The Board of Directors of the African Development Bank Group approved a flexible loan of $ 20 million to finance the Seychelles Governance and Economic Reform Support Program, which is expected to contribute to the macroeconomic stability of the island nation and recovery after Covid-19 in the medium term.
The government program aims to deepen the reforms introduced as part of the Bank’s budget support program for the response to the Covid-19 crisis, approved in June 2020 for $ 10 million. These reforms are expected to advance fiscal sustainability, improve the business environment and Seychelles’ resilience to climate change and the environment.
Bank financing will complement funds from the World Bank and the International Monetary Fund to support reforms that will benefit Seychelles’ private sector, dominated by small businesses. By ensuring that these businesses stay afloat during these difficult times, the operation will have a positive impact on women and young people, while creating jobs and equal opportunities.
Seychelles Minister of Finance, Trade, Investment and Economic Planning Naadir NH Hassan thanked the Bank for being a trusted partner in the development of the country. “The installation comes at an opportune time and will provide much-needed relief given the economic hardships we face in light of the Covid-19 pandemic. This will help the government to close the current budget financing gap and achieve economic development goals as we steer the country on the path of recovery and debt sustainability, ”Hassan said.
The global slowdown resulting from the Covid-19 pandemic has adversely impacted the Seychelles economy, despite government interventions.
“The Covid-19 pandemic has devastated the tourism sector, which contributes around 25% of GDP and accounts for the largest share of total employment,” said Nnenna Nwabufo, director general of the Office of Regional Development and Delivery of the Bank Group in East Africa.
She noted that on the same day the loan was approved, the IMF and the government of Seychelles reached a staff-level agreement for a $ 107 million arrangement under the Fund’s extended financing facility, which underlines the speed of the Bank’s intervention and the strength of the partnership. between the Bank and the IMF.
The pandemic has severely affected the macroeconomic performance of Seychelles. Real GDP growth, which averaged 4.2% in 2016-2019, contracted by 12.9% in 2020. The overall budget deficit ranges between -1.4% and 0.7% of GDP over the period 2016-2019 widened to -19.5% in 2020, while the debt, which stood at 62.3% of GDP at the end of 2018, is now projected at 87.7% at the end of 2021 , according to the Bank’s appraisal report.
The Bank’s approved and ongoing portfolio in Seychelles in July 2021 includes five public sector operations totaling $ 45.7 million. Of these, 53% are in the water supply and sanitation sector and 47% in the multi-sector.
Kwasi Kpodo, Department of Communication and External Relations, African Development Bank. Email: [email protected]