This Selected Issues paper for Seychelles argues that sound fiscal policies and smaller governments can be conducive to growth and help reduce a country’s economic vulnerability. Growth in Seychelles has been volatile and underperformed most small states from 1998 to 2005. Seychelles’s revenues, expenditures, and total public debt are higher after an improvement in 2003. Its fiscal balance has worsened and has been weaker in comparison with most small states for most of the period. Seychelles’s expenditure composition is most similar to that of low-growth small states.
I. L arge F iscal A djustment in S mall S tates: L essons for S eychelles 1
1. One of the major objectives of the Seychellesauthorities’ strategy for 2017 is to reduce public debt to 60 percent of GDP from 146 percent of GDP at the end of 2007 . For this to be achieved a large and sustained fiscal adjustment will be needed, as well as a public debt restructuring with a substantial relief component (not discussed here). Following on the 2007 Selected Issues paper, 2 this study analyzes the experience of small states in order to