Seychelles : Public Sector Debt and Prospects for Successful Economic Reform

Seychelles is at a development crossroads. With public sector debt at over 200 percent of Gross Domestic Product (GDP), manifested by years of poor macroeconomic management and rigid economic structure, the economy has been experiencing a serious downturn since the beginning of the 2000s. While real GDP contracted by cumulative nine percent for the past four years, the significantly overvalued rupee has led to a loss of export competitiveness, leading to persistent balance of payments difficulties. Following independence in 1976, Seychelles adopted a state-led development model, in which the Government plays a dominant role in every segment of the economy through extensive controls and regulations. It intervened directly in manufacturing, distribution, trade and other economic activities through its parastatals, often at the expense of private sector development. Provision of education and health services was predominantly the responsibility of the Government. Seychelles is faced with formidable challenges in the years ahead. With public sector debt at some 200 percent of GDP, manifested by decades of poor policy management, there is no painless solution to Seychelles debt predicament. For Seychelles the primary tool to reduce the debt burden, and turn the economy back to a sustained growth path is the implementation of a comprehensive macroeconomic reform program, with a strong emphasis on fiscal adjustments, privatization, exchange rate realignments and structural reforms. Without a significant change in policy direction, Seychelles medium-term prospects are bleak. Continuation of the present policies will neither mitigate the acute foreign exchange shortages nor further build-up of debt, which will be even more damaging in the future. This paper is structured as follows. Section 2 presents the basic facts about Seychelles public sector debt and analyzes its burden and sustainability. Section 3 then discusses the medium-term economic outlook, assuming that no significant economic adjustments are made. Section 4 then seeks ways to reduce Seychelles public sector debt to a more sustainable level, and discusses a comprehensive macroeconomic reform package that is needed to achieve this goal. Section 5 concludes the paper.

