IMF国际货币组织全球-Seychelles_Fourth-Review-Under-the-Policy-Coordination-Instrument-and-Request-for-Modification-of-Targets_60页_4mb

Seychelles: Fourth Review Under the Policy Coordination Instrument and Request for Modification of Targets

Core Content

The IMF conducted the fourth review under the Policy Coordination Instrument (PCI) for Seychelles on December 17, 2019, without holding a formal meeting. The review confirmed that the implementation of Seychelles' economic program is largely on track, with strong growth in the tourism and communication sectors contributing to a 4% estimated economic growth in 2019. The Central Bank of Seychelles (CBS) lowered the monetary policy rate in September 2019 due to declining inflationary pressures, and the near-to-medium-term economic outlook remains favorable as long as prudent policies under the PCI are maintained.

The program aims to achieve a primary fiscal surplus of 2.5% of GDP through 2022, which is expected to gradually reduce the public debt-to-GDP ratio. Despite a small miss in the end-June 2019 primary surplus target due to delayed stamp duty receipts from a telecom company sale, the overall fiscal performance is aligned with the program. The 2020 budget includes permanent fiscal measures to enhance revenue and reduce expenditure, aiming to support the fiscal sustainability goals.

Main Points

Economic Performance

• Growth: Estimated at 4% in 2019, driven by strong performance in tourism and communication sectors.
• Inflation: Declined to 1.4% in September 2019 from over 4.5% in early 2018.
• Exchange Rate: The CBS maintains a flexible exchange rate policy.
• Reserves: Gross international reserves (GIR) are projected to remain adequate at around 122% of the ARA metric in the medium term.

Program Implementation

• Quantitative Targets: Most QTs were met, with a small miss in the primary surplus target due to delayed telecom company sales receipts.
• Structural Reforms: Some reform targets (RTs) are delayed due to technical and capacity constraints, but progress is being made on the 5th and 6th review RTs.
• Debt Sustainability: The public debt-to-GDP ratio is projected to decrease from 61.5% to 47% by 2022, assuming continued surplus and debt unwinding.

Fiscal Policies

• Primary Surplus: Targeted at 2.5% of GDP through 2022, with a focus on reducing public debt.
• Revenue Enhancements: Includes increased environmental levies, excise changes, property tax, and fees for financial services and permits.
• Expenditure Savings: Includes better targeting of social welfare programs, freezing non-essential hiring, and reducing low-priority spending.

Risks and Outlook

• External Risks: Include possible shocks from tourism market weakness, global bank withdrawal of correspondent banking relationships (CBRs), and higher energy prices.
• Domestic Risks: Primarily linked to fiscal slippages, especially related to the Presidential election in 2020 and Air Seychelles' financial situation.
• Favorable Outlook: The economy is expected to continue growing, with a moderate risk profile due to the government's strong track record and commitment to macroeconomic stability.

Key Policies

A. Buttressing Fiscal Sustainability

• The 2020 budget includes permanent revenue and expenditure measures to support the fiscal surplus target.
• Revenue-enhancing measures are estimated to increase government revenues by about 1% of GDP.
• Expenditure-saving measures are expected to reduce spending by around 0.6% of GDP in 2020.
• The government plans to implement a medium-term fiscal plan to better target social welfare programs, aiming for savings of 0.1% of GDP in 2020 and 0.3–0.4% over the medium term.

B. Minimizing Fiscal Risks

• The government is committed to reducing risks from state-owned enterprises (SOEs), especially Air Seychelles.
• Air Seychelles has initiated operational restructuring, leading to improved financial performance.
• The government does not intend to take on additional liabilities from the company, and will assess further support needs in future reviews.
• A new SOE ownership and dividend policy is expected to be submitted to the Cabinet by end-October.

C. Preserving Price and External Stability

• The CBS is advised to maintain a flexible exchange rate policy and limit foreign exchange purchases to preserve reserve coverage.
• A working group has been established to improve coordination between the CBS and the Ministry of Finance.
• The CBS is working on formalizing and expanding inflation expectations surveys to improve monetary policy effectiveness.

D. Supporting Financial Stability

• The government is enhancing the AML/CFT framework and improving financial stability.
• The CBS has implemented a 6-phase plan to strengthen inflation forecasting and liquidity management.
• The government plans to conduct a Public Investment Management Assessment (PIMA) by mid-2020.

E. Enhancing Inclusive Growth

• The structural agenda includes improving the business climate and enhancing inclusive growth.
• The government is exploring the use of public-private partnerships (PPPs) and concessional financing to fund infrastructure and climate change projects.
• A gradual introduction of a carbon tax is being considered as part of a comprehensive tax reform.

Conclusion

The IMF has endorsed the fourth review under the PCI for Seychelles, recognizing the country's progress in implementing its economic program. The outlook remains favorable, provided the government continues to adhere to prudent fiscal and monetary policies. The focus is on maintaining fiscal sustainability, minimizing risks from SOEs and external shocks, and enhancing inclusive growth through structural reforms and improved governance.