Economy doing better than IMF forecast
17.08.2009
Our economy is now doing better than the International Monetary Fund (IMF) predicted, so this year’s gross domestic product (GDP) should fall by about 8% instead of the 11% forecast.
The head of an IMF economic performance evaluation team, Paul Mathieu, said this on Friday during a press conference attended by Finance Minister Danny Faure, principal secretary in the ministry Ahmed Afif and Central Bank governor Pierre Laporte.
Mr Mathieu said the revised forecast is based on a better performance by the tourism industry, with visitor arrivals expected to drop by only 15% and not the 25% predicted earlier.
He also noted that fishing, which was threatened by piracy, is doing better because the problem is being addressed.
He said Seychelles is making “strong progress” in its economic reform programme and announced that the IMF will now disburse US $1.4 million as part of the US $24 million arrangement approved when we launched the reforms in November. A sum of US $12.3 million has already been received.
“The economy is gaining strength and the decline in the real GDP that we forecast earlier at 11% will now be somewhat less than it appeared in May.
We do not have a final figure yet, but the decline will probably be between 8% and 9%,” Mr Mathieu told reporters.
“The early signs of the programme’s success that we noted in May are becoming reality, and the rupee has strengthened further. Prices and interest rates are coming down.
“This very strong performance has been made possible by a very tight budget and proper monitoring policies by the Seychelles government and the Central Bank, and there is strong evidence that the programme is continuing to work to achieve its objectives.”
He said the key aims of the programme are to consolidate macro-economic stability by maintaining a tight fiscal policy and putting in place the supportive structural reforms, removing constraints to growth and improving the performance of the public sector.
“Strong progress is being made by the Seychelles authorities in their reform programme,” added Mr Mathieu.
“The programme is on track and is achieving its economic stabilisation and reform objectives. A prudent and well-balanced monetary and fiscal stance have been effective in rapidly reducing inflation to the low single digits.
“All end-June 2009 quantitative targets under the programme were met, and structural reforms are being implemented with determination. The economic downturn, reflecting primarily a sharp drop in tourism earnings, is easing and the decline in real GDP is likely to be somewhat less than earlier feared.”
Mr Mathieu said the strong progress on inflation reduction and the appreciation of the rupee have permitted a gradual easing of monetary policy.
“The preparation of a fundamental reform of the tax system, a major reinforcement of control over parastatal performance and strengthening of the financial system are proceeding. The tax reform aims to harmonise rates, broaden the tax base and raise self-compliance while maintaining the overall tax take,” he said.
“Seychelles’ public debt remains unsustainable. But good progress is being made in advancing public external debt restructuring discussions, and the mission encourages the authorities to press ahead with their debt restructuring strategy.”
Mr Mathieu said the third IMF review mission, based on end-September performance, is expected in October and will coincide with talks on a medium-term structural reform programme to be supported by a three-year arrangement under the Extended Fund Facility.
He said the latest mission was here from August 4-15 to assess economic performance under the Stand-By Arrangement with Seychelles. His team called on President James Michel, Minister Faure, and Governor Laporte as well as representatives of the private sector, parliamentarians and civil society.