- This has been the year of economic disaster but also of great reforms in Seychelles. But the return of steady growth seems secured already for next year.
An analysis of the current economic situation by the International Monetary Fund (IMF) pronounces great optimism for crisis-struck Seychelles. Growth is to return much faster than feared only one year ago.
According to the Fund, real GDP is still expected to fall by a considerable 7.5 percent during 2009 at large. But the crisis is already ending. By now, "the economic recovery is expected to strengthen, with economic growth rising to 4 percent in 2010," according to the IMF analysis.
Ealier this year, the economic future of the prosperous archipelago looked very bleak. Years of overspending added to the high commodity prices of 2008 and led to an in-made economic stagnation. For the first time, Seychelles had to ask for IMF help. In addition came the global financial crisis, which strongly hit the island state's main revenue source; up-market tourism.
Luckily for President James Michel, quick foreign refunding was ready for the archipelago as soon as a thorough economic reform plan was presented. While government prepared the population for tough reforms, IMF and other loans paid for the restructuring of the Seychellois economy.
The IMF report praises Seychellois authorities for a good reform package and for its swift implementation of reforms. All the performance criteria and structural benchmarks had been "met with margins," the report said.
"Rapid progress has been made on restoring macroeconomic stability, the result of the liberalisation of the exchange regime, strong fiscal adjustment, and prudent monetary policies," the Fund observed. "Programme implementation has been exemplary, even in the face of strong head winds from the global recession," it added.
Results therefore had been better than expected: "Inflation has been near zero since March and the exchange rate has appreciated steadily from lows early in the year. Official external reserves continue to recover from near depleted levels. The economy is responding well to the reforms and the contraction in economic activity will be somewhat less than previously forecast," the IMF reports.
In a recent meeting in Victoria, an IMF delegation and Seychellois authorities therefore agreed that the next step of the country's reform efforts already was due. "The focus now shifts to implementation of a second generation of reforms aimed at putting public finances on a sustainable footing and durably raising growth," according to government.
The IMF has pledged to support the next step of reforms on a 3-year basis, both contributing with fresh funds and economic advice. Some US$ 3.4 million were to be made available within weeks.
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