(Seychelles News Agency) - The executive board of the International Monetary Fund (IMF) has approved a three-year Policy Coordination Instrument for Seychelles to help monitor a reform agenda, a press release from the organisation said earlier this week.

Seychelles, an archipelago in the western Indian Ocean, is the first IMF member country to request the Instrument to consolidate its macroeconomic stabilisation.

The Policy Coordination Instrument is the IMF’s new non-financing fund instrument that supports countries seeking assistance to develop and help monitor a reform agenda. It is available to all member countries.  

According to the press release, the Deputy Managing Director and Acting Chair of the IMF Executive Board, Tao Zhang, said that Seychelles' “economic program supported by the Policy Coordination Instrument aims at locking in economic stability while fostering sustained and inclusive growth.”

The Instrument will help the island nation build on the lessons from the previous programmes supported by the IMF. While the Policy Coordination Instrument involves no use of IMF resources, successful completion of programme reviews would help signal Seychelles’ commitment to continued strong economic policies and structural reforms.

“Seychelles has made considerable progress toward external viability and fiscal sustainability since the crisis in 2008 under three successive Fund arrangements,” said Zhang.

Seychelles embarked on a macroeconomic reform programme in November 2008 to address external debt difficulties. The island nation requested the assistance of the International Monetary Fund to put the domestic economy on a sustainable path.

The IMF approved another three-year loan of $17.6 million in June 2014 to support the island nation’s economic reform programme. The first five-year IMF backed programme expired in December 2013. 

Zhang said the strong ownership of Seychelles’ authorities has played an important role in the success of the Fund-supported programs.

“However, the country remains vulnerable to external shocks and further efforts are needed to address challenges in maintaining fiscal discipline,” said Zhang.

Zhang said that it is important for Seychelles to maintain the flexible exchange rate policy and limit foreign exchange intervention to preserve the international reserve buffers at around the current level.

He welcomed the authorities’ continued efforts to ensure a successful transition to the recently introduced monetary policy framework in which interest rates play a prominent role.

Zhang said that Seychelles structural reform agenda is ambitious and targeted. Among measures being taken are the strengthening of the Anti-Money Laundering/Combating the Financing of Terrorism framework, a critical step in maintaining correspondent banking relationships, and state-owned enterprise action plans to minimise potential fiscal risks arising from the sector.

“These efforts will help shore up fiscal sustainability and boost growth prospects. Continued efforts to diversify the economy under the “Blue Economy” initiatives will go a long way toward promoting shared prosperity,” he said.

Next year will be exactly 10 years since Seychelles started its macroeconomic reform programme with the assistance of IMF.