as base effects. After averaging 9.8% in 2021, inflation fell to 2.6 % on average in 2022. For 2023, inflation is expected to continue to moderate and decline to 1.4% on average in 2023,” the report adds.

Unlike deficits of 3.2% in 2021 and 15.2% in 2020, Seychelles recorded a primary fiscal surplus of 0.7% of GDP last year.

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