/ 15 November 2008

IMF agrees Seychelles $26m rescue package

The International Monetary Fund has agreed a two-year $26-million rescue package in support of reforms to reboot the Seychelles’ deeply indebted economy.

The Indian Ocean archipelago, best known for its high-end tropical tourism but reeling under the impact of the global financial crisis, will receive some $9,1-million immediately.

”The executive board of the IMF today approved a two-year stand-by arrangement to support Seychelles’ bold economic reforms, with total access equivalent to about $26,1-million,” the fund said in a statement late on Friday.

As part of its reform package, the Seychelles lifted long-standing currency exchange controls earlier this month, prompting a 48% slide in the value of the rupee.

The IMF said the government had made a good start, and it praised the archipelago for its commitment to far reaching reforms aimed at tackling macroeconomic imbalances that have built up over years. But it said further steps were needed.

”Strong fiscal policy reforms, including the removal of tax exemptions and strengthening of public financial management, need to be sustained in order to secure substantial primary surpluses over the medium term,” it said.

The IMF disbursements will be subject to performance.

Analysts predict a painful path to recovery while the Seychelles’ central bank forecasts the economy will slow to 3,1% this year, and possibly contract in 2009.

The tiny Indian Ocean nation has a population of just 85 000. – Reuters