- Seychelles has been approved for an immediate disbursement of about US$1.3 million by the Executive Board of the International Monetary Fund (IMF).
The board has made the approval following the completion of the first review of Seychelles’ economic performance under the two-year Stand-by Arrangement, further granting waivers for the nonobservance of the performance criterion related to the primary balance of the consolidated Government budget and the continuous performance criterion related to the nonaccumulation of external payment arrears by the public sector.
The two-year SDR 17.6 million (about US$26.6 million) Stand-By Arrangement for Seychelles was approved on November 14, 2008.
The IMF has however called for an increased technical assistance, and project and programme financial support by development partners to the Seychelles government, saying donor coordination has already been initiated and is expected to be strengthened in the months ahead.
The IMF Deputy Managing Director and Acting Chair, Takatoshi Kato, stated: “The authorities are to be commended for their determination to implement the programme despite difficult circumstances and a major deterioration of the external environment. The program has made a good start, reflecting the authorities’ strong commitment and ownership of the reforms".
He said early signs of success of the macroeconomic stabilisation efforts are encouraging and have strengthened confidence in the reforms, pointing that the establishment of the social welfare agency is an important element in the reform process, and it will be essential to ensure that the targeted social safety net protects the most vulnerable segments of society.
The IMF has also noted that further coordinated efforts by the Central Bank of Seychelles and Ministry of Finance on liquidity and treasury management need to be pursued as planned.
“The programme includes an appropriate strengthening of public financial management, which is critical to support the fiscal sustainability effort and improved economic efficiency. A major programme objective is to reinforce financial discipline and accountability of the parastatal sector through enhanced oversight by the Ministry of Finance," said Mr Kato.
He concluded by commending the authorities commitment to reinforce debt management capacity and pursue public external debt restructuring strategy, aimed at normalising relations with creditors through good faith negotiation efforts.
"Given the impact of the deteriorating external environment on growth prospects, the programme financing needs are now somewhat higher than previously expected, but the programme is financed for 2009, assuming that a public debt restructuring consistent with Seychelles’ more limited payments capacity can be achieved," he said.
The Seychelles support programme was drawn in the midst of an acute balance of payments and public debt crisis, which is jeopardizing the population's living standard and the country's economic development.
According to the IMF, large macroeconomic imbalances and vulnerabilities resulting from longstanding unsustainable macroeconomic policies, combined with recent external shocks, culminated in mid-2008 with the near-exhaustion of foreign reserves and missed payments on public debt obligations.
The Seychelles, a former SADC member off the east coast of Africa, with a small population of less than 100,000, has been labeled the world's most owing country, with its tourism sector feeling the bite of the global recession and its waters now at risk of pirates infestation.
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