The IMF approved Seychelles’ request for emergency financial assistance under the Rapid Financing Instrument (RFI) of about US $31.2 million; the near-term economic fallout of the COVID-19 pandemic is expected to be severe. Restriction in travel will hinder tourism and weaken fiscal and external positions, creating large additional financing needs; the authorities reacted swiftly by taking immediate measures of containment, including border closures, strengthening health policy responses and supporting households and firms.

The Executive Board of the International Monetary Fund (IMF) approved today Seychelles’ request for emergency financial assistance under the Rapid Financing Instrument (RFI) equivalent to SDR 22.9 million (about US$31.2 million, or 100 percent of quota) to meet the country’s urgent balance of payment needs stemming from the COVID-19 pandemic.

The near-term economic fallout of the COVID19 pandemic is expected to be severe. Travel restrictions and the subsequent loss of tourism receipts are sharply reducing economic activity and weakening the fiscal and external positions, creating large additional financing needs. The authorities reacted swiftly by taking immediate measures of containment, including border closures, strengthening health policy responses and supporting households and firms.

The RFI will provide timely resources to the authorities to address the urgent balance of payments needs and soften the hit on the budget. The IMF will continue to monitor Seychelles’ situation closely and remain in close dialogue with the authorities.

Following the Executive Board discussions, Mr. Tao Zhang, Deputy Managing Director and Chair, made the following statement:

“Seychelles’ hard-won economic gains since the 2008 crisis, supported by successive Fund arrangements, are being eroded by the severe impact of the COVID-19 pandemic.

“A temporary fiscal expansion as well as expeditious external support are needed to address the large output contraction. The authorities have taken decisive measures to prevent a local outbreak and mitigate the economic fallout on affected businesses and the most vulnerable households. Once the pandemic dissipates and confidence is restored, the authorities are committed to return to a fiscal stance that stabilizes debt.

“The central bank’s prompt response to provide emergency assistance will help alleviate the economic fallout. The flexible exchange rate has served Seychelles well, and the resilience of the banking system will play a crucial role in restoring external and internal balances. The central bank should remain vigilant to potential market stress and emerging risks to financial markets.

“The emergency IMF support under the Rapid Financing Instrument provides timely resources to the authorities to address the urgent balance of payments and budgetary needs. The assistance of other international financial institutions and development partners is crucial to close the remaining financing gaps, ease the adjustment burden, and preserve economic growth. The authorities are committed to transparency and good governance in the use of emergency financing by providing monthly reports of pandemic-related expenditure to the National Assembly and undertaking an independent audit of such spending and procurement and publishing the results.”