(Seychelles News Agency) - The executive board of the International Monetary Fund has approved $105 million under the Extended Fund Facility for Seychelles with an immediate disbursement of $34.26 million.

In a press statement on Thursday, the IMF stated that "the key objective of the proposed programme is to support the authorities' efforts to restore macroeconomic stability and debt sustainability while strengthening the post COVID-19 recovery."

The IMF's deputy managing director and chair, Tao Zhang, said, "The Seychelles' economic outlook is positive, but risks remain high. Tourist arrivals since March 2021 point to a strong recovery. Nonetheless, the outlook is uncertain and contingent on the pandemic path, the effective rollout of vaccines in Seychelles' key tourist markets, and the expected recovery in external demand."

"The new arrangement under the Extended Fund Facility will support Seychelles' post-pandemic recovery, anchor reform implementation and catalyse additional external financing," he added.

Seychelles, an archipelago in the western Indian Ocean, was hit hard by the COVID-19 crisis which caused a downturn in travel which affected the tourism industry, the nation's top economic contributor.

The IMF stated that "the authorities reacted swiftly, by locking down the economy, thereby keeping infection and fatality rates low. However, the travel restrictions and global economic downturn triggered unprecedented economic contraction. The authorities responded with measures to mitigate the economic fallout on businesses and households."

The IMF added that as a result "the public debt ratio increased sharply, reflecting the primary balance deterioration, exchange rate depreciation, and GDP contraction. As soon as vaccines became available, Seychelles led the world in vaccination coverage and reopened its borders. With tourist arrivals bouncing back, a V-shaped recovery is now expected."

According to the Ministry of Finance, some of the measures to be taken under the economic reform include improving Seychelles' debt sustainability, the business environment and reform of public administration.

The IMF stated that the key strategy focuses on maintaining the recovery momentum while reducing the risks to debt sustainability.

"Advancing the reform agenda through an ambitious fiscal adjustment, reinforced debt management, strengthened fiscal governance frameworks, and financial sector development and inclusion are essential priorities to sustain the post-COVID-19 recovery and generate high, sustainable, and inclusive growth," said the IMF.

The last time Seychelles embarked on economic reform was in 2008. The macroeconomic reform programme with the assistance of the IMF was to primarily address the serious balance of payments and external debt difficulties.