Seychelles’ Economic Reforms Drive Stability and Resilience
Seychelles has emerged as one of Africa’s most economically stable nations, boasting inflation below 2 percent, a recovering GDP, declining public debt, and the highest per capita income in Sub-Saharan Africa, according to the International Monetary Fund (IMF).
The country’s transformation is striking, given that just two decades ago it was in the midst of a severe economic crisis. In the mid-2000s, expansionary fiscal policies, high subsidies, heavy debt servicing, and a rigid state-led economy left Seychelles with a public debt exceeding 192 percent of GDP and foreign reserves covering just two weeks of imports. By mid-2008, the nation defaulted on private foreign debt, prompting a downgrade to selective default by Standard & Poor’s.
In response, the government, with IMF and development partner support, implemented sweeping reforms. These included floating the rupee, abolishing exchange restrictions, cutting subsidies in favour of targeted social safety nets, reforming state enterprises, and consolidating public finances. Paris Club creditors also agreed to a debt reduction. Within five years, inflation dropped, reserves exceeded three months of import cover, and public debt fell below 70 percent of GDP.
This stability proved crucial during the COVID-19 pandemic, which caused a near 12 percent economic contraction in 2020 as global tourism collapsed. The government responded with timely fiscal and monetary measures, emergency IMF financing, and swift tourism reopening. Growth rebounded to almost 13 percent in 2022, reserves remained robust, and the exchange rate adjusted to external shocks.
Looking ahead, the IMF warns that volatile global conditions, environmental constraints on tourism, and vulnerability to external shocks necessitate continued fiscal discipline, investment in infrastructure, human capital development, and strengthened social safety nets.
The IMF notes that Seychelles’ experience offers valuable lessons for other small economies aiming to achieve long-term resilience through sound macroeconomic management and institutional reforms.
