(Seychelles News Agency) - Seychelles’ economic performance last year was strong with growth exceeding 5 percent, but inflation is still rising, a representative of the International Monetary Fund (IMF) said.

The IMF mission chief for Seychelles, Amadou Sy, said the growth was mainly due to “strong tourism and fisheries performance, and strong private credit.”

“Inflation has been estimated to be around 3.5 percent for 2017. This is due to the current account deficit, high credit growth to the private sector, high oil prices and the potential effect of some administrative measures,” he told journalists.

The IMF chief of mission for Seychelles (centre) met with reporters on Tuesday. (Seychelles Nation) Photo License: CC-BY

The governor of the Central Bank of Seychelles (CBS), Caroline Abel, said that inflation is occurring because although there is high credit going to the private sector, money is going towards consumerism.

“With the position taken by the Central Bank last year to loosen its monetary policy, a lot of credit has gone towards consumerism. When consumerism is high, there is great demand for foreign exchange for importation. This is why there is a depreciation of the dollar against the rupees,” said Abel.

She said that to reduce the pressure, the Central Bank has decided to tighten the monetary policy for the upcoming months.

In spite of all the challenges Seychelles still face, the IMF chief of mission said, “We expect strong economic growth for 2018.”

The IMF delegation was in Seychelles for one week to finalise the first review of the island nation’s performance with regards to the Policy Coordination Instrument.

Sy said that the Policy Coordination Instrument is on track and is reflected in three key criteria – foreign exchange reserve, the primary surplus of the government and the debt-to-GDP (Gross Domestic Product).

“We were here six months ago and we set some target.  On all these three criteria, the target has been met,” he said.

Sy added that in order for Seychelles to continue on its economic progress, it is instrumental not to increase the debt burden of the country by financing big projects as mentioned in the State of the Nation Address.

Earlier this month, President Danny Faure announced several big projects in his State of the Nation Address to be undertaken, including a plan to build two tunnels on Mahe. 

Another recommendation of the IMF is the strengthening of the country’s anti-money laundering framework and finalizing a strategy for the offshore financial sector.

“This will be necessary to manage reputational risk,” said Sy. 

On his side, the minister of finance trade and economic planning, Peter Larose, said that the financial sector can become the third pillar of the economy after fisheries and tourism.

Larose said that for that to happen “we need to work closely with the Central Bank to ensure a strategy that complies with best international practices.”

“As we know anti-money laundering especially illicit financial flows hinders the development of a country. Therefore we need to address this with a good framework and strategy,” he added.