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Fitch: Seychelles' Fiscal Discipline Stabilizes Rating

by Lorys Charalambous, Lowtax.net, Cyprus
11 February, 2015

Fitch Ratings has affirmed Seychelles' long-term foreign currency credit rating at 'B+' with a stable outlook, as its current judgment is that the Government will continue to maintain fiscal discipline in a way consistent with its debt reduction targets.

The Government's medium-term fiscal strategy was first put in place in 2008 following a default in debt payments. It includes an International Monetary Fund-agreed target to cut the country's debt-to-gross domestic product (GDP) to below 50 percent by 2018.

Fitch pointed out that government debt was still relatively high at 61.3 percent of GDP at end-2014. Although fiscal performance was strong, mainly due to increased import duty receipts, exchange rate depreciation meant the debt-GDP ratio changed little last year, as most public-sector debt is denominated in foreign currencies.

However, it was also recognized that the Government had introduced additional tax measures in its 2015 Budget to improve the primary surplus in 2015 and 2016 and put Seychelles back on track to meet the medium-term debt target.

Those measures included an increase in vehicle fees and road tax, and in excise duties on tobacco and spirits, while postponing a planned reduction in corporate tax rates and introducing measures to improve tax compliance.

Fitch has concluded that the affirmation and stable outlook for Seychelles' rating therefore "reflects its assessment that upside and downside risks to the rating are currently well-balanced," and that one of the main factors that could lead to a positive rating action would be "continued reduction in public-sector debt in line with the Government's medium-term fiscal plan."

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