| World Bank Approves US$9 Million Development Policy Loan to Support the Seychelles’ Development |
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06/11/2009 11:46 (15 Day 11:18 minutes ago) | |||||
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The FINANCIAL -- The World Bank has approved a Development Policy Loan (DPL) of Euro 6.5 million (US$9 million) to help the Republic of Seychelles to return to a sustainable development path following years of economic and fiscal imbalance.
The loan, approved today by the World Bank Board of Executive Directors, will assist the Government of Seychelles in their efforts to establish a stable macroeconomic environment and sustainable fiscal framework. It will support the government to improve public administration, accelerate civil service reforms, reduce the role of the State in commercial enterprises, and provide a targeted social safety net for the country’s most vulnerable households.
The Board also discussed the Seychelles’ Interim Strategy Note (ISN), which lays out a two-year Bank re-engagement strategy for the country. It is the first Bank strategy for Seychelles in 17 years.
“The Bank’s intervention in the Seychelles comes at a critical time when the government is implementing significant reforms to stabilize the economy,” says Johannes Zutt, the Country Director for Seychelles. “The DPL will deepen the comprehensive reform program that has been undertaken since November 2008, when the government signed a two-year Stand-By Arrangement with the International Monetary Fund.”
Seychelles, a middle-income country, is among the most indebted countries in the developing world. The island nation’s economy is dependent on tourism and fisheries, both of which are vulnerable to global and climate change shocks.
“The global economic crisis has particularly hit the Seychelles hard as it affected tourism, which has been the traditional driver of growth,” says Tracey Lane, the Bank’s Senior Economist for Seychelles. “Gross Domestic Product (GDP) could decline by as much as 10 percent in 2009, but should recover modestly to 3.5 percent in 2010.”
The government’s reform strategy, spearheaded by President James Michel, has been widely endorsed by the country’s parliament, opposition, civil society and people. The goal is to remove constraints to growth and transform the economy by allowing the private sector to take the lead in commercial production activities while the state remains the provider of core public goods. A liberalized foreign exchange regime and elimination of price controls over the medium term are expected to increase employment opportunities, particularly in tourism, banking and fishing industry, and also to enhance real incomes.
The Bank’s ISN focuses on the key challenges facing the country, including private sector development, poverty reduction and climate change. The strategy will help develop the knowledge base that the Bank needs for a longer-term policy engagement with Seychelles.
The DPL is an International Bank for Reconstruction and Development (IBRD) fixed-spread facility with a 25.5 years maturity.
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