The International Monetary Fund (IMF) on Friday approved $31.2 million loan to the Seychelles to address COVID-19 economic crisis.
The IMF said Seychelles’ emergency financial assistance was secured under the Rapid Financing Instrument (RFI).
According to the IMF, the near-term economic fallout of the COVID-19 pandemic is expected to be severe for the Seychelles as restriction in travel will hinder tourism and weaken fiscal and external positions, creating large additional financing needs.
Mr. Tao Zhang, an IMF Deputy Managing Director and Chair, said “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.”
“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,” Mr. Zhang added.
According to him, the loan is justified because “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,” he added.