Seychelles: 2024 Article IV Consultation, Second Reviews Under the Arrangement Under the Extended Fund Facility and the Arrangement Under the Resilience and Sustainability Facility, Requests for a Waiver of Nonobservance and Modification of Performance Criteria-Press Release; and Staff Report; and Statement by the Executive Director for Seychelles

SEYCHELLES IMFCountryReportNo.24/191 June2024 2024ARTICLEIVCONSULTATION,SECONDREVIEWSUNDERTHEARRANGEMENTUNDERTHEEXTENDEDFUNDFACILITYANDTHEARRANGEMENTUNDERTHERESILIENCEANDSUSTAINABILITYFACILITY,REQUESTSFORAWAIVEROFNONOBSERVANCEANDMODIFICATIONOFPERFORMANCECRITERIA—PRESSRELEASE;STAFFREPORT;ANDSTATEMENTBYTHEEXECUTIVEDIRECTORFORSEYCHELLES UnderArticleIVoftheIMF’sArticlesofAgreement,theIMFholdsbilateraldiscussionswithmembers,usuallyeveryyear.Inthecontextofthe2024ArticleIVconsultationwithSeychelles,thefollowingdocumentshavebeenreleasedandareincludedinthispackage: APressReleasesummarizingtheviewsoftheExecutiveBoardasexpressedduringitsJune3,2024,considerationofthestaffreportthatconcludedtheArticleIVconsultationwithSeychelles. TheStaffReportpreparedbyastaffteamoftheIMFfortheExecutiveBoard’sconsiderationonJune3,2024,followingdiscussionsthatendedonApril3,2024,withtheofficialsofSeychellesoneconomicdevelopmentsandpolicies.Basedoninformationavailableatthetimeofthesediscussions,thestaffreportwascompletedonMay15,2024. AnInformationalAnnexpreparedbytheIMFstaff. AStatementbytheExecutiveDirectorforSeychelles. TheIMF’stransparencypolicyallowsforthedeletionofmarket-sensitiveinformationandprematuredisclosureoftheauthorities’policyintentionsinpublishedstaffreportsandotherdocuments. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.org InternationalMonetaryFundWashington,D.C. ©2024InternationalMonetaryFund PR24/203 IMFExecutiveBoardCompletesSecondReviewsUndertheExtendedFundFacilityandtheResilienceandSustainabilityFacilityArrangementsandConcludesthe2024ArticleIVConsultationwithSeychelles FORIMMEDIATERELEASE TheSeychelloiseconomycontinuedtorecoverin2023,thoughataslowerpacethanin2022.Touristarrivalscontinuedtorise,andsectorssuchasITandconstructionwerestrong.However,floodingandanindustrialexplosioninDecember2023dampenedoverallgrowth. ThegovernmenthasmadeconsiderableprogressundertheExtendedFundFacility(EFF)andResilienceandSustainabilityFacility(RSF)Arrangements—strengtheningfiscalandexternalbuffers,reducingpublicdebt,andenhancingthepolicyframeworktoaddressclimatechange.TheExecutiveBoard’sapprovalofthereviewswillallowforatotaldisbursementofSDR9.2million($12.2million). Longtermchallengescenteronthelimitstosustainabletourism-basedgrowth,economic diversification,andSeychelles’highvulnerabilitytotheeffectsofclimatechange. Washington,DC–June3,2024:TheExecutiveBoardoftheInternationalMonetaryFund(IMF)completedtodaythesecondreviewsofSeychelles’economicperformanceunderthe36-monthEFFandRSFArrangementsapprovedonMay31,2023.ThecompletionofthereviewsallowsfortheauthoritiestodrawtheequivalentofSDR6.1million(about$8.1million)undertheEFFandSDR3.1million(about$4.1million)undertheRSF,bringingtotaldisbursementstoSDR18.3million(about$24.3million)andSDR6.2million(about $8.2million)undertheEFFandRSF,respectively. Seychelles’realGDPgrowthisestimatedat3.2percentin2023comparedto15percentin2022.Touristarrivalsrosetoabout91percentofthepre-pandemichigh(2019)butspendingpertouristwasflat.Informationtechnologywasthemainimpetusofnon-tourismgrowth,alongwithfishingandconstruction.However,unseasonablyheavyrainsandfloodingcombinedwithanindustrialexplosioninDecembercontributedtoacontractioninmanufacturing.Year-on-yearheadlineinflationwas-2.7percentbyDecember,reflectinglowerglobalcommoditypricesandabroadlystableexchangerate.Grossinternationalreservesincreasedto$682million(3.2monthsofimports)byend-2023.Thegovernment’sprimaryfiscalsurplusof1.7percentofGDPwashigherthanexpected,duemainlytolowerthanprojectedcurrentandcapitalspending. Lookingahead,realGDPgrowthisprojectedtoriseto3.7percentin2024,andannualaverageinflationisexpectedtoreach1.2percent.Whiletheexternalcurrentaccountisexpectedtoremainbroadlystable,grossforeignexchangereservesareprojectedtoreach 2 $751millionbyend-2024,equivalentto3.4monthsofimports.PotentialdownsiderisksincludeSeychelles’highvulnerabilitytoexternalshocks(suchasvolatilityincommodityandshippingprices),climate-relatedevents,ordisruptionstotourism. TheExecutiveBoardalsoconcludedthe2024ArticleIVConsultation1withSeychelles. FollowingtheExecutiveBoard’sdiscussion,Mr.BoLi,DeputyManagingDirector,andactingChair,issuedthefollowingstatement: “TheSeychelloiseconomyhascontinuedtodemonstrateresilience,despitecontinuedvolatilityintheexternalenvironmentandtheintensificationofclimateshocks.TheperformanceundertheFund-supportedExtendedFundFacility(EFF)andResilienceandSustainabilityFacility(RSF)arrangementshasbeenstrong.Theauthoritiesarecommittedtopreservingmacroeconomicsustainability,buildingbuffers,andsupportinginclusivegrowthandresilience.Strongsupportfromdevelopmentpartnersiscriticalforthesuccessfulimplementationofthereformagenda. “Sustainedgrowth-friendlyfiscalconsolidationthroughrevenuemobilization,prudentspending,andimprovedpublicfinancialmanagementwouldhelptoreducedebtvulnerabilitiesandcreatefiscal