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According to the IMF, Seychelles’ macroeconomic outlook is favourable but challenges remain as the spillover effects from the Russia-Ukraine conflict are expected to weigh on the external and fiscal balances due to a surge in commodity prices.
A team from the International Monetary Fund (IMF) headed by Boriana Yontcheva was in Seychelles from April 26 to May 9. They held discussions on the second review of Seychelles’ economic and financial program supported by the Extended Fund Facility (EFF) arrangement. The IMF is supporting the economic reform program of Seychelles.
The IMF delegation head said that Seychelles strongly recovered in 2021 with real GDP growth to an estimated 8 percent, driven by a swift rebound of the tourism sector. In spite of the deterioration of the international environment associated with the war in Ukraine, tourism earnings in March 2022 surpassed the 2019 level. The GDP growth is expected to reach 7 percent in 2022,. However, she said that Seychelles’ open economy was highly vulnerable to external shocks and climate change. Therefore, there was a need to build buffers against shocks.
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Price inflation in Seychelles rose to 10.1 percent in December 2021, a huge jump from 1.2 percent in 2020, leading to large depreciation of the rupee in 2020 as well as pandemic-related cost-push factors. In March, inflation dropped to 2.2 percent due to the impact of the 2021 appreciation of the currency. Inflation is expected to be at 5.7% at the end of the fiscal year due to the surge in global prices including oil.
The team also discussed the diversification of the economy with officials of Seychelles’ finance ministry, the Central Bank, and other local partners and stressed the need for looking at developing different types of tourism. The IMF will prepare a report that is subject to management approval and will be presented to the IMF executive board for decision and approval. The third disbursement of the EFF -US $19 million – is expected to be made this year and the same amount will be disbursed in 2023.
