Between 1976 and the mid-2000s, Seychelles had transformed itself from a poor subsistenceeconomy into a high middle income country with low levels of poverty and many socialindicators comparable to Organisation for Economic Co-operation and Development (OECD)countries. However, this growth could not be sustained and faced with a growing internationalfinancial crisis, severe shortages of foreign exchange resulted in the government defaulting inits international payment obligations in 2008. Starting that year, the government beganimplementing a radical program of macroeconomic stabilization and structural reforms. Thecenterpiece of these reforms was a strong fiscal adjustment to reduce the burden of externaldebt and a progressive dismantling of the role of the state in allocating resources. Thesereforms were supported by the Standby and Extended Fund Facility (EFF) arrangements of theInternational Monetary Fund (IMF), and by the Bank through a series of development policyloans (DPLs). Seychelles also benefited from debt relief provided by other official and privateinternational creditors. As a result of the reforms, macroeconomic imbalances were corrected,the role of markets was enhanced, and economic growth restored. However, some importantmeasures such as privatization or SOE reforms (to improve their governance) were stalled orprogressing at a very slow pace and there are increasing pressures to reverse some key reforms(such as reducing the size of government). The Bank played an important role in Seychelles’ successful turn-around.
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