Bibliographic Details

Main Author:	Kojo, Naoko C.
Language:	English en_US
Published:	World Bank, Washington, DC 2005-10
Subjects:	ACCUMULATION OF ARREARS, ACCUMULATION OF DEBT, ALLOCATION, ANNUAL RATE, ANNUAL REPORTS, APPROPRIATION, ARREARS, BALANCE OF PAYMENT, BALANCE OF PAYMENTS, BLACK MARKET, BOND, BOND ISSUE, BORROWER, BORROWING COSTS, BROAD MONEY, BUDGET CONSTRAINT, BUDGET DEFICIT, BUDGETARY IMPLICATIONS, BUSINESS TAX, CAPITAL EXPENDITURE, CAPITAL OUTLAYS, CENTRAL BANK, CENTRAL GOVERNMENT, COLLATERALIZATION, COMMERCIAL BANK, COMMERCIAL BANKS, COMMERCIAL CREDITORS, COMMERCIAL DEBT, COMMERCIAL LOANS, CONTINGENT LIABILITIES, CONTRACTUAL OBLIGATIONS, CREDIBILITY, CREDITORS, CREDITORS INTEREST, CURRENT ACCOUNT DEFICIT, DEBT BURDEN, DEBT DATA, DEBT DYNAMICS, DEBT EXCHANGE, DEBT INSTRUMENTS, DEBT INTEREST, DEBT LEVEL, DEBT PAYMENTS, DEBT REDUCTION, DEBT RESTRUCTURING, DEBT RESTRUCTURING OPERATION, DEBT SERVICE, DEBT SERVICE BURDEN, DEBT SERVICE PAYMENTS, DEBT SOURCES, DEBT STOCK, DEBT SUSTAINABILITY, DEBTOR, DEBTOR COUNTRY, DEVALUATION, DEVELOPMENT BANK, DOMESTIC BORROWING, DOMESTIC DEBT, DOMESTIC DEBTS, DOMESTIC DEMAND, DOMESTIC FINANCIAL SYSTEM, ECONOMIC CONDITIONS, ECONOMIC GROWTH, ECONOMIC PROBLEMS, ECONOMIC RECOVERY, ECONOMIC REFORM, EXCHANGE CONTROLS, EXCHANGE RATE, EXCHANGE RATE ADJUSTMENTS, EXCHANGE RATES, EXOGENOUS SHOCKS, EXPENDITURE, EXPORT COMPETITIVENESS, EXTERNAL ARREARS, EXTERNAL BALANCE, EXTERNAL BORROWING, EXTERNAL COMMERCIAL BORROWING, EXTERNAL DEBT, EXTERNAL DEBTS, EXTERNAL LOANS, FINANCIAL CRISIS, FINANCIAL INSTITUTIONS, FINANCIAL SUPPORT, FINANCIAL SYSTEM, FISCAL ADJUSTMENT, FISCAL ADJUSTMENTS, FISCAL AUSTERITY, FISCAL BALANCE, FISCAL BURDEN, FISCAL CONSOLIDATION, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL DISCIPLINE, FISCAL MANAGEMENT, FISCAL MISMANAGEMENT, FISCAL OUTTURN, FISCAL PERFORMANCE, FISCAL POLICY, FISCAL POSITION, FISCAL RESULTS, FISCAL SCENARIOS, FISCAL STANCE, FISCAL SUSTAINABILITY, FOREIGN CURRENCIES, FOREIGN EXCHANGE, FOREIGN EXCHANGES, FOREIGN INTEREST, FOREIGN INVESTMENT, FOREIGN INVESTORS, FOREIGN RESERVES, GLOBAL DEVELOPMENT FINANCE, GOVERNMENT ASSETS, GOVERNMENT BORROWING, GOVERNMENT BUDGET, GOVERNMENT DEBT, GOVERNMENT DEBTS, GOVERNMENT EXPENDITURE, GOVERNMENT FINANCING, GOVERNMENT SPENDING, GROWTH RATE, HEALTH SERVICES, HIGHER INFLATION, HOLDING, HUMAN DEVELOPMENT, IMPLICIT INTEREST, INDEBTEDNESS, INDIVIDUAL INVESTORS, INFLATION, INFRASTRUCTURE PROJECTS, INSTRUMENT, INTEREST ARREARS, INTEREST BURDEN, INTEREST PAYMENTS, INTEREST RATE, INTEREST RATES, INVESTMENT CLIMATE, INVESTOR CONFIDENCE, LABOR MARKET, LENDERS, LEVEL OF DEBT, LEVEL PLAYING FIELD, LOAN, LOAN AGREEMENTS, LOAN CONTRACTS, LOAN DEFAULTS, LONG-TERM DEBT, LONG-TERM EXTERNAL DEBT, LONG-TERM INSTRUMENTS, MACROECONOMIC MANAGEMENT, MARKET FORCES, MARKET REFORM, MARKET VALUE, MATURITY, MEDIUM-TERM PROJECTION, NATIONAL INCOME, NEGATIVE PLEDGE CLAUSE, NET EXTERNAL BORROWING, NET LENDING, OIL PRICES, PENSION, PENSION SCHEME, POVERTY REDUCTION, PREPAYMENT, PRICE INDEX, PRIVATE PLACEMENT, PRIVATE SECTOR, PRIVATIZATION, PROFIT MARGINS, PROGRAMS, PUBLIC DEBT, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE REVIEW, PUBLIC FINANCES, PUBLIC INVESTMENT, PUBLIC SECTOR, PUBLIC SECTOR DEBT, PUBLIC SECTOR EMPLOYEES, PUBLIC UTILITIES, RATES OF INTEREST, REAL GROWTH, REAL GROWTH RATE, REFORM PLAN, REFORM PROGRAM, REGULATORY STRUCTURE, RESERVES, RETURN, SALES TAX, SHORT-TERM DEBT, SHORT-TERM INSTRUMENTS, SOCIAL GAINS, SOCIAL INDICATORS, SOCIAL SECURITY, SOCIAL SECURITY FUNDS, SOCIAL SERVICES, SOVEREIGN DEBT, STATE ENTERPRISES, STOCKS, STRUCTURAL ADJUSTMENT, STRUCTURAL REFORM, STRUCTURAL REFORMS, SUSTAINABLE DEBT LEVEL, TAX, TAX COLLECTION, TAX EXEMPTIONS, TAX RATES, TAX REVENUE, TOTAL DEBT, TOTAL EXPENDITURE, TOTAL PUBLIC EXPENDITURE, TOTAL PUBLIC SECTOR, TRADE LIBERALIZATION, TRANSACTION, TREASURY, TREASURY BILL, TREASURY BILLS, TREASURY BOND, TREASURY BONDS, WELFARE LOSS,
Online Access:	http://documents.worldbank.org/curated/en/2005/10/16286576/seychelles-public-sector-debt-reduction-strategy https://hdl.handle.net/10986/8245
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