IMF OKs $13.7M for Seychelles After Facility Reviews

• The Executive Board of the International Monetary Fund (IMF) completed today the fourth reviews of Seychelles' economic performance under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) Arrangements. Completion of the reviews allows for an immediate disbursement of about US$13.7 million intended to strengthen macroeconomic stability, sustain growth, and reinforce fiscal and monetary policy frameworks, while also supporting efforts to strengthen resilience to climate change, exploit synergies with other sources of official financing, and catalyze financing for climate-related investments.
• Economic growth for Seychelles in 2024 is estimated at 2.9 percent, reflecting lower dynamism in the tourism sector. Inflation remained subdued and fiscal performance was tighter than budgeted, driven mainly by underspending on capital expenditure. For 2025, economic growth is projected at 3.2 percent, reflecting slower growth projected for Europe-Seychelles' most important tourism source market.
• Performance under the EFF has been strong with all quantitative targets and structural benchmarks for end-December 2024 met. However, two SBs scheduled for 2025 have encountered minor delays due to capacity constraints. Progress has been satisfactory under the RSF implementation, and the authorities remain committed to the programs' objectives.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the fourth reviews of Seychelles' economic performance under the 36-month EFF and RSF Arrangements approved on May 31, 2023 . The completion of the reviews allows for the authorities to draw the equivalent of SDR 6.1 million (about $8.3 million) under the EFF and SDR 3.9 million (about $5.3 million) under the RSF, bringing total disbursements to SDR 30.5 million (about $41.7 million) and SDR 13.3 million (about $18.2 million) under the EFF and RSF, respectively.

Economic growth for Seychelles in 2024 is estimated at 2.9 percent, slightly lower than earlier forecasts due to lower activity in the tourism sector. Year-on-year inflation reached 1.7 percent as of December, driven by an increase in utility prices and pass-through effects of currency depreciation. Fiscal performance was tighter than budgeted driven mainly by underspending on capital expenditure, with a primary surplus equivalent to 3.2 percent of GDP in 2024. The Central Bank of Seychelles has maintained an accommodative monetary stance. The current account deficit widened to 7.9 percent of GDP in 2024, but gross international reserves increased to $774 million, equivalent to 3.8 months of imports or 115 percent of the Assessing Reserve Adequacy (or ARA) metric.

EFF-supported program implementation has been strong. All quantitative program targets (QPCs) and structural benchmarks (SBs) for end-December 2024 were met. However, two SBs scheduled for the first half of 2025 have encountered minor delays due to capacity constraints. Progress has been satisfactory on RSF implementation. All reform measures (RMs) for March 2025 have been implemented. However, one component of an RM scheduled for April 2025 (related to energy pricing and the issuance of a new multi-year electricity tariff system) is delayed and expected to be completed in November. The authorities requested minor modifications for two RMs slated for December 2025. 

The outlook suggests low but stable growth for 2025 and beyond but is subject to considerable uncertainty. Real GDP growth is projected at 3.2 percent for 2025 compared to 4.3 percent at the previous reviews. The downward revision reflects slower a weaker outlook for tourist activity on the back of slower growth in Europe (Seychelles' most important tourism source market). Year-on-year inflation is expected to moderate to 1.2 percent by end-2025 due to lower utility, fuel and food prices. Reserve coverage is expected to increase to 3.9 months of import cover in 2025. Near-term downside risks relate mainly to how slower global growth and higher uncertainty translate into tourism arrivals and spending.

Going forward, continuation of prudent macroeconomic policies is paramount for maintaining resilience. The authorities' near-term priorities are to support economic growth, strengthen fiscal and external positions, and maintain prudent monetary policy and a sound financial sector. In the medium-term, the authorities' aim to continue a steady fiscal consolidation to reduce the ratio of public debt to GDP, while simultaneously improving the efficiency of public spending. Building capacity with respect to public financial management and financial sector supervision is another key focus. The structural reform agenda emphasizes revenue administration, public financial and investment management, climate change resilience, and governance improvements, including digitalization and transparency.

Following the Executive Board's discussion, Mr. Bo Li, Deputy Managing Director, and acting Chair, issued the following statement:

"Seychelles has continued to demonstrate sound macroeconomic management and commitment to structural reforms. Lower than expected GDP growth for 2024 reflected lower tourism income and weakened performance in such sectors as accommodation, food services, and transportation. Fiscal outturns have been tighter than projected, reflecting delays in execution of capital projects, bottlenecks in public procurement, and civil service recruitment delays. Monetary policy remains accommodative in the face of low inflation. Good progress has been made on essential macrostructural reforms.

"For the fourth reviews, program performance under the EFF was strong, with all quantitative program targets and structural benchmarks through end-December successfully met. Progress has also been satisfactory on RSF implementation, with all RMs through March implemented and only one component of an RM scheduled for April has been delayed. The authorities continue to implement an ambitious reform agenda and prudent fiscal and monetary policies in the face of an increasingly challenging external environment.

"The authorities should remain vigilant with respect to near and medium-term risks as the outlook is subject to rising uncertainty. These include a slowdown in tourism activity due to slower growth projected for Europe—Seychelles' most important tourism source market. Commodity price volatility could also feed through to inflation, while global trade tensions may reduce FDI and lead to tighter financial conditions. The EFF arrangement will continue to help protect macroeconomic stability and support stronger fiscal and external buffers, while advancing the authorities' structural reform agenda.

"The authorities are advancing with reforms under the RSF to enhance the climate-resilience of public investments, diversify financing, and strengthen assessment and disclosure of climate-related financial sector risk. Successful implementation of the reform agenda will enhance economic resilience and external financing risks by building institutional capacity for public investment in climate adaptation and diversifying Seychelles' power generation capacity—reducing its dependence on imported energy. Continued collaboration with the IMF and other partners will be important to help fill capacity gaps and to mobilize climate finance."