IMF Strengthens Seychelles’ Economic Resilience with Staff-Level Agreement on Final Reviews and 2026 Consultation
The International Monetary Fund (IMF) has reached a significant staff-level agreement with the Seychellois authorities, marking a pivotal moment in the country’s economic strategy. This agreement outlines the necessary policies to finalize the last two reviews under the 36-month Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). As Seychelles navigates a complex global landscape, this development is crucial for its economic stability and resilience.
Economic Progress and Strategic Reforms
Seychelles has demonstrated notable advancements in its economic objectives, including a substantial reduction in public debt and the rebuilding of foreign exchange reserves. The government has also made strides in strengthening its monetary policy framework and enhancing financial sector supervision. These efforts are complemented by ongoing climate-related reforms, positioning Seychelles favorably as it faces external shocks, particularly those arising from geopolitical tensions in the Middle East.
During a mission led by Todd Schneider, the IMF Mission Chief for Seychelles, discussions were held from March 4 to March 19, 2026, focusing on the final reviews and the 2026 Article IV Consultation. The IMF Executive Board is expected to consider these developments in May 2026.
Financial Implications and Future Projections
At the conclusion of the mission, Schneider announced that Seychelles is poised to receive a disbursement of up to SDR 32.9 million (approximately $45 million), contingent upon the implementation of reforms and approval from the IMF Executive Board. This would bring total disbursements to SDR 76.7 million (around $105.1 million) since May 2023.
The economic performance of Seychelles in 2025 was robust, with real GDP growth estimated at 5.1 percent, largely driven by record tourist arrivals. Consumer price inflation remained low, just below zero, while the government fiscal balance indicated a primary surplus of 2.5 percent of GDP. This fiscal discipline has contributed to a reduction in public and publicly guaranteed debt to 53.6 percent of GDP, and enhanced tourism revenues have helped decrease the external current account deficit to 6.5 percent of GDP. Consequently, the central bank’s foreign exchange reserves have increased to cover just over four months of imports.
Structural Reforms and Climate Initiatives
The performance under the EFF arrangement has been commendable, with all quantitative targets for June 2025 met, and nearly all targets for December achieved. The Seychellois government has either implemented or is on track to complete most structural reforms under the EFF, although two reforms will require additional time.
The Central Bank of Seychelles plans to launch a pilot retail-oriented window for banks to purchase government securities by January 2026. However, prerequisite reforms, including the establishment of a Real Time Gross Settlement System and a Central Securities Depository, necessitate further time. Additionally, functional reviews of the ministries of finance, education, and health are expected to be completed with World Bank support before the end of 2026.
Progress has also been made in climate-related reforms under the RSF. The Central Bank of Seychelles has completed several measures related to managing and reporting climate-related financial sector risks. Remaining tasks include analyzing gaps in climate-related data and publishing a climate risk exposure assessment of the banking sector. One pending reform involves establishing an implementation framework for a multi-year system for cost-reflective end-use electricity tariffs, which is subject to Cabinet review.
Outlook Amid Global Challenges
The IMF mission has provided a detailed outlook for 2026, taking into account recent developments in the Middle East. Based on conservative assumptions regarding disruptions to air connectivity and tourist spending, real GDP growth is projected to slow to approximately 1.5 percent. Rising international prices for oil and food, coupled with increasing freight costs, are expected to elevate average consumer price inflation to 2.6 percent.
The anticipated decline in tourist income, alongside higher import prices, may lead to a deterioration of the external current account balance, estimated at 7.8 percent of GDP. This situation could result in a modest decline in central bank foreign exchange reserves. Additionally, reduced tourism activity is likely to impact government revenues, potentially increasing the overall fiscal deficit.
In light of these projections, the IMF recommends that the Seychellois government consider contingency measures on both the expenditure and revenue sides. Any additional spending should be targeted at the most vulnerable segments of the population and be temporary in nature. The flexibility of the exchange rate will also be essential for maintaining external buffers and facilitating necessary adjustments.
Commitment to Sustainable Growth
The IMF mission expressed gratitude for the cooperation of the Seychellois authorities and the candid discussions held throughout the mission. As Seychelles approaches the successful conclusion of the EFF and RSF arrangements, the IMF remains committed to supporting the nation in maintaining macroeconomic stability amid new challenges. The focus will continue to be on advancing its reform agenda to foster resilience and promote sustainable, inclusive growth.
According to publicly available www.zawya.com reporting.
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