IMF agrees new Seychelles package, sees 2010 growth

By George Thande

VICTORIA (Reuters) - The International Monetary Fund (IMF) said on Monday the Seychelles had made rapid progress in restoring economic stability after a rescue package last year and the Indian Ocean archipelago economy should grow 4 percent in 2010.

In a statement, the IMF said it had agreed a third stand by arrangement (SBA) to provide the Seychelles support, as well as a new three-year arrangement under the extended fund facility (EFF) worth $30.7 million, to replace the existing SBA.

"Rapid progress has been made on restoring macroeconomic stability, the result of the liberalisation of the exchange regime, strong fiscal adjustment, and prudent monetary policies," the IMF mission said after a two-week visit.

"Programme implementation has been exemplary, even in the face of strong head winds from the global recession," it said.

The IMF agreed a two-year $26 million rescue package for the heavily-indebted Seychelles' economy in November last year.

As part of the deal, the government lifted long-standing foreign exchange controls, prompting a 48 percent slide in the value of the rupee.

The rupee's fall in the import-dependent luxury tourist destination sent year-on-year inflation rocketing to a peak of 63.3 percent last December, but prices have started falling back leaving the September inflation rate at 29.3 percent.

The IMF said the economy would contract 7.5 percent this year, less than a 8-9 percent fall forecast in August, and grow 4 percent in 2010